Neon signs ignite promises of fast cash in front of Army Check Cashing on Mission St., but inside, the pale yellow glow illuminates a typically empty lobby. Business is slow today — just like most days, lately — and with jobs disappearing and wages falling nationwide, owner Vincent Mathews is pessimistic.
“This crisis is affecting everybody,” Mathews says. “If someone says they are not affected, then they are lying. Maybe it can turn around, but I don’t know.”
Mathews’ store, and the more than a dozen others like it in the Mission District, are the para banks where those living on the edge take care of their financial businesses.
They offer customers immediate cash — for a fee — without the need to establish a checking account. In addition to these check-cashing services, the stores offer loans — not business or mortgage loans, but payday loans or cash lent at high interest rates until the borrower gets paid. For these loans, a proof of a checking account is required.
While their brightly lit, garish interiors might seem far from the wood-paneled rooms of Wall Street, they are, in a sense, the first place a national economic catastrophe can become personal. Customers generally have no safety net, no 401Ks that have dipped, no credit cards to use in an emergency. They hold marginal jobs — as day laborers, housekeepers, handymen.
“I know it’s not really what’s best,” says Tony Giron, a dishwasher who says he has taken out at least one payday loan in each of the last three years. “But when you just need a little extra, it’s easy to get (a payday loan) and take care of it.”
So here, a client can bring in a pay stub that shows he or she receives a regular paycheck of $300, and that person will receive $255 up front, with a $45 fee to be taken out when the borrower returns with a paycheck. If the loan is received at the beginning of a pay period that lasts 14 days, then the borrower will have paid a 459 percent annual percentage interest rate. A similarly sized loan from the Mission SF Federal Credit Union on Mission St. would carry a rate of 18 percent APR.
Payday lenders advertise themselves as sources of quick cash in isolated emergencies. But according to a 2007 study by the California Department of Corporations, 80 percent of borrowers are repeat customers. The cycle often begins with a personal crisis, says Liana Molina of the Mission branch of the California Reinvestment Coalition, but borrowers quickly find themselves unable to keep up with the loans.
“Some borrowers go from one lender to pay off another,” Molina says. “Ultimately, the impact can be devastating. The cycle of debt can become inescapable.”
Less than a block from Mathews’ store, the inside of a Check ‘n Go branch presents a contrast from the cramped, neon-lit lobbies that characterize most of the Mission’s check cashers. Here, a spacious, carpeted lobby gives way to a wall decorated with posters that feature smiling white adults and say, simply, “Freedom” and “Security” in large bold letters.
But for dreadlocked bartender Antonio, who asked that his last name not be used because he doesn’t want his borrowing needs revealed, the store’s image doesn’t match his reality. Today he is taking out his third loan in the past two months. He has yet to crumble under the debt, he says, but he is struggling to keep up with medical bills for his daughter, who was recently sick with a stomach virus.
“That’s just the way it is,” he says. “This is the best place for me to go.”
His desire for anonymity is common. In the Department of Corporations’ study, 53 percent of customers — whose contact information was taken directly from the lenders themselves — denied having ever taken out a payday loan.
For Mathews’ part, he says his store rarely grants payday loans. These loans often go unpaid, he says, and his independent store does not have the resources to sue borrowers for the money. California law also restricts lenders from collecting treble damages on bad checks, as is typical in Nevada and other states.
“We don’t bother taking them to court,” Mathews says. “If they don’t pay, what can you do? Bigger companies can get the money, but we cannot. So we do a credit check and don’t give the loans unless we think it is safe.”
Usually, he says, it’s not.
Most check-cashing stores in the Mission are branches of regional or national chains — including Check ‘n Go, MoneyMart and California Check Cashing. Those companies have policies that no one outside the corporate office, including franchise owners, may answer questions from the press. Requests for interviews with corporate representatives were denied or unreturned. Molina says that these companies often wield their resources toward the harassment of borrowers.
“Legally, they can’t threaten them with jail time or criminal charges,” she says, “but beyond that, they turn the borrowers over to debt collectors who call and harass them.”
Across the state, Hispanics account for the largest number of borrowers at 36.2 percent, followed by whites, 35.7 percent, and blacks, 18.4 percent. Borrowers must prove that they have an active checking account in order to receive a loan. Molina says that undocumented immigrants — many of whom don’t have checking accounts — use the stores primarily for check-cashing services. For this, customers are charged three percent — or $1.50 out of each $50 — to cash payroll checks. Rates for personal and other types of checks vary.
Mathews — who says that a $24,000 annual profit is typical at his store — defends his business practices by saying that they are providing a service for people who have no credit, no way to establish a banking account and often, no valid identification.
“They have nowhere else to cash these checks,” he says. “They need a place like this.”
But better alternatives are available, Molina says. Many banks now accept identification cards from Mexican consulates to open an account. Last year, Bank of America began issuing credit cards to undocumented immigrants. At the Mission SF Federal Credit Union, members can take out small loans at significantly discounted rates.
The union’s CEO, Salvador Duran, says that his institution interviews each member and grants these 18 percent APR interest-bearing loans on a case-by-case basis. He says he works with individuals to determine a proper payment plan and is sensitive to the circumstances of his members, which number more than 2,000. The credit union’s Mission roots — it has been around since 1971 — give it a unique understanding of the lives of those who turn to such loans, Duran says. His institution also makes efforts to educate the community about the danger of payday loans and to encourage financial responsibility.
“But really, it’s a dream to think that a person is going to be able to save,” he says. “They live on a check-to-check basis.”