As Rachel explains, the payday lending business, or what we used to call loan sharks, is fighting against any new regulations. As she noted, the mega-rich Check Into Cash CEO is one of those fighting against the industry being regulated at all.
In the wake of the biggest financial crisis since the Great Depression, a high-living, politically connected Tennessee businessman who made a fortune by lending money to the poor at sky-high interest rates has ties to a successful effort to water down financial regulatory reform.
Meet W. Allan Jones, who in 1993 founded Check Into Cash, a pay-day lending chain that says it now has 1,100 stores in 30 states. The company offers short-term loans designed to tide customers over until their next paycheck. But the interest rates can be as much as 400 percent on an annualized basis, meaning that they lead many borrowers to end up digging themselves deeper into debt.
...The business has been good to Jones, 56, however. In 2005, a Tennessee business magazine put his net worth at $500 million -- high enough to put him on a list of the state's richest 20 people, alongside FedEx founder Fred Smith and Thomas Frist Jr., the hospital entrepreneur and father of former Senate leader Bill Frist.
And Jones hasn't been shy about displaying that fortune. According to the magazine, Jones's 400-acre home boasts an air-conditioned muscle car garage, which includes a $300,000 Maybach; an on-site greenhouse with a full-time horticulturist; a three-story tree house; and -- get this -- a regulation-sized football field with lights, a scoreboard and supporting field house and stand, which he used to host the first-ever private college football game, raising $100,000 for University of Tennessee-Chattanooga.
...All of this wouldn't amount to much more than a rather severe lapse in taste (although we admit the three-story tree-house sounds cool) were it not for recent events in the U.S. Senate.
There, Corker reportedly has weakened the section of the major financial regulatory reform bill that deals with pay-day lenders. Thanks to Corker, who sits on the Senate Banking committee, the new CFPA will have to get permission from a body of regulators in order to enforce rules against payday lenders and other non-bank financial companies -- a step that consumer groups say will significantly hamstring the agency's ability to crack down on predatory lending practices. Read on...
Check For Cash founder Jones started a new blog and as Rachel noted, tried to downplay just how much money his industry makes.
"Is a store that earns $8.96 for each hour they are open 'raking it in?' Believe it not, some elitist people and the mainstream media think so," Mr. Jones writes in his first blog posted Wednesday....
"It's hard to feel like a predatory lender when you make about the same wage as the average employee at Burger King a company which, by the way, netted $200 million last year. Whoppers are clearly more profitable than payday loans," Mr. Jones writes.
Yeah, that elitist mainstream media from poor little old Allan Jones --Tennessee Business Magazine:
W. Allan Jones
Source of Wealth: Check Cashing * $500 Million
Jones is the founder of the payday advance industry (see previous story). His 400-acre home site in Cleveland has an air-conditioned muscle car garage highlighted by his $300,000 Maybach; an on-site greenhouse with a full-time horticulturist; a three-story tree house; and a regulation-sized football field with lights, a scoreboard and supporting field house and stands. Jones hosted the country’s first-ever private college football game, raising $100,000 for University of Tennessee-Chattanooga.
Jones owns and operates the Crescent H Ranch, a 233-acre commercial dude ranch and western lodge in Jackson Hole, Wyo., home to seven miles of spring creeks, ponds and the Snake River—a fisherman’s paradise. In all, Jones owns 433 acres in Jackson Hole. In the shadows of the Teton Range, it borders 1,300 acres of national forest. He bought it at auction in 2000 for $12.3 million, but its value has shot through the roof since. The seller? Fellow Tennessean John “Thunder” Thornton, who paid $52 million for a much larger parcel in 1997, then sold several multi-million dollar lots.
After his 136-foot Mefasa yacht previously owned by King Juan Carlos of Spain burned in a fire near Palm Beach, Jones bought a 157-foot boat, named after his wife, Janie, that was under construction for NASCAR racing kingpin Rick Hendrick. Its estimated price tag is $24 million. The boat has a 61-inch plasma television in the lounge. In the pilothouse are nine additional televisions on nine satellite receivers for thorough tracking of Saturday college football games. It’s available for charter for $175,000 per week ($25,000 a day). Jones expects to make $1 million leasing the boat this summer alone. Racecar driver Jimmie Johnson honeymooned on it. This May, the boat was in Monaco hosting wealthy Russians attending the Grand Prix. It later docked at the Cannes film festival.
For use in his businesses, Jones owns two planes, a Challenger 600 ($5 million) and a Citation V Ultra ($4 million). He’s about to buy a third, rumored to be a new “Global Express,” considered the ultimate corporate jet, with a price tag around $40 million.
As Rachel noted, Sen. Kay Hagan has introduced a bill to protect consumers from predatory lenders -- HAGAN INTRODUCES BILL TO PROTECT CONSUMERS FROM PREDATORY PAYDAY LOANS:
WASHINGTON, D.C. - U.S. Senator Kay R. Hagan (D-NC) today will introduce legislation to ensure payday lenders can no longer send hardworking families into a spiral of debt. The Payday Lending Limitation Act of 2010 protects borrowers by ensuring that short-term cash advances remain short-term. Senators Richard J. Durbin (D-IL) and Charles E. Schumer (D-NY) are cosponsoring the bill.
"Too many hardworking individuals have fallen victim to payday lending," said Hagan. "Payday lenders prey upon folks who find themselves in need of a quick loan. These lenders charge astronomical interest rates and expect unrealistic repayment terms. In the state Senate, I worked to pass legislation that effectively ended payday lending in North Carolina, and I hope to do the same across the country. By reigning in payday lenders, we will protect consumers from racking up endless, long-term debt that can ultimately cause a family to declare bankruptcy."
"This bill would stop unscrupulous lenders from charging 400 percent interest on loans, especially during these hard economic times," said Mike Calhoun, president of the Center for Responsible Lending, a nonprofit, non-partisan research and policy group based in Durham. "Sen. Hagan fought for these protections when she was in the North Carolina senate and is now bringing this commonsense approach to the federal level."
By marketing payday loans as short-term advances, predatory lenders trap borrowers in a cycle of debt. With repayment due in just days, interest rates that reach 400 percent, and required lump-sum repayments, borrowers are often forced to take out new loans to repay the old loan. Over 60 percent of payday loans go to borrowers with 12 or more transactions per year and 24 percent of payday loans go to borrowers with 21 or more transactions per year.
Payday borrowers typically receive loans of $300-$500 and secure them with a post-dated check or debit authorization that coincides with the borrower's next payday. These loans often are taken out to meet unexpected, short-term expenses. However, studies and anecdotal evidence show that borrowers frequently remain indebted for many months after receiving their first payday loan.
Hagan will work with her colleagues to include the Payday Lending Limitation Act in the Wall Street reform legislation the Senate will soon consider. The current version of Wall Street reform excludes regulation of payday lenders.
The Payday Lending Limitation Act of 2010 would modify the Truth In Lending Act to:
· Limit Rollovers -The bill will prohibit creditors from issuing new payday loans to borrowers with six loans in the previous 12 months or 90-days aggregate indebtedness. FDIC-regulated banks have been subject to this six-loan standard since 2005 - this bill would just extend the same standard those community banks observe to all lenders.
· Provide Extended Repayment Plans - Gives borrowers an option to repay their loan over a longer time period to break the debt trap. The bill mandates that creditors offer an extended repayment plan to borrowers who are unable to meet repayment obligations
· Regulate the Payday Lending Industry - Gives the Federal Reserve Board the authority to require licensing and bonding of payday lenders.