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Providers or Predators in Austin? A research project for Austin students.

This offbeat post opens with a photograph of something you see in Chicago's poorest neighborhoods: prosperous-looking auto title lender at 5200 west North Avenue and Laramie:
 Illinois Title Loans, SW corner at 5200 W. North Avenue (at Laramie)
Using screen shots taken from Google Maps street view photos, here's image of the 24 hour Check Cashing service across the street from Illinois Title:
Check Cashers, NW corner at 5200 W. North Ave
If signage size is any indication, these are hugely profitable businesses. I pass them on my to THE AUSTIN VOICE at 5236 W. North Avenue. So why these photos of them?

Last week the New York Times (registration required) ran a fascinating story about a related type of lender: the buy here, pay here car dealer/lenders like the nearby Value Auto Mart at 2734 N. Cicero:
 
Value Mart Auto with its "Buy here pay here" sign on the 2nd pole from the left.
Value Auto is one of many dealer/lender carlots on Cicero. In Spanish it's compra aqui, paga aqui. The Times story centered on use of the computerized shutdown devices - starter interrupter devices - that dealers can trigger by remote control whenever a borrower is so much as a day late with a loan payment. The story opens as follows:


So what exactly does "buy here, pay here" actually mean? Value Auto Mart's website leaves no doubt about the answer: "It means we are the bank so we approve anyone we want". "No credit checks!" as they boast at their website:


Buy here pay here car dealer/lenders like Value Auto - (No Credit Checks!) - get my attention because I drive by them on Cicero Avenue on my way to the Austin Voice. The Times article got me thinking about a research project for Chicago area high school and college students who want to learn about financial responsibility and also about the credit system into which, for good or ill, all Americans are born: 
  • Do Value Auto Mart and similar dealers make use of the starter interrupter devices that the Times says kept Mary Bolender from driving her daughter to the emergency room? 
  • Do they charge interest rates of up to 29% on high risk loans, as the Times article says many of them do? 
  • And, for that matter, do car title lenders like Illinois Title charge comparable interest rates?
  •  And finally, what makes services like Check Cashers as profitable as they appear to be?
Comments to the Times article - there were hundreds - fascinated me. They were polarized, sharply between two camps: commenters who blame the borrowers and commenters who blames the dealer/lenders. I like people who try to bridge the divide. "Izzyeddy" a former employee of a dealer/lender did so beautifully, sympathizing first with those who blame irresponsible borrowers and second with those who blame irresponsible lenders:


The Times chose Eddy's thoughts as one of 19 "Times Picks" from over 900 comments.  But only a few Times readers liked it. I thought it was great. Here's my response:


Typo: last sentence should read "how to snip".  Looking at my response, there's a major unsupported assertion here, namely that big banks actually do own, control or protect the smaller pay day, car title and buy-here-pay-here type lenders. If the goal is to teach financial responsibility to young people in high crime neighborhoods like Austin - neighborhoods where these high fee, high interest lenders are such visible features of the community - would it not make sense for educators to help young people  discover for themselves how these lenders actually work? Are they, for instance, in fact owned, controlled or protected by the nation's big banks, as I assert above? Such was certainly the case with egregious sub-prime lenders that created the housing bubble that burst in 2007-2008.

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