Wednesday, August 27, 2014

rule of law: misery ground zero for extreme usury - another form of "poor peoples tax"...,

pitch |  On October 25 of this year, a man named Del Kimball was served papers at his home in Mission Hills. The following day, Kimball's business partner, Sam Furseth, was also served in Mission Hills.

Kimball and Furseth head up a variety of online payday-lending operations, many of which are based in downtown Kansas City, Missouri, at 908 Baltimore. True to industry form, the names of these outfits are countless and constantly in flux. There's LTS Management (of which Furseth is listed as president on LinkedIn). There's Glacier Marketing. There also are DMS Marketing and the Loan Shop Online. Each is part of a turnkey business that markets, funds, lends and collects on payday loans.

Not a lot of sunlight finds its way into 908 Baltimore. Workers are prohibited from speaking with the media. No sign hangs outside the building.
"It's because the owners are afraid of shootings and retribution for their collection practices," says a former employee. "They keep everything as private as possible. There's no relationship between upper management and the rest of the staff."

Most people who operate and finance payday-loan businesses — whether brick-and-mortar shops, such as the ones seen on every other street corner on the East Side of Kansas City, or online companies like Kimball and Furseth's — have an elevator pitch prepared about the social utility of their services. The gist is that they're giving people access to credit that they can't get anywhere else.
Say your car breaks down. You need to fix it so you can get to work, but you don't get paid for another 10 days. A bank won't give you a short-term loan to fix your car. Nor will any government agency. So you take out a $500 payday loan against the check coming to you in 10 days. When that check arrives, the payday lender gets $575 from you. It's a high interest rate, but it got you out of a jam — assuming you settle that $575 right away.

But many borrowers can't or don't get out from under their payday debts as soon as the next check comes, and the knock against such loans is that they trap borrowers in a cycle of debt. Defenders of the industry tend to dismiss such instances as aberrations. But according to a July 2012 company overview from online-lending operation Evergreen Capital Partners LLC, repeat customers are one of its "competitive differentiators."

Kimball is the CEO of Evergreen Capital Partners, and Furseth is the president. They split ownership 50-50. The overview indicates that 174 people were employed by the company in July 2012. Its online loans range in size from $100 to $800, the overview states, with fees set between $15 and $60 per $100 borrowed.

"On average, repeat customers account for 40-50% of the Company's annual loans," the overview reads. "The Company's average customer will borrow ~$1200 (~3 loans) and repay ~$2350 over a 4-year timeframe. Margins on loans to repeat customers average 150% higher than loans to new customers."

To translate: The average person who takes out a loan from Kimball and Furseth ends up paying back double what he or she initially borrowed. Factor in the 500,000 loans that Evergreen Capital Partners says it has issued since its inception, and a picture emerges: Operators and investors can get pretty rich with a business model like this.