Broke, USA

by Gary Rivlin

  But of course new customers wouldn’t do the company much good unless they were converted into semi-regulars. So Check ’n Go programmed its computers to spit out lists of customers who had gone sixty days without taking out a new loan. “We got one of those reports every single morning,” Browning said. “We were supposed to call every person on that list and then also send them a letter. And that person kept showing up on your reports until they came back in.” Management taught her little tricks. “You were supposed to say, ‘I notice you haven’t been here in two months; why don’t you stop by later, we’ll update your information. I’m sure you can use some extra money right now.’” And to keep Browning and her cohorts motivated, corporate offered both a carrot and a stick. Store managers would receive an extra bonus if enough of their sixty-day borrowers returned each quarter—or would get grief if their “customer reactivation rate” was too low. Mainly Browning got grief.

  “As far as I was personally concerned, we were being told to harass these people until they walked back in the door,” she said.

  Another order that she found even more noxious was the practice of up-selling a loan. Check ’n Go, like most payday lenders, allows people to borrow up to one week’s salary. Up-selling was aimed at a customer who earned enough to borrow $500 at a time but borrowed less than that. “I was to repeat, no less than three times, ‘Now, are you sure you don’t want to borrow $500 before I print this contract?’” Browning said. While she was printing the contract, she might say, “You know I can void this out; are you sure you don’t want that extra money?” Reviewing the contract offered one more opportunity to make her pitch. On the final page of the agreement it laid it out in black and white: We have offered you $500 but you are taking a lesser amount. And Browning would say, “Now you see, you qualify for $500; are you sure this $200 is going to be enough money?”

  Collections was its own torture. “If a customer was late paying us back, we were to contact that customer a minimum of three times a day,” Browning said. People give three references when taking out a loan and she was instructed to phone them as well. If they were still late in paying off the loan, she was to phone their place of work. “It was no holds barred,” she said. “You were supposed to do whatever you need to do to get the company’s money back.”

  At least the home office didn’t force her to make what some of her rivals referred to as “field calls”—visiting people at home. “If they weren’t there,” Browning said, “they’d have to put on a door hanger that says, ‘You owe us $575, you need to contact our office immediately,’ or whatever, and then it’s there for everybody who comes to the door to see. I had customers tell me they even had people knock on their next-door neighbor’s door to ask what time they’d be home. The idea was to embarrass them into paying any way they could.”

  Through her large plate-glass window, Browning could see the Advance America outpost that had opened directly across the street in 2006. Cashland had leased a storefront a few doors down from her own in 2003 and a fourth store called Quik Cash opened in 2005. And so Browning would amuse herself during idle moments watching people play a kind of human pinball between shops.

  Her store could boast the biggest parking lot so generally people made her shop their first stop. “They’d borrow money from me and walk straight from my door across the street to the Advance America,” she said. “I don’t know what they did in there, whether they were paying back or borrowing more, but then I’d watch them walk to the next store and then finish up by walking across the street to Cashland. Then they’d walk back up to my place to get their car.” The whole sequence usually played itself out in forty-five minutes or less.

  Browning would see the occasional new face inside her store, but she spent most of each day loaning money to the same core of customers. Browning is a talker and inevitably many of these people became friends. They would bring her leftover slices of birthday cake; they would surprise her with cupcakes they had baked. One couple popped in one day for no other reason than to drop off a few apples from the bushel they had bought at a roadside stand out on the highway. Is it any wonder, Browning asked, that with time she saw her job as less about earning quarterly bonuses and more about getting a good night’s sleep so she could survive another day?

  “The whole thing came to be about money and greed,” she said.

  Maybe a bartender has the same feeling when the glum-faced man who every once in a while used to sneak in for a mid-afternoon snort starts showing up at 11 A.M. for his first nip and eventually is stopping by every day before work. After a time Browning took to applying a kind of shock therapy to her regulars. She would lecture them about the high cost of a payday loan. Stop buying that six-pack of beer, she would order them. Stop going out to eat. And then to punctuate her point she would swivel her computer monitor around. On the screen there was a tally of all the fees they had paid the company over the years.

  Browning tried the gambit on a woman named Susan and it worked exactly as she had hoped it would. Susan, an administrator at the local hospital, had been borrowing the same $500 every two or three weeks for almost two years. That $500 was costing around $1,500 a year in fees. “I thought I was going to have to pick her up off the floor,” Browning said. Worse, the woman was borrowing money from other stores. At Browning’s suggestion she borrowed $450 instead of the usual $500, and tried to borrow $50 less each successive time. The last time Browning ever saw her was when she came in to pay back the $150 she owed plus the $22.50 fee.

  But far more common were customers like David, a GM pensioner who was as reliable as the morning mail. Each month began the same way, Browning said, with David standing outside her door, two cups of coffee in hand. “If it was the first of the month,” Browning said, “I knew I could count on a McDonald’s coffee.” David, she said, received a monthly pension of around $2,600 plus another $1,800 or so from Social Security—more than $50,000 a year. His house was paid for. But he was an inveterate gambler and always broke. Every month he would borrow the $500 maximum—and then $800 starting in 2005, after the legislature increased the ceiling on a payday loan. It had been costing him $900 a year in fees to borrow $500 a month and then $1,400 a year once he was able to borrow $800.

  Browning would plead with him to borrow less. “We really need to get you out of this,” she would tell him. It was too late, though. He owed money to stores all around town. When Browning ran into him at the local Walmart in the fall of 2007, a few months after she was fired, he confessed to her that he was juggling loans at seven stores. She figured that in the ten years and three months she served as a manager with Check ’n Go, David had paid $9,150 in fees on 115 loans. That, of course, didn’t count the tens of thousands of dollars he was paying to other stores. And he was hardly alone. Browning said she did the math. In the final two years she ran her store, six in every ten people she would see in a given week were customers she saw at least once a month.

  She fantasized about quitting. The job was affecting her sleep and making her irritable. “No one in my family was happy with me,” Browning said. “I was tense. I was upset. I was depressed. I had fifty thousand different kinds of emotions I did not like.” It seemed so tempting when the managers at rival stores were always quitting. “I know of a few who just got up and walked out the door,” she said. “They’d wait for their supervisor to make a visit and then literally say, ‘That’s it, I’m done.’”

  But Browning was pushing sixty and by that time was earning a base salary of around $30,000 a year. Neither she nor her husband had saved enough for either of them to stop working, and no one was dangling jobs that would pay her that much money. The plan was to put in a few more years and retire.

  Still, she was hardly acting like an employee eager to stick around. When a manager from the next region over, a guy named Maurice, began a conversation by saying, “Here’s what I need you to do for me, Chris,” she couldn’t help herself. “I said—and this is word for word—‘What I need you
to do, Maurice,’ I says, ‘I need you to go downtown in front of the courthouse. I’ll meet you there so I can shove my foot up your ass.’” When I asked her why she would have spoken to a boss like that, she looked at me incredulously. The words practically exploded out of her mouth: “Because he was an idiot!” Only later did she explain to me her real reason for getting angry. Maurice, she said, was phoning to tell her she needed to do a better job recruiting back old customers. “Every morning I’d get a printout listing out all the people who hadn’t been in the store in at least twenty-four months,” she said. “These are ones who managed to get out of the cycle. And I’m supposed to sit there late every night on the phone, bothering them at home? They know where to find me if they need me.”

  One day, she spotted three young black men lurking outside her store (roughly 20 percent of Mansfield’s population is African-American). Fearing she was about to be robbed, she hid a couple of thousand dollars in cash in a filing cabinet. It turned out to be a false alarm, but, unfortunately, her immediate supervisor chose that hour or two when she was feeling paranoid to make a surprise visit. Finding that she had socked away around $2,000 in a filing cabinet, she was fired. She is now suing Check ’n Go for wrongful termination.

  Jared Davis went off when I mentioned Browning’s name. How good a manager could she really have been if she was lending out money to people owing money to all these other stores? That made a person a greater credit risk—and you weren’t doing that person any favors in the long run. “If we abuse a customer, is that customer coming back?” he asked in a pleading tone. “Come on.” He shook his head as if to ask how anyone could believe such nonsense as Browning put forward.

  Davis denied that it was Check ’n Go policy to up-sell customers (“If you’re asking me did it ever happen—I’m not saying there’s not some employees out there who’ve never done something wrong”) but he readily admitted to its practice of contacting those who have not visited one of their stores in sixty days. “Payday lending isn’t like it used to be where you just open a store and make money,” he said. “You have to keep your brand out there in front of people.” With increased competition, he said, “we all do what we can to find an edge.”

  The company’s public relations director, Jeff Kursman, sat in our meeting and he piped up. “We work very hard here at being a good corporate citizen,” Kursman said. He pointed his chin at the shiny green press packet in front of me. Inside were a series of slick brochures offering parents advice on protecting their kids (“Halloween Safety Checks for Children,” “Summer Safety Checks for Children”) that Check ’n Go, working in partnership with the National Center for Missing and Exploited Children, distributes at all its stores. The packet also included a copy of CheckPoints, a short pamphlet Check ’n Go put together with tips for its customers on saving money. The “$10 tip” is to return DVDs on time; the “$40 tip” is to pay your credit card bills before the due date.

  “I think we’re doing right by people,” Davis said. But people like Browning gave the industry a bad name. “It’s irresponsible the way she was acting,” he said. “The part she never learned is that we’re in this for the long haul. If we’re abusing people, do you think they’re coming back?”

  Perhaps—but perhaps people just don’t feel like they have any other choice. A few days after my visit, Browning responded to a follow-up email I had sent to her suggesting that I might phone her daughter. “She can speak with you,” Browning wrote, “from a former customer perspective about how they kept chiding her to borrow more money.” In the end, even after Browning’s warnings, her own daughter succumbed. She had fallen so deep into debt, Browning said, that she and her husband needed to bail her out.

  Eleven

  The Great What-If

  GEORGIA, 2002–2003

  Over barbecue in a town that might as well be a suburban Mayberry, Roy Barnes, self-described good ol’ boy, was telling me how close Georgians came to saving the world from itself in 2002. He still thinks about the bill he had signed into law during his final months as Georgia’s governor, convinced that had it been allowed to stand, Lehman Brothers and Bear Stearns and the whole lot of them on Wall Street might not have been so quick to buy whatever junk a subprime mortgage lender was peddling. “I was just trying to put my momma’s rule into law: You have to live with your choices,” Barnes said in a drawl that calls to mind Andy confiding in Aunt Bee. “There had to be accountability. These banks; think about what would have happened if they knew they would have to pay a price for all those loans that were no good.”

  Vincent Fort, a black state senator who jokingly describes his politics as “neo-confrontational,” told me more or less the same story in a conference room across the street from the state capitol. “I’ll tell you what, man,” he said in a deep bass voice. “You just had to see the way they came after us to know that we were on to something.” Like the 1999 North Carolina law, the bill that Fort drafted and Barnes refined was aimed at clamping down on predatory subprime loans but went one critical step further. It dictated that any entity taking possession of a “high cost” subprime loan—including a big investment bank on Wall Street that held it only long enough to sell it off in small tranches to municipalities, pension funds, college endowments, and anyone else in the market for a mortgage-backed security—was legally liable for the integrity of that loan. The law defined high cost as a loan carrying more than five percentage points in up-front costs or an interest rate more than eight percentage points higher than the rates on a comparable Treasury bill. Perhaps if they knew they might get sued, the banks might have taken at least a cursory look at a loan’s terms before snapping it up on a secondary market and selling it off in small slices to investors as far away as Reykjavík and Berlin.

  Eventually other states, including New York, would follow Georgia’s lead and pass similar laws. And those states would then learn that there was another impediment in their way as they tried to crack down on the most reckless subprime lenders. But in Georgia, in 2002, a half-dozen years before the world would be lamenting America’s subprime mortgage mess, lawmakers had devised if not the perfect prophylactic against financial disaster, then at least the beginnings of a solution. “In Georgia,” Fort says, “of all places.”

  “I twisted arms,” Roy Barnes said. “I called in favors. I had legislators out to the mansion every morning. I threatened everyone. It was the hardest bill I ever passed—and I changed the Georgia flag.” And then, when the state’s white majority denied Roy Barnes a second term that November because he sided with the blacks and the liberals and others seeking to erase the Confederate stars and bars from the Georgia state flag, Fort said, the real fight began.

  Vincent Fort was teaching at Morehouse and other local colleges in the early 1990s when Bank of America announced it was shutting down branches in black neighborhoods around town, including one not far from his home in south Atlanta. Fort, whose specialty was black studies and the civil rights movement, had always stressed the centrality of economic institutions to the health of the black community. Fort began speaking out at community meetings around town and working with others to organize demonstrations. “We beat up on them pretty good,” Fort recalled with a laugh. When the dust settled, black Atlanta still had several fewer bank branches but it also had a new leader, then in his late thirties. “I said then a day will come when we’ll engage these folks again,” Fort said.

  That day came a half-dozen years later when he was nearing the end of his first term in the state senate. Andrew Cuomo, the HUD secretary, was coming to Atlanta for the first of five hearings he was holding around the country to investigate predatory lending. A friend of Fort who was helping to organize the event suggested he attend. Cuomo was already on record calling the issue of high-interest mortgages and excessive fees a “national crisis…with a troubling racial factor.” Fort decided to sit in.

  Bill Brennan testified that day, as did one elderly African-American widow facing foreclosure and
another seemingly on the verge of disaster. Fort had spent most of his first term championing an anti-hate law in Georgia but sitting in the audience that day he wondered how he could be on the sidelines when abusive lenders were targeting the city’s black neighborhoods. A HUD study released shortly before Cuomo’s visit found that a borrower living in a predominantly black community in 1998 was five times more likely to end up in a subprime loan as someone living in a community that was predominantly white. Even an upper-income African-American, the study found, was twice as likely to hold a subprime mortgage as a lower-income white homeowner. Worse, Fannie Mae had analyzed its portfolio of mortgages for that same year and discovered that half of all those paying the higher rates and fees on subprime mortgages qualified for conventional loans. Fort was so incensed by what he was learning that he stood up and audaciously declared that he would see to it that Georgia passed the country’s strongest anti–predatory lending law.

  “That would be my first mistake,” Fort said with a deep rumbling laugh. A lobbyist with the Georgia Association of Mortgage Brokers sidled up to Fort and offered him his card. “He tells me how much he’s looking forward to helping me with my legislation,” Fort said. “And then from that point on, he and his folk would work tooth and nail against me.”