New Book Studies the Rise of the Payday Loan Industry
A new book reveals the story of the short-term loan industry and how it came to be what it is today.
It’s hard to believe, but just a couple decades ago, those with less-than-perfect credit only had three options when cash was tight: bounce a check, borrow from family, or risk borrowing from loan sharks or other unsavory lenders.
Luckily, today’s consumers have more choices – including options like cash advances that are legal, regulated and safe. An honest new book, Broke USA, by journalist Gary Rivlin explores the rise of the payday loan industry and how it has helped and hampered today’s credit-needy consumers.
The Wall Street Journal praises the book for its honesty, but calls for more a more detailed look at how licensed short-term lending has allowed poor-credit consumers to avoid more dire financial consequences, such as bankruptcy, unlicensed lenders and illegal loans. Reviewer, Katherine Mangu-Ward, writes:
“Yes, some people—who find themselves in a fiscal hole and respond with more vigorous shovel work—face mounting debts. Tales of poverty made worse by unrepayable loans are moving, and Mr. Rivlin tells them vividly. But almost completely absent from “Broke, USA” is a discussion of what might have happened to Poverty Inc.’s “victims” in the absence of Poverty Inc. It is indeed expensive to be poor: a loan of $100 for two weeks costs between $15 and $25, something like a 300% or 400% annual interest rate. But the money would not be available at all without the fee, and prompt payment dodges virtually all of Mr. Rivlin’s dire consequences. The best part about the commercialization of credit to the poor is what happens when someone can’t pay: phone calls, visits from collection agencies, tax liens, evictions and perhaps bankruptcy. No picnic, to be sure. But no crowbars either.”
Want to learn more? Read the full review.
