Pawn shops. Rent-to-own stores. Check cashing places. And payday loans. Holy smokes, where did all these places come from? You go to certain strip centers and it's just one after another.
A lot of it has to do with changes in laws regarding interest rates, certainly in Wisconsin. But the industry says it also has to do with high banking fees. When it costs $35 for a bounced check, a $20 interest charge on a weekly loan doesn't seem so bad.
In his new book, Broke, USA: From Pawnshops to Poverty, Inc.; How the Working Poor Became Big Business, journalist Gary Rivlin tells how the industry exploded, following the movers and shakes, as well as the critics and victims.
It wasn't a shock to my fellow booksellers that I was reading this. I'm both interested in business and economics from the market aspect, but also from the moral side. And boy, does Broke USA have a lot of both.
You just connect the dots to see how the subprime mortgage meltdown happened. A lot of the initial companies in the business, Beneficial and Household Finance, for example, were staid old companies. Household, though it practically printed money, hoped to burnish its image with diversification.
The change happened when the capital markets decided that it was ok to make as much money as you could off the working poor. So what if folks got caught up in neverending rolled-over loans. So what if your salespeople lied about interest rates and contract clauses to make a sale. You weren't breaking the law, they were.
It wasn't always the story I wanted told--for example, when the story started with a victim, I thought there would be these stories sprinkled throughout, but they vanish for long stretches.
And then there's the nonprofit Atlantia Legal Aid Society, which accidentally spearheaded subprime lending and probably never expected it to be so corrupted. They are sort of the heroes in the book, but their storyline is worthy but a bit dry. Still interesting, though.