Saturday, June 9, 2018

Some of the Nicest People...

I don't think that payday loans, check cashing stores, rent-to-own furniture, or buy-here-pay-here used car lots are good bargains.   This does not necessarily mean the people running these places are evil or crooks - or view themselves as such.

I met a nice couple who are retired and living in their RV.   They owned a chain of check cashing stores and payday loan places, as well as rent-to-own furniture stores and a few buy-here-pay-here used car lots.   What was interesting to me was that they were very nice people, not what you'd expect given the stereotypes of "evil capitalists" exploiting the masses.   And although they were able to retire early (in their 50's, I'd guess) they certainly weren't putting on the dog.  They didn't have a fancy motorhome like a million-dollar Prevost bus or something.  They lived quite modestly, from what I could tell.

A couple of years ago, a reader asked me if it was OK to run a payday loan store.  My response was, that if he didn't do it, someone else would.   You see, these types of businesses are not run based on push, but pull.   It is the customers coming through the door who demand shitty deals that makes the whole operation tick.   So long as there are people who think they are "lucky" to get a loan, or that borrowing money is a way to solve their financial problems, there will always be exploitative lending operations.

And if you make them illegal or try to regulate them, they merely move underground.   When I was a kid, the Mafia had a roaring business running "the numbers" until the State lotteries made that sort of obsolete.  Why gamble with some sketchy outfit when the corner convenience store sells state-sanctioned tickets?   Similarly, back then, "loan sharks" would offer loans to people at rates that were as high as, well, as high as a payday loan place today.   The problem for the Mafia today is, why would someone go to a loan shark when you can go to the local "Money Tree" instead?

The folks I met had made some good money at the business, but were hardly Warren Buffet rich.   They did OK, but in the business of sub-prime lending, there are a lot of costs involved, the main one being the high rate of default - which is why interest rates are so high in this business.   Of course, it becomes a self-fulfilling prophesy - with high interest rates, the borrowers can never pay off their loans, so default is a given.  And even if you make a lot on interest and get most of the principle back in a workout in bankruptcy, there are costs involved in dealing with insolvent clients - even those who eventually pay, but pay late, chronically.

These operations are legitimate businesses today.  But that does not mean it is a good idea to patronize them.   I leave it to your own moral compass to decide whether you think it is right and proper to run such an operation.  Myself, I think I would have a hard time running such a business.   But then again, the sort of folks who are "victimized" by a payday loan place (but in reality are merely victimizing themselves) are the same folks who sat in the back of class at school and snickered at me when I raised my hand (and beat me up after class).   Maybe it is just karma coming around to bite them on their ass.  Ignorant people who refuse to learn - or worse yet, eschew education as somehow "elitist" or whatever, get their comeuppance in the short and long run.  These are the sort of folks who  vote for Trump and then wonder where all the money went.

We can outlaw payday loans - and then only outlaws will make such loans, as loan sharks did in the past.  We can try to regulate them and force them to limit interest rates - but such regulations can be circumvented or drive business underground.   In one state, after efforts to regulate "buy here pay here" used cars, the dealers merely changed to "lease here pay here" used cars.   These sort of operators are creative - and their clients are the ones driving the business, not the operators of the businesses.

So I do not sit in judgement of those who operate such businesses. I am not "outraged" by the latest story on the internet about some poor slob with three kids out-of-wedlock who lost their job and thought a payday loan was the answer to their problems.   If they hadn't gone to one payday loan place, they would have gone to another.   Ignorance and stupidity have a high "tax" associated with them, and I know this firsthand having paid this tax time and time again in my life.   The answer wasn't in outlawing shitty deals, the answer was me waking up from a long slumber and realizing what a first-class chump I was being.

Some of the nicest people run these sort of outfits, and they view themselves as legitimate businesspeople, which of course, they are.   You can blame them for offering crappy deals to the poor, or you can stop taking crappy deals and stop being poor.   Whenever you read one of these "victim" stories in the press, there is always another side either untold or told on page two, that sort of picks apart at the threads of the story.  Usually drug and alcohol abuse is part of the picture, and again, I say this from personal experience.

No one felt sorry for me when I act the fool or did stupid things.   And likely, no one will feel sorry for you, either.  It is incumbent on all of us to look out for our own best interests.  And salesmen and businesspeople look out for their own interests first, and then to yours, if they do at all.  Thinking that the nice man at the car dealer or the loan store has your best interests in mind is just foolishness.

You can call it blaming the victim if you'd like.  But no one is ever "forced" into signing onerous loan documents It is a conscious choice.