From the department of good government practices: St. Louis’ City Treasurer Tishaura Jones is helping city workers escape the high-interest, payday loan world and gain the advantages of having bank accounts. She’s doing it with a simple, commonsense measure: paying city workers via direct deposit.

“St. Louis is near the top of the nation in the number of “unbanked” minority households. We are third in the nation right now, and just a few years ago, we were number one,” said Jones in an interview with Republic 3.0, an organization that highlights practical governmental solutions to issues. “This means that more than a third of our minority residents don’t use a traditional bank or credit union for financial services. Instead, they’re using payday loans or check cashing services or title loans.”

Jones started looking into a direct-deposit payroll system in 2013, soon after she was elected City Treasurer.

I found that we could take our city employees to mandatory direct deposit. Out of 7,000 employees we manage payroll for in the treasurers’ office, 1,600 of them weren’t on direct deposit.

We held three banking fairs for people to choose a traditional bank or credit union, and if they didn’t choose one, they were assigned their benefits on a [pre-paid] card. Eight hundred people chose that option, although another 800 people chose a traditional bank or credit union. Going to direct deposit not only saves the employees money, we saved over $100,000 for the city each year [in fees] by going to direct deposit.

Jones’ policy addresses an issue that affects workers everywhere, not just in St. Louis. According to a report by the FDIC [Federal Deposit Insurance Corporation]:

• As many as 10 million American households – or 1 in 12 – lack a bank account.
• As many as a quarter of U.S. households rely on non-bank financial service providers, such as check cashers, payday lenders or title loan companies, for all or part of their banking needs.
• These services can be expensive – check cashing typically costs up to 4 percent of the value of the check – and offer no options for consumers to save.
• Low-income people are the ones most likely to be underbanked. Among households with annual incomes of less than $15,000 a year, 28% have no bank account and another 22% have less than a full range of services.
• Rates of underbanking are similarly high among the unemployed, people without high school degrees and those under the age of 25.
• In addition, African Americans, Native Americans and Hispanics have higher rates than whites and Asians.

Why do so many people remain outside of the financial mainstream of banks and credit unions? Jones says:

One reason is lack of trust in traditional banks or credit unions. We also find that people have had a bad experience – [they’ve] bounced several checks and as a result have an outstanding balance with the check system that they have to pay off before getting access to another account.

Another reason is that banks and credit unions just aren’t located in their neighborhoods, whereas payday lenders are. The same relationship you may have with a banker or a financial institution, they may have with a payday lender.

The consequences of being unbanked are that the average family could save over $40,000 over a lifetime or over $1,200 a year by using a traditional bank or credit union.

There are many arguments to be made against the way our banking system works: That our financial system is rigged in favor of banks and against consumers; that the banking lobby has successfully blocked many needed regulations that would help consumers get a fair deal; that banks themselves have created the payday-loan/checking cashing industry that deliberately preys on low-income people; and that banks have abandoned low-income neighborhoods, forcing residents to use high-cost check-cashing services.

With all that, it’s understandable that some people distrust banks and have opted out. But despite these legitimate concerns, the fact remains that people who are “unbanked” are at a distinct economic disadvantage, and many “unbanked people” aren’t outside the system by choice. Without a bank account, it’s hard to establish a credit rating. Not having a bank account often means that you can’t get a loan at a reasonable rate—you are forced to go through payday lenders, whose interest rates are often extremely high. Without a bank account, you can’t get a credit card. The list goes on.

St. Louis is not the only city that uses direct deposit to pay its workers, and Tishaura Jones didn’t invent this idea all by herself. But kudos to Jones for bringing this practical approach to St. Louis, bucking the ugly nationwide trend of punishing public workers, and instead, trying to improve their lives.

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Honestly, I think you have to be a masochist to work for social justice in MIssouri.

Case in point:  the recent effort to get an initiative on the ballot that would allow voters to put a cap on payday lending in the state.

I say “recent effort,” but in fact some people have been working on this for more than a decade.  An organization called Communities Creating Opportunity in Kansas City has been working to get some regulation into the payday loan industry for 13 years.

Payday lenders (along with those who loan money in exchange for your car title, and the notorious “rent to own” outfits), dot the Missouri landscape like boils on a suffering Job.  In some rural areas there are three or four around the courthouse square.  In urban areas, they set up shop in low-income communities, where their victims are frequently people of color or recent immigrants.

Because these outfits charge exorbitant interest rates for short-term loans (in Missouri, the average rate is 445 percent, but it can go as high as 1,000 percent if the borrower repeatedly renews the loan), advocates have for years tried to bring some justice into the system.  Missouri legislators, many of whom receive hefty campaign contributions from out-of-state payday lenders, have resisted every attempt to regulate the industry.

Finally, in 2011, enough people got fed up to tackle the issue head-on.  A group of grassroots advocates, working as Missourians for Responsible Lending, developed a petition to get the issue on the ballot in November 2012.  The petition called for payday loan interest rates to be capped at 36 percent, which is the exactly what the Federal government allows lenders to charge members of the active-duty military.

Today, these grassroots advocates are wiping the grass stains off of their petitions.  They have been felled by the Roundup of the payday loan industry.

It didn’t take the money-changers long to bring in their big guns.  Last winter, as petitions began circulating and people began talking about the abuses of the industry, leaders of churches and synagogues across the state received letters from a law firm in Grapevine, TX.  The letter warned clergy (erroneously, but who cares about the facts) that their institutions could end up losing their tax exemptions if they supported the petition drive.

When lies and intimidation didn’t work, the profiteers tried other tactics.  Hundreds of signed petitions were stolen from a car in southwest Missouri,  Petitioners were harassed on the streets.  Fake petitions were printed and circulated in an effort to confuse voters.  Deceptive ad campaigns were launched.  Millions of dollars were spent before industry leaders resorted to the courts, where they used every avenue available  to assert that hundreds of thousands of legally signed and verified petitions did not qualify for the ballot in November.

It was too much for the good guys.  In a real-life version of Survivor, the predatory lenders, unencumbered by morals or ethics, were able to outspend, outwit and outlast them.

It was a sad irony that Missourians for Responsible Lending announced that they were suspending their legal challenges on Labor Day, a day set aside to honor workers and their many contributions to our communities.  Give Missourians a Raise, also a grassroots effort to collect signatures on a ballot initiative to raise the minimum wage in Missouri, also threw in the towel on Labor Day.

“Despite Missourians’ clear desire to have both initiatives on the November ballot, we have reluctantly concluded that the legal hurdles erected by the payday lending industry, their allies and their lawyers are too high for us to cross before the September 21 deadline for finalizing the November ballot,” said the Rev. James Bryan, treasurer for Missourians for Responsible Lending.

Advocates for reform are vowing that they are not giving up, and I don’t doubt that they will be back to fight again.  But I’m beginning to wonder if the supply of masochists might be running dry in Missouri.

Payday lending reform and increasing the minimum wage are just two issues that have been beaten back in this state.  We’re now on our third try in ten years to increase our cigarette tax, which is the lowest in the nation.  Our legislators have vowed not to expand Medicaid (never mind that it would bring millions of dollars into the state; it’s a part of—gasp—Obamacare!)  In our last legislative session we witnessed our leaders pitting healthcare for the blind against funding for higher education.  We still have the death penalty in this state and dozens lined up on death row.  We don’t bother to collect taxes on purchases made on-line and our tax code hasn’t been modernized since the 1930s.  Yes, we are the Show-Me State.

Masochism is defined as “a pervasive pattern of self-defeating behavior.”  If this sounds like one of your character defects, I welcome you to join us in Missouri and pick one of these issues to work on.  We’ll show you frustration.

The post Wanted: More masochists in Missouri appeared first on Occasional Planet.

Three measures in Missouri garnered enough petition signatures to make it on the November 2012 ballot, but will Missourians’ conviction be enough? With nearly twice the required minimum number of signatures on each petition, Missourians submitted ballot measures to raise the minimum wage, increase the country’s lowest cigarette tax, and cap loan annual percentage rates (APR) at 36%. Once reviewed and approved by the Missouri Secretary of State, they should be on the November ballot, but opposition is fierce.

Moneyed interests are fighting the petition to cap loan APR’s with bully tactics that include physically preventing signers from accessing petitions, harassing signature gatherers and signers, perhaps even breaking into a gatherer’s car to steal more than 2,000 signatures. Payday lenders and their enablers also filed a lawsuit claiming that the language of the measure is “deceptive.” Faith leaders and proponents disagreed.

In early April, a circuit court judge sided with lenders, ruling the petition’s language “insufficient, unfair, likely to deceive petition signers and voters.” The Missouri attorney general’s office filed an appeal of the ruling, but now the opponents of the cap are pushing Secretary of State Robin Carnahan to invalidate the more than 180,000 signatures in order to keep it off the ballot in November.

It is clear from the sheer number of signatures alone that many Missourians agree the current annual percentage rate of payday and title loans is exorbitant. Efforts to inform voters are paying off. More than 430% APR on a single small loan does little to help low-income people—who are overwhelmingly targeted by these types of lenders—stem the tide of debt, and Missourians know this. Voters’ interests, however, may not be enough against a huge Missouri predatory lending industry willing to bully, buy, and lawyer their way to victory.

It may come as little surprise that big tobacco is also waging a battle to prevent Missourians from voting to raise Missouri’s tobacco tax from 17 cents to 90 cents per pack. Despite garnering over 220,000 signatures and an apparent mandate, this ballot measure’s language was also challenged in court. A trial judge in Cole County recently upheld the measure’s language, declaring it clear and fair. Pending the secretary of state’s review and approval, the measure could make it to the ballot.

It’s worth noting, however, that the Missouri legislature had quite a few bills last session regarding a cigarette tax increase and unilaterally failed to bring them to the floor. Again, this is not a big surprise, especially given this year’s antics and the many failures of the Missouri legislature to enact laws for the greater good. (What happened to all those jobs we were promised?)

Voters have also defeated efforts to raise the tobacco tax twice in the last decade. Recent budget cut battles, austerity measures, and public sector layoffs may convince them that increased tobacco tax is much-needed revenue for education and smoking cessation programs.

The Missouri Chamber of Commerce is opposing the ballot initiative to raise the minimum wage to $8.25 from its current level of $7.25 per hour and also allows for increases every year based on inflation. Opponents claim paying employees a full dollar more per hour is a financial hardship on employers during “fragile” economic times and could abate hiring, but they made the same claim in 2006 when the economy was in better shape, and unemployment was about half the levels we’ve been seeing.

There is no evidence to suggest that giving low wage workers a small raise in itself harms the job market, though it’s not difficult to argue that paying people too little is seriously distressing for millions of families. All three of the Republican candidates currently duking it out [in extreme fashion] in the primary to run against Claire McCaskill could not even tell you what the minimum wage is, much less how detrimental or beneficial it is. And yet they all oppose increasing the minimum wage for Missourians and across the country. Disconnect much?

Wages nationwide and around the world have scarcely kept pace with inflation, as countless experts and economists have asserted. Though our personal hardships may be a testament to this fact, it is difficult to predict whether an extremely and increasingly polarized red state—complete with newly drawn political districts–will disregard all the paid-for political noise and vote in their own best interests.

We’ll find out in November.

The post Missouri ballot initiatives: Will big-business’ interests trump voters’ interests? appeared first on Occasional Planet.

Every November, a host of new fliers appear on doors in my low-income neighborhood. They are not typical advertisements. With all the Black Friday and holiday hubbub this time of the year, it’s not unusual for consumers to be bombarded with promises of never-before-seen sales, “blowouts”, and price slashing. In my neighborhood, however, it’s not unusual to come home from work and find a door-hanger promising quick payday or title loans, guaranteed home/auto financing “regardless of credit”, and low weekly rent-to-own payments [invariably for those big-screen televisions we keep hearing the poor overwhelmingly own].

So it came as no surprise that I found just such an advertisement hanging on my front door when I arrived home one recent November afternoon. The ad proclaims “Turn your car title into cash!” and entices the reader with promises of the “most cash”, “Instant approval”, and “no credit check”. It also claims to provide the lowest rates. Normally I toss these things in the trash bin where they belong. But that bold, all-caps “lowest rates” stamp really set me off.

Many of the same companies that provide payday loans are also in the car title loan business and use the exact same short-term, high-interest loan model. Annual percentage rates (APR) for title and payday loans in Missouri typically fall between 300 and 400 percent. Thanks to skimpy regulatory laws, payday lenders in Missouri can charge up to 75 percent of the loan amount in interest and fees–or $75 for every $100 loaned. That amounts to a whopping 1,950 APR at the top end. It also makes Missouri a virtual paradise for lenders who are closing their doors in other states that have caps on payday loan interest rates.

The poor make ideal targets

If you’re hard-up for a few hundred dollars, what’s several hundred more in interest and fees, right? And if you can’t pay back nearly twice what you borrowed in a matter of days, just extend the loan; for a fee, of course. Due to high fees and short terms, many Missouri borrowers will take out a payday loan to pay off another payday loan, creating a cycle of unsustainable debt. The average number of payday loans per borrower [nationally] is 9 per year.

Who would fall into such a trap? Low-income individuals who regularly fall behind on monthly bills or want, like everyone else, to put a few gifts under the Christmas tree are likely to be lured in by easy, instant cash. If you have ever found yourself in the position of being unable to pay a bill that was due yesterday and/or are facing shut-off or eviction, you too are a target.

The Better Business Bureaus of Missouri and Illinois released a 2009 report that details predatory lending practices. In it, they cite The Consumer Federation of America’s profile of the typical borrower: “Payday loan borrowers are typically female, make around $25,000 a year, and more likely to be minorities than the general population.” The report goes on to quote a press release from U.S. Rep. Luis Gutierrez of Illinois, which states that payday lenders are “concentrated in low-income and minority neighborhoods” and that “those who most need these loans are often the least able to repay them.”

Naming names

The public accountability initiative, National People’s Action, has collected data on predatory payday lenders and their enablers. In an aptly named report The Predator’s Creditors is a telling graphic “web” of lenders that puts banks like Wells Fargo, Bank of America, and US Bank at the center of the industry. Stuck in the sinister web of onerous loans is JP Morgan and executives from Goldman Sachs and Morgan Stanley, all recipients of TARP money.

At a time when credit for personal and small business loans is hard to come by, these banks are extending massive amounts of credit to payday lenders so they in turn can fleece the public—and Missourians in particular—out of billions of dollars in fees and exorbitant interest. According to The Predator’s Creditors, “Big banks provide $1.5 billion in credit to publicly held payday loan companies, and an estimated $2.5-3 billion to the industry as a whole.”

Regulatory law and order

By Missouri law, consumers can obtain short-term loans (typically 2 weeks) from various payday loan companies simultaneously. Unlike in other states, Missourians are allowed to renew loans up to six times while being charged the same interest rate as the original loan and a 5% fee on the outstanding balance. That’s a lot of cheese.

The Division of Finance reports that Missouri is the only state, of 9 contiguous states, to allow renewal of payday loans. Next to Tennessee, Missouri has the most payday loan companies. As of 2009, Tennessee had more than 1,480 and Missouri had 1,275. Not surprisingly, Missouri also allows the highest APR with 1,950%, the next highest being Arkansas with a maximum APR of 520%. Of all 50 states, multiple payday loans (more than 5 per year) cost Missourians the most—Missouri ranked #2 on the list of states, at $317 million according to the Center for Financial Responsibility.

Multiple congressional attempts to cap payday loan APR’s have failed, though a few states have been successful in ridding themselves of payday loan companies. Most recently, Arizona legislators let a law expire that allowed high-interest loans, capping them at 36% and effectively putting a stop to predatory lending practices. Washington, Ohio, North Carolina, and the District of Columbia are all among the states that let lapse temporary laws allowing payday loans and/or put caps on loan APR’s. Montana voters approved I-164 this November, a ballot initiative to cap car title and payday loan APR’s at 36%.

A similar interest cap in Missouri would undoubtedly offer Missourians protection from predatory lenders and stop a major factor in the high-debt cycle. For maximum effect, Missouri should adopt restrictions on the number of simultaneous payday loans a person/household can obtain. We simply can’t afford to adopt the easy-come, easy-go attitude of the banking industry.

Image credit: Ameriloansearch.com

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