A mother and her two children, one a baby in her arms, the other a toddler holding her hand, approach a neon-lit storefront. It is snowing outside, but the toddler is trying to remove her puffy jacket for reasons that are probably very important to her but very frustrating to her mother, who struggles not to drop the baby while forcing the sleeves back around her daughter's tiny arms. That accomplished, the woman guides her little girls past the threshold of a business named, unbelievably, "Cash Store."
They are there because the woman has no money and needs some. Probably it will be another two weeks before she is paid again by the pharmaceutical chain that employs her, at the rate of $10 an hour, to stand behind a counter and ask customers whether they have signed up for the Rewards Program. But she hasn't got two weeks to wait. She has to put gas in her vehicle and pay her rent and the bill charged by the care center where her children spend their days while she furthers the vital mission of the Rewards Program. She has to buy formula and juice and crackers and maybe food for herself. She has to figure out what's going on with the bill from the pediatrician's office — but, what's that, it's already gone to a collection agency even though she was told by an agent of the insurance company to which she gives $300 a month that her daughter's visit was fully covered. She wants to call to ask about that, but her phone service was terminated last week. Maybe, too, in a moment of rashness, she did what Sen. Chuck Grassley (R-Iowa) told her not to do, even though he expects robust economic growth this year, and bought something for herself, like a beer or a movie ticket, that she didn't really need.
So rather than explain to her baby that the formula will have to wait she hands the Cash Store clerk a copy of her pay stub and her bank account information. In a few minutes she leaves with $400. If all goes well, she will only have to pay back the $400 plus another $200 in interest and miscellaneous fees. Doubtless this $200 would be useful to her in two weeks' time, but she needs that $400 now.
Payday lending, with its grotesquely high interest rates and fees, is indefensible. Who could argue otherwise? In other ages, in every clime, there used to be another name for it — usury — and it was a name that burned on the lips of defenders of the common good from Aristotle to Gandhi. But in America in 2018, where it is a $50 billion industry, it has many defenders. Mick Mulvaney, who is in charge of budgets at the White House, which recently issued its recommendations that women who require assistance in order to feed their children should in the future receive cans of peas and dried milk in the mail instead of being allowed to visit the grocery store, is also the head of the Consumer Financial Protection Bureau. He defends the usurers. Indeed, he has been paid to do so by the usurers themselves. This probably explains why he has just shut down an investigation into an online lender that had been charging customers 900 percent interest.
But not everyone is like Mulvaney. There are also the economists, professional and otherwise, who defend usurers for free. You know the sort of person I mean. There is a style that is universal among economists and the popular devotees of that science, a mawkish, counter-intuitive posture that involves racing to see who can say "Actually … " with the most evident self-satisfaction. The authors of Freakonomics, who in their bestseller welcomed the decision of the Supreme Court in Roe v. Wade on the grounds that it might have reduced crime, patiently explain that, poor dears, the customers served by the payday lenders have no one else to turn to. Probably they are right. Payday lenders of their charity agree to take advantage of people so marginalized that even Visa and Capital One decline the privilege of exploiting them. Besides, the economists observe, citing a survey, "almost 90 percent of users of the product say that they're either somewhat satisfied or very satisfied with the product afterwards." Imagine thinking that this was unanswerable.
With the exception of abortion, payday lending is the most obvious indictment of the modern world and how it is organized. It wraps under its hideous mantle greed, consumer fetishism, waste, fraud, theft, and the vast indifference of a system organized around the exploitation of the desperate — all the sins that we tolerate or ignore because without them our comfortable way of life would disappear. Yet it would be wrong to think of payday lending as something cold and mechanical, indifferent to the fate of those upon whom it preys. This is because it is not content with depriving them of their worldly goods. It also feels entitled — and what economist could argue otherwise, for is there not a contract? — to their dignity.