The term loan shark often elicits images of a mob boss who charges enormous amounts of interest on a short-term loan he's fairly sure the borrower won't be able to pay back in time. As the stereotype goes, the loan shark then sends hired goons to collect money or break the bones of those who can't pay back the loan in a timely fashion. Such characters are often portrayed as the scourge of the neighborhood and the last resort of the financially desperate. Of course, such a scenario is illegal and done out of sight of the authorities.
ACORN, the Association of Community Organization for Reform Now, claims that Money Mart is little more than a loan shark institution and is directly telling them so in a campaign to end their alleged predatory lending practices. With two Money Mart locations on Rainier Avenue South and one on Martin Luther King Jr. Way South, ACORN's campaign directly affects those living in Southeast Seattle.
ACORN describes itself as the nation's oldest and largest community based grassroots organization. It was founded in Little Rock, Arkansas and has grown to over 200,000 members in 41 states including the District of Columbia. According to John Jones, Chairman of the Board for ACORN Washington State, their focus is to be pro-active rather than reactive.
"We try to look for solutions rather than just complain about the problems of being poor," Jones said.
Money predators
Jones and ACORN contend that Money Mart charges outrageous interest and fees while conducting predatory loaning practices. Jones gives the example of a 14-day loan of $300.
"The initial cost of the loan will be $362 with the finance charges," Jones asserted. "If after two weeks the borrower cannot pay the loan back in full, the loan rolls over on top of the original loan for two more weeks. After three months of this, $351 of interest has accrued and the borrower still owes the original loan plus fees."
Adding insult to injury, Jones explains how a bad situation gets worse.
"When Money Mart has collected from the customer all they are legally allowed to charge, they sell the loan to a collection agency," Jones observed. "Collection agencies are more aggressive in their pursuit of payment and not above calling employers to inform them of the customer's debt woes. This entire process takes money from people who can't afford to lose it, and destroys the credit of those who badly need it."
However, Jones doesn't blame the collection agencies. "They're just doing their job. A lot of people don't like the job they do, but it's not their fault. The fault lies with businesses like Money Mart who create the unfair debt in the first place."
As part of its campaign, ACORN has written a document entitled "Money Mart Customer's Bill of Rights." It begins by stating that "as low and moderate-income families, many of us are struggling to make ends meet. We have bills piling up, rent or mortgage payments due, children who need to be fed, and cars that need to be fixed so that we can get to work. Money Mart knows this and built its entire business through preying on people in need. Payday lending, high check-cashing fees, and tax refund loans harm our communities. These predatory lending practices strip billions of dollars from our neighborhoods and take money away from working families who need it most."
ACORN states that part of these rights include that people "should be charged no higher than a 36 percent interest rate on payday loans instead of rates up to 1,000 percent as Money Mart does now." The statement goes on to say that "we should be given a longer period of time to repay a payday loan, such as eight weeks for a $200 loan and 10 weeks for a $300 loan, rather than the two weeks that Money Mart expects us to pay it back in."
The lender speaks
Also in dispute is Money Mart's custom of loaning money with the goal that the customer won't be able to pay it back in full in the expected time. This business practice seems to be the very definition of predatory lending and leads directly to the "loan shark" label placed on the company.
In a letter penned to Jeffery Weiss, CEO of Money Mart and its parent company Dollar Financial Corporation, ACORN leaders write, "in cities across the United States and Canada, ACORN members are presenting Money Mart with our 'Loan Shark of the Year' Award."
It goes on to explain that ACORN is giving the companies the award because of Money Mart's predatory practices.
"It is wrong for your company, or any company, to prey on people in need and to view our financial misery as a source for your profits," reads the ACORN letter. "We demand that you stop ripping off our communities and that you make changes in your payday lending, check-cashing, and tax preparation practices."
ACORN is insisting a meeting with Jeffery Weiss to discuss their business practices, but the two have yet to establish a dialogue.
Essentially, ACORN is looking for two outcomes from their campaign. In addition to a meeting with Weiss, ACORN is seeking both city and state legislation to put a cap on interest at 1 percent a month.
"Proper legislation can put a stop to many of these practices, but politicians need to know their constituents are being ripped off and are upset about it," Jones insisted.
ACORN is currently attempting to gain attention for their cause through demonstrations like the one they held March 2nd at 1774 Rainier Avenue South, near I-90.
Money Mart's response to those allegations was delivered via e-mail from Roberta Wiley at their Media Line in Canada.
"Money Mart is an industry leader in protecting consumers and delivering quality service to our customers.
"Money Mart was a founding member of the Canadian Payday Loan Association and fully supports regulation of the industry to ensure that unscrupulous service providers are put out of business," Wiley's e-mail reads. "We join with ACORN in urging governments to move quickly in regulating this industry to ensure both consumer protection and a viable industry serving an established need in the marketplace."
Just one shark?
However, Money Mart isn't the only financial institution that ACORN has targeted. Recently, the organization has also gone after Citibank, H&R Block and Wells Fargo.
In their campaign against Wells Fargo, ACORN claims the well-known bank also practices predatory lending with its sub-prime loans through its affiliated company, Wells Fargo Financial.
According to their website, www.ACORN.org, Wells Fargo allegedly gave different home loans than they originally quoted borrowers. Borrowers would believe they were getting a fixed rate loan, only to see an adjustable rate loan at closing.
ACORN also accused Wells Fargo of attaching large fees to the loan or having the borrower pay their own taxes and insurance outside the loan. To combat Wells Fargo, ACORN has partnered with Bank of America to help people get better home loans.
What makes changing these business practices difficult is knowing there are people who are in dire need of money right now, said Jones. He stated that he wants people to know that there are companies out there who will prey on the working class and those struggling to make ends meet. Jones' advice to these people is to look at the long term.
"There are no places that will just give you money for nothing, but there are places where a person can get government services and assistance so they can use their own money more wisely. Debt and financial counseling is a way to help folks learn to live within their means," Jones said. "There are three Money Marts in the 37th District. Until our politicians like Sharon Tomiko-Santos and Eric Pettigrew push for legislative changes in lending laws, the poor will always be a target of companies like Money Mart and other predatory lenders."
Richard Maltby may be contacted through editor@sdistrictjournal.com.[[In-content Ad]]
