Short-term loan, long-term commitment
Maria Lockwood

Editor’s note: This is the second in a series of stories the Daily Telegram is publishing this week on the issues and laws surrounding local short-term lending businesses in Superior.

The drive across the bridge became the hardest part of Ron Larson’s day.

Larson, of Duluth, managed a payday and title loan business in Superior for 19 months. By the end of that time, he said, he dreaded that morning drive.

“Ethically it got to a point where I felt this was wrong,” Larson said. “We advertised it, they came in. I followed the company’s rule, but I was still part of it.

“I hated seeing people get into that debt, but I had to make money for the business.”

The stress led Larson to leave the business.

Superior’s bumper crop of payday loan companies — eight in all — show no signs of doing the same.

The payday loan business offers short-term loans. The customer signs over a check, including the fee, to the business in return for cash in-hand. The lender promises not to deposit the check for up to 14 days. The amount of the loan is, according to the companies, a percentage based on the client’s income. Some companies also offer title loans — a loan with your automobile title as collateral. The interest rate for both types of loans can reach into the stratosphere.

A sampling of some of the companies along Belknap Street showed interest rates of up to 573 percent annually.

“It’s absolutely the worst case of predatory lending that I’ve ever seen,” said Rep. Frank Boyle, D-Superior. “It makes old-time pawn shops look like they are very legitimate.”

That sky-high rate applies, however, only if the loan rolls over and over for a full year.

“If they paid it off in two to three days, it would be less than a credit card,” Larson said.

Payday loan businesses serve a purpose in the community, he said.

“Banks will no longer do a 90-day note like they did with our mom and dad,” Larson said.

He said his clients at the business tended to have exhausted all the other means for coming up with the money.

“They’ve just obliterated their own finances with bankruptcy,” Larson said. “They can’t get a credit card, they’re underemployed ... the mentality is, ‘It’s going to get better,’ but things come up.”

For some, he said, a payday loan may be the only thing between them and living on the street.

“I would not doubt that some people do it because they need rent,” Larson said. “If they don’t pay that rent, they lose their security deposit and have to find someplace else to live.”

Larson also cited school costs, car repairs and gambling as reasons some people chose payday or title loans, if they even chose to state a reason.

“It is clearly articulated if they have a free and clear title, a valid driver’s license and the ability to pay, we’re basically not going to turn them down,” Larson said.

While legislators believe that the high rates are kept secret, Larson said that just isn’t the case.

“The obligation falls on me to articulate the terms and conditions,” he said. “They’re cognizant of it.”

And many kept a clean slate with the lender.

“For the most part they tried to reconcile and did reconcile the loans,” Larson said. “If they kept in good standing with me they could borrow again, and they didn’t have another option.”

He recalled customers who would take out loans for the second, third, even 16th time. One woman, he said, had borrowed and repaid nearly $30,000.

While with the business, Larson dealt with people from as far away as Ashland, Grand Rapids and Ely. He estimated that at least half the business’ customers were from Minnesota.

“If legitimate banks and savings companies can’t meet the demand, these businesses fill a necessary role,” said Boyle.

But he disagreed with the high interest rates.

“We need to follow other states in terms of rational interest rates we can charge,” he said.

From: http://www.superior-wi.com/placed/index.php?sect_rank=1&story_id=173082