Turning Poverty Into A Multibillion-Dollar Industry.

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Turning Poverty Into A Multibillion-Dollar Industry

TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

There's a relatively new financial subculture made up of businesses like
payday lending, rent to own, check cashing, instant tax refunds,
corporate pawn shops, consumer finance loans, subprime credit cards and
debit cards sold by banks and other companies.

These businesses make big profits by lending money at very high interest
rates to the working poor and others just managing to get by on their
paychecks. People in the business call it alternative financing, but my
guest, journalist Gary Rivlin, prefers the terms fringe financing and
the poverty business.

His new book, "Broke USA," is about how the working poor became big
business and which businesses are profiting. Rivlin has worked as a
writer and reporter for the New York Times, and his articles have
appeared in the New York Times magazine, GQ, Salon, Newsweek and Wired.
Gary Rivlin, welcome to FRESH AIR. Why did you want to write this book
on payday loans and the poverty industry?

Mr. GARY RIVLIN (Author, "Broke, USA: From Pawnshops to Poverty, Inc.
How the Working Poor Became Big Business"): You know, I was intrigued by
how big these businesses have become. It used to be you could drive a
Cadillac, have a nice, big home, rich off check cashing or as a
pawnbroker. But now people are making tens of millions, if not hundreds
of millions, of dollars off of these businesses. And I wanted to explore
a world that seemed upside-down to me, where people with little money in
their pockets was good for business.

Who are some of these people? What are some of the clever ways they
device to cash in on the working poor? And, you know, what makes them
tick? Who wakes up in the morning and says, you know, I'm going to make
my millions and my mark selling these high-priced loans to waitresses
with two kids?

GROSS: One of the things that amazed me in your book is that, you know,
payday loans, loans against your next paycheck, there's more payday loan
outlets in the United States than the combined number of McDonald's and
Burger Kings. That's huge. I had no idea the industry was that big.

Mr. RIVLIN: And it's only about 17 years old. It's actually retracted
some. The consumer advocates have defeated the payday lenders in a few
states. So where there used to be 24,000 payday stores, there's now
22,000. So, now it's pretty much the same exact number. There's, you
know, the same number of McDonald's and Burger Kings combined as payday
stores.

And, you know, I also want to point out that the payday loan operators
only operate in about two-thirds of the states.

GROSS: Do the other states outlaw it?

Mr. RIVLIN: Well, it's one of a couple of things. Typically, though they
put a cap on the rates you could charge, you know, most states have
usury caps, typically around 28 or 36 percent, the payday lenders, the
way they operate in all these states is they won exemptions from the
state legislatures from that usury cap. Their argument was that, well,
these are short-term, two-week loans. It's not really an interest rate.
It's a fee. And, you know, many state legislatures agreed with that, not
all, though.

GROSS: So how does the payday loan industry work?

Mr. RIVLIN: So, you know, the payday lender is kind of the emergency
banker for the working poor. All you need is a checking account and a
regular check. It could be a paycheck. It could be a Social Security
check, a disability check. Some even nowadays take an unemployment
check.

And the idea is that you have some bills that you have to pay today,
your check isn't coming for a couple weeks, you could take a loan out
against that upcoming check.

It makes some sense in a narrow way. If you're going to end up bouncing
some checks, paying $30 to borrow $200 for two weeks makes economic
sense. The problem is that the same person who's so desperate that
they're going to a payday lender for $200, in two weeks, when they owe
$230, that's going to be a hard amount of money for them to come up
with.

There's a woman in Dayton, Ohio – some of the book takes place in
Dayton, Ohio – and just a great quote. It's a bridge loan to cover a
gap, but the problem is, the gap keeps getting wider and wider and
wider.

GROSS: Do they payday loan people like that? Like, if you take out a
loan, and then you give them your check when it comes in, but you're
still in debt, and you can't pay back the interest, so you have to take
out another loan, is that good for the industry, or do they start to
worry that you'll never be able to pay them back?

Mr. RIVLIN: Well, you know, I mean, yes and yes. I mean, it's the way
the industry is making the bulk of their revenues. In some states,
you're allowed to just simply roll over the loan. So you could come in
and, to use the example I just used of $200, you could just pay them the
$30 and get another two weeks until you’re able to muster up the full
$230.

Other states, it's more of a logistical thing. You have to pay it back,
but then you could take a new loan out the next day, and so what you
start to see happen is a person goes to store A to pay back store B, but
then they have to go store C to pay back stores B and A. And you start
to get into a trap, and that's when the payday lenders are starting to
worry, as you can imagine, the defaults could be pretty high.

About five percent of borrowers default and, you know, the person who
owes two or three or four stores at once is at a higher risk of
defaulting, but the business wouldn't be nearly as big or as lucrative
without these repeat customers.

GROSS: So what are some of the big companies that have made big profits
in the payday loan industry?

Mr. RIVLIN: Well, one thing that really surprised me is there are at
least seven publicly traded companies in the payday loan business. I
mean, none of them are household names.

The biggest is called Advance America, based in South Carolina. It has
around 2,500 of these stores. It was co-founded by someone who actually
worked in the Clinton White House. There's a few chains of about 1,000
or 1,200 stores. One was founded by a small-town debt collector. Another
was founded by a banker's son who was casting about for something to do.
That first one in Tennessee is called Check Into Cash. The banker's son
one is called Check and Go.

GROSS: So you describe this payday loan industry as a reaction in part
to banks having abandoned poor neighborhoods.

Mr. RIVLIN: Well, you know, in a way, all the businesses that I just
ticked off are there because the banks have fled certain neighborhoods:
working-class neighborhoods, inner city neighborhoods, some rural
neighborhoods.

And, you know, so where can you get your loan? You go to a payday
lender, you go to a consumer finance shop, you go to a pawnbroker. But,
you know, to me, the real reason payday has grown like it has is more of
an economic reason than a geographical reason.

It's – you know, there's been stagnating wages among the lowest 40
percent in this country. And, you know, so they're not earning any more
real dollars. At the same time, rent is going up, health care is going
up, other expenses are going up, and it just becomes harder and harder
and harder for these people who are making $20,000, $25,000, $30,000 a
year to make ends meet. And the pay lenders are really convenient. You
know, between going home from work and shopping, you can stop in one of
these stores and get instant cash in five minutes.

GROSS: You said earlier that you wanted to write this book in part
because you wanted to see how people justify getting very, very rich by
giving high-interest-rate loans to the poor. And you got a chance to
kind of answer that question when you went to the National Check Cashers
Association 20th annual gathering in October of 2008 in Las Vegas. So
what was your sense of how they see themselves, from having attended
their conference?

Mr. RIVLIN: What I expected going in is that people would say, hey,
we're legitimate businessmen, this is legal what we're doing, we're
providing a service that people want.

Instead, the check cashers, just like the payday lenders, just like the
pawnbrokers, et cetera, they tend to cast themselves as noble. You know:
We're in neighborhoods doing business where others don't go. It's almost
heroic because they're brave enough to be doing business — they just
cast themselves as providing an essential service for the person who
otherwise would be trapped.

What do you do if your car breaks down and you owe a few hundred dollars
to the auto mechanic or you need to pay the auto mechanic a few hundred
dollars, and you don't have a rich uncle to hit up, you don't have a
credit card? The payday lenders claim that they play an essential role
in helping these folks.

I should also say, by the way, it's the check casher's convention, but
they call themselves financial service centers now. And it's the one
place in the country I could find where not just the check cashers but
the pawnbrokers and the payday lenders and the debt collectors, they all
show up for the Annual Check Cashers Show. It's kind of the one place
where this industry, or what I'm describing as an industry, comes
together and meets.

GROSS: How do they see the banks?

Mr. RIVLIN: You know, I mean, I don't know if this was because in
October of 2008, you know, this was the worst of the subprime meltdown
but at the convention, they were using the banks as a convenient
whipping boy, as if, you know, while everyone – while the consumer
advocates were on our case about the check-cashing fees we charge or
about charging $15 for every 100 for a payday loan, you know, meanwhile,
hundreds of thousands of dollars were being lent in these subprime
loans, and it virtually blew up the global economy.

So it was a very handy whipping boy, but the banks have been the best
thing happening for the payday lenders and check cashers, et cetera.
They fled these communities, creating the opportunity, but more than
that, it's the big banks, the main banks from, you know, Goldman Sachs
to Wells Fargo to Wachovia and Bank of America, Citibank, that funded
these industries. Whether it's the subprime credit card industry, the
payday lenders, they provided the funding and eventually helped bring
some of these companies public.

So, on the one hand, it was a way of scoring some rhetorical points. On
the other hand, it strikes me that they've been in something of an
alliance.

GROSS: When you say the banks provided the funding, you mean through
loans, through bank loans?

Mr. RIVLIN: Through bank loans, you know, tens of millions of dollars to
some of these companies, in some cases hundreds of millions of dollars,
loans to let them grow.

Advance America, the big payday chain, you know, they borrowed $50
million before they had opened a single store. Their whole plan was to
be like Wal-Mart to the payday lending industry, and they successfully
pulled it off by borrowing this money from the banks. And then Morgan
Stanley, one of the most well-regarded banks, investment banks on Wall
Street, took them public in 2004.

GROSS: If you're just joining us, my guest is Gary Rivlin. We're talking
about his book, "Broke, USA: From Pawnshops to Poverty, Inc. How the
Working Poor Became Big Business." Let's take a short break here, and
then we'll talk some more. This is FRESH AIR.

(Soundbite of music)

GROSS: If you're just joining us, my guest is Gary Rivlin. We're talking
about his book, "Broke, USA: From Pawnshops to Poverty, How the Working
Poor Became Big Business."

So you said that at this National Check Cashers Association 20th annual
gathering in Las Vegas, that the people seemed to see the loans they
were making to the poor and the working poor as noble because these are
people who have trouble going into a bank and getting money. What's the
other side of that argument?

Mr. RIVLIN: Well, let's just stick with payday loans. According to the
industry, the average customer takes out eight or so of these loans a
year. If you state $15 per 100 as an annual interest rate, somebody
taking out eight of these loans a year, they're paying about 130 percent
interest for this money for the year.

There's four states in the country that monitor customer behavior, and
it's pretty consistent across all four that one out of five customers
take out 20 or more of these loans in a year. And now we're talking
about a good number of people paying about 400 percent interest for
their money.

You know, another data point is that around 10 million to 14 million
people a year take out payday loans. One out of five means more than two
million people every year are paying 400 percent interest for their
money. And, of course, we're talking about those who can least afford to
pay that kind of interest, you know, the single mom with two kids, the
warehouse worker getting by on 20 grand a year.

GROSS: So the argument on the other side is these are high-risk people
because they don't have enough money to be guaranteed of paying back
their loan.

Mr. RIVLIN: Right, right, right.

GROSS: So in return for the high risk, the payday loan company is going
to be charging a lot.

Mr. RIVLIN: Right, and you know, the problem with that argument are the
profits the industry had been making, at least until the last few years.
In the last few years, it's gotten so competitive, it's so saturated,
the consumer advocates have won some battles, that their profits had
dropped. But until recently, they were making profit margins of 20
percent to 25 percent a year and at the same time growing in double
digits year over year.

And so, to me, the moral point is, like, sure, there's nothing wrong
with doing business in the inner-city or a working-class community in a
rusted-out Midwestern town. It's just that you're making so much more
profit off the working poor than you are over the more prosperous
customer. That, to me, is where we get into, you know, morally
questionable behavior that it's a profit opportunity.

Subprime credit cards really took off because a few innovators took the
risk and said, you know, we're going to give credit to those with
tarnished credit because we think we could charge such a high interest
rate that we'll make money.

Well, they were making, like, two or three times the profit as the banks
who were giving out credit cards to those with good credit. And so what
you saw happening is that the big banks started getting into the
subprime credit card field, just drawn to those kind of profits.

You could say the same argument for the subprime mortgage, that, you
know, the big-name-brand banks who were in the mortgage business saw
that some scruffier lenders in the '80s and '90s were making all these
profits, huge profit margins, off subprime loans to working-class
people, the working poor, and they got into it and then brought it to
the middle class. And, you know, I think most of the people listening
know the rest of that story.

GROSS: Let's look at the rent-to-own furniture and appliance business.
Describe what the typical deal is here.

Mr. RIVLIN: So you need a bedroom set. You want a flat-screen TV. You
just can't put it on your credit card the way a lot of people could do
it. And so - but you want the item, you need the item, in some cases.
And so you rent it by the week or the month, and after a certain amount
of time, typically a year and a half, it's then yours, assuming you made
every payment along the way.

I mean, it's a really interesting business because the genius there is
they have figured out how to sell a $500 TV for $1,200. And their
customers tend to be happy. They want the TV, there's no other
alternative that they can figure out to buy it, and so they rent it by
the week, and if there's a happy ending, if they made all the payments,
they get then to keep it.

GROSS: And if they don't?

Mr. RIVLIN: Then you're going to get a – well, let's put it this way:
You're late, and you're going to be getting phone calls from them, and
if you don't answer the phone calls, you're going to get a visit from
them. They want their item back. It's like, you're not paying for it
anymore, and they want it back.

Rent-A-Center, the big company in the rent-to-own field, they have a
policy, the lifetime guarantee, they call it something like that, where
you can stop paying but then a month later, three months later, you have
your job back, you can make payments again, they're going to let you
start where you left off.

I mean, you know, the thing about these businesses is they want repeat
business, and so they want people to keep coming back. They don't want
to just, you know, have you go to 74 payments out of your 78 payments,
miss one and then, like, na-na-na-na-na, you know, you just blew it.

You know, they want people to have a good feeling about them and the
next year come back to rent their couch and living room set and the next
year, you know, a bedroom set for their children. And so, you know, they
tend to want to keep their customers very happy.

GROSS: So the risk with the Rent-A-Center is that you're going to be
paying a lot more for that TV because...

Mr. RIVLIN: You are paying a lot more for that TV.

GROSS: Right.

Mr. RIVLIN: I mean, and that's part of the pricing that they use. I
mean, again, just to look at this from a business point of view, you
know, you compare Best Buy, you know, a huge retailer, to Rent-A-Center,
and Rent-A-Center is making a larger profit than is Best Buy because
they're able to make more per item than a Best Buy.

GROSS: Gary Rivlin will be back in the second half of the show. His new
book, "Broke USA," is about how the working poor became big business for
companies selling high-priced loans. I'm Terry Gross, and this is FRESH
AIR.

(Soundbite of music)

GROSS: This is FRESH AIR. I’m Terry Gross back with journalist Gary
Rivlin. His new book "Broke USA" is about what he describes as the
poverty industry - the industry that makes big profits by loaning money
to the working poor at very high interest rates. Rivlin's definition of
the poverty industry includes: payday lending, rent-to-own, check
cashing, instant tax refunds and consumer finance loans.

Now you include the pawnbroker industry in your book. And, as you point
out in the book, pawnbrokers seem kind of, you know, old fashion, small
time. What's the difference between the old pawnbroker industry and the
contemporary version of it?

Mr. RIVLIN: Right. So you see much more Ma and Pa and the typical
pawnbroker loved - loves what they do, right? I mean these are people
who are history buffs or just, they really pride themselves in being
able to judge what this piece of jewelry, this guitar, electric guitar
or whatever is worth. And that still exists, unlike some of these other
areas we’ve talked about. It's not dominated by the big chains. Most
pawnbrokers are still small time. But what's also happened is that
several big chains have gotten into it.

The biggest is Cash America and they have about 650 pawn shops and
logged about $150 million in profits last year. So you’ve got kind of
parallel stories here. And, at the same time, Cash America, the other
two big pawn chains that are publicly traded, they do payday loans. They
do check cashing. They’ve gotten into the debit card business, some of
them.

So, you know, they're more diversified. They're pursuing whatever
revenues are available under this poverty umbrella, unlike most
pawnbrokers that pride themselves in being pawnbrokers and, in fact in
some cases, scorn if not resent the payday lenders because what's a
payday loan? It's a short-term loan. What does the pawnbroker do? Well,
they're making small loans against the ring you bring in, the TV you
bring in, so they're competitors.

The thing that most amazes me about the pawn industry is the average
pawn loan last year was about $90. It’s such a small amount. It just
seems such a nickel and dime business. But you put together enough of
these pawn shops and, you know, it's a billion dollar business for Cash
America. It's, you know, $150 million profit off of this nickel and dime
business.

GROSS: Let's talk about household loans, like consumer finance shops.
And an example of a really successful outfit is Household Finance. You
see this as like a model for the whole industry. So let's start with
what the business is and how it works, and then we'll look a little bit
at its history.

Mr. RIVLIN: So Household Finance is the first - actually, it went out of
business last year, so it was the first.

GROSS: Oh. Oh.

(Soundbite of laughter)

Mr. RIVLIN: Yeah. Yeah. It was bought in 2002 or 2003 by HSBC, the huge
London-based bank. They too wanted to get into the subprime mortgage
business and it proved such a disaster and such a mark on its record
that they just closed the bank down, closed down Household Finance not
that many months ago.

But, you know, the consumer finance shops started as a way for those on
the economic fringes to buy a dining room set or their refrigerator
broke so they had to buy a new fridge. And so they were these loans of
$600, $800, $1,000 that had big upfront fees and charged high interest
rates, 15, 18, 20 percent, sometimes more and it was a very good
business.

And then, starting in the 1980s, with deregulation of the home loan
market, the consumer finance shops, Household Finance but also the Money
Store, Beneficial, there's a slew of these, they started making home
loans. Not original loans so somebody could have a first time - they
weren't loans to first time homebuyers. It was people who already had a
home and they would convince them to refinance or to take out a home
equity loan. And so, instead of, of course, loaning $600, $800, $1,000
at a time, we're talking about tens of thousands and these companies got
huge.

And I would also say, you know, when people talk about subprime mortgage
lending there's this question, you know, who is to blame? The person who
buys a $500,000 house with a salary good enough for a house at half that
price clearly deserves some of the blame. All those people who used
their homes as an ATM machine to build a second bathroom, to go on
vacation, clearly they deserve some of the blame. The kind of mortgage
lending that went on, especially in the 1980s and 1990s by Household
Finance, by its competitors, was clearly predatory.

To me there's no moral ambiguity about it. It was - home repair meant
knocking on the doors of old ladies a la the Tin Man, driving them to a
mortgage broker, putting them into mortgages, refinances, typically home
equity loans with interest rates of 25 percent, with upfront fees of 20
percent, packing it with all these extras that just added to the cost.
It was these businesses, Household in particular, they would go through
the deed records to figure out which homeowners owned their home
outright and then find out which ones needed repairs or had big credit
card debts. And then they would target those people.

They would train their sales people, talk fast during the closing so
people don’t ask questions. The sales people had all this pressure on
them to sell all these extras, credit life insurance, could add as much
as 20 percent to principal. And it was just this very aggressive selling
machine, and, in fact, in the year 2002, Household Finance paid what was
then the largest fine or settlement ever paid in a case like this - $484
million because of the kinds of abuses that they were doing.

GROSS: So you said this Household Finance no longer exists. But which of
the consumer loan companies are still big?

Mr. RIVLIN: You know, Citi Financial is the real big one. Citigroup
bought one of the two or three biggest consumer finance companies in
2000. They paid $31 billion and I bet you most of the people who read
the news had never heard of the company that they just paid all that
money for. And they're really big into it. You could travel the country
and you'll see Citi Financials in all kinds of working-class,
downtrodden communities. But even Citigroup is talking about trying to
sell them.

I mean, the problem with the consumer finance shops is where there was
an interesting modest business in making these small loans for, you
know, furniture or a refrigerator, they got inspired by the potential of
the money to be made doing subprime mortgages. Of course, come 2008,
2007, that all exploded and that left a lot of these businesses in
tatters.

Unlike a lot of the subprime mortgage lenders they were holding a lot of
this stuff in portfolio. They didn’t sell it to Wall Street to slice and
dice and sell off to Dusseldorf. They had a lot of this stuff on their
books. And so, it was just collateral damage to the subprime mortgage
fiasco.

GROSS: My guest is Gary Rivlin, author of the new book "Broke USA."
We'll talk more after a break.

This is FRESH AIR.

(Soundbite of music)

GROSS: My guest is Gary Rivlin. He's the author of the new book "Broke,
USA: From Pawnshops to Poverty, Inc. How the Working Poor Became Big
Business." And his book is about what he calls fringe finance, which
includes consumer finance shops, payday lending, check cashing, rent-to-
own.

So one of the things I learned about in your book, I hear ads for this
all the time at around tax time that if you go to this tax agency that
you will get an instant tax refund. You'll get it immediately after the
forms are filled out. You don’t have to wait for the IRS to send you
your refund. What is that about?

Mr. RIVLIN: See, now technically they're never going to say an instant
tax refund. This is a loan against the tax refund that you’re going to
get. In a way this is my favorite of the businesses just from that
narrow perspective of like, my God, somebody thought of this.

So there's one time in the year, if you make $15-, $20,000, $30,000 a
year and if you have kids that you’re rich and that's tax time. Through
the earned income tax credit, an anti-poverty program that dates back to
the Nixon era, you’re going to get as much as two or three months of
salary at once. And so starting in the late 1980s - actually H&R Block
was the first to do this - they started deliberately opening up tax prep
stores in neighborhoods where the average household income was under
$30,000.

And one could say like, well, why would you go open businesses where
people don’t have money? Well, the person who's living on 20 grand who
suddenly is going to come into $3,000, they're typically desperate for
that money. They owe the landlord. They owe credit cards. They just want
to catch up. They’ve been dreaming of that living room set, TV,
whatever.

And so there are businesses that for a fee, for a pretty expensive fee,
will give you your tax refund that day or the next day knowing that in
two or three weeks they're going to get their money because the IRS is
going to pay off the refund. And this is just a huge business. And an
earned income tax credit is about $40 billion a year, and collectively
these, you know, instant tax mills collect $3- or $4 billion. About a
billion dollars of that are in the fees on these loans.

Hey, you want your money tomorrow, you could pay - it's typically, I
don't know, between 60 percent, 150 percent interest on that loan. And
on top of that they’ll charge $200, $300 to prepare your taxes, even
though typically it's a very easy tax form to do. It takes 15, 20
minutes to do it. So this is one of these huge businesses - $3-, $4
billion dollars a year even though it really exists for a month.

GROSS: So in writing about how the fringe lending industry has changed
over the past few decades, you write a little bit about the usury laws,
the laws that prevented high interest rates and how those laws have been
changed over the years. So where are we now in terms of laws that
actually regulate how much any aspect of this industry is allowed to
charge for lending money?

Mr. RIVLIN: Well, there's a few things. I mean first off Congress, with
the financial reform package, one piece that may or may not end up in it
would undo a Supreme Court ruling from 1978 which said that it doesn’t
make a difference where you as a credit card customer are sitting. All
that matters is where the credit card issuer is doing business. And once
that happened, suddenly every credit card company set up offices in
South Dakota or Nevada. And if notice, when you’re writing out your -
you’re sending in your payment, it’ll go to one of a few states that has
no existing usury law.

And so this just opened up the door for a lot of business for South
Dakota and Nevada and I think Delaware too. So Congress might undo that
and that would have a huge impact on the credit card companies because
then they would have to abide whatever the usury law in that particular
state where the customer is sitting is.

Another change that's going on with the payday lenders is that there's
been a lot of pushback from the consumer advocates. And so there's been
a lot of - some legislative changes and a lot of pressure on them to
change their habits. At the same time the payday lenders are realizing
that they overbuilt. There are just simply too many stores and they're
starting to cannibalize their customers. They're starting to compete too
much with each other. So there's been a retraction of the payday lending
industry too.

But there's also the possibility that the payday lenders might be
legislated out of existence. So there's some changes that have taken
place, but the big fear among most of these poverty businesses that I'm
writing about is that the real big change is still on the horizon.

GROSS: In terms of legislation.

Mr. RIVLIN: In terms of legislation. Their big fear - they’ve really
ramped up, the payday lenders, the pawnbrokers, the check cashers,
etcetera. They’ve really ramped up their lobbying effort in Washington,
D.C., because they really live in fear that with a single law they could
be essentially legislated out of existence. And Barack Obama as a
candidate, at least, he's never - he hasn’t spoken of it that I know of
as president, he came out in favor of a rate cap. So clearly, if it got
through Congress it was a very good chance that the president would sign
the legislation.

GROSS: One of the things that you say the fringe lending industry is
afraid of is Wal-Mart getting into the business.

(Soundbite of laughter)

GROSS: What is the way that Wal-Mart is entering or is trying to enter
it?

Mr. RIVLIN: Well, they’ve been in the debit card business for a while
and that would really hurt the check cashers in particular. And a second
way Wal-Mart would really hurt and it would be the check cashiers is
Wal-Mart's gotten into the check cashing business. And Wal-Mart being
Wal-Mart, they're charging much less than the typical check casher. And
so it’s, you know, a fee of maybe 2 or $3 on a check.

And, of course, Wal-Mart doesn’t care if that's loss leader for them
because you have these people with pockets full of cash in their stores
and so that's a big win for them. And the last time I checked, a couple
months ago, they're in - about a third of their stores were offering
check cashing purposes. And so, you know, the more they roll this out,
the more they advertise it, the more the check cashers could be losing
business.

GROSS: One more thing, have you ever spoken to a professional loan
shark?

(Soundbite of laughter)

GROSS: Someone who isn't affiliated with one the companies you write
about but makes loans for, you know, big interest profits? But, of
course, with a loan shark they’ll like break your knees if you don’t
pay, so it is fundamentally different. But I wonder if you’ve spoken to
any loan sharks how their interest rates compare and what they think of
the kind of, you know, payday loan, check cashing businesses that you
write about in your book.

Mr. RIVLIN: Well, you took away my line. I was going to say the payday
lenders charge higher rates, but they at least don’t break knee caps.
They just call you a lot looking for their money and they call every
person you know that you put down as a reference and they call you at
work, et cetera. But yeah, I actually did talk to a loan shark and
basically your typical loan shark is charging two or three points and
that works out to about 150 percent interest a year. The payday lenders
are typically if you’re expressing it as an interest rate, charge 400
percent a year. So yeah, they're much cheaper than the payday lender.

And the one loan shark - I mean, this is a poll of one so I don’t know
what we can extrapolate, but the one loan shark I spoke to, he admired
the payday lenders. He just was amazed that they took their business
model, so to speak, and just went corporate and went national with it
and figured out how to make so much money. I mean, one of the payday
lenders I spent time with, yeah, he's making like 25 million a year in
after-tax profit from the payday loans. So, you know, the loan shark is
just amazed at what the payday lenders have pulled off.

GROSS: Gary Rivlin, thank you so much for talking with us.

Mr. RIVLIN: Thank you. My pleasure.

GROSS: Gary Rivlin is the author of the new book "Broke USA." You can
read an excerpt from the book on our website, freshair.npr.org.
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John Prine: Midwestern Mind Trips To The Nth Degree

TERRY GROSS, host:

There are two new albums involving the singer-songwriter John Prine. One
is called "John Prine In Person & On Stage" and is a collection of
concert performances from recent years. The other is a tribute album
called "Broken Hearts and Dirty Windows: The Songs of John Prine." On
that one, some of Prine's most familiar songs are covered by younger
admirers such as Josh Ritter and bands including My Morning Jacket,
Drive-By Truckers and Deer Tick.

Rock critic Ken Tucker reviews both.

Mr. JOHN PRINE (Musician): Hello.

(Soundbite of applause and cheering)

(Soundbite of song, "Spanish Pipedream")

Mr. PRINE: (Singing) She was a levelheaded dancer on the road to alcohol
and I was just a soldier on my way to Montreal. Well, she pressed her
chest against me about the time the jukebox broke. Yeah, she gave me a
peck on the back of the neck, and these are the words she spoke. Blow up
your TV, throw away your paper, go to the country, build you a home.
Plant a little garden, eat a lot of peaches, try to find Jesus on your
own.

KEN TUCKER: John Prine possesses a sage goofiness, a wit untouched by
world-weariness. He sings in a drawled manner of phrasing that cuts any
possible pretense in his impeccably metered wordplay. His new live album
proves that he’s retained all these traits into senior citizenship. The
same cannot be said of the tribute album saluting him, though. This
version of same song Prine just sang, "Spanish Pipedream," is rendered
with an excessive jauntiness by the Avett Brothers.

(Soundbite of song, "Spanish Pipedream")

AVETT BROTHERS (Folk-rock band): (Singing) She was a levelheaded dancer
on the road to alcohol and I was just a soldier on the way to Montreal.
Well, she pressed her chest against me about the time the jukebox broke.
She gave me a peck on the back of the neck, and these are the words she
spoke. Blow up your TV, throw away your paper, move to the country,
build you a home. Plant a little garden, eat a lot of peaches, try to
find Jesus on your own.

TUCKER: Tribute albums, always well-intentioned, tend to be pretty
dreary affairs, and "Broken Hearts and Dirty Windows" is no exception.
Most of those who admire Prine here execute his subtle turns of emotion
with something closer to flat-footed awe and imitation. One of the few
bands that gets Prine right by not sounding like John Prine is the

(Soundbite of song, "Daddy's Little Pumpkin")

DRIVE-BY-TRUCKERS (Alternative country band): (Singing) You must be
daddy's little pumpkin. I can tell by the way you roll. You must be
daddy's little pumpkin. I can tell by the way you roll. It's quarter
past eleven and you're sleeping on the bedroom floor. I can see the fire
burning, burning, baby burning, right behind your eyes. I can see the
fire burning, burning right behind your eyes. You must have swallowed a
candle or some other kind of surprise.

TUCKER: That song is about as minor as John Prine material gets — I want
to hear a Drive-By Truckers version of "If You Don't Want My Love,"
shockingly not performed on either of these collections.

As for Prine's live album, he cherry-picks favorite performances of his
from the past few years. Being the laid-back, generous but high-standard
type of fellow that he is, Prine knows how to choose the right people to
sing his material, as is proven on this duet with Iris DeMent on the
wonderful "In Spite of Ourselves."

("Soundbite of song, "In Spite of Ourselves")

Mr. PRINE (Singing) She don't like her eggs all runny. She thinks that
crossing her legs is funny. She looks down her nose at money. She gets
it on like the Easter Bunny. She's my baby I'm her honey. I'm never
gonna let her go.

Ms. IRIS DEMENT (Country-folk singer): (Singing) Well, he ain't got laid
in a month of Sundays. I caught him once and he was sniffing my undies.
He ain't too sharp but he gets things done. Drinks his beer like it's
oxygen. He's my baby and I'm his honey. Never gonna let him go.

Mr. PRINE AND Ms. DEMENT: In spite of ourselves we'll end up a
sitting...

TUCKER: Because he started out strumming an acoustic guitar, and because
one of his first well-known songs was a Vietnam War-era song called "Sam
Stone," Prine gets pegged as a folk singer-songwriter, when in fact,
he’s always had at least as much country music in his rhythm and his
rhymes. That's another thing his kind admirers on his tribute album
don't seem to get: That you can convey sincerity through something
besides emoting. It's called detachment — a detachment that roots a
soaring, ringing song such as "Glory of True Love" in an earthiness that
really enables it to lift off.

(Soundbite of "Glory of True Love")

Mr. PRINE: (Singing) Oh, the glory of true love is a wild and precious
thing. It don't grow on old magnolias or only blossom in the spring. No,
the glory of true love is it will last your whole life through. Never
will go out of fashion. Always will look good on you. You can climb the
highest mountain...

TUCKER: In 1998, Prine lost some throat tissue to cancer, and some of
the range in his already ragged tone to radiation treatment. He sounds
pretty great on almost every cut on this live album, though. And he
could teach the whippersnappers with juicier vocal cords on his tribute
album a few things about how to sell a song. Not for nothing did Bob
Dylan declare just last year that Prine's songs are, quote, "Midwestern
mind trips to the nth degree." From a master of mind games to a master
of mind trips, that's a pretty good tribute all by itself.

(Soundbite of applause and cheering)

GROSS: Ken Tucker is editor-at-large for Entertainment Weekly. He
reviewed "John Prine In Person & On Stage" and “Broken Hearts and Dirty
Windows: The Songs of John Prine."

You can listen to two tracks from "John Prine In Person & On Stage" on
our website, freshair.npr.org, where you can also download podcasts of
our show.

I'm Terry Gross.
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