Eaten Alive

Rent-to-own stores, pawnshops, payday lenders -- it's hope for sale, with interest

Yet a handful of purchases quickly turned into a hot-and-heavy shopping binge. The couple bought a rug set and a new television, an $800 couch set and a $350 radio. Tinita's kids wore Air Jordans and Old Navy, Baby Gap and Gymboree. She wore $250 braids. She was pretty sure her neighbors thought she thought she was all that. She looked bougie. But she was only living bougie. "I didn't think ahead for anything," she says. "Financial strain wasn't even on my mind."

Tinita was suffering from the early stages of what John de Graaf, in the title of his recent book, dubs "affluenza": "a painful, contagious, socially transmitted condition of overload, debt, anxiety, and waste resulting from the dogged pursuit of more." De Graaf, a veteran producer of PBS documentaries on consumer culture, traces the root of affluenza to ubiquitous advertisements and marketing. Between 1935 and 2004, adjusted for inflation, U.S. media advertising expenditures increased by nearly a factor of ten. The fastest-growing advertising sector for more than a decade has targeted children, who now tend to be highly brand-aware, even in low-income families. "The whole purpose of this is to train people from a very, very early age on that it's about spending everything you have, more than you have, in many cases," de Graaf says. "Because life is about the stuff, it's about the brands."

Tinita's brand obsession of the moment that year was Compaq. She couldn't afford a computer after making her other purchases, so she leased one from Rent-A-Center. Getting online for the first time quickly led to a string of inadvertent chat-room confrontations that ended in Tinita's giving out her phone number. People called and said, "Bitch! What you say?"

Tinita Samuels Dorsey pawned her ruby-studded high 
school ring for $20.
Daniel Kramer
Tinita Samuels Dorsey pawned her ruby-studded high school ring for $20.
With 1,371 stores in 37 states, Irving-based ACE 
Cash Express dominates the check-cashing industry.
Daniel Kramer
With 1,371 stores in 37 states, Irving-based ACE Cash Express dominates the check-cashing industry.

Those calls were much easier to stop than the indignant ones from Rent-A-Center asking her why she'd missed payments. Months of installments still left her owing roughly half of the ridiculously inflated $1,200 rent-to-own price. Rent-A-Center employees called Tinita at work and even rang her "references" -- friends she'd listed on her rental contract. Tinita fought back. She consulted an attorney and sent Rent-A-Center a stern cease-and-desist letter. She never heard from the company again.

The victory convinced Tinita that she could win against the fringe economy.

Maybe she could even be smart enough and tough enough to live off the meat of the loan sharks.

Money often costs too much. -- Ralph Waldo Emerson

In November 1990, Tinita and David gave birth to a son, and money was tight. They owed payments to the gas company, the cell phone company and Tinita's mom for the truck note. A $300 electric bill arrived with a disconnection notice. Tinita had received a promotion at SBC and was raking in $20 an hour, "but after taxes and four kids," she says, "that was nothing."

Tinita got on the Compaq, did a search for something like "money," and found a payday loan outlet in a bank building on Richmond Avenue. The terms looked attractive. She'd get $500 up front as soon as she dropped off a check for the amount, plus $95 in interest. The company would deposit the check on her payday two weeks later -- an attractive deal to Tinita because "it was just plain and simple."

Fourteen days later, however, complications arose when the loan matured just as more bills arrived. Tinita called the payday outlet in a fit of nerves, worried that the check she'd already handed over would bounce. She was quickly reassured. All she had to do, the clerk told her, was pay the $95 interest and renew the $500 loan for another two weeks. Paying $95 was easy. So she renewed again two weeks later, then again, then again, all the while owing the same mighty $500 principal. "I was stuck," she says.

Borrowers such as Tinita, locked in months-long cycles of debt, are fueling explosive growth in the payday loan industry. Between 2000, when the Consumer Credit Commission began regulating the industry in Texas, and 2003, the last year for which data is available, payday loan volume in the state grew sixfold, to more than $600 million. Stores called ez Money, Cashcow Payday, Check 'N Go, Fast Bucks and Payday Today dot low-budget strip malls across Houston, often jockeying for customers block to block. In general, most of the companies' profits come from people who take out ten or more loans a year, people who are using the loans "on a regular basis to make ends meet," Karger says.

The loans are well designed to suck people in and their money out. The two-week term affords little time to recover from a financial hardship completely enough to repay a debt. And the fees (typically 500 percent annual interest -- double the rate of pawn loans) make the harshest credit cards look cheap. "Even Tony Soprano would charge less," Karger says. But the terms and conditions of payday loans often mean little, former customers say. All they were thinking the moment they signed the borrowing form was that they needed money, and they needed it fast.

Three months after Tinita took out her payday loan, after she'd spent nearly $400 to borrow $500, she finally paid it off in a fit of tears and proclamations that she'd never go that route again. But her financial life wasn't getting any easier. In January 2000, she enrolled full-time at the University of Houston-Downtown while still working full days at Southwestern Bell. David quit his job to stay home and care for the children. In addition to spending money on books and tuition, Tinita bought airline tickets to visit David's family in Los Angeles on spring break and again during the summer. She spent a September pay bonus on a $1,500 55-inch TV, even as she maxed out a Capital One credit card and her phone buzzed with calls from bill collectors. They annoyed her so much that she bought a call-screening device known as the Zapper.

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Payday loans or title loans are very helpful if you manage them properly. Otherwise they can create more problems than they were meant to solve. These loans already have a high interest rate but with the passage of time the interest increase even more. So if you delay the repayment of your loan, you will pile up a huge amount of debt for yourself.

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