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My most recent film, The God Who Wasn't There, is available on DVD at the official site and elsewhere.

Bat Boy: The Musical is currently being staged in productions of various sizes around the world. A movie adaptation directed by John Landis is in development, with no casting announced or shooting date set.

My next feature film, Danielle, remains in development.

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THIS ENTRY:
Slate: "Many Americans—particularly those who don't live paycheck to paycheck—are unfamiliar with the payday-loan industry, one of the nation's fastest-growing and most depressing businesses. Payday advance companies offer tiny, short-term loans—a few hundred bucks for a few weeks—while charging annual interest rates that top 500 percent. Borrow $200 today, pay back $240 or $250 on payday."

� | HOME | �

May 11, 2004

The poverty tax

Three of the most depressing signs in my neighborhood, and they're everywhere: "Pawn Shop," "Check Cashing" and "Payday Loans." They depress me because every time I see one it reminds me that poor people get ripped off in ways that the well-to-do will never know. Millionaires don't pay 500% annual interest on a loan, but poor people do. The middle class doesn't pay a 2.5% or 5% fee just to cash a paycheck, but a large percentage of the lucky duckies who gross $200 a week have to (a minimum account balance is hard to maintain, and conventional banks may not exist anywhere near them anyway). The people who have the least to spare week to week often pay the most in predatory fees and interest rates.

Call it a tax, and add in the payroll tax and other paycheck deductions, and they're in the same tax bracket as Warren Buffet (who, by the way, doesn't think they should be). Add in state sales tax, which they pay in a higher percentage than the average person, as they have to spend 100% of what they earn just to keep treading water, and a lesser portion of their weekly paycheck actually goes to their own direct benefit than that of many richer folks. It can cost a lot of money to be poor.

I was reminded of the noxious odor of "payday loans" by this Slate article by Michelle Leder:

Many Americans—particularly those who don't live paycheck to paycheck—are unfamiliar with the payday-loan industry, one of the nation's fastest-growing and most depressing businesses. Payday advance companies offer tiny, short-term loans—a few hundred bucks for a few weeks—while charging annual interest rates that top 500 percent. Borrow $200 today, pay back $240 or $250 on payday.
...

For millions of Americans, these high-interest short-term loans are a way of life. Just before Christmas last year, more than 10 million people took out a payday loan, according to industry statistics. Between 2000 and 2003, the number of outlets offering these loans more than doubled to 20,000—not counting the many Web sites such as sonicpaydayland.com, mycashnow.com, and so forth that give high-interest quickie loans. Ohio-based Check 'n Go opened 100 new stores last year and anticipates opening another 100 this year. Advance America, a company that only started in 1997, already has more than 2,000 stores. The businesses are thriving in about 35 states.

...

The business is booming because of the massive growth in low-wage service-sector workers. People on the edge have turned payday-advance outlets into a kind of alternative banking sector. It's not illogical. The payday loans are safer than dealing with loan sharks—they won't break your legs if you don't pay, only break your credit rating. And, the industry claims, payday loans may end up being cheaper than actual banks. Despite the sky-high rates, the loans may cost less than the $60 to $70 penalty for bouncing a check, or the $30 in late fees, not including interest, that credit card companies extract for missing a payment. "Our customers don't think they're making a bad financial decision," says John L. Rabenold, a spokesman for Check 'n Go.

There are people out there trying to give the working poor an alternative to Rabenbold and his ilk. One here in L.A. is John Bryant of Operation Hope, about whom I wrote this in Distinction magazine (a magazine for extremely rich people) last year:

In 1992, John Bryant, like many successful 26-year-old investment bankers, did not have a strong interest in philanthropy. “I was a straight-up capitalist. I wanted to be the first African American in history to build a for-profit multinational conglomerate. I wanted to get rich.” But on April 29, 1992, a court in Simi Valley announced the acquittal of the officers involved in the beating of Rodney King, and Bryant’s life took a radical turn. “I was emotionally crushed,” he says, and the riots that followed, on the streets where Bryant had grown up, deepened the blow.
Bryant became convinced that God had allowed him to hone his considerable business skills so they would be ready to apply at this point in Los Angeles history. On May 3, 1992, while South-Central was still smoldering, Bryant called up 30 business associates and took them on a “banker’s bus tour” of the area. The group met a man who had just lost his pharmacy to a fire. On the spot, using a brown paper bag as a scratch pad, the bankers worked out a $400,000 loan to the man. That deal became the first of many rebuilding contracts Bryant would initiate under the umbrella of Operation Hope, the nonprofit social investment banking institution he immediately founded, which has since grown into a marvel of the nonprofit and investment banking communities.

In 11 years, Operation Hope has grown from 8 partner banks to 70. It now has a $5 million annual budget and programs in Chicago, New York City, Washington, D.C., Arlington, Virginia, and Oakland, California. In addition to business investments, the organization has made 540 home loans without a single default. Bryant, who analyzes like a banker, strategizes like a visionary and talks like a preacher (“Justice, or ‘just us’?” “History, or ‘his story’?” “Rationalize, or ‘rational lies’?”), is typically blunt when asked what he plans to do next: “Eradicate poverty and change the world as we know it.”

In addition to business and home loans, Operation Hope also focuses on getting banks to come into low-income areas and on teaching people about alternatives to payday loans and check-cashing operations.

10:04 AM

Politics

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| May 11, 2004 01:28 PM

I don't know. Looks to me like this comments thing is starting to make you a little testy. :-)

(Sorry. Couldn't pass it up.)

By the way, although comments come up, I'm getting script errors when going from a blog page to the comments page.

Susan | May 11, 2004 06:12 PM

Script errors also when I post a comment.

Susan | May 11, 2004 06:15 PM

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