The Ugly side of Payday LoansPosted by Sandra Rogers on Oct 28, 2016 in Payday Loans | Comments Off on The Ugly side of Payday Loans
Generally speaking payday loans are the ugly side of loaning business. But they are in some cases smart solutions for small budget issues. But throughout recent history, and in preset day there exists an ugly side of those payday loans, and majority of people know that side as lending sharks or loan sharks. In this article I will try to remind everyone about the existence of those loan sharks as well as some of their roots.
Loan sharks are people who offer payday loans that have huge interest rates which are illegal. Loan sharks are also known to use blackmail or threats of violence and sometimes even violence in order to enforce repayment from those people that refuse to repay that money or are far behind repayment date.
Origins of money sharks can be found in 1920s salary buying, juice operation in late 1940s and early 1950-ies and 1960s heyday which lasts until present time in some cases. These are all roots found in mafia of that time, but there are non-mafia related roots that are still present, but about them we will discuss later.
History of Payday Loans
Payday loans existed even before 1920s but strict law was created to ensure the extinction of this kind of business. But people found a way, and it was names salary buying. As they explained they were not giving loans, but buying wages for the future. And loan sharks prospered due to holes in the law, but that came to an end with a new law in late 1930 which closed those holes. This stopped more extreme loan sharks, but those that were ready to easy on the interest rate still managed to maintain business.
Between 1930s and 1950s payday lending became a thing of the underworld. Only mobs that were organized enough kept this business going. And they didn’t have large clientele. At the beginning only office clerks and factory workers were served by these groups, but later married men were also introduced to the business. Main reason for aiming at married men is due to the fact that they were more reliable clientele than other people, they could be coerced into paying their loans back.
Changes from 1960s
1960s brought change into payday lending business of these mobs. They moved away from factory workers and other similar clients and refocused their business on small and medium businesses. These businesses had assets that could be seized and sold in case of debtors who were unwilling to pay their loans or they didn’t have enough cash to repay them. At its peak, payday lending was second most profitable illegal business, just after illegal gambling. Media attacked these mobsters with stories of beaten or killed customers, but in reality the number of those cases was really small, compared to number of customers that were regular in paying their debts.
Areas where mob presence was low was populated by lenders that operated by themselves, without any connections to mafia. They were more inclined to violence in order to get their money and interest back.