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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 youre 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. Im 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 weve 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 youve 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. Theyve 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. Its 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 dont 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 didnt 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 dont 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 youre 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 youre rich and that's tax time. Through the earned income tax credit, an anti-poverty program that dates back to the Nixon era, youre 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 dont 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. Theyve 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 theyll 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 doesnt 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 youre writing out your -youre sending in your payment, itll 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 - theyve really ramped up, the payday lenders, the pawnbrokers, the check cashers, etcetera. Theyve 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 hasnt 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, theyve 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 its, you know, a fee of maybe 2 or $3 on a check.

And, of course, Wal-Mart doesnt 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 theyll like break your knees if you dont pay, so it is fundamentally different. But I wonder if youve 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 dont 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 youre 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 dont 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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