- Payday loans are a $9 billion industry in America, with more outlets than Starbucks and McDonald's combined.
- The industry has grown rapidly in just over 20 years.
- Payday loans are short-term loans with high interest rates, often around 300-400% on an annual basis.
- Many borrowers end up re-borrowing before their next pay period, leading to a cycle of debt.
- Payday loan companies often charge fees that borrowers may not be aware of.
- Some payday loan companies present themselves as helpful, but their business model relies on customers getting trapped in debt.
- The industry is good at avoiding regulation and has powerful lobbyists.
- Politicians who oppose regulation often have personal financial interests in the industry.
- The payday loan industry is seemingly unstoppable due to its ability to avoid regulation.

- The chairman of the state's finance commission overseeing payday loan companies is also a vice president of one of the largest payday loan companies in the country.
- Payday loan companies find ways to bypass regulations, such as offering loans with longer terms or shifting to selling title loans instead.
- Some payday loan companies partner with Native American tribes to avoid state regulations.
- Payday loan companies are difficult to regulate effectively and can take advantage of borrowers who may not have better options.
- A counter campaign is suggested, encouraging people to explore alternatives to payday loans.

Payday loans put a staggering amount of Americans in debt. They prey on the elderly and military service members. They’re awful, and nearly impossible to regulate. We’ve recruited Sarah Silverman to help spread the word about how to avoid falling into their clutches.

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-♪ ♪ -♪ ♪ We're going to look at 1 of America's most resilient industries, payday loans.

1 in 20 households have taken 1 out at some point.

And payday loan outlets are all over the place.

There are more payday loan sores in America than Starbucks and McDonald's.

I didn't know there was more of anything in the U.S.

Than McDonald's, including people and grains of sand.

-♪♪ And the payday loan industry has only been around for just over 20 years.

Even Ebola looks at that growth rate and thinks, that's impressive, you guys spread fast.

And it's not just the number of companies, it's the variety.

You've got Fast Cash, Cash Central, Speedy Cash, Quick Cash, with the word quick spelled wrong, and Quick Cash, with both quick and cash spelled wrong.

Because what could be more reassuring than a business that can't correctly spell either their product or the speed at which they're getting it to you?

There are so many different options, there are even services to help match you to a lender.

Hi, I'm Montel Williams from Money Mutual.

Get up to $1,000 in your checking account by tomorrow.

How the hell are you a financial spokesman?

Isn't that the guy who did that episode on how it's hard to be the less pretty conjoined twin.

This guy might have some pretty sound financial advice.

When something is this popular and this prevalent, you owe it to yourself to find out exactly what it is.

Much in the way that I finally gave in and read all 4 Twilight books.

A payday loan is a quick way to get the cash you need to cover an unexpected expense, like a car repair or a doctor bill.

It's called a payday loan because the loan balance is typically due on your next payday.

I thought it was a loan that you repaid in payday candy bars.

Clearly, this lady is psychotically friendly and also seems to have an appealing product.

So, how much might a company charge for this sort of service?

Often it's 300 or 400 percentage points on an annual basis.

Some of those rates, legally, are as high as 1,900% a year.

Even the most demanding abusive football coaches only Ask for 110.

Now, to be fair, payday loan companies will say these are short-term loans, so an annual percentage rate doesn't apply, which is true if you pay them off immediately, but many customers don't.

1 study showed that 3 quarters of the industry's volume was generated by borrowers who have to re-borrow before their next pay period.

Basically, payday loans are the Lay's potato chips of finance.

You can't have just 1, and they're terrible for you.

And it's when you start missing payments that you're susceptible, not just to frightening levels of interest, but also to fees that you may not have been aware of.

I was, like, I'd say, maybe $6,000, like, deep.

Every time I got paid, I would pay it off and I would get another 1 and then let's cycle dead in I Would advise anybody not to

I thought I would pay 325 I actually paid $700, but it would have been $1,100 had I not gone to the bank and put a stop to this.

It is not often that a metaphorical slippery slope costs as much as an actual ski vacation.

Payday loan companies present themselves as a way for you to get back onto your feet.

They don't want you to get trapped in debt.

In fact, they'll help you if you fall behind.

Remember the friendly ace cash lady from before?

What happens if you can't pay back your loan?

Sometimes people have a hard time paying us back, and we'll be there to work with you if that should happen.

Your business model depends on it, because an actual Ace Cash training manual for employees featured a diagram which starts with the customer applying for an Ace loan, moves through them spending the money on that loan, being unable to pay it back, and then being forced to apply for an ace loan again.

You'll notice that has a certain roundness to it.

It's basically a recycling symbol for human misery.

It's the circle of debt, And it screws us all.

Now, obviously, we must not generalize about this shitty industry.

Some companies hold themselves to a higher standard.

In fact, the Community Financial Services Association of America insists that their members are different from the shadier elements of the industry.

They even brag about it in 1 of the most boring videos on the Internet.

In our industry, I mean, let's be honest, there are some companies out there that don't even follow the law, let alone follow a standard of best practices like our member companies do.

Our member companies are pillars of the community.

Did you know that 1 of them gave a kidney to a little girl in a hospital.

She was in there for tonsillitis, but now she has 3 kidneys.

So let's take a look at their wonderful members and their best practices.

First, there's Advance America, 1 of the biggest companies in the industry, whose co-founder defends his business like this.

The consumer demand for the product is overwhelming and speaks for itself.

Okay, that's fair, although it's also worth pointing out that the customer demand for heroin is also overwhelming.

And that doesn't mean it's a product you'd necessarily recommend to your friends to get them out of a jam.

Advance America is a company whose best practices somehow include agreeing to an 18.75 million dollar settlement in North Carolina after they were accused of illegally high interest rates.

But they're just 1 of the 2 largest companies in the business.

Okay, so how do they practice their best practices?

Cash America was ordered to pay $19 million in refunds and fines late last year for illegally overcharging service members and for destroying documents.

Illegally overcharging service members is a ballsy business practice.

They must have been the ones driving around with those bumper stickers that say, -"Extort Our Troops." -$TRUMP'S TROOPS But...

But settlements like those are actually something of a rarity, and that brings us to why the payday loan industry is seemingly unstoppable.

They are incredibly good at avoiding regulation.

They actually tried to rein in the payday loan industry there a few years ago, but they faced opposition from 1 particular state legislator.

Why this legislation could possibly be necessary unless it is the big...

The big institutions trying to squeeze the little guys.

And the little guys, in his analogy, are payday loan companies.

Although I've got to say, if you spell little guys with a dollar sign instead of an S, you've got yourself a pretty good name for a store right there.

That man is Texas State Representative Gary Elkins, and his proud defense of the little guy is about to get a little muddier.

But isn't it true that you have 12 very successful payday and title loan locations across the state?

It is true He does and they include an outpost of the wonderfully named power finance, Texas Can I interest y'all in some power finance?

that you stand to add to your personal wealth considerably by killing these bills?

Elkins, Do you know the meaning of the term conflict of interest?

Why, madam, I am the physical embodiment of that term at this very moment.

Now, you might be thinking that that woman, Vicky Truitt, is awesome.

You know, fearlessly calling out how the payday loan industry influences politicians.

Which is why it's going to be so hard to tell you that just 17 days after leaving office, she signed on as a lobbyist for Ace Cash Express.

Now, thankfully, Texas also has a finance commission which oversees the payday loan industry.

White is vice president of Cash America and was also appointed by the governor as chairman of the state's finance commission, which oversees payday loan outfits.

The chairman of the commission that oversees the payday loan industry is also, at the same time, a vice president of 1 of the biggest payday loan companies in the country.

So, so let's just, let's just quickly break all of that down.

If you were hoping to protect Texans from the payday loan industry, you would need to approach a commission overseen by the vice president of a payday loan company, and then introduce a bill into the state legislature where the owner of 12 payday loan stores will debate the merits of the payday loan industry with 1 of the payday loan industry's future f-cking lobbyists.

Apparently, even cluster f-cks are bigger in Texas.

But the truly chilling skill payday loan companies have is not how they prevent legislation from getting passed, it's how they react when it gets through.

For instance, when Illinois passed an act which applied to loans of up to 120 days, companies simply began offering loans with terms of 121 days instead.

Which is like betting a dollar on the price of right...

You're technically allowed to do it, but you know, f**k you.

When Arizona outlawed payday loans, Many companies shifted to selling title loans instead, which are basically the same, except they also get to take your car.

For regulators, it's like playing legislative whack-a-mole.

Just when you think you've squashed them down, somewhere, up they pop up, somewhere else, wearing a completely different outfit.

And the most amazing example of all of this took place in Ohio.

In 2008, they somehow capped payday loan rates at 28%.

Any company licensed as a short-term lender had to abide by that.

But, where 1 mole falls, another mole shall rise.

-♪ Oh, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah ♪ And as of last year, there were no businesses in Ohio licensed as short-term lenders.

There was, however, a sudden increase of companies registering as mortgage lenders, offering people short-term mortgages of around $300.

What now, as the lawyer for a company called Cashland explains this to a judge.

So Cashland would not be subject then to the short-term loan act because it's not registered as a short-term lender.

The short-term loan act by the legislative enactment says it applies only to those who register under the short-term Loan Act.

Why even bother calling yourselves mortgage lenders?

Why not just call yourselves peanut butter octopus companies?

And in the rare case where states succeed in imposing stringent regulations, some payday loan companies have 1 final trick up their sleeve.

Now, some payday lenders have found a loophole by partnering with Indian tribes that gives payday lenders the cover of sovereign immunity to avoid state regulations.

Some payday lenders are currently dressing themselves up as Native Americans.

I thought only Johnny Depp was allowed to do that.

This payday lender, CashFairy, has teamed up with the Fort Belknap Indian tribe in Montana, and as you can see, they're charging online interest rates in the 700% range.

If you can become affiliated with a tribe and be able to avert local and state laws.

In my opinion, apparently loan sharking is still legal in this country.

Although, let's be fair, no loan shark would ever go by the name Cash Fairy.

Hey, you better get me that money by midnight or you're gonna get a visit from the cash fairy.

Payday loan companies are almost impossible to effectively regulate, and they are not going anywhere.

A Pew survey found that a majority of borrowers said payday loans take advantage of them, but a majority also said they provide relief.

But you have to be absolutely sure there are no better options.

Apparently, 41% of those surveyed who've taken out payday loans ended up having to borrow from family or pawn possessions or other things that they could have done in the first place just to pay off that payday loan.

And yet, payday loans superficially do look easier.

All these commercials, they're enticing, and they're also everywhere.

The least we can do is launch a counter campaign with a celebrity spokesperson of our own to remind people to make sure they explore all their better options first.

If you're considering taking out a payday loan, I'd like to tell you about a great alternative.

The way it works is instead of taking out a payday loan you literally do anything else.

Sell your sperm, sell some blood, throw yourself in front of a rich guy's car, he'll throw money at the problem just to make that shit go away.

Go to the grocery store right now, fill up a cart with everything you need, and walk the f*** out of there.

It doesn't matter, but it's something that you have to do every day anyway, right?

By not doing it, you are literally flushing money down the toilet.

It's like Dorothy having the power to go home the whole time.

The point is, no decision in your life will be worse than dealing with these payday loan mother...

So if you're thinking about getting a payday loan, just simply pick up the phone, then put it down again and do literally anything else.


Speaker 0: -♪ ♪ -♪ ♪ We're going to look at 1 of America's most resilient industries, payday loans. 1 in 20 households have taken 1 out at some point. It's a 9000000000 dollar industry. And payday loan outlets are all over the place.

Speaker 1: There are more payday loan sores in America than Starbucks and McDonald's.

Speaker 0: More than Starbucks or McDonald's. McDonald's! I didn't know there was more of anything in the U.S. Than McDonald's, including people and grains of sand. -♪♪ And the payday loan industry has only been around for just over 20 years.

Even Ebola looks at that growth rate and thinks, that's impressive, you guys spread fast. And it's not just the number of companies, it's the variety. You've got Fast Cash, Cash Central, Speedy Cash, Quick Cash, with the word quick spelled wrong, and Quick Cash, with both quick and cash spelled wrong. Because what could be more reassuring than a business that can't correctly spell either their product or the speed at which they're getting it to you? There are so many different options, there are even services to help match you to a lender.

And you cannot have avoided these ads.

Speaker 2: Hi, Montel here. I'm Montel Williams. Hi, I'm Montel Williams from Money Mutual. Call or go to moneymutual.com. Get up to $1,000 in your checking account by tomorrow.

The car repair bill, paid. The medical emergency, handled. Extra cash until payday, done.

Speaker 0: Done! -♪ ♪ -♪ Thanks, Montel. Quick question, though. How the hell are you a financial spokesman? Hey, hey, everyone.

Isn't that the guy who did that episode on how it's hard to be the less pretty conjoined twin. Everybody be quiet! This guy might have some pretty sound financial advice. When something is this popular and this prevalent, you owe it to yourself to find out exactly what it is. Much in the way that I finally gave in and read all 4 Twilight books.

I'm on Team Bella, by the way. Team Bella. She doesn't need a man to define her. Team Bella, okay? I'm on Team Bella.

Bella. That's not the point. The point is, what is a payday loan?

Speaker 3: What is a payday loan? A payday loan is a quick way to get the cash you need to cover an unexpected expense, like a car repair or a doctor bill. It's called a payday loan because the loan balance is typically due on your next payday.

Speaker 0: Oh, that does make sense. I thought it was a loan that you repaid in payday candy bars. Your way's better. Your way is better than mine. Clearly, this lady is psychotically friendly and also seems to have an appealing product.

So, how much might a company charge for this sort of service?

Speaker 4: Often it's 300 or 400 percentage points on an annual basis.

Speaker 1: Average annual rates of 570%.

Speaker 5: Some of those rates, legally, are as high as 1,900% a year.

Speaker 0: 1,900%?! Even the most demanding abusive football coaches only Ask for 110. Hit him in the mouth, Billy! Hit him in the mouth! Now, to be fair, payday loan companies will say these are short-term loans, so an annual percentage rate doesn't apply, which is true if you pay them off immediately, but many customers don't.

1 study showed that 3 quarters of the industry's volume was generated by borrowers who have to re-borrow before their next pay period. Basically, payday loans are the Lay's potato chips of finance. You can't have just 1, and they're terrible for you. It... And it's when you start missing payments that you're susceptible, not just to frightening levels of interest, but also to fees that you may not have been aware of.

Speaker 4: I was, like, I'd say, maybe $6,000, like, deep. You know, every payday, I was here. Every time I got paid, I would pay it off and I would get another 1 and then let's cycle dead in I Would advise anybody not to

Speaker 6: I borrowed 250. I thought I would pay 325 I actually paid $700, but it would have been $1,100 had I not gone to the bank and put a stop to this.

Speaker 0: $1,100. It is not often that a metaphorical slippery slope costs as much as an actual ski vacation. -$1,100. -$1,100. Payday loan companies present themselves as a way for you to get back onto your feet.

They don't want you to get trapped in debt. In fact, they'll help you if you fall behind. Remember the friendly ace cash lady from before?

Speaker 3: What happens if you can't pay back your loan? Sometimes people have a hard time paying us back, and we'll be there to work with you if that should happen.

Speaker 0: Yeah, no shit you'll be there for them. Your business model depends on it, because an actual Ace Cash training manual for employees featured a diagram which starts with the customer applying for an Ace loan, moves through them spending the money on that loan, being unable to pay it back, and then being forced to apply for an ace loan again. You'll notice that has a certain roundness to it. It's basically a recycling symbol for human misery. It's the circle of debt, And it screws us all.

Now, obviously, we must not generalize about this shitty industry. Some companies hold themselves to a higher standard. In fact, the Community Financial Services Association of America insists that their members are different from the shadier elements of the industry. They even brag about it in 1 of the most boring videos on the Internet.

Speaker 7: In our industry, I mean, let's be honest, there are some companies out there that don't even follow the law, let alone follow a standard of best practices like our member companies do.

Speaker 0: Oh. Those other companies are awful. Our member companies are pillars of the community. Did you know that 1 of them gave a kidney to a little girl in a hospital. She was in there for tonsillitis, but now she has 3 kidneys.

We're good companies. So let's take a look at their wonderful members and their best practices. First, there's Advance America, 1 of the biggest companies in the industry, whose co-founder defends his business like this. The consumer demand for the product is overwhelming and speaks for itself. Okay, that's fair, although it's also worth pointing out that the customer demand for heroin is also overwhelming.

And that doesn't mean it's a product you'd necessarily recommend to your friends to get them out of a jam. Advance America is a company whose best practices somehow include agreeing to an 18.75 million dollar settlement in North Carolina after they were accused of illegally high interest rates. But they're just 1 of the 2 largest companies in the business. The other company is Cash America. Okay, so how do they practice their best practices?

Speaker 1: Cash America was ordered to pay $19 million in refunds and fines late last year for illegally overcharging service members and for destroying documents.

Speaker 0: Say what you like about that. Illegally overcharging service members is a ballsy business practice. They must have been the ones driving around with those bumper stickers that say, -"Extort Our Troops." -$TRUMP'S TROOPS But... But settlements like those are actually something of a rarity, and that brings us to why the payday loan industry is seemingly unstoppable. They are incredibly good at avoiding regulation.

Just look at 1 example in Texas. They actually tried to rein in the payday loan industry there a few years ago, but they faced opposition from 1 particular state legislator.

Speaker 5: Members, I just cannot see why this... Why this legislation could possibly be necessary unless it is the big... The big institutions trying to squeeze the little guys.

Speaker 0: And the little guys, in his analogy, are payday loan companies. Although I've got to say, if you spell little guys with a dollar sign instead of an S, you've got yourself a pretty good name for a store right there. That man is Texas State Representative Gary Elkins, and his proud defense of the little guy is about to get a little muddier.

Speaker 8: But isn't it true that you have 12 very successful payday and title loan locations across the state?

Speaker 0: Let me answer that question for him. It is true. It is true He does and they include an outpost of the wonderfully named power finance, Texas Can I interest y'all in some power finance? But I apologize I interrupted

Speaker 8: that you stand to add to your personal wealth considerably by killing these bills?

Speaker 5: You know what? That is not about the bill.

Speaker 8: Mr. Elkins, Do you know the meaning of the term conflict of interest?

Speaker 0: Oh. 0, it's, do I know it? Why, madam, I am the physical embodiment of that term at this very moment. Now, you might be thinking that that woman, Vicky Truitt, is awesome. You know, fearlessly calling out how the payday loan industry influences politicians.

Which is why it's going to be so hard to tell you that just 17 days after leaving office, she signed on as a lobbyist for Ace Cash Express. You know, the circle people. Now, thankfully, Texas also has a finance commission which oversees the payday loan industry. Guess who runs that?

Speaker 1: William J. White is vice president of Cash America and was also appointed by the governor as chairman of the state's finance commission, which oversees payday loan outfits. That's right.

Speaker 0: The chairman of the commission that oversees the payday loan industry is also, at the same time, a vice president of 1 of the biggest payday loan companies in the country. I call Dingo. I call Dingo on that man. I call Dingo on him. I call Dingo.

Dingo, Dingo, Dingo. So, so let's just, let's just quickly break all of that down. If you were hoping to protect Texans from the payday loan industry, you would need to approach a commission overseen by the vice president of a payday loan company, and then introduce a bill into the state legislature where the owner of 12 payday loan stores will debate the merits of the payday loan industry with 1 of the payday loan industry's future f-cking lobbyists. Apparently, even cluster f-cks are bigger in Texas. But...

But the truly chilling skill payday loan companies have is not how they prevent legislation from getting passed, it's how they react when it gets through. For instance, when Illinois passed an act which applied to loans of up to 120 days, companies simply began offering loans with terms of 121 days instead. Which is like betting a dollar on the price of right... On the price is right. You're technically allowed to do it, but you know, f**k you.

Now, guess what? When Arizona outlawed payday loans, Many companies shifted to selling title loans instead, which are basically the same, except they also get to take your car. For regulators, it's like playing legislative whack-a-mole. Just when you think you've squashed them down, somewhere, up they pop up, somewhere else, wearing a completely different outfit. And the most amazing example of all of this took place in Ohio.

In 2008, they somehow capped payday loan rates at 28%. Any company licensed as a short-term lender had to abide by that. But, where 1 mole falls, another mole shall rise. -♪ Oh, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah ♪ And as of last year, there were no businesses in Ohio licensed as short-term lenders. There was, however, a sudden increase of companies registering as mortgage lenders, offering people short-term mortgages of around $300.

What now, as the lawyer for a company called Cashland explains this to a judge.

Speaker 9: So Cashland would not be subject then to the short-term loan act because it's not registered as a short-term lender. Exactly, your honour. The short-term loan act by the legislative enactment says it applies only to those who register under the short-term Loan Act.

Speaker 0: Why even bother calling yourselves mortgage lenders? Why not just call yourselves peanut butter octopus companies? You can't regulate peanut butter octopi. They don't technically exist. And in the rare case where states succeed in imposing stringent regulations, some payday loan companies have 1 final trick up their sleeve.

Speaker 10: Now, some payday lenders have found a loophole by partnering with Indian tribes that gives payday lenders the cover of sovereign immunity to avoid state regulations.

Speaker 0: That's right. Some payday lenders are currently dressing themselves up as Native Americans. I thought only Johnny Depp was allowed to do that. How does that even work?

Speaker 10: This payday lender, CashFairy, has teamed up with the Fort Belknap Indian tribe in Montana, and as you can see, they're charging online interest rates in the 700% range.

Speaker 2: If you can become affiliated with a tribe and be able to avert local and state laws. In my opinion, apparently loan sharking is still legal in this country.

Speaker 0: It's true. Although, let's be fair, no loan shark would ever go by the name Cash Fairy. Hey. Hey, you better get me that money by midnight or you're gonna get a visit from the cash fairy. The cash fairy.

Here's the problem. Payday loan companies are almost impossible to effectively regulate, and they are not going anywhere. A Pew survey found that a majority of borrowers said payday loans take advantage of them, but a majority also said they provide relief. And that is why they are so dangerous. People sometimes need them.

But you have to be absolutely sure there are no better options. Apparently, 41% of those surveyed who've taken out payday loans ended up having to borrow from family or pawn possessions or other things that they could have done in the first place just to pay off that payday loan. And yet, payday loans superficially do look easier. All these commercials, they're enticing, and they're also everywhere. The least we can do is launch a counter campaign with a celebrity spokesperson of our own to remind people to make sure they explore all their better options first.

Speaker 4: Hi, I'm Sarah Silverman. If you're considering taking out a payday loan, I'd like to tell you about a great alternative. It's called anything else. The way it works is instead of taking out a payday loan you literally do anything else. Sell your sperm, sell some blood, throw yourself in front of a rich guy's car, he'll throw money at the problem just to make that shit go away.

Are you an old person and need money? Take things. You're old. No one's gonna stop you. You're not gonna go to jail.

Go to the grocery store right now, fill up a cart with everything you need, and walk the f*** out of there. You know what? People will pay you to pee on them. That's true. Duties, too.

Duties are more, like, double. I know this for a fact. I... It doesn't matter, but it's something that you have to do every day anyway, right? By not doing it, you are literally flushing money down the toilet.

It's irresponsible. There's money inside of you. It's like Dorothy having the power to go home the whole time. The point is, no decision in your life will be worse than dealing with these payday loan mother... They're mother...

They're... Of mothers. So if you're thinking about getting a payday loan, just simply pick up the phone, then put it down again and do literally anything else. Do it now.

Speaker 0: -♪ you

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