We've seen all the commercials.
The smiling, happy young woman comes walking out of the payday lending office telling us
how happy she is that they now have $500 in their hand with no credit check.
But what that happy spokesman isn't telling you is that in the real world that $500 in
cash comes with a weekly percentage rate that's over 100%, meaning that it could take months
before they ever pay off that small loan.
For several years, horror stories about payday lenders have been plentiful.
There's the case of a 71 year old who borrowed $250 from an Austin, Texas franchise of Cash
Plus after losing her job as a receptionist.
Four months later she owed almost $1,000 and faced the possibility of jail time if she
didn't pay up.
There's a story of a man named Elliot Clark from Kansas who took out a $2,500 loan from
a payday lender to pay off medical bills.
Mr. Clark ended up owing more than $50,000 on the interest charges to that lending company.
He was required to make minimum payments each month.
Even though he did that, it was still $50,000.
There's stories of borrowers who saw their interest rates hiked up to well over 900%
after the week of their loan.
Putting them in an endless cycle of interest payments that takes years to pay off.
This is how the payday lending industry works.
They set up a shop in poor areas of the country or near military bases.
They advertise their services as quick and easy.
It's an easy way to get cash.
Then they rope consumers into a cycle of debt in borrowing that is impossible to break.
Payday lending is a business practice preys on low income citizens, low income families
that have no access to banking services.
They turn to predatory loans when they need to cover a temporary imbalance of expenses.
The industry itself siphons $3 billion a year out of the poorest communities in America.
While this seems like the perfect industry for the government to step in and regulate
and maybe even issue the courts ... The courts ought to take care of those industry, those
parts of our government do nothing.
Joining me to talk about this is attorney Dan Soloway.
Dan, tell us how bad this payday lender problem really is.
What are these lenders doing to American consumers?
Mike, this problem is bad and it's getting worse.
It's a $46 billion industry that is targeting the poor and the minorities, the exact people
who cannot afford to take these loans out.
They're supposed to be to bridge emergency situations, but 85% of the people who take
out these loans can't pay them back.
So it's a cycle of financial ruin for these families.
How are they specifically preying on poor communities?
That seems to be the story.
I mean, if you follow this story all over the country, they seek out poor communities.
What is your take?
Well, it's their business model.
They're not going to loan money to the people who can afford to pay these short term, high
interest loans back.
These predatory loan companies target those people who are having problems paying their
day to day bills.
So when 85% of the people can't afford to pay these loans back, they get a series of
roll overs.
In other words, they take out a second loan to pay back the first loan.
They have to pay a fee to get that second loan.
Those fees are reaching $8, $9 billion a year alone.
So these companies are getting rich off the exact people that they want to get rich off
because there's the people who shouldn't be taking out the loans in the first place.
That's they're creating a cycle of debt that these families cannot get out of.
You know, Dan, for years we were told that the consumer financial protection group was
going to step in and do something about payday lenders.
Just like I said in the open, it doesn't seem like government is there to help at all.
It doesn't seem like regulators are there to help at all.
These people are on their own where it comes to payday lenders.
What is your take on what's actually happening with the responsibility of government to get
involved and say this is just not going to tolerate this?
What's your take?
In the beginning, in 2010 when the bureau was created, they did some good things.
They went after these predatory loan companies.
They hit Cash America with a $19 million fine.
Ace Cash for $10 million.
I mean, they went after these companies that were doing robocall or robo-copying documents,
targeting the military, destroying documents.
But remember, in 2010 when this started, these companies saw what was happening and they
started giving money through politics to various congressmen who stopped the good regulations.
The best regulation was to restrict companies and give these loans only to people who could
afford to pay them back.
That has been eviscerated.
When Trump came in with the new bureau person, it stopped everything.
Well, let me real clear on something and I know you saw this in this story, this is not
just Republicans doing this.
You have the Wall Street Democrats who are actually pushing to let this happen.
I mean, it's amazing.
When you look at the lineup of Democrats that say, "Yeah, we're just going to allow this
to go on," it's pretty incredible.
Tell us about Mick Mulvaney, the acting head of the CFPB.
Is he doing anything to reign in these payday lenders?
I wouldn't expect that, but maybe I'm missing something.
I don't think he is.
I mean, when he got the job through Trump, the first thing he did was put in a budget
request for zero dollars.
He needed no money to control these lenders.
Then for all those campaigns that were going after through policing actions, certain cash
companies, he stopped them in their tracks.
He even stopped an investigation into somebody who gave him a contribution when he was running
for Congress in South Carolina.
Certainly the Democrats are on board because, in some respects, they simply believe there
is a need for this type of short term, high finance or high interest loan.
But we're not seeing through Mulvaney any good control of lenders.
Rather what we're seeing is protection of the lenders and no help for the consumers
who are falling into debt, as you mentioned, that they can't get out of.
A congressman would have be an utter fool not to be able to look at this and say, "Look,
this is nothing but predatory lending.
They're putting these people into impossible situations."
So it's not logic that's driving these congressmen.
Here's my point, you look at the facts, the facts are clear.
Some of these people paying 900% on their loan.
The worst part about it is now with the new trend in the United States, people who don't
pay these loans back are ending up in jail.
I know you know that story too.
It's incredible.
There have been reports that court systems in certain areas around the country, particularly
some courts in Texas that are working with payday lending companies to threaten borrowers
with jail time if they don't pay up.
First of all, is that even legal and can people be thrown in jail for failure to pay these
debts?
What's your take?
Debtors prisons have been illegal in the United States since 1833.
But that hasn't stopped the courts and certain prosecutors by getting involved in this payday
loan scheme.
The way it works is this, the person doesn't pay back the loan, they get sent to a collection
agency.
The collection agency sends it to a lawyer who does what's called an examination under
oath, a court proceeding to find out where their money is to pay back these loans.
Are they employed?
Let's get some garnishment of wages.
Do they have property?
Let's attach that property.
If they don't appear at that examination under oath, then they apply to the court for an
arrest warrant.
The person is arrested.
They may not even gotten notice of the proceeding that they were to be presented at and give
testimony.
There they rot in jail, not only because they haven't paid the debt, but also now because
they didn't attend a quasi court proceeding.
So in fact, we have debtors prisons.
So here again, connect the dots, it's easy.
A congressman, like the congressman and the regulators who support this idea.
We want to create heroes in our mind and that is while this congressman is a Democrat, therefore
they're not going to get involved in this.
They're going to do something about it.
When you really kick over the rotted log, the same Democrats and Republicans who are
taking so much money from Wall Street.
It's not that you can't look at the facts and tell that a, the payday lending predatory
practice is protected by Congress.
B, Congress understands that there's a connection between the individual who gets caught up
in that cycle, has to pay 900%, goes completely, utterly bankrupt because it's an impossible
cycle.
That person can end up in jail because they haven't paid the bill.
So this isn't rocket science, is it?
This isn't rocket science, is it, Dan?
I mean, anybody who says up in Congress, "Oh, gee.
We just didn't know what was going on," or, "This is really good for poor people."
Anybody talking that stupid talk like that understands the same thing we're seeing right
here.
Is there anything hidden about this process that maybe I'm missing?
There's nothing hidden about the process, Mike.
I mean, what would it take?
One restriction.
Require these companies to do some research to make sure that the people they're loaning
the money to have the financial ability to pay it back.
If you do that, it in fact destroys their business model and they stop putting the people,
the 85% who can't afford these loans, into the jails.
But when you don't have the bureau policing these lenders, when you don't have Congress
doing anything other than passing laws to protect the lenders, then nobody is there
to help the consumer and these predatory companies go after those that can afford these the least.
Right.
You hear the other side saying, "Well, they took the loan.
They should've read it."
A lawyer ... Actually this was tested.
They put out several of these contracts to people who had law degrees.
They said, "Where in there is it saying that this thing can actually climb to 900%?"
The lawyer that does this for a living couldn't find it.
It's in the small print, the representation on the phone is an absolute fraud, and these
people get caught up in it.
So this criticism, "Ah gee whiz, they needed the money.
They took the loan.
They have to pay for the problem."
Everybody who has looked and reviewed these documents knows that's utter nonsense.
That this is nothing more than a scam.
It's no different than stealing money from poor people.
Congress knows that, regulators know that, the media knows that.
How about this, why don't you check and see how many times corporate media has done a
story on this issue.
How about try to find it, Google it and try to find it from corporate media today.
You're going to understand the reason they don't is because payday lending advertisement
is so big, especially on the cable network.
Dan, thank you for joining me.
I really think this is going to get bad.
It's going to get worse before it gets better.
Thanks for being here.
You're welcome.
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