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Without Shame

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It’s that part of the summer where I have to turn on the air conditioner as soon as I wake up, which is not something I’m fond of.  It also means that my allergies tend to need about an hour to cool out before I’m completely competent, and that has some interesting consequences for the writing.

Yesterday, both that and the after-project fuzz put me in the position of sitting on the loveseat, running a bunch of cable news stations on the television set, and periodically being brought up short by the airing of a very strange ad.

I don’t know how many of you out there have seen this ad.  I’ve only noticed it myself over the last week or two, and only really noticed it yesterday.  This may be because it hasn’t been running long up here–and I think there are indications that that might be the case–or simply that I’ve had my mind on other things. 

Yesterday, however, I had no such impediment to noticing it, and I noticed.

It’s a clumsy ad.  The production qualities are not good.  It comes off as the kind of thing the local cable company helps local small businesses to make, except that it’s even less entertaining than that. 

I’m actually very fond of some of the local ads.  There is this guy named Carl who owns two Tru-Value hardware stores up north of me, plus a carpet place.  He runs ads with his wife and with one of his favorite employees.  Then there’s Family Ford, which features the family.  So far, the wife’s the best actor of the bunch.

This ad, though, is just sort of flat.  A woman who looks Native American comes out and asks if you could use $2500 in your bank account by tomorrow.   Then she gives a little spiel about how this money is expensive, but if you’re in a bind it may be worth it, call this number.

Apparently, there is small print showing on the bottom of the screen that gives the first clue as to what’s going wrong here, but I don’t actually look at the television when I “watch” it, so I didn’t see it.

I did get the distinct impresson that there was something very, very wrong here.  So I went and looked it up on the Internet.

And that’s where the fun started.

You’ve got to understand, up front, that I am not the sort of person who claims that I’m “good at math.”  I’m not particularly good at math.  I managed to pass two semesters of calculus in college, and my board scores were very good, but I’m limited, and I know it.

All of this makes me better than the average American math phobic, but still.  My father in law, who never graduated from high school, could stand at the cashier’s in the grocery store and total the bill up in his head before her machine did it.  I am not that good.

I am also not the kind of person who feels that government needs to rush in to save people from themselves whenever they do something I personally think is stupid.

I don’t even think government should rush in and shave people from themselves when they’re doing what is demonstrably and objectively stupid. 

That’s why I don’t oppose “payday loans,” where people go in and borrow $300 on Monday and pay it back in two weeks and the interest amounts to $50.  The interest is awful, but if you’re making minimum wage and that’s the only way you can get the electric bill paid, it serves a purpose.  People who want to run the payday loan companies out of business need to establish a different process by which the kind of people who use them can get done what they need to get done.

All that being said, however, this was a kicker.  The ad was placed by a business calling itself Western Sky Financial.  If you go to their website

http://www.westernsky.com

you get some very interesting information.  And you do get the information.  There is no attempt to mislead anybody.   That’s a very important point.  Somebody took a lot of effort to make sure that they could not be criticized for running a scam. 

Of course, they have been accused of running a scam, but that’s because the whole thing is so outrageous, a lot of people assume that it must be one.  What it is, I think, is the legendary “tax on people who can’t do math.”  Yes, I know, that’s supposed to be the state lotteries, but this really comes closer to the mark.  You spent a dollar or two, or even ten, a week on lottery tickets, you’re being foolish.  You get involved in this thing and you’re ruining your life.

Everything about this thing is bizarre.  First, there’s the question of the company, which the ad tells you is a Native American owned company.  Then it lists a single individual living on a reservation in South Dakota as the owner. 

There’s a lot of other Native American language in the ad and on the web site–the agreement for that loan, for instance, includes a provision that the terms will be adjudicated under tribal law (and not the law of the federal or state US government) and that you give up all rights to do things like bring complaints with state and federal agencies or file a class action suit.

Whether the company is actually run by Native Americans is not so clear.  When you look at the application process, you see that when you apply for a loan, that loan is processed not by WSF, but by a California payday loan company called Cashcall. 

Nobody seems to know if WSF has contracted with Cashcall for processing services, or if Cashcall has contracted with WSF to provide cover for its own activities. Whichever way it is, Cashcall has a very bad rep and literally thousands of complaints against it with BBBs across the country.

Of course, that may not matter much, because the real interest in the small print.  Remember that these are not payday loans in the usual sense.  People take on loan agreements that last for years.

And the lowest possible rate of interest you can get on these loans is…115%.

That is not a typo.

Of course, not very many people get that prime rate of 115%.  The company will quite cheerfully tell you that it’s much more normal for the rate to be 139%.  And it can go higher.  As high as 300%.

And the fees are incredible.

For instance:  if you take out a loan for $1500, the company charges you a one-time initiation fee of $500, which comes right out of the loan.  That means you only get $1000 in actual cash, but you pay back the entire $1500 over the course of a few years.  Your final tab?  Over $4000. 

If you take $2600–the largest amount available–your fee is only $75, which doesn’t sound bad.  Unfortunately, the total cost at repayment is at over $11,000.

And you’re not guaranteed to get off even that cheaply.  One of the provisions of the contract you signed is that the company gets to change the terms any time it wants, for any reason it wants. 

Just because it wants to.

I know, but now, most of you are probably thinking that nobody would enter into a contract like this without being brain dead.  Even people who are not good at figuring out how much their dinner at TGIFriday’s costs if they put it on the credit card and pay only the minimum should be able to figure out this is awful.

Even desperation doesn’t completely explain how people get sucked in by something like this.   Yes, desperation can make your mind go blank.  This requires your mind going vegetable.

I’m happy to report that the Internet is full of people who are good at this kind of math and willing to help out the people who aren’t.   If you plug “western sky financial scam” into Google, you get whole lists of financial and debt blogs with very full and complete and comprehensible explanations of the deal, the problems with the deal, and the various problems people have had dealing with the company.

And there have been a lot of problems.  Some people complain that after they called the company, they started getting dunning phone calls even though they never took any money.  Other people say their phones were innundated with voice mails and text messages–hundreds in a single day–trying to sell them payday loans and other high-interest financial “services.”

In the meantime, the states of West Virginia, Maryland and Colorado are all going after the company to force it to cease doing business in those states and to stop it from collecting any more payments on any loans it made in those states.   The states don’t seem to buy the idea that if the thing is run out of an Indian reservation, it doesn’t have to follow state and federal laws.

My guess is that I’m seeing these ads in Connecticut now because the company is looking to replace lost territory with new territory–and because Dick Blumenthal is no longer our attorney general. 

Blumenthal is a good man in a lot of ways, although he’s a little too much of a welfare-state liberal for me–but on stuff like this, he was stellar.

This will be the first test of his successor’s resolve and drive and intensity.  I’ll be waiting to see the result.

And in the meantime, I keep trying to think of a character caught in something like this, or perpetrating something like this.

People are very odd about money.

Written by janeh

July 7th, 2011 at 8:47 am

Posted in Uncategorized

7 Responses to 'Without Shame'

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  1. Actually, for people with pollen allergies, it is recommended that they close up their house completely a couple of weeks before pollen season starts, and keep it closed until pollen season is over. Rather than opening the windows at night, keep them closed and run you air conditioner as much as it takes. I finally persuaded my ex-husband to try this one year, and he was amazed at how little he was affected by hay fever. In all previous years he “had to” stay at his office long hours because his hay-fever didn’t bother him as much there as it did at home. The next year, of course, he had forgotten all about how much better he felt in a closed environment, and insisted we go back to “saving money” by opening all the windows at night. And he went back to essentially living at his office. Oh, well.

    Charlou

    7 Jul 11 at 10:34 am

  2. What we need is more disclaimers on TV commercials similar to the ones required for prescription drugs.
    Disclaimer: “If you borrow $1,500 from us, we will actually only give you $1,00, and you will have to pay back $4,000.”
    or
    Disclaimer: “Every food available at KFC except the lettuce contains MSG, which can aggravate existing medical conditions you may have or create new medical problems, especially in children.”
    or
    Disclaimer: “Eating regularly at McDonald’s will cause you to gain about a pound a week.”
    or
    Disclaimer: “If you buy this cool-looking car, you will not actually become cool.”
    or
    Disclaimer: “If you buy this toy for your kid, the noise it makes will drive you crazy after about one minute, but don’t worry because you kid will be bored with it after about an hour and never touch it again.”
    or
    Disclaimer: “The word ‘faux’ as used by us to describe our product, ‘genuine faux pearls,’ actually means ‘fake’, which means what we are trying to sell you is a string of genuine fake pearls.” [Yes, I actually heard this on one of the home-shopping networks.]
    or
    Disclaimer: “The size 1 dress you see our anorexic model wearing will not look the same on you if you wear a size 16.”

    But why stop there? Why not expand this and require “news” reports to add disclaimers:
    Disclaimer: “The news report you have just seen contains 15% news and 85% opinion, which opinion is not that of the reporters or editors or producers at this station but was mandated by the fat-cat who owns this station.”
    or
    Disclaimer: “In order to raise our ratings and be able to charge more for our commercials, our news editors have chosen to bring you this extended report on the exciting private plane crash in Florida; time constraints have therefore forced us to leave out all the boring news about what government agencies are doing in your state to screw up your life even worse than it was screwed up before.”

    And speaking of government, we could also require politicians to use disclaimers:
    Disclaimer: “Although we have ‘borrowed’ huge amounts of money from the Social Security pension fund, what we have actually done is steal it since we don’t intend to ever pay it back, but when your Social Security payments are cut, we’re going to be fine because we have our own private pension fund that isn’t tied into Social Security.”

    Unfortunately, none of this is really very funny.

    Charlou

    7 Jul 11 at 11:25 am

  3. This is why, when my son was young and starting to pay attention to advertisements, we sat down together and talked about what they were saying, what they were *actually* saying, and what it all meant.

    “Look at this ad. The kids are playing with this toy, and they look *really* happy. Do you think they want you to believe this toy will make you that happy? Have you EVER been that happy playing with a toy? Look at the tiny print. ‘Each sold separately.’ That means you have to buy 8 different pieces to get the amount of toys shown in the ad. That’s going to cost a lot. Is that where we want to spend our money?”

    Starting there gave him a good basis for evaluating every kind of ad…for cars, booze, toothpaste, or payday loans. Oh, and having a rule against buying anything that said “each sold separately” in the ads saved me TONS of money. He wasn’t deprived though, we just bought the expensive toys at garage sales, which are an art form in the Midwest.

    The credit industry laid the groundwork for these payday type life-ruiners when they took off the limits on credit-card interest rates. Usury is an obsolete term now. If you look at some of your current cards, I bet you’ll find that gradual changes in terms even on the best, most reputable cards, will cause rate rises to 25% or 30%+ if you are late paying. Payday loans just take it one step further. Poor people don’t have access to credit at reasonable rates, which is one reason they remain poor.

    What I find incredible is that people think that if Exxon Oil makes a 3% profit, that’s “unreasonable” but the 300% interest rates these guys are charging are okay. :/

    Lymaree

    7 Jul 11 at 12:53 pm

  4. And now a word for the loansharks.

    These Western Sky people are clearly preying on the desperate and stupid. It would be nice to find some way, not just to make them stop and think of a new way around the law, but to convince them that preying on the desperate and stupid is not in their own best interests.

    Problems. First, a LOT of modern government is based on the idea that I’m too stupid and ignorant to be left to make my own decisions. Often the fact that people do what the government disapproves of is considered sufficient proof of stupidity and/or ignorance. That’s not something I much care to encourage. Second, it’s pretty big business. No, not the loansharks–or at least not just them. I think I can find you between three and half a dozen statements by serving politicians this week every bit as truthful sentence by sentence as Western Sky–and every bit as deceitful in overall effect. Ban “truthful but misleading” and maybe you really will be able to read the entire Internet.

    We need a guiding principle which gets rid of these people but still leaves us politicians, used car salesmen and smoking in restaurants. I don’t know what that is. I have one suggestion: we do not seem to need regulations on prices, for the most part, and our attempts to regulate wages have mostly worked out poorly, or at least had major unintended consequences. If you’ve got a competitive market, businesses normally go broke offering wages below prevailing or charging prices only stupid people would pay. If we can work out why this isn’t working here, maybe we can work out what exactly to regulate, or find some way to make it work.

    Also it’s worth remembering that “reasonable rates” have to be calculated based on the lender’s chances of getting his money back. With the best will in the world, that will make for some pretty stiff rates in some cases. Not Western Sky rates, maybe, but if making payday loans were really a license to make money, I could name some banks who’d be out doing it. Most of them, actually.

    robert_piepenbrink

    7 Jul 11 at 6:20 pm

  5. I don’t know why Jane says this isn’t a usual payday loan situation. It’s almost exactly a payday loan situation, because payday loan companies don’t always want their loans paid on payday. They make a lot more money if they aren’t – and the amount owed can snowball quite quickly to these amounts.

    And it’s not at all surprising that people fall for this sort of thing – you’ve got the stupid, the desperate, the stupid AND desperate. Then add in the optimists, who get hit with an expensive repair for the car they need to get to work, and are absolutely certain they can pay it back in time and are willing to pay the fees because after all they need the work – but then, the toilet backs up or water starts pouring in the roof or (in the US) someone in the family breaks an arm, and they not only can’t make their payments, they need more money, which of course, the company is happy to provide. For a price.

    I don’t think there’s any limit to what a desperate person will offer to pay for money for expenses, and I don’t think those loan companies have a lot of overhead, so it must be a very profitable business even if a lot of their clients eventually can’t pay. What matters is how much money they come up with before they can’t pay – small amounts per person, but LOTS in volume.

    Some of the clients learn, though. The mother of a friend of mine borrowed money from a company that was about one step up from a payday loan company, and scrimped and scraped and paid it all off. The company promptly phoned her and offered another loan, which she refused in terms that her daughter remembered for years and years.

    Cheryl

    8 Jul 11 at 7:48 am

  6. “Also it’s worth remembering that “reasonable rates” have to be calculated based on the lender’s chances of getting his money back. With the best will in the world, that will make for some pretty stiff rates in some cases. Not Western Sky rates, maybe, but if making payday loans were really a license to make money, I could name some banks who’d be out doing it. Most of them, actually.”

    Some few years ago, I read an article in a respectable source making a pretty fair defence of the pay-day loan industry here in Australia. I can’t remember the details now, but the risks, overheads and other costs of dealing with the sort of people and the sorts of places which generate the main business for these companies virtually demand exceptionally high interest rates. Obvious the exorbitant sums being bandied about above are cruel and unusual, but then so are hire purchase flat rates of interest and credit card charges which, over long term loans, eg up to five years here sometimes, have an effective rate of interest not much lower.

    To the extent I recall the article, I think the main point was that most of the loans were for what are to most people relatively trivial sums, say for not much more than $200 or thereabouts for which a standard rate of interest for a sum to be repaid in a week wouldn’t pay the costs of a lender standing on a street corner in the rain let alone operating from a rented office with a phone, even on the fringes of the local suburban business district.

    They provide an essential service for a class of people with no viable alternatives, and shouldn’t just be generally condemned out of hand.

    Mique

    8 Jul 11 at 9:46 am

  7. My Mastercard credit card charges a daily interest rate of 20/365 % on cash advance, They can vary the terms at will but send me a 50 page booklet when they change the terms. I wonder how many people read it.

    I try to use my debit card rather than the credit card!

    jd

    8 Jul 11 at 4:09 pm

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