The following is a letter from William Harrod, a former payday lending store manager, to all Virginia legislators.
My name is William Harrod and until last month I was a payday lending store manager with Check ‘n Go, the nations second largest payday lender. I have worked in stores in Gloucester, VA, Northern VA, and Washington DC. I know that the Virginia legislature will likely consider laws relating to payday lending in your upcoming session and I wanted to provide you some information based upon my experiences as a payday lender for nearly a year. Please understand that the information I convey in this email is drawn from my experiences working in the commonwealth of Virginia, throughout my training experience.
Much of the information I need to convey is already widely publicized. I also understand that the industry comes to your hallowed halls with lies, fabrications, unethical tactics and a great deal of money to throw around. While I understand all lobbyists attempt to convey information to lawmakers in the most favorable way for their client, the payday lenders actually lie. Theirs is an attempt to perpetrate a fraud on your lawmaking body, and continue to operate outside of usury laws.
I didn’t always feel this way. When I joined the industry I thought I was going to work for a company that would help people. Quickly, however, I realized that our customers were not receiving help. The industry will tell you that their product is short term, but this is absolutely not true. In my time working for the industry, I NEVER saw a customer use the payday loan product and immediately pay it off. Most customers stay in the same loan for more than a year. Think about it – on a $500 loan the customer pays $575. The average consumer is paid biweekly, meaning they will pay that fee 26 times over a calander year. The total fees over a year for the $500 loan is $1950, and the customer STILL owes the principal. While consumers do make the choice to enter into this contract, we have state usury laws for a reason. To grant an exception to these laws for the payday lenders is to turn your backs on the people who are suffering so much from these horrific interest rates. Also understand, as a manager I was taught (by a regional level executive in Gloucester, VA) to qualify every customer for the max. This way they can never pay the loan off, and they have to reborrow immediately. More reborrows, more fees. The business model is based upon growing your fees, and we are taught to do this by getting repeat borrows to continue taking additional loans. That’s why the APR does matter, and when the industry tells you different they are simply lying.
I also wanted to touch on collections. When training with a regional level executive in Gloucester, I was taught to use words like “uttering” and “warrant” to threaten customers who did not pay with criminal prosecution. We were also taught to look for info on the application that might be suspect – a transposed phone number, a reference that was illegible. We would then threaten the customer with criminal prosecution – for “obtaining money by false pretenses” by lying on their application. In addition to these unethical practices, we were also taught to dial into customer bank records by using their personal info (social security number, bank account numbers) to pretend that we were the customer. We were to track purchases for collection purposes and to track account balances. When I expressed concern over this practice (as I believe it to be in violation of VA criminal code relating to Identity Theft) I was told “this is how the company operates” and that if I wanted to stay employed, I would quickly conform.
In conclusion, please don’t allow yourselves to be lied to and manipulated by the payday lenders. I was part of their organization, and I understand their tactics. They will stop at nothing to protect their profits. I am reminded of a conversation I participated in earlier this year. The conversation was with the director of government affairs for my company. We were discussing the closure of our stores in PA after the law change relating to an interest rate cap. This person (who is in charge of lobbying for the industry) told me that we could have stayed open in PA. He said we could have changed our business model to a line of credit, and made profit at the 36%. He said the reason we did not do this is because we were concerned that, if other states saw payday lenders could continue to operate with a cap, that other states would quickly pass caps. In other words, we sacrificed our operations in PA in order to prevent a precedent being set that would prove the industry lies when it says it can’t do business within the usury laws.
I hope to testify before your assembly in the upcoming legislative session. I am also available should any of you want to meet with me or have any further questions. Please don’t believe the industry fabrications, and please stand up for the many Virginians who are trapped, stuck in a cycle of debt from which there are no legal protections and very slight chance of escape.
Thank you for your time,
William A. Harrod
The Greater Wards Corner Partnership has always remained in the forefront of opposition to Payday Lenders. Payday Lenders set up shop years ago in Wards Corner and from the very day they opened, we have opposed these operations.
For more information on efforts to discourage predatory lending in Virginia see the Virginia Partnership to Encourage Responsible Lending (VaPERL) website.