Mark Winston Griffith

Unholy Alliance: Rent-A-Center and Payday Lending

Enhancing its image as one of the leading bottom feeders in the financial services industry, Rent-A-Center, unaffectionately known as RAC, is venturing into the payday lending market.

This is the moral equivalent of local thugs arming themselves with chemical weapons. RACs, operating mostly in low- and moderate-income areas and neighborhoods of color all over the country, essentially make ridiculously high priced loans for ridiculously over priced household items and appliances. Payday loans, illegal in New York, at least for now, are small, short-term loans made at usurious prices.

Payday lending will be the chef special on RAC's unsavory menu of fringe financial services that also include check cashing, money-transfers, bill payments and other items commonly found in check cashing operations. According to a recent story in the American Banker:

"In June, Rent-A-Center acquired 27 rent-to-own stores in Idaho, Montana, Nevada, Oregon, Utah, and Washington that were already making payday and other short-term loans, and it is quickly ramping up its short-term loan business. By Dec. 31 it had started offering the loans in another 13 stores, and by the end of this year it plans to be offering them in 140 to 200 of its stores. So far [Rent-A-Center] has about 1,800 stores in the 35 states that permit payday lending".

This obliterates what should be a firewall between commerce and financial services; imagine someone using a payday loan to finance their RAC "rental". Moreover, it helps bring payday lending further into the corporate mainstream and increases the pressure on states like New York where check cashers and others are pushing for the legalization of payday lending.

In a Securities and Exchange Commission filing RAC essentially punked the banking world, claiming that "Traditional financial services providers ineffectively market to our customer base, and an opportunity exists for us." What clearer evidence do we need to prove that banks are becoming hopelessly irrelevant to low- and moderate-income America?

Posted at 10:00 AM, Apr 21, 2006 in Permalink | Comments (1) | TrackBack (0)