In response to the coronavirus pandemic, more than 20 states have shut down non-essential businesses so far, and like clockwork, an increasingly unlikely parade of companies is claiming to be essential. The latest is Cash Store, an “alternative to payday loan” chain that has ranked its more than 100 locations in Illinois, Michigan, New Mexico and Wisconsin as essential businesses. All four states have placed shelter-in-place orders, but at Cash Store, life goes on.
Critical business listings for some states, such as Illinois, include “banks and financial institutions.” But payday loan stores aren’t considered financial institutions – in fact, at least one circuit court has specifically held that they are not. Still, Cash Store said it remains open as a core financial service, meaning all of its storefronts are staffed and open at regular times, including for borrowers who wish to “invest funds for periods of time.” long and short “or” transfer financial risk between clients. ”
Payday lenders are notorious for finding clients in difficult circumstances and leaving them in the worst. Deferrals, misleading advertisements and unrealistic repayment schedules push desperate borrowers to debt traps, where many pay thousands of dollars in interest on a few hundred loans and always end up going bankrupt. Borrowers take out new loans so as not to default on old ones; according to a Pew Charitable Trusts report, paying off an average payday loan “requires about a third of the average borrower’s salary, leaving not enough money to cover daily living expenses without borrowing again.” Likely to borrow for critical needs: Medicaid expansion in California cut payday loans ( Guaranteed Approval Loan ) by more than 10%, in 2017 Health affairs study find. And “alternatives” to payday loans, such as car title loans, often end in repossession.
But it’s an incredibly lucrative industry: short-term borrowers, i.e. bankrupt people with bad credit,paid over $ 60 billion in fees and interest in 2015. Things got worse with Donald Trump go back consumer protections of the Obama era, as well as its evisceration of the only federal agency built to fight predatory lending.
Cash Store is the retail face of Cottonwood Financial, a major retail credit player, which has spent over $ 50 million in advertising only in the 2000s. Cottonwood CEO and Chairman Trevor Ahlberg (also an enthusiastic big game hunter, according to a detailed survey speak Texas Observer) has donated over a million dollars to conservative causes, and thousands to PACs supporting Trump — and he’s far from alone in industry. As early as 2013, the Texans for Public Justice found that Ahlberg was “by far the most politically active payday lender”. according to at D Magazine.
by Cottonwood Better Business Bureau page is a litany of complaints (and often replies by form letter) from consumers who claim that they have been asked to pay the same debt, or part of it, more than once; that Cash Store has made unauthorized direct withdrawals from their current accounts; and, of an employee identifying himself as a benefits specialist, that Cash Store said he would not add his young child to his employer’s health insurance without a court order. (Cottonwood responded, acknowledging that he ultimately added the child.) In his own backyard in Texas, Cash Store practices appear to bypass local laws that limit loan amounts and payments, the Observer reported.
It is not immediately clear why Cash Store would keep hundreds of physical stores open. Many payday lenders offer cash advances online, including through apps that you can access over the phone. Some claim to deposit your funds remotely within minutes. And if you want to donate your money to Cash Store from home, no problem – you can make a loan payment by phone, mail, or electronically, through its coronavirus webpage. But need to borrow money? You will need to get there. Unlike some competitors, Cash Store will only take money from a distance, not distribute it., despite evidence that small cash loans can be approved remotely. This means thousands of workers are walking into hundreds of stores, helping Cottonwood collect debts, at the cost of exposure to COVID-19.
The Cash Store website claims to have “implemented additional cleaning and disinfection protocols” and sent its stores “additional cleaning supplies to increase health safety.” Their blog has several articles related to COVID: “We decided to check the facts on some of the top stories related to the coronavirus, to help you overcome the stigma and get straight to the point! We say. Another offer dismissed job seekers a list of companies currently hiring, from CVS to Papa John’s. After all, you can’t get a payday loan without a payday. With 5 million jobs or more on the chopping block in March alone, Americans will need money in the months to come. But the typical requirement for a payday loan is a steady stream of income, and massive job losses could lead to problems for payday lenders.
If Cash Store is at risk of losing business, why stay completely open? A clue: Americans have about $ 10 billion in outstanding payday loans. Many borrowers default on high interest loans, and stores like Cash Store are building this into their model; Cottonwood Financial sells its unpaid debt to collectors for pennies on the dollar. But third-party debt collectors are about to get more business than they can handle, most better than payday loans. “At this point, we’re a glorified collection agency,” one cash advance lender wrote on Facebook. On social media, small lenders are rushing to fundraise from individuals and small businesses, swapping stories about lenders who won’t help them lend more, but are still waiting for their money.
Unlike independent lenders of small fingerlings, Cottonwood is not indebted to anyone. The company is promoting itself as “one of the largest private lenders” in the country; it is cash rich, has no debt and is much less risky by closing some or all of its over 300 stores. Even if they were made redundant, frontline Cash Store workers could collect extended unemployment benefits under the CARES Act; instead, they risk COVID-19 for the sake of Cottonwood’s investments. (Cottonwood did not respond to requests for comment.)
Other types of lenders offer breaks on the high interest rates and short terms of most cash advances. The American bank has lower rates on his short-term cash loans, which he presents as an alternative to the payday loan. Barclays waives fees on (usually expensive) credit card cash advances. Cash Store, meanwhile, offers borrowers affected by the tidal wave of closures and layoffs a chance to… borrow again. A web-based FAQ for the business states that you can get “cash back refinance” on your “alternative” payday loan, but you “still need to visit your local Cash Store to complete the loan agreement.” . Fortunately, if you’ve already paid off one Cash Store loan, you’re pre-approved for another.
In fact, the five largest banking and financial regulators in the country have unanimously pushed banks and credit unions to offer serious payday loan alternatives during the coronavirus crisis – cheaper alternatives, not as expensive loans in a slick package. Even borrowing with your credit card, if you have one, could costs less in interest and will not force you into a store.
Cash Store isn’t the only store that remains open under the dubious guise of an essential service. GameStop, Guitar Center, and Lobby also informed Americans that we cannot live without them. Joann Fabrics and Crafts, loan by Thoreau, initially defied state orders close, although he is now giving in mask making kits for good Samaritan couturiers. And some tried to make extra money during the crisis: the Menards hardware chain was ordered last week to stop drive up prices on cleaning products and masks. States have seen a wave of price abuse complaints, and the cost of protective equipment has skyrocketed among online retailers.
Do you have any other examples of businesses refusing to close despite better judgment, cutting corners on safety, or simply profiting? Help Mother Jones track corporate fund seizures during the pandemic with an email to [email protected]. If you can, include photos, links, or documentation.