Thursday, July 12, 2012

Need a few bucks?

 Loan please             “At some point, the government will realize there needs to be two different kinds of banks. One that serves people who don’t need it; the other for those who do. The first could be lavish, but the second could do its work in a Quonset hut.” That’s the comment I’m thinking of saying to the President of the bank across the street.

What’s prompted me is the fact that I’ve met so many people who want to be small engines in our sputtering economy, people with great ideas and work ethics to match, but people short of capital. One of those men asked me to go with him to a nearby bank for a
small loan; he had the title of his car for collateral. Because it was a bridge loan that would keep him afloat until his project was finished, it would have been paid back in less than six months.

“Sorry,” the smug banker told him, holding what appeared to be the applicant’s credit report, “but your scores are too low. We can’t make the loan.”

The banker offered no consolation, didn’t suggest a remedy. Nor did he mention an alternative, as I would have in my business. “Try such-and-such a store,” I would have said. “They still sell that product.” But the banker just sat there.

Outside the bank, I apologized. I knew that the loan amount requested was much less than the loan value of the car. Also, I knew the only other option. “What about the title lenders?” I asked, dreading the answer.

In addition to their interest rates being staggering, the values they are willing to apply to collateral are much less than ordinary but uncooperative banks.

“I tried,” said the man. “For the same car that the bank would have loaned ten grand or more, they say the limit is sixty seven hundred.”

I grimaced. What came to me was a story from the June edition of Durham, NC’s Triangle Free Press, “Preying on Poverty.” In one chilling paragraph, Barbara Ehrenreich wrote:

Lenders, including major credit companies as well as payday lenders, have taken over the traditional role of the street-corner loan shark, charging the poor insanely high rates of interest. When supplemented with late fees (themselves subject to interest), the resulting effective interest rate can be as high as 600 percent a year, which is perfectly legal in many states.

Ehrenreich rambles on about many other unjust practices. Although I’ve dealt with many of them too, I would like her to know about the payday lender who came to my class to discuss payday lending and the legislation that allows it. That speaker explained the need, but also explained the ethical concerns tied to that business. Impossible to ignore, he examined those concerns with my class. In the end, most agreed that payday lending was a most necessary evil.

Unfair as that business may seem to be, the need for such lending practices exists. Many people flounder temporarily in what I call “the almost state,” as in almost there, like the man I mentioned. He has assets that won’t translate to needed funds as well as a business plan that will succeed if only those funds are forthcoming. He is not indigent, but has been treated as if he were.

Hopefully, he will find a solution. I want to help despite knowing the unfavorable odds.
Coming up with a creative and meaningful answer is a challenge both he and I want to tackle. And we will.

Nonetheless, I wish there were banks different from the ones I’m all too familiar with.

                            B. Koplen 7/12/12

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  5. That was a sad story to read. It is really a must to find a company that would give good service and would tend to the costumer’s needs. It would be good if you could find a company that provides service without hidden fees or policy charges, and simply pay a competitive flat rate for the period of the loan which you can repay or extend at any time.

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