Gary Rivlin's Broke, USA tells the story of the birth, growth, and
flourishing of fringe lending, the business of extending credit to the
working poor. Beginning in the 1980s, and accelerating in the 1990s and
2000s, fringe lenders sprung up in gas stations and pawnshops across
America, and by loaning small sums at high interest rates, ultimately
created a multi-billion dollar consort to CitiBank, Bank of America, and
other major financial institutions. While payday outlets, rent-to-own shops,
and check cashers are now fixtures of the urban landscape, this was not
always so. Through interviews with the entrepreneurs behind one of the
fastest growing industries of the last twenty years, Rivlin gives readers a
terrifying glimpse into the origins of what Rivlin dubs "Poverty, Inc."
Rivlin is particularly fascinated by the de facto villain of the book, Allan
Jones, the father of the payday loan industry. He also introduces us to the
people who made fringe lending a success, namely, the working poor,
many of whom become ensnared in loans whose terms are outrageously
unfavorable. Their stories read like parables of financial mismanagement.
Lillie Mae Starr, a retired factory worker, is sold a home loan with a 23.3%
interest rate and comes to owe $63,000 on an initial loan of $5,000. David, a
retired General Motors worker, spends almost all of his modest pension
juggling payday loans from seven different stores. In these and other
cases, the consumers of fringe lending - often elderly, frequently minority,
always poor - sign up for loans it is difficult to imagine a reasonable person
(or, at least, a person who is not extremely desperate) agreeing to.
Rivlin's book leaves one with more questions than answers: why, the
reader wonders, do people agree to such a short-term loan with a 3910%
annual percentage rate ("APR")? How will people who cannot live
without a payday advance or a tax refund today be able to return these
loans on top of shocking amounts of interest tomorrow? And perhaps most
importantly: how can this be legal?
Taylor Asen & Nicholas Serafin,
Broke, USA: From Pawnshops to Poverty, Inc. - How the Poor Became Big Business, by Gary Rivlin,
Yale Hum. Rts. & Dev. L.J.
Available at: https://digitalcommons.law.yale.edu/yhrdlj/vol14/iss2/5