The Payday Loan Experience
Payday loans have been a hot topic in the media lately—John Oliver did a great segment as well as NPR, Washington Post, and others. Most exposés uncover the problematic economics and politics behind the industry, but they don’t actually take us into the bank-like stores so we can feel the highs and lows that come with trading the future for short-term stopgaps. Two characters in my novel have very distinct experiences with predatory lending, and I wanted to walk in their shoes, so I set out to find some cash.
You don’t have to seek out a payday loan store, just drive for a minute on any major street not in Beverly Hills and you’ll pass a few bright green signs claiming, “Get Cash Now,” “Cash for Checks,” and “Immediate $$$.” There are actually more payday lenders in the US than McDonald’s. I found one that looked the most inviting and served up the loans with a side of bill paying and cellphone “top-ups,” which I soon discovered add minutes to cell phone plans running low.
The store opened at 10:00am and I arrived at 10:02am; there was already a line of five people ahead of me. The first customer was a woman who spoke as quietly as possible, while still allowing her excuses to penetrate the thick glass partition protecting the cashier. The rest of us in the 15 x 8 box could easily hear her explain that she worked at the Vons down the street and only needed the money because her mother had a medical emergency.
When it was my turn, I understood the impulse to explain why I needed the money, but instead simply said I wanted $50. The cashier’s responses were short and dull.
“You need a pay stub and bank statement to get the money.”
“Is it okay if they’re on my phone?”
She acted as if that’s the first time she’d ever received the question. “I don’t know… sure. Fill this out.”
A form slid through the opening in the protective glass, but I had still some questions.
“I’d like to know what the loan costs.”
“It’s on the wall.” She pointed to a poster that had the APR for 14 days and 30 days listed.
I studied economics in college and still didn’t fully understand what those numbers meant in REAL dollars. “So how much would I owe if I can’t pay in 14 or 30 days?”
She stared blankly. “We’ll cash your check.”
“Yes, but what if there’s no money in my account?” After all, most people who are taking payday loans don’t have a truckload of money on the way. Many have to find new loans to payoff old loans, which ends up as a downward spiral of debt. The cashier continued to stare at me, without a specific answer to the question. Finally she said, “Are you going to fill out the form or not?”
I slunk over to a small circular table in the corner. The form was one page, with basic information; however, one section caught me off guard. It asked for personal references and my employer’s contact information. If they called my work to check-in on me, it wouldn’t exactly speak to my stability. So, I walked to the side of the booth and made the, “I have a quick question,” gesture.
The cashier knew what it meant and responded by raising her voice and ordering me to the “back of the line.” Ten minutes later, I got to ask if they would actually be contacting my employer. “Only if you don’t pay in 30 days.”
“Okay,” I said, “But, what else happens if I don’t pay the money back in 30 days? How much would I owe if it takes 90 days? What about a year?”
She pointed. “I told you, it’s all on the poster.”
NO IT ISN’T. The poster simply explains that they would hand me $42.50 in cash, and I would pay them $50 in 14 or 30 days. It did not list the fees and penalties associated with late payment. I later used a calculator and research on compounding interest to figure out that a 460.08% APR means I would owe $280.40 in a year (this still isn’t exactly how the interest is calculated since they have late fees that also pile on each month). Now, just imagine taking out a $1000 loan ... You’d owe $5,600.
Through the experience, I’d grown closer to my book’s characters and discovered what is missing from most of the news coverage regarding predatory lending:
Amidst the oversimplified posters, lack of information, abrasive employees, and desperate need of finances, I’m not sure how anyone could understand the long-term impact of signing the form.
I walked out of the store with my $42.50 and the drained, dismal feeling you get after a long argument that nobody wins. Still, I realized my fortunate luxury in actually having the means to pay the loan back. But, I didn’t do it. Returning the money felt like ending an experiment before the beaker even started to boil.
The American dream is becoming more financed by debt. American consumers owe 11.85 trillion dollars. The size of this figure is best illustrated by the amount of numerals it takes to write out what we owe: $11,850,000,000,000.
This isn’t to say debt is bad. It’s how we buy houses and cars; it’s how we start businesses; and in many cases it’s how we make money. Many people view capital as THE most important factor in hitting it big. “It takes money to make money.”
So, in a completely unscientific way, I’ve decided to take my $42.50 and try to leverage the debt to make money over the next three days. How is TBD, but I will post another story with the results.
Streets of Gold is available for pre-sale now. Reserve your copy on Amazon.
Hustle the beautifully gritty streets of Los Angeles in the shoes of a 14-year-old gang pledge and a wealthy entrepreneur playboy who live a mile apart but would never cross paths . . . until now.
Scooby grew up believing a brutal LA gang, the Lords Latino, was responsible for putting food on his family’s table. Now, still too young to shave, he has a chance to join his brother in the gang and help provide for his baby sister. First, though, he must survive initiation: being beaten—possibly to death—or committing an unthinkable crime.
In the same city but a different world, payday loan scion Tom Milford would rather be partying the night away with (yet another) model, but after insensitive comments land his company in a PR quagmire, his very public act of contrition takes him to a rough-around-the-edges part of town, where bad timing places him at the center of Scooby’s initiation.
Their violent clash triggers a series of events that rapidly spirals out of control, putting both lives in the crosshairs and bringing tensions that have long simmered just below the city’s surface to a boil, drawing young and old, poor and rich, powerful and powerless into a battle that threatens to destroy them all.