Victoria Lusk reports that payday lender Check’n Go is closing its doors next week, thanks to voters’ wise decision to cap short-term interest rates at 36% and not fall for the payday lenders’ decoy Amendment U:
Signs posted at Check ‘n Go, 524 Moccasin Drive, reference the failed passing of Constitutional Amendment U on Nov. 8 as the reason why the business can no longer offer new loans in South Dakota. The sign also states Check ‘n Go will close Dec. 9.
…”[Initiated Measure 21] prohibits our company and companies like ours from recovering the costs associated with bringing small, unsecured loans to the market,” read a statement emailed on behalf of the business from Meredith Fossett, government affairs representative [Victoria Lusk, “At Least One Payday Loan Business in Aberdeen to Close,” Aberdeen American News, 2016.12.02].
Lusk confirms what I heard a couple weeks ago, that no payday lender in Aberdeen is issuing new loans.
We shouldn’t usually celebrate business closings, but in this case, we should be as happy as when we shut down drug dealers or other unscrupulous, socially destructive enterprises. Aberdeen will be better off without these loan sharks preying on our working class. Fewer people will be tricked into inescapable debt, and some storefronts will be available for more reputable businesses.
I’m of mixed feelings about this topic. It sounds like payday lenders are closing shop throughout South Dakota.
You assert Aberdeen (and really all of South Dakota) will be better off without payday lenders.
Are you willing to do the investigative legwork to analyze and verify the true impact of IM 21?
We already know the impact of charging 300, 400, or 500%. The rich get richer. The poor get poorer. The rich become big time philanthropists so everyone thinks they are great. Wash, rinse, repeat.
Regular banks should be able to figure out a way to offer regular interest low dollar amount loans.
Elizabeth Warren floated the idea of Post Office Banks for the purpose of small loans and some services people need from banks. It seems like a brilliant way to keep post offices vibrant and needed in communities and cut out the middleman/usurer to get needed credit to people.
Mr. Wiken, what part of this don’t you get? Banks don’t make unsecured loans to people with poor credit. The people that need these loans cannot get them anywhere else. It is clear that these payday loan sharks are not interested in loaning money to people that struggle to repay them. IM 21has dried up the source of the poor of getting a loan in SD.
I understand banks are basically lazy and don’t work out ways to make small loans. That does not mean they can’t do it. Some of them took the easy way out and owned the payday loan places.
I have often thought that employers could replace Payday loans to some extent. Payday loans operate on payments from your next paycheck. It seems banks, credit unions, individuals and employers could come to some type of agreement where the employer withholds the payment amount from the employees paycheck. The employer then remits the payment to the lender.
Since the loan payment would be guaranteed, the lender could charge a very low interest rate. This would entail the employer doing a little extra record keeping but may help keep a good employee.
What you propose is tricky and has been opposed by many worker advocacy groups as it reminds them of the old “company town” where workers became beholden (ala slaves) to their employer. That said, I think there was a way for it to happen indirectly with employer support via payroll deductions. But, it still requires lenders willing to take the credit risk and we have now eliminated the most likely such lenders.
Traditional lenders (bank and credit unions) are unlikely without regulatory relief as it costs them a couple of hundred dollars to book a loan regardless of the amount. Cost reduction can’t happen without regulatory relief.
Take Denny with you.
Yes, lets celebrate lost revenue in taxes these companies paid, the taxes paid by the employees that worked there, property taxes paid by the building owners…and the list goes on and on….
“What you propose is tricky and has been opposed by many worker advocacy groups as it reminds them of the old “company town” where workers became beholden (ala slaves) to their employer. That said, I think there was a way for it to happen indirectly with employer support via payroll deductions. But, it still requires lenders willing to take the credit risk and we have now eliminated the most likely such lenders.”
Well, it also requires the employee to continue working, and many of the people drawing these loans have spotty employment records. My concern is that it could just shift the burden of risk on the employers themselves.
That is why I said INDIRECTLY where the lender takes the risk the worker quits. The only thing the employer has to do is remit payments to the lender taken from the paycheck. There is a lot of labor and lender law (federal and state) which would come into play if the loans are direct. Effective prohibition.
?? Yes, payday lenders throughout the state will be closing because what they were doing is now illegal.
Here are two points I’ve tried to repeatedly make:
1. Assuming people going for a PAYDAY loan have jobs and a paycheck coming in, we encourage these people to ask their employer for a payday advance at zero interest. Maybe there is a legislative way to incentivize or encourage our small and large businesses to offer an employee benefit in the form of 2-4 payday advances a year. We challenge our business community to be good corporate citizens in the regard. We’ve heard loud and clear that employers hate the hassle of these lenders in garnished wages and illegal collection activities, even re-possessing cars which make it harder to get to work. But, come on, these loans are supposed to be PAYDAY loans. If indeed a payday loan is needed it should come from the person issuing the pay check. This is a great way for our business community to give back as a thank you for the low-tax, low-regulation environment they enjoy here in South Dakota.
2. Some states help credit unions fill the need for small dollar loans by offering a loan guarantee so lenders can better afford the risk of making these types of loans affordable. That would entail our state government allocating a fraction of it’s reserves to loan guarantees for the poor. This should be a no-brainer because the state and taxpayer pay so dearly when these unscrupulous lenders toss these people in a far worse condition to the curb. These are all good ways forward to actually help the poor.
I know some fellows who will loan out money for a reasonable charge with no paperwork at all. Go down to the Brass Rail bar late any evening and wander towards the back where that little gate out into the painted alley is.
DR, the economy will be just as strong or stronger without the payday lenders skimming tens of millions from the poor in SD. The money that these poor exploited people would otherwise be forking over to the payday loan sharks will be spent in SD. Poor folks generally have no choice but to spend every dime they make just to live. Instead of Chuck Brennan pocketing the profit off these loans and taking the money out of state or putting it in a bank or an account in the Cayman Islands, the money will be spent and remain in the SD economy.
another bites the dust. Bye.
It also sounds like Gentry in Hot Springs closed its doors and moved its remaining operations to Rapid City.
I expect the few remaining operations of the money-lenders-to-the-stupid will gravitate to East North and maybe a few downtown just south of Talley’s where they will eek out a meager living preying on the math-impaired who borrow money to play the video lotteries.
Steve Hickey claims SoDak has low business regulation but Troy Jones, in true Republican fashion, advocates for less. How long ’til the next Republican economic collapse? Hmmm? Troy Jones … Obama is turning over one of the very best economies ever turned over to the other party. If Trump runs it into the ditch like Bush did will you then finally admit we’re better at economic growth and operating a successful government? Of course you will. You’ll have to.
Or as Archie and Edith Bunker sang:
“And you knew where you were then.
“Girls were girls and men were men.
“Mister, we could use a man like Herbert Hoover again.”
It will be interesting to watch during this coming year, the increase, or decrease, of small crimes. Also if any welfare programs show an increase.
O, Warren and Bernie Sanders have a good idea. If people really need short-term loans, and if the free market is unable to provide that service in a non-exploitative fashion, then it makes sense for government to assume its proper role in providing that necessary service.
DR, folks propose the tax revenue we could get from legalizing marijuana, and Marty Jackley and the SDGOP freak out.
If more men beat their wives, Sanford and Avera would see a boost in their revenues from the victims’ increased medical bills. But if we stop domestic abuse, we get a morally cleaner and broader boost in revenue from the work and spending those women are able to do.
Up to know, a lot of working-class money was funneled into Dollar Loan Center, which paid a little property tax revenue (wait: payday lenders don’t pay bank franchise tax, do they?) but then, as Darin says, ship a lot of South Dakota money out of state to their corporate coffers (and to shingle Chuck Brennan’s mansions in Vegas and California). Shut them down, and their former employees still own homes and buy groceries and will get other jobs to keep doing so. Their former customers will get out of their debt traps and be able to spend more of their money here at Kessler’s and Runnings. Check’n Go’s loss is everyone else’s gain.
I will openly celebrate ridding ourselves of tax revenue generated from immoral, exploitative, socially costly activities.
The small crimes and welfare increases that Wilf mentions are parts of the investigative work we need to do over the coming years to assess the impact of driving loan sharks out of business.
I’ll be happy to pay the cost of state assistance that past payday borrowers were too proud or ashamed to take, in return for the economic benefits of preventing people from falling into Chuck Brennan’s debt trap.
I’ll be very curious to see if anyone can establish that payday lenders were actually fighting crime. Maybe pawn-theft won’t increase; maybe we’ll just see it shift to earlier in time, because maybe the folks who get trapped in payday debt end up stealing stuff anyway to cover their payments. In that scenario, when the crime happens and we bust the thief at the pawn shop (police browse the pawn shops, don’t they? It’s pretty easy to track down who brought in hot merchandise, right?), we catch that thief before he is in the debt trap, a net improvement over the current situation where the thief ends up in jail and is still in debt to Chuck Brennan.
I’ll wager we lose few if any residents from this rate cap. Poor people won’t move to another state just to get payday loans. They can’t afford to move! Payday loan center workers won’t move, because who makes a career out of payday lending? The labor market is tight enough that payday lending store workers will easily slide over into new positions. And nobody from elsewhere looking to move is going to say, “Well, I was thinking about moving to South Dakota, but they imposed that 36% rate cap, and I just can’t move to a state that doesn’t have a thriving payday loan industry.”
Our state isn’t blazing new trails here. We are the 15th state to cap the rate at 36%. That said, in no state has there been an increase in crime. In no state has there been an increase in online or unregulated lending any greater than in states without a rate cap.
Welfare programs most likely will show a yuuuge increase as wingnuts fight to get rid of minimum wage and then they will show a yuuuuge decrease as wingnuts eliminate welfare programs for the poor.
Payday loan stores are associated with higher crime rates:
Montana enacted its 36% rate cap on January 1, 2011. In 2011 in Montana, property crime, burglary, larceny-theft and vehicle theft declined from 2010 levels, while robbery went up. In following years, crime rates rebounded in Montana.
We do it a little different. All payday lenders haven’t moved on but they’ve been highly restricted. First off, no loans “less” then 6 months (no borrowing for a week). Then, varied rates by amount borrowed. Only one renewal allowed. Limits on collection fees. These regs were initiated 2010.
Colorado State Information
Maximum Loan Amount: $500
Loan Term: Min: 6 Months
Maximum Finance Rate and Fees: 20%: $0-$300 + 7.5%: $301-$500 plus 45% per annum interest plus monthly maintenance fee $7.50 per $100 borrowed, up to $30, after first month.
Finance Charge for 14-day $100 loan: Not applicable
APR for 14-day $100 loan: Not applicable
Maximum Number of Outstanding Loans at One Time: No limit if total debt does not exceed $500 and 30-days between loans
Rollovers Permitted: One renewal at 45% interest allowed.
Collection Fees: One $25 NSF fee; Court Costs; Reasonable Attorney’s Fees not to exceed loan amount
Criminal Action: Prohibited (Unless the consumer’s account was closed before the agreed upon negotiation date)
Changes like this are the equivalent of huge social science experiments that can’t be organized otherwise. When SD gambling was stopped for a time, clothing and grocery sales increased. A number of other positive results that I don’t remember now. Unfortunately, legislators too influenced by big money “gifts”, seem immune to such facts.
What people fail to realize or see, is the real cause and effect of these loans. It’s not about just the “poor”. The real cause is what the people do with, how the people spend their money, whether it’s money they have or borrow. While I supported this bill, it will not solve the problems. ~ I suffered a personal loss (more like a tragedy) this past year. Would love to share it. Cory has my contact info and I will share it if he thinks appropriate.