Hardship, Loans & Ripoffs

Hardship, Loans & Ripoffs
Looking back at what credit used to be (and what it is now)

 

Back when I was a kid, when my dad ran short of money, he had three options available to get his hands on some ready cash. First, tap a relative. Second, get in touch with a guy who knew a guy (you know what I mean).

The third option, which is now fashionable again at your local Check into Cash joint, was writing a post-dated check to the owner of a family storefront business.

Unbelievable as it may seem, there were a whole mess of stores, small businesses really, lining the main streets of any city.

I grew up in Lakewood just this side of the middle of the last century. Madison and Detroit Avenues had shops galore. Not just delis and countertop restaurants, but hardware stores, appliance stores, men’s and women’s clothing stores, and bakeries. Pretty much anything you needed was within walking distance.

There were few chains back then and the only credit readily available was from the department stores.

What these local stores did offer, at a slightly higher price, was the owner being right there on the spot. You got to know him and he got to know you. That was the rule that has become the exception now.

There was this place called the Midnight Market. You could get what you needed to get there deep into the night. And it was open on Sundays. Remember, back then grocery stores here in Cuyahoga County shut down tight at 6:00. You can forget Sunday.

The guy who ran it, Fred, would take my dad’s check for goods and then later exchange the check for cash or deposit it by the date on my dad’s check. This, of course, was a short-term loan. Or in modern terminology; a “Payday Loan” or “Check into Cash.”

It was also good for Fred and all the other storeowners who practiced this form of credit because it moved inventory. Still, it was a risk. But it cut both ways. If Fred didn’t take my Dad’s check, word would get around and no one in the neighborhood would either.

If you were really desperate for cold, hard cash, you could always head on downtown to put some stuff in hock with a pawn store. They are still there, these Collateral Based Loan Providers, lining Prospect Avenue just like they did back then. You can find them right around the corner from the trendy East 4th area.

Now you can sell your old gold (old gold, what exactly is that?) by dropping your stash in a conveniently supplied envelope and sending it off to get appraised. No more Schlepping to the pawnshop. Saves the embarrassment, I guess. Or better yet, you can sell gold and silver, only high value items please, right here in Westlake, Avon and North Olmsted.

In the ’80s, when I became an accountant, some of my small business clients still practiced this post-dated check form of credit that was not called credit. They made up for the potential loss by adding what they called a convenience charge into their pricing.

Then came Master Card and the big national chains. This turn of events pretty much wiped out the local stores that offered only the personal touch of having the owner living in the neighborhood.

In these days of credit scores, 30% credit card interest and the cashless, checkless market place, if you are out of that loop, you are out of luck.

Now these Payday loans and check cashing outfits that have slithered into the void exist only to prey on the likes of my dad who was always running short and people who are outside looking in at the modern financial system. They charge fees but are now required to show you the real interest rate you will be paying. Change we can believe in.

What’s worse is these Pay Day operations locate in places where people are always short on cash. (Psst. If one of these outfits opens in your neighborhood, you might want to take a look at your property values over on Zillow.com.)

By the way, you can get pre-qualified online before you head over to the storefront. How convenient is that?

Here in Ohio, say you need $250 for 14 days. You will pay a “fee” of $64.89, which translates into an annual interest rate of 676.1%. Up the pike a piece in Michigan, that same loan will only cost you $35.95, which results in a much lower interest rate of 374.91%. I guess that state up north frowns on blatant usury.

(They have to call it a “fee” in order to get around that pesky 28% interest rate limit on loans Ohioans passed overwhelmingly back in 2008.)

The thing is, this is all legal. In fact, the people who operate these gyp joints are welcome donors to the political dandies down in Columbus.

But if you need money and have no other place to go? It’s easy for me to criticize this practice because I have fairly good credit. But not everyone does.

So it really isn’t fair for me to judge what people do when they are in such dire straits. But for Christ sake, do these proprietors really have to charge such onerous fees just so someone can get through a stretch of bad luck?

 

Christopher Green is a Cleveland native who’s well versed in tax issues, having been a self-employed Tax Preparer since 1989. He has previously served as an Editor/Account Manager for the Downtown Tab, worked with the Cuyahoga County Board of Elections, and even ran for State Senate and Congress. He enjoys playing and performing his guitar, learning to play the keyboard, writing and is an avid reader. Read his blog, which documents his journey through the Cleveland Clinic Lung Transplant program, here: http://MyLungTransplantYears.wordpress.com/about.

Post categories:

One Response to “Hardship, Loans & Ripoffs”

  1. Jmthornburgh

    You paint a grim picture with those interest rates. The great thing about our country is that there is absolutely nothin preventing you or anyone else from opening a cash advance store that charges as little interest as you feel would be fair to charge to keep the business open. You could drive all these greedy stores out of business if you coul operate by charging the lower rates you state would be fair!

Leave a Reply

[fbcomments]