"We already were up against the entire mortgage industry," Faith said. "At that point we didn't need a whole new set of enemies lining up against us."

Faith had promised Allio he would turn his attention to payday finance as soon as the mortgage fight was over, but months pa.s.sed without Faith making any commitments. "I was still dragging my feet," Faith said. "So now Tom is getting even more p.i.s.sed." It was no longer a question of what he thought of payday loans. A woman on his staff was getting calls at work because of a sibling who was past due on some loans and he heard from another friend whose sister had also gotten herself into a deep hole using them. "Once you start looking into this thing, you see it's a really ugly world," Faith said. But Faith, ever the pragmatist, wanted to see if they stood a chance before jumping into the fight. He checked in with a few friendly legislators and he set up a meeting with the governor-elect, a Democrat named Ted Strickland. Strickland, who would take office at the start of 2007, asked him to wait, but he also made it clear he would sign something if it reached his desk. Faith had similarly encouraging signs from the others, so he informed Allio he was on board.

The group called themselves the Ohio Coalition for Responsible Lending-a self-conscious nod to the Center for Responsible Lending. Jim McCarthy and Dean Lovelace were members, as were a long list of labor leaders, housing activists, community organizers, legal aid attorneys, and those representing faith-based organizations around the state. "To many of us this wasn't just an economic issue but a moral one," Allio said. "The high interest rates they charge is a modern-day form of usury. I don't care what the text, whether it be Jewish or Catholic or mainline Protestant, there's clear statements in each against usury and the need to offer fair interest rates." The group decided that its aim would be to cap the interest rates that payday lenders could charge and limit the number of loans a person could take in a given year. "We had people calling the office every day who are like, 'I've got five, six, ten payday loans, I'm trapped,'" said Nick DiNardo, a legal aid attorney in Cincinnati. "And there was nothing we could really do short of helping them if the collections got too aggressive." It fell to Faith to find a lead sponsor for their bill.

The new governor was a Democrat but the Republicans still controlled both the Ohio House and Senate. So instead of starting with a good liberal, Faith surprised his allies by first approaching a conservative legislator named Bill Batchelder. With Leonid Brezhnev eyebrows, oversized Mars Blackmon gla.s.ses, and a tendency to quote Adam Smith, Batchelder hardly seemed to fit the bill of consumer champion. But if they could first muster Republican support, Faith reasoned, some of the bipartisanship good feeling they had nourished during the mortgage fight might carry over to payday. Besides, the two got along famously. Unlike most every other lobbyist traipsing through his office, Batchelder told me, he always found Faith a man of conviction "who was actually looking to engage you in a serious policy debate." If some of Faith's allies were inclined to describe Batchelder as one of the legislature's "cavemen conservatives," that was all right with Batchelder, who reacted to the characterization with a burst of delighted laughter.

Batchelder and Faith might disagree about most everything but he was an easy sell on payday lending. Batchelder told him he was happy to sponsor the Coalition for Responsible Lending's bill, not despite Adam Smith, the first apostle of laissez-faire, but because of him. "The rates lenders charged were a moral question for Smith," Batchelder said. "Smith pointed out that if you charge too much, you damage a society. And he's right. You can't charge people these kinds of interest rates without hurting their situation and society." In October 2007, Batchelder and Robert Hagan, a liberal Democrat from Youngstown, introduced a bill that would impose a 36 percent rate cap on the interest rates payday lenders could charge.

In Washington, D.C., Steven Schlein reacted to the news with an indifferent shrug. After four years with the payday lenders, he had learned not to get too worked up over every dispatch from the hinterlands. "Every year a bunch of states put payday into play," Schlein said. "But then in the end you have few actual fights." They had lost legislative battles in Oregon and New Hampshire over the previous few years but mainly they ended up with a compromise that the big chains could live with. "Ohio didn't seem one of the places we should worry about it," Schlein said.

In Spartanburg, Billy Webster was similarly unconcerned. The market was too important and the industry too strong in Ohio to lose. Check 'n Go was based in Cincinnati and the Davis brothers several years earlier had had the foresight to spend the money necessary to lure away a top Ohio Senate staffer to run its governmental affairs office. There was also CheckSmart, based in Columbus, a chain of 175 payday and check-cashing stores that had just been sold to a large New Yorkbased private equity fund for $268 million. After writing a check that big and with half of its stores in-state, CheckSmart's investors weren't going to sit idly by. "We were told time and time again," Webster said. "With Check 'n Go and CheckSmart there, there was no way Ohio would be in play."

The Coalition for Responsible Lending held forums across the state and organized small delegations to meet with individual legislators and with the editorial boards of all the big daily newspapers. A local research group, Policy Matters Ohio, released a report demonstrating that payday had become widespread even in the state's suburban and rural areas. When, in the autumn of 2007, Marc Dann, the state's Democratic attorney general, announced he would be holding hearings investigating the lending practices of the state's 1,600 payday stores, the search was on for customers and employees, or at least former employees, willing to talk about their experiences.

The first of three hearings was held in a large Baptist church on Cleveland's east side. The industry might have been confident about a victory but they were hardly complacent. Its supporters showed up in full force, wearing yellow "I Support Payday Lending" b.u.t.tons and made sure their perspective was voiced. They pointed to the list of "best practices" their trade a.s.sociation had developed, including a twenty-four-hour rescission policy and a once-a-year extended payment plan for customers who get themselves into financial trouble with a payday loan. Payday's critics, many of whom sported b.u.t.tons showing a shark's snout biting into a large stash of cash, dismissed these voluntary policies as not worth the paper they were printed on. One of the more moving speakers in Cleveland was a man named Charles Mormino, who told the crowd about a family member with psychiatric problems (he was no more specific than that) who had gotten into trouble with a trio of payday stores. He settled up her debts at all three and then sent a certified letter to each alerting them to the family member's problem. But all three-Advance America, CheckSmart, and ACE Cash Express-continued to do business with her.

A former payday manager named Tom Kirk spoke at the attorney general's hearing in Columbus. On paper, Kirk said, the payday lenders were generally responsible citizens. There were in fact rules at the company where he worked against lending to a customer carrying loans at multiple stores, and there were policies to protect borrowers from overzealous collections. The rub was that employee bonuses were based largely on volume. "The policy manual of the company I worked for was good," Kirk said. "The problem is that the district manager and the store managers and the store personnel don't always follow it."

Those who supported the Batchelder bill might have felt encouraged by their organizing efforts if not for one failing: They seemed to be getting nowhere in their hunt for legislators willing to join their crusade. Particularly baffling was the reluctance of House Democrats to commit to their cause. "Several of the legislators were not friendly, verging on hostile," said Jeff Modzelewski, an organizer for BREAD, a church-based group in the Columbus area, who met with all twelve legislators representing the capital and its suburbs in the statehouse. Even Joyce Beatty, the House minority leader, a black woman representing central Columbus, proved frosty. "We figured she would be strongly enthusiastic," Modzelewski said. "She represents a black, poor urban district with inner-city problems. But meeting with her-she was among the worst. I'm there with twenty church members and she's talking to us like we don't know what we're talking about."

There are people in the black community, of course, with a favorable view of the poverty industry. In South Carolina, I spent an evening with Willie Green, the former pro football player who had proven brave or foolish enough to appear on 60 Minutes Wednesday 60 Minutes Wednesday. Green, who by this time had gone to work for Advance America, spoke rhapsodically about the critical role these fringe financial inst.i.tutions played in the life of the black community. "Check-cashing stores and p.a.w.nshops and payday lending stores, those are the poor man's inst.i.tutions," Green said. "You go to any poor black person, and I guarantee you, they've borrowed money from a payday person, a t.i.tle loan person, or a p.a.w.nshop. That's what you do if you don't have the luxury of going into a bank and borrowing money." Green's father, a janitor at a movie theater in Athens, Georgia, had raised nine kids on $85 a week. "He used to play golf on Sat.u.r.days and Sundays and then go to the p.a.w.nshop," Green said. "He'd p.a.w.n his clubs and he'd pay for my school, or whatever I needed to succeed in life. And then he'd go get his clubs at the end of the week when he got paid.

"He made that sacrifice for us. If my dad had not had the ability to use a p.a.w.nshop, I wouldn't be where I am. I wouldn't have been able to go to college. I wouldn't have been able to play professional sports."

But Joyce Beatty was another story. The Cleveland Plain Dealer Cleveland Plain Dealer revealed that CheckSmart, the company that had just been sold for more than a quarter of a billion dollars, put Beatty's husband, himself a former legislator (she had taken his seat in the legislature), on the CheckSmart payroll. Even the whiff of controversy was all the motivation many in Beatty's caucus needed to make up their minds about the evils of payday lending. "A lot of wavering Democrats suddenly had very strong opinions," said Jim Siegel, who covers the state legislature for the revealed that CheckSmart, the company that had just been sold for more than a quarter of a billion dollars, put Beatty's husband, himself a former legislator (she had taken his seat in the legislature), on the CheckSmart payroll. Even the whiff of controversy was all the motivation many in Beatty's caucus needed to make up their minds about the evils of payday lending. "A lot of wavering Democrats suddenly had very strong opinions," said Jim Siegel, who covers the state legislature for the Dispatch Dispatch. Even Beatty came out in support of meaningful payday reform, as if to show that she was not in bed (so to speak) with the industry. Now all they had to do was convince enough Republicans that there was a compelling reason to add to the state's job loss and shutter an industry that employed several thousand people across Ohio.

In the eight years he served in the Ohio House of Representatives, Chris Widener remembers a gavel being used during a committee hearing only a few times-and all of them were in the winter and spring of 2008, when his committee, Financial Inst.i.tutions, was debating payday lending. Widener is an architect by profession, thorough and precise, a thin man with blue eyes, metal-framed gla.s.ses, and a receding hairline. He believed that any person wanting a chance to speak should be given one and so he held four hearings on the issue, one of which lasted nearly seven hours.

The crowds were large and often raucous. What Chris Browning remembers about her time in front of Widener's committee was the hissing and the jeering that accompanied her testimony. She told the committee about the GM pensioner who had borrowed money from her store for 115 consecutive months-and people wearing yellow "I Support Payday Lending" b.u.t.tons and yellow shirts booed and yelled out things like "liar" and "bulls.h.i.t." She declared that "repeat borrowers are the payday loan inst.i.tution's bread and b.u.t.ter," which prompted more catcalls and cries. "Widener's banging that gavel of his and telling people they'll be quiet or he'll remove them but it's not making much difference," Browning recalled.

An unhappy Allan Jones took his turn at the witness table. He had better things to do than try to explain his business to people who didn't understand it, yet suddenly he had been told that he needed to worry about shutting down all his stores in one of his best markets. "It's like overnight we're hearing we might lose Ohio," he recalled. With foreclosures starting to spike across the country and the economy starting to teeter, he was worried that payday would end up collateral damage. "Payday didn't cause any of this but I realized we were being used as an easy scapegoat," he said. You might not like how I make my money, he told the committee, but the people you'd be hurting if you imposed this cap "were the ones who without us couldn't pay the electric company or the repair shop if their car breaks down."

Bill Faith listened in amazement to this heavyset man from Cleveland, Tennessee, who had flown to Columbus in his private jet to lecture the Ohio state legislature about the plight of the working man. "We provide them an essential service to help them when they're most in need," Jones said earnestly. Who is is this guy, Faith asked himself-and then quickly realized it was his best friend. "I just wanted him to talk and talk and talk," Faith said. "Because the more he talked, the more he offended everybody." Faith had the opposite reaction when Lynn DeVault, a Jones underling serving as the president of the payday trade group, took her turn at the microphone. Rather than dismissing the critics as pointy-headed elitists, she acknowledged the payday horror stories but then blamed them on mom-and-pop shops refusing to adopt the industry's best-practices pledge. Our customers like us, she said, and if that wasn't quite true, they certainly didn't dislike them so much that they did something about it. Only about a dozen people a year typically filed a complaint about a payday lender with the state-a small number when compared to those filed against check cashers and others in the poverty business. "Customers are intelligent people who choose the lowest-cost alternative for themselves at a particular point in time," DeVault told the committee. They can pay us $15 to borrow $100-or they can pay the bank $35 every time they bounce a check or blow $50 paying a utility company a restore-service fee because they were two payments late on their electricity bill. this guy, Faith asked himself-and then quickly realized it was his best friend. "I just wanted him to talk and talk and talk," Faith said. "Because the more he talked, the more he offended everybody." Faith had the opposite reaction when Lynn DeVault, a Jones underling serving as the president of the payday trade group, took her turn at the microphone. Rather than dismissing the critics as pointy-headed elitists, she acknowledged the payday horror stories but then blamed them on mom-and-pop shops refusing to adopt the industry's best-practices pledge. Our customers like us, she said, and if that wasn't quite true, they certainly didn't dislike them so much that they did something about it. Only about a dozen people a year typically filed a complaint about a payday lender with the state-a small number when compared to those filed against check cashers and others in the poverty business. "Customers are intelligent people who choose the lowest-cost alternative for themselves at a particular point in time," DeVault told the committee. They can pay us $15 to borrow $100-or they can pay the bank $35 every time they bounce a check or blow $50 paying a utility company a restore-service fee because they were two payments late on their electricity bill.

Terrence Jent, who had worked as a regional director for Check 'n Go, offered a very different perspective than Jones or DeVault. Jent had started as a store manager in his last semester of college and quickly worked his way up from district manager to regional manager. What bothered him about his four years in the industry, it seemed, was the aggressiveness with which they pursued someone who was late in paying them back. "You will receive hara.s.sing phone calls three to four times a day," he told the committee. "All of your personal references will receive phone calls each day. You will be visited at work in an attempt to embarra.s.s you into paying your loan. You will be visited at your home so that you understand that the payday lender knows where you live."

Yet the hearings, while raucous and often dramatic, weren't swaying opinions. Widener regularly polled committee members, as did Jim Siegel over at the Dispatch Dispatch. Both were hearing the same thing. Republican members might be willing to do something about payday but nothing so radical as a rate cap. "They were telling me, 'We might have to do a bit of tinkering, we might need to put on some kind of limit, but we don't want to shut an industry down,'" Siegel said. Widener was searching for a compromise that set aside the rates the payday lenders charged but limited people to two loans at any given time or perhaps eight loans a year. "At that point, it didn't look like anyone was pa.s.sing anything," Siegel said.

Steven Schlein might want to claim the role of underdog but in Ohio the payday lenders were anything but outmanned. Schlein's group, the Community Financial Services a.s.sociation, had six lobbyists on the payroll during those months they were debating a payday cap (including Chuck Blasdel, the former state representative who had done the bidding of the subprime mortgage lenders in 2002 and 2006). A group calling itself the Ohio a.s.sociation of Financial Service Centers had its advocates, as did the individual chains. Cash America, with 139 stores in the state, hired two lobbyists. Rent-A-Center, with fifty-three stores in Ohio offering payday loans, hired four. "You could see it just sitting there," Faith said. "It's like each little delegation sitting in the crowd had their own lobbyist."

In the end, though, the rival lobbying seem to carry less weight than the gathering economic cataclysm that was threatening to engulf the state. The Republicans had already lost the governorship and they were scrambling to maintain their majorities in the Ohio House and Senate. The Speaker of the House, Jon Husted, wanted the party to be on the side of reform. So one day in early April, with the hearings over, Husted held an impromptu press conference with a small gaggle of Columbus reporters.

"I sense growing support for a rate cap in our caucus," Husted announced. That of course wasn't what they were hearing or what Widener had been telling them, but the Speaker was sending a message. He wanted to see a rate cap pa.s.sed and he wanted it to happen quickly.

Strickland, the new governor, also turned up the heat after Bill Faith ran into him in the hallways of the capitol. The two had known each other for years, and when Strickland asked Faith how it was going, Faith told him he could use his help on the payday lending bill. That day Strickland's staff penned a letter with Faith's help. "It is my hope," the governor wrote, that the legislature would approve a 36 percent rate cap and that "I would have the opportunity to sign this policy change into law in the near future."

That weekend Husted called Widener. He was not about to be out-flanked by a popular new Democratic governor on an issue he had already staked out. Perhaps the simplest solution, Widener suggested, was to take away what the legislature had granted the industry back in 1995, when it exempted these short-term loans from the state's 28 percent usury cap. That was a cap even lower than the one Strickland had endorsed, which sounded fine to Husted. Twenty-nine Republicans joined forty Democrats to pa.s.s the bill by a 6926 margin. The bill also limited people to four payday loans in a year.

The industry made a last-ditch stand in the senate. They hired more local lobbyists, flew in more troops from out of state, and held a giant rally in front of the statehouse. About two thousand people, most of them payday employees, gathered to listen to speakers and chant, "Save our jobs!"

But it was too late. The day after the rally, the state attorney general released his report on Ohio's payday lenders. There was "compelling evidence of an industry that uses deceptive practices to target some of the state's most vulnerable citizens," Marc Dann wrote. He dismissed payday loans as "a deceptively attractive choice for those in need of quick cash." Widener's bill flew through the senate with only minor changes and Governor Strickland signed the bill into law in early June.

The payday lenders, though, would have the last laugh. "It's a sad day when the opinions of editorial writers and so-called consumer groups count for more than the opinions of the people," Lynn DeVault said in a statement released on the day Strickland signed the cap into law. The next day, DeVault and her allies did something about this grave injustice when they filed paperwork with the secretary of state's office indicating their intention to repeal the new rate cap through a statewide referendum. The foes of payday lending would have to win twice, though this time in an expensive statewide ballot fight that seemed well beyond their budget.

"I was," Bill Faith said, "more surprised than I want to admit." At a press conference, he told the a.s.sembled reporters, "You ain't seen nothing yet," but in truth he was nervous. "I had pulled every rabbit out of a hat I could think of," he said, and his reservoir of clever ideas seemed dry.

Fourteen.

Maximizing Share of Wallet LAS VEGAS, OCTOBER 2008 2008.

Tim Thomas, the owner of Daddy's Money p.a.w.n Shop in Wichita, could not really say why he flew from Kansas to Las Vegas for the twentieth annual check cashers' meeting. Around us the ambitious scurried about, dreaming of new markets to conquer, but Thomas was content with the way things were. "I've got a good manager so basically my time is mine," he said. Thomas typically shows up at his shop mid-morning. He inspects the previous day's receipts, does a quick scan of the books, and makes up the day's lunch schedule. Except for tax season, that's his workday, pretty much over just two hours after it starts. Sometimes he goes to the health club to work out but mainly, Thomas said, "I play a lot of golf."

Thomas, who was fifty-four when we met in the fall of 2008, didn't choose the poverty business as his path to Easy Street so much as it chose him. He was in his mid-thirties and working a route for a vending machine supplier when a childhood friend asked him to help him open a p.a.w.nshop in Wichita. That didn't quite work out as either had hoped but a new world had been opened to Thomas, and in short order he was managing a rival p.a.w.nshop doing a robust business cashing people's checks and making payday loans. In 1999, after eight years of working for someone else, he opened Daddy's Money. It too would be a full-service financial center making p.a.w.n loans but also handling a range of low-denomination financial interactions. What started out as a modest-sized, 1,500-square-foot shop is today an 8,000-square-foot superstore employing a staff of ten.

Daddy's Money faces stiff compet.i.tion. A partial list of rivals within the Wichita city limits includes A-OK p.a.w.n, the p.a.w.n Shop, King's p.a.w.n, Cash Inn, Money Town, A Loan at Last, Aces' p.a.w.n, Air Capital p.a.w.n Shop, Cash Inn p.a.w.n, C&C p.a.w.n Shop, Country p.a.w.n, Easy Money p.a.w.n Shop, Mr. p.a.w.n, and Sheldon's p.a.w.nshop. But apparently even in the country's fifty-first most populous city, with 350,000 residents, there's more than enough business to go around. Daddy's Money, Thomas acknowledged, turns a handsome profit.

"I'm making a lot of money," he said shaking his head, as if he were as astonished as the next guy over his good fortune.

For months I had talked with poverty industry pioneers who had portrayed what they did for a living as n.o.ble. To hear them tell it, it was never about the money but instead about helping people and providing a valuable service. But Thomas didn't reach for the high moral plane when describing how he made a living. That became immediately clear once he started talking about his various businesses, starting with check cashing. Check cashing generates only a few thousand dollars in fees per month, accounting for a small sliver of Daddy's Money's revenues, but it's also a lucrative piece.

Kansas is one of seventeen or so states where there's no cap on the fees a check-cashing establishment can charge. Thomas takes a relatively small portion (2 percent) when a customer presents a payroll check but a high one (10 percent) if it's a handwritten personal check. On the surface that makes sense. Cashing a handwritten check seems far riskier than cashing one issued by an established business. But Thomas has removed almost all the risk inherent in the transaction before a clerk slides over any money. By that point, an employee has spoken to both the person who has written the check, to verify that it's good, and to the bank, to make sure the funds are available.

Why, then, does he still take one-tenth of the face value of a check given the improbability that it will bounce?

"Because I can," Thomas said with an amiable smile. "Other states have their rules but in Kansas I can charge as much as I want. It's part of the game you play."

Playing the game means taking whatever nips Thomas can from every check cashed inside his store. People who don't have a bank account must pay their gas and electric and cable bills in person, using cash, or they must pay someone like Thomas to pay the bills for them-at $2 per bill. He has also partnered with Western Union for those customers, immigrants especially, who want to wire money overseas. But Thomas didn't use a word as genteel as "partner." Western Union pays him a "kickback," Thomas said, every time a customer made a wire transfer, just as he earned a "kickback" each time he sold one of the prepaid debit cards he peddles for a subsidiary of American Express.

"If I sell a card for $10.95, I get $5," he said. "Every time they swipe a card to make a purchase, something like a nickel or a dime or maybe a quarter kicks back to me"-depending on how much one of his customers spends on a transaction.

Cash advances represent another healthy source of Thomas's revenues. In most other states where payday loans are offered, customers can't take out back-to-back loans indefinitely but in Kansas they can. That cuts both ways, Thomas said. It's great for the bottom line if a customer simply pays another 15 percent commission every other week for months at a time before paying back a loan. The flip side is that there's nothing in the law to stop that customer from taking out a second or a third loan. Thomas imagines the customer who borrows $500, the maximum allowed under Kansas law. "That loan is costing him $75 every two weeks," Thomas said. That might not sound like much, he said, but $150 a month can swamp, say, the home health-care worker earning $8 an hour and taking home $1,000 per month.

"If one month he has trouble keeping up with his payments, he'll take out a second payday loan and then a third," he said. "After a while that's self-defeating. They're looming on bankruptcy and they just don't know it. And I'm not getting paid." Defaults eat up roughly one-fifth of his payday revenues-more or less the same number that the big chains report.

In the payday business, September and December are typically the best months of the year because of back-to-school and the holidays. But Thomas is also in the tax preparation business; that means January and February are the most lucrative for Daddy's Money.

Almost every enterprise that's part of the fringe economy takes a stab at the tax return business. That's something that Fesum Ogbazion griped about when we spoke in Dayton: all those p.a.w.nshops and check casher operations and even used car lots encroaching on his turf. Tim Thomas's experience at Daddy's Money shows why so many take the plunge. Thomas charges $65 for every return he fills out-good compensation, he said, for a job that typically takes him less than an hour. And while that's the end of the work he must do, that's just the start of the ways in which he is remunerated for his efforts.

The pages of Cheklist Cheklist, the monthly magazine of the check-cashing industry, are marbled with the ads of companies pitching their services as a no-fuss way of making money in the tax business. Refund Today ("NO Tax Knowledge Necessary"), for instance, offers a product it calls "EZ Refund": Pay nothing out of pocket, its ad reads, and we provide the software you'll need and also the back office support. That means they take care of everything from electronically filing the completed tax return with the IRS to arranging the loan terms for those seeking a rapid refund. Under Thomas's deal, he earns $6 for every client who opts for a refund antic.i.p.ation loan (most do, he said) and then at the end of the season receives a bonus check based on the volume of his RAL business. In recent years, that's meant an extra $2,000 to $3,000 in revenues.

The refund antic.i.p.ation loan pays off in two additional ways. There's the extra check-cashing fees he earns from those who invariably choose to cash a check on the spot and also the corresponding boost in p.a.w.n sales. Because of the earned income tax credit, the tax season is the one time each year that many of the working poor feel rich, and his p.a.w.nshop is a bargain hunter's dream, a veritable warehouse crammed with flat-screen TVs, jewelry, video cameras, video games, and power tools-"everything except firearms," Thomas said. Not surprisingly, he said, the first two months of the year are his best on the p.a.w.n side of the business, which accounts for around half his revenues.

In other environments, Thomas might seem covetous. But here in Las Vegas, surrounded by fresh-scrubbed junior executives in shirts stamped with the names of some of the country's largest Poverty, Inc. brands, he comes across as the last modest man. He knows he could make a lot more money if he opened a second or a third store but then that would mean spending his days bouncing between stores and constantly fretting over new hires. Besides, what would he do with that extra money? "I'm not a greedy individual," he said. "I'm fine with the one store."

Modest" is not a term anyone would use to describe the ambitions of a thirty-two-year-old junior mogul named Fraser MacKechnie. MacKechnie is the chief operating officer of Amscot Financial, a family-run, all-purpose Poverty, Inc. enterprise (check cashing, payday loans, tax prep, money orders, prepaid credit cards) with more than 170 stores and 2,300 employees stretched across thirteen counties in central Florida. A tall, thin man with a wedge of blond hair, MacKechnie was featured in a panel discussion ("Marketing Strategies That Improve Perception and Profit") I attended on the first morning of the check cashers' convention. He spent thirty minutes sharing the tricks and tips that he, his father, and his brother have learned in operating what is widely considered one of the better run and more successful regional powerhouses.

MacKechnie began by stressing the "all-important" issue of "curb appeal." Aim to look like a McDonald's, he counseled; look to chains such as Starbucks for ideas. "We make a concerted effort to blend in and look like any national retailer," he offered. He also took on what might be described as the third rail of check cashing in the late 2000s-what he dubbed the "highly controversial issue" of direct deposit (I would attend a later workshop t.i.tled "Direct Deposit: Friend or Foe"). Many in the industry might fight direct deposit because it means losing the check-cashing fee, MacKechnie said, but at Amscot they've taken the opposite tack and offer their customers a direct deposit option. It has meant a short-term drop in revenues, MacKechnie acknowledged, but they also feel they're holding on to some customers as they move up the economic ladder. Think of the loyalty that builds, he counseled the three dozen or so people sitting in the audience. Invariably some of those customers will slide back down that ladder-especially in the current economy-"and then you'll be there to cash their unemployment checks." Think as well of the PR benefits. "It lets us present ourselves as more of an integrated financial inst.i.tution," he said. "It helps give us a story when we talk to reporters."

If MacKechnie had one message to impart above all others, it was that today's Poverty, Inc. entrepreneur needs to become indispensable. Sell monthly commuter pa.s.ses, lottery tickets, and postage stamps. Let people pay their parking tickets at your offices. You won't make much, if any, money on any of these items but customers will have extra reasons to stop by your stores and, more important, you'll find yourself with a strong set of friends when the industry is under attack. "We figure if we work with and become an arm of government," MacKechnie said, "they'll hopefully be less likely to do away with us as it will directly affect them." Similarly Amscot has offered its stores to local gas and electric companies anxious to shed the costs of operating satellite offices. "They're not much of a moneymaker for us," he said of these deals, "but they make us truly part of the fabric of the community."

Meeting with elected officials should be another priority. "It's not just about giving contributions," MacKechnie said. Sell your story. Show them the quality of your stores. Let them see what you do. "And then make sure you issue a press release about the visit," he said. MacKechnie figures that he, his brother, and their father have met with more than two hundred elected officials.

Throughout the weekend, the check cashers, payday lenders, and others taking the stage in Las Vegas patted themselves on the back for all they were doing on the philanthropy front. But sitting in the audience I often had the opposite reaction: That's the extent of your giving? The first time I had that feeling was listening to MacKechnie. The numbers he was talking seemed paltry for a company with Amscot's size and reach-$500 here, $500 there-and mainly he stressed the public relations advantage of sharing bits of their largesse. "Let the broader community know you care," he advised. "Make sure you send out a press release whenever you make a contribution." Later I checked and learned the company issued eleven such press releases in 2008, each announcing a $500 donation, or a total of $5,500. That worked out to about $32 per store.

MacKechnie had one more idea to share before turning over the microphone: Amscot has banned the "at times controversial phrase 'payday loan.'" They stopped using the term in promotional materials, he said, and they no longer use it in press releases. Instead they now offer a "life-line product" called a "cash advance." "We figure that way we can avoid some criticism by not being lumped in any time there's something negative written about payday," he said.

Mike Hodges of Nashville had made the same decision. When he started in the business in 1996, at the age of twenty-four, Hodges did nothing but payday loans. But by the time of the check cashers' show near the end of 2008, he was operating twenty stores and building a twenty-first and each provided, among other fee-generating services, check cashing, auto t.i.tle loans, money transfers, and prepaid Visa cards. But though he might have started off in the payday business, that's not a word you'll hear watching one of the commercials his company, Advance Financial, runs on local television stations, and it's not a word you'll hear spoken by his clerks, all of whom have been instructed to use the term "cash advance." "The term 'payday' has become the black skull and crossbones of our industry," Hodges complained.

Hodges and his wife, Tina, who helps him run Advance Financial, were my luncheon companions on my first day at the convention. Mainly that meant listening to Mike Hodges rail about the big chains that run the payday industry. Payday is not an easy sell given what he described as a cultural bias against "the waitress with three kids who is short $200 on her rent," but industry leaders haven't helped their cause much. "It's like our industry is just now figuring out that we're not selling bottled water," he said. For a long time the big chains have been so focused on opening new markets that they have failed to do the hard work of educating the wider public. "They've put much more effort into lobbying and not enough into public relations," Hodges said. As a result, "We've let ourselves become easy targets at the hands of consumer advocates."

Despite that, business remained good inside Advance Financial through hard economic times, so much so that Tina Hodges's main complaint was a worldwide credit freeze that put their expansion plans on a shelf. I expressed amazement over twenty-one stores in a single metro area and Tina Hodges shrugged. "We could have a lot more," she told me. But with credit tight, any money committed to opening more stores means less money out on the streets. "With twenty stores, they're not rich yet," Steven Schlein told me when I brought up the Hodgeses the next time we met. "But they're making a good living." He wasn't much interested in talking about Mike Hodges's criticism but he was eager to learn more about Advance Financial. He was more impressed when I told him its stores offered much more than cash advances, including check cashing, debit cards, and beyond. He let out a little whistle of air. "Twenty stores is a lot," Schlein said. "The number I hear is $100,000 as a ballpark for profits per store. That's $2 million a year."

There was a small convention floor upstairs from where the workshops and the speeches were held. There large and familiar companies such as Western Union and H&R Block shared exhibit s.p.a.ce with the more modest-sized booths occupied by small companies like Citylight Bullet Proof ("for all your bulletproof needs"), Cheklist Cheklist magazine (the publication representing the "neighborhood financial services provider"), and the Rolland Safe Company. A veritable ecosystem had formed around the poverty industry, and walking the convention floor meant hearing from multiple compet.i.tors in any number of subspecialties, from debt collectors who had shown up in Las Vegas to offer their services to software makers there to peddle specialty products. Several companies sold themselves as offering better "card-scanning solutions," and at the booth for Acton Marketing, Zach Gabelhouse, the residential numbers genius for this Lincoln, Nebraskabased direct mail company, told me why his company was superior to the four or five other direct mail companies vying for the attention of conference attendees. The practice of microtargeting has meant that "prospecting"-the art of getting people in the door-is routine nowadays. "The real challenge is retention," Gablehouse said. "You need to maximize the household value of that customer. Where we come in is we help you to maximize your share of wallet." magazine (the publication representing the "neighborhood financial services provider"), and the Rolland Safe Company. A veritable ecosystem had formed around the poverty industry, and walking the convention floor meant hearing from multiple compet.i.tors in any number of subspecialties, from debt collectors who had shown up in Las Vegas to offer their services to software makers there to peddle specialty products. Several companies sold themselves as offering better "card-scanning solutions," and at the booth for Acton Marketing, Zach Gabelhouse, the residential numbers genius for this Lincoln, Nebraskabased direct mail company, told me why his company was superior to the four or five other direct mail companies vying for the attention of conference attendees. The practice of microtargeting has meant that "prospecting"-the art of getting people in the door-is routine nowadays. "The real challenge is retention," Gablehouse said. "You need to maximize the household value of that customer. Where we come in is we help you to maximize your share of wallet."

Over the years there have been plenty of companies to do just that, starting with Western Union decades ago. As if intent on strutting its central place in the check-cashing industry, Western Union occupied a stretch of real estate in the middle of the convention floor so large that it would have been impossible to miss, even if the company hadn't bothered to hire an Elvis impersonator. Squadrons of sales people dressed in the company's familiar yellow and black didn't talk to visitors to the booth one-on-one so much as they swarmed them in threes or fours. Western Union may be synonymous with the telegram, one explained to me, but the company had exited that business altogether a couple of years ago. Nowadays, the company, a global powerhouse that booked $5.3 billion in revenues in 2008 and $1.2 billion in pretax profits, makes nearly all its money wiring money across borders, primarily through deals with third parties. "We'll cut franchise deals with anyone who'll have us," another of the buzz team told me. "We've got deals with the big discount drugstore chains, with grocery stores, with clothing stores." But Western Union's best partners have been the country's check cashers and other Poverty, Inc. businesses, all of which earn a small amount of the $50 or so Western Union charges for every $1,000 a customer wires overseas. And that's only the start of the benefits, according to a Western Union brochure I took with me. Supposedly, three in every four people walking into a store to wire money spend money on a second product at that store.

Diversification has been the watchword of the forward-looking fringe financier in recent years, and any number of companies were in Las Vegas to help conference goers enhance their bottom line by broadening their offering of products. There were about a half-dozen tax preparers on the exhibit floor pitching the instant tax refund as the perfect way to goose annual revenues ("CHARGE to prepare returns and CHARGE to cash their check"). There were companies pitching prepaid phone cards and also several pushing gold buying as the ideal side business ("add significant income to your financial service center's bottom line at virtually no cost") in hard economic times, when more people would be needing access to quick cash. The largest crowds, though, seemed to be drawn to the booths of those peddling the debit cards that help Wichita's Tim Thomas live the good life.

Debit or prepaid credit cards have become a sensation inside the industry in recent years. A price sheet I picked up when visiting the booth of a company called CashPa.s.s, which sells a prepaid MasterCard, spelled out why. Sell more than 500 CashPa.s.s debit cards in a month and the enterprising check casher earns a 25 percent cut of all the charges that card generates. That includes an $11.95 setup fee, a $6.95 monthly fee, and more fees when a customer puts more cash on the card. Sell more than 1,000 and your cut is 30 percent. A CashPa.s.s representative was happy to translate those numbers into dollar figures for me: 1,000 cards on average means an extra $10,700 per month added to an entrepreneur's bottom line. The advantage to the customer is that with what in effect serves as a portable bank account, he or she has taken a step forward into the mainstream, albeit a stunningly pricey one.

Listening to speeches that weekend in Las Vegas meant hearing about any number of bogeymen. In his welcoming speech, the group's chairman, Joseph Coleman, singled out the FDIC and its hand-wringing over those 17 million or so Americans without a bank account, the so-called "unbanked." From the FDIC's point of view, the people who could least afford it were paying a surcharge on their wages-the Brookings Inst.i.tution found that a worker bringing home $22,000 who doesn't have a bank account spends an average of $800 to $900 a year on check-cashing fees, or more than $1,000 annually if factoring in fees on money orders and bill-paying services-and the agency in recent years had been using its bully pulpit to pressure the banks under its charge to do more to reach moderate-income customers. Coleman couldn't bring himself to even use the term "unbanked." Banks charge noxiously high bounced-check fees and they revealed themselves to be so greedy they practically took down the global economy. His preferred term, to the delight of the crowd, was "the bank free."

Several speakers spoke about compet.i.tive threats posed by Walmart, which was moving aggressively into both the check-cashing and debit card businesses with a pair of low-priced products. It cost $3 to cash a payroll or government check at a Walmart and the retail giant was offering better terms on Visa debit cards as well. Other giant retailers were also starting to nibble around the edges of the market, and for those in the cash advance business there were the online payday lenders that charged considerably more than their brick-and-mortar counterparts but had nonetheless been gaining in popularity, accounting for roughly $3 billion of the $44 billion in payday loans made in 2007.

Maybe the weekend's gloomiest speaker was Bill Sellery, the group's top lobbyist. The news out of Washington wasn't good, Sellery told the crowd. d.i.c.k Durbin, the a.s.sistant majority leader in the U.S. Senate and, not incidentally, the senior senator representing Barack Obama's home state, had introduced a bill capping the national interest rates on subprime loans at 36 percent. That would affect the payday lenders and also auto t.i.tle lenders and those in the p.a.w.n business. Several congressmen were working on similar legislation in the House. The only good news was that there had been so much bad news in the previous year, Sellery said, and so Congress probably wouldn't have much time for worrying about a group of industries on the economic fringes.

The news from state capitals around the United States was no less ominous. There were small threats to the industry, such as the occasional community voting to impose a moratorium on new check-cashing stores, payday lenders, and p.a.w.nshops, and larger threats like those in Ohio. So great was the unease over Ohio that when Ted Saunders, the chief executive of CheckSmart, the Columbus-based chain that had recently been sold to a private equity firm, appeared on a panel about mergers and acquisitions, he spent as much time talking about the election in his home state as he did his a.s.signed topic.

The polls offered mixed news, Saunders told the group. "People out there have a very negative impression of our industry," he said. "It's really scary. Our data shows that we rank just below prost.i.tutes and politicians in terms of popularity." But the problem-that people don't understand the value proposition we offer customers-could also prove the industry's saving grace. Focus groups showed their side "slightly ahead among people who have seen our commercials and understand our message," Saunders said. The key was raising enough money to deluge Ohioans with television ads. He reminded people that on the convention's first night there had been an appeal for every operator to donate $1,000 per store to help in Ohio and also Arizona, where there was a second, less pressing referendum on the ballot. (On the convention's second day, a different speaker suggested that every chain donate $50 per store to a FiSCA Scholarship Fund.) They were planning on spending "in the high $30 million range," Saunders said, over the last ninety days of the campaign in the hopes Ohio would serve as their Maginot Line. "If we can beat back this attack, we take away this notion it'd be easy to put us out of business," Saunders said. "This can be our line in the sand."

Fifteen.

Payday, the Sequel OHIO, FALL 2008 2008.

Bill Faith doesn't walk into an office so much as he bursts through the door. He is a gale-force wind blowing through the corridors. Sitting in the office of one of his staff members while waiting for him to arrive, I heard Faith before I saw him. "We're going to do it!" a gravelly voice boomed as if amplified by a megaphone. "This is David versus Goliath!" he bellowed, talking to no one in particular. With election day a few weeks away, political junkies across the country were weighing the relative strengths of the Obama versus McCain get-out-the-vote efforts but Faith was preoccupied by Issue 5, the Ohio state referendum sponsored by the payday lenders. Everybody in the office had stopped working, taking in the show. "David is going to beat Goliath," Faith roared happily. "We're taking these giants down."

It seemed an odd day for Faith to be feeling optimistic. That morning, the office of Ohio's secretary of state released the most recent campaign disclosure forms. In the previous few months, the payday lenders had spent $13.8 million, compared to the $260,000 spent by the "Yes on Issue 5" side. (Confusingly, though Issue 5 was paid for by the payday lenders, a yes vote was a vote in favor of imposing a 28 percent rate cap on the industry.) Worse, Faith and his allies had only $4,000 left in the bank with election day a few weeks away. But to Faith this glaring imbalance represented an occasion to score points-to cast a stone when the media would be paying attention to their down-ballot fight. He repeated his David-versus-Goliath line, tinkering with the phrasing, listening to how it sounded. A few hours later, "Yes on Issue 5" put out a press release telling reporters and editors that they could attribute the following quote to Faith: "This is a David versus Goliath battle. Voters need to know that a 'yes' vote on 5 lowers outrageous interest rates. It's the stone that stops the giant industry."

Before Faith's happy entrance, I had been talking with Suzanne Gravette Acker, the communications director for COHHIO, Faith's advocacy group. Gravette Acker, in contrast to her boss, was feeling jumpy about the payday ballot initiative. "They've hired really good lawyers," she said. "They've got really good strategists." She worried over the wording of the referendum ("it's so vague and confusing you don't know if you're supposed to vote yes or no"), and she fretted over the latest series of pro-payday television ads, which mentioned jobs and raised privacy issues but never mentioned the 391 percent APR. "They've done a great job of muddying the water," Gravette Acker said-and meanwhile the Yes side had spent all of $200,000 on a limited cable TV buy.

But Faith was having none of it. "Suzanne just needs a day off," Faith said, and then jokingly ordered her home. What more did they need to do, he asked, aside from reminding voters that those who were least able to afford it were paying triple-digit interest rates? "These people, they're vultures picking on the bones of working people," Faith said of the payday lenders. "And I don't see voters saying, 'Yeah, that's right, let's let these vultures continue to prey on hardworking people and seniors living on Social Security. Let them charge them 391 percent.'" He gave his head a shake and grunted out a phlegmy laugh. "Ya know?"

The industry enjoyed the element of surprise, of course. Even before the final vote in the Ohio Senate, those on the payday side were quietly reaching out to the big signature-gathering firms and lawyers and a couple of the state's better-known political operatives. But payday's advocates only learned that much sooner how much of an uphill climb they faced.

The lenders' first task was to gather the 250,000 signatures needed to get their referendum on the ballot. Normally that's a matter of writing a few big checks, but these were hardly normal circ.u.mstances, said CheckSmart CEO Ted Saunders: "Basically we had just been kicked out of the state. The Columbus Dispatch Columbus Dispatch and and Plain Dealer Plain Dealer for months were telling people we're loan sharks, we're sc.u.mbags, we're just these awful people." Was it any wonder, then, that at least some of the low-wage people who were hired to pa.s.s their pet.i.tions sometimes resorted to fibbing? for months were telling people we're loan sharks, we're sc.u.mbags, we're just these awful people." Was it any wonder, then, that at least some of the low-wage people who were hired to pa.s.s their pet.i.tions sometimes resorted to fibbing?

Sandy Theis thought she had died and gone to heaven that day when she was shopping with her teenage son in a mall near Columbus and happened upon a man trying to convince pa.s.sersby to sign a pet.i.tion that would put the payday referendum on the ballot. Faith had hired Theis to handle the press for the Yes on 5 campaign and also help run the day-to-day operations. After listening to the pet.i.tion carrier's pitch, she rushed home to grab a tape recorder. She captured two pet.i.tion circulators on tape that day, both of whom utilized the same ready-made argument: We're here to shut down the payday lenders. The pet.i.tion pa.s.sers were being paid by the payday lenders, but they were giving the anti-payday argument. "These guys are legal loan sharks and we want to regulate them," one told Theis.

"But I thought it's the payday lenders using the ballot so they can keep charging 391 percent."

"No, ma'am," the man answered politely.

Ours is now a world in which taping someone is as simple as. .h.i.tting the record b.u.t.ton on a cell phone. That's what Robert Hagan did when he encountered a pair of circulators in his hometown of Youngstown. They too were claiming that the proposed initiative, if placed on the ballot, would lower the rates the state's beleaguered working cla.s.s would pay for a payday loan, not raise them. Hagan, the state rep who had co-sponsored the original payday bill with Bill Batchelder, certainly knew better. So did his son, a student at Oberlin College, who claimed he had come across a trio of circulators spinning the same fabrications. Others told a similar story, including a city councilman from Toledo and a Columbus-area man named Peder Johanson, who was so incensed at the deception that he launched an "I Want My Name Back" campaign on YouTube.

The payday lenders would turn in more than 400,000 signatures, and after the secretary of state rejected 56 percent of those signatures (including undoubtedly "I'mGoingTof.u.c.kYou," which is how former Check 'n Go manager Chris Browning signed a pet.i.tion being pa.s.sed near her home), they gathered 200,000 more. In its campaign disclosure forms, the payday lenders reported spending $3.4 million to qualify their referendum for the ballot. Presumably that included the costly television ads the industry felt compelled to run asking people to at least keep an open mind and allow the voters of Ohio to decide on the future of payday in the state.

"That's how out of hand this all got," the payday trade a.s.sociation's Steven Schlein said. "We're spending money on ads just to get people to sign a pet.i.tion."