Loansharking is now legalized, in the form of “payday lenders.” The stock of payday lenders is traded on the New York Stock Exchange and NASDAQ. Many payday lending companies do business with Wall Street’s biggest banks. Many payday lenders would not exist if Wall Street had not given them the money to get started. Gary Rivlin writes in his book, Broke USA, “The working poor have become big business.”
Businesses make big money off people who live paycheck to paycheck. There is a whole segment of society that does not use traditional banking services. They cash their paychecks at Wal-Marts, liquor stores, and payday lenders. It is hard to get ahead when you are paying 300 percent or more in fees and interest payments.
In 2006, the U.S. Department of Defense realized that soldiers had a problem with payday lenders. They found that 17 percent of all military personnel were using payday loans. It was estimated that payday lenders were charging members of the U.S. military interest rates between 360 percent and 720 percent. Congress cut it down to a maximum of 36 percent.
According to the Citizens for Responsibility and Ethics in Washington, payday lenders donated more than $1.5 million to federal office holders during the 2010 election cycle. It would have been simple for Congress to extend that 36 percent cap to all Americans, but it did not. Instead, the battle has become one that each state must fight individually. Payday lenders have a well-organized, well-financed front. They hire the best lobbyists. They make lots of contributions to all the right people.