Over the years I’ve noticed an abundance of payday and quick loan type businesses popping up. Generally they exist in areas where there is a larger cash economy. Often in parts of the city where folks do not have regular bank accounts, speak little English and don’t trust banks, or where less than economically savvy people hang their hats. They wouldn’t do well with a normal bank account because quite frankly they can’t balance a check book. Whose fault is this, is there someone to blame? Why has this venue flourished while the regular banking sector taken such a hit in this last economic recession. Yes, let’s discuss all this if we might.

Many years ago, I had an acquaintance who started a payday loan business and a pawn shop. I used to tease him and call him a loan-shark. He vehemently defended his establishment as just, honest, and claimed free-market status. He said he didn’t hold a gun get quick loans today to anyone’s head to bring in their personal items or take out expensive consumer loans, they did it by choice and I for one who loves freedom, liberty and choice should respect this. Yes, I understand that argument. Still, when you see too many of these types of businesses in town, well, you know; there goes the neighborhood as they say.

I’ve always noted that they attract the wrong element. But maybe that’s because that level of citizen may not be able to use the normal banking system, for whatever reason. Perhaps, previous personal choices they’ve made, who knows, nevertheless, my observations do hold true. In neighborhoods with an abundance of liquor stores, one-dollar stores, tattoo parlors, and bars, we always see the proverbial payday loan establishment in a strip center nearby, usually more than one. Yes, it must be a good business model, even with the bullet proof glass and often less-than-desirable standing in line or loitering out front.

Then again as my past acquaintance says; who the hell am I to judge? In wealthier suburbs you don’t see a lot of payday loan businesses really, sure there are a few, but in the inner city or poorer neighborhoods you see them in every large shopping center and near areas with lots of low rent apartments. There are other issues with all this, you see many people go to cash checks in these types of places, and the company takes a hefty fee for doing so, sure there is risk involved for them, but their business model allows for that too. People not paying taxes, working under the table, getting occasional checks – cash those checks at these places.

It seems we have a problem with consumer credit these days. Credit Card companies make a killing off those with large perpetual balances and charge interest rates which are insanely high. Banks can’t charge that much for their loans, as they are regulated, but somehow these companies can thanks to their lobbying power. The same thing is true for pay day loans, that’s the same ballpark I’d put them into. Let’s face it poor people make poor decisions, often they don’t have many choices, but choosing to use an establishment like one of these is yet another unwise decision on top of whatever choices led these folks to this personal economic reality of theirs.

The Wall Street Journal has done a number of articles over the years of how the cash economy exists, how the IRS is trying to cut down on it, and how payday loan companies and pawn shops have sprung up to meet the free-market needs of those who are playing in an underlying realm of our economy. The growth of both the cash economy and these types of establishments has really grown over the years.

Additionally,despite what my acquaintance has to say about all this, I don’t find that a positive development. It just perpetuates economic enslavement, high interest rates on short-term borrowing, and increased criminal activity and minor tax evasion issues. So, the other day, when sitting at Starbucks overhearing a conversation, someone said; “I need a payday loan quick,” I thought to myself; “no he doesn’t” that’s just a poor temporary economic decision, which is probably a habit of his, and why he is still poor. Please consider all this and think on it.

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