Part 4 (1/2)

In the end, though, the sheer size of a.s.sociates left the Self-Help executive team feeling they had no choice. a.s.sociates had started its life nearly a century earlier as an auto finance company aimed at helping people buy a Model T. Where Self-Help had a half dozen offices around the state and had made around five hundred home loans in North Carolina in 1998, a.s.sociates had eighty storefronts scattered around North Carolina making or buying thousands of home loans each year. Self-Help relied largely on word of mouth and a network of nonprofits; a.s.sociates had Terry Bradshaw, the former football great, pitching its loans on television and booming, ”We make loans that make life better!” At Self-Help they felt like they were really something when in the late 1990s they were making more than $25 million in home loans each year. When, in 1998, Ford spun off a.s.sociates First Capital, as its subprime lending unit was called, through an initial public offering, it was generating nearly $1 billion a year in profits.

”It really hit us in the face,” Mike Calhoun said. ”We recognized that if we don't do something about predatory lending, we're kidding ourselves that we're really achieving something by putting people in homes.” This organization that had always viewed its core mission as helping families build wealth had come to the conclusion that it was equally as important to help families protect the wealth they had already attained. The solution, as they saw it, was for North Carolina to become the first state in the country to pa.s.s an antipredatory lending bill aimed at reining in the most audacious practices of its subprime lenders.

In downtown Durham, an activist named Peter Skillern heard from Martin Eakes and told himself that it was about time. For years, Skillern, the executive director of the Community Reinvestment a.s.sociation of North Carolina, or CRA-NC, had been organizing protests against subprime lenders at home and in Was.h.i.+ngton. He had even been known to don a rubber shark's nose to underscore his point that these lenders were a dangerous breed to avoid. Skillern admired Eakes and all that he had accomplished but Self-Help had declined to take part in CRA-NC's actions. ”Martin is a remarkably effective leader,” Skillern told me when I visited with him in Durham-but that only made Eakes's lack of engagement in the fight that much more maddening.

Skillern's bete noire wasn't a.s.sociates but a lender much closer to home, NationsBank, based in Charlotte. To him, NationsBank, one of the country's largest, offered a stark example of what he saw as the country's ”parallel banking system.” ”It's like NationsBank has two doors, side by side,” Skillern told me. If you were white, middle cla.s.s, and had good credit, you were ushered into one door. If you were low-income and had imperfect credit, you were shuffled into the door for either NationsCredit or EquiCredit, Nation's two subprime subsidiaries. And if you were black your economic cla.s.s or FICO score didn't seem to matter; according to studies, you were far more likely to end up with one of the subprime lenders and one of their high-interest loans just by virtue of the color of your skin. The subprime lenders claimed they needed to charge higher interest rates and steeper fees to offset the increased risk they were taking with subprime borrowers but Skillern thought that was bunk. The big consumer finance companies, Forbes Forbes reported in 1997, were enjoying returns as much as six times greater than those of the best-managed banks. Neither NationsCredit nor EquiCredit was nearly as large as a.s.sociates, but by the late 1990s the two units were generating around $400 million in profits each year. reported in 1997, were enjoying returns as much as six times greater than those of the best-managed banks. Neither NationsCredit nor EquiCredit was nearly as large as a.s.sociates, but by the late 1990s the two units were generating around $400 million in profits each year.

Skillern would prove to be one important Eakes ally against a.s.sociates, Bill Brennan in Atlanta another. Eakes could rely on Rogers to help put a human face on predatory lending and there were others from among the fifty people who had complained about a.s.sociates to the state authorities over the previous year. Brennan, however, provided video, much of it starring Bill Brennan and all of it powerful. Brennan had played a key role in the making of the Primetime Live Primetime Live episode, providing some of the piece's rhetorical fire (he described Ford Motor as ”the worst predatory lender in the country”) and also its heart. It was Brennan who pointed a producer to the couple who would give the expose its emotional anchor, the Iveys of Atlanta, who almost lost their home of twenty-five years after a broker with a.s.sociates talked them into consolidating some credit card bills in a preposterously expensive home equity loan that included 24 percent in up-front charges and a payment schedule this couple of modest means couldn't possibly afford. episode, providing some of the piece's rhetorical fire (he described Ford Motor as ”the worst predatory lender in the country”) and also its heart. It was Brennan who pointed a producer to the couple who would give the expose its emotional anchor, the Iveys of Atlanta, who almost lost their home of twenty-five years after a broker with a.s.sociates talked them into consolidating some credit card bills in a preposterously expensive home equity loan that included 24 percent in up-front charges and a payment schedule this couple of modest means couldn't possibly afford.

Then there were all those television pieces Brennan was able to orchestrate in the Atlanta area using his local contacts. Abusive and predatory loans weren't necessarily illegal, and so when he was getting nowhere with a case, he would give a heads-up to a friendly TV reporter. In short order, a story would air about an elderly black woman living on meager means who had been ruined by a.s.sociates, or the short-order cook with diabetes who struggled to stand on his feet all day, or the hardworking couple with two young children, and there would be Brennan, eyes moist, bathing the viewer in sincerity, decrying the terrible injustice that had been done. With the heat turned up high, negotiations would commence and an accord would be reached contingent upon everyone's future silence. Brennan's friends dubbed it the ”media-induced settlement.” Brennan copied several of these local broadcasts onto a video and, along with the Primetime Live Primetime Live piece and a few other choice offerings (including snippets of depositions with two former a.s.sociates employees, who spoke of the lengths they would go to lard deals with expensive extras), sent it along to Self-Help. piece and a few other choice offerings (including snippets of depositions with two former a.s.sociates employees, who spoke of the lengths they would go to lard deals with expensive extras), sent it along to Self-Help.

In the hands of most advocates, Brennan's tape would have been a useful tool. In the hands of Martin Eakes it took on a life of its own. Inside Self-Help they made jokes about what they called Eakes's ”teletubby”-the stout combination TV-VCR that the boss brought with him everywhere during the months they were lobbying for an antipredatory lending law in Raleigh. There were fifty state senators in North Carolina and 120 members of the state a.s.sembly and Eakes, intent on showing the tape to every last one of them, rolled his teletubby door-to-door in the manner of an old-fas.h.i.+oned vacuum cleaner salesman. If a receptionist or some other staffer was reluctant to allow him inside to see a legislator, he would show it to that person, hoping after viewing it he or she would feel compelled to pa.s.s the tape he left behind on to their boss. One news account had Self-Help distributing seven thousand copies of the videotape around the state. By that time, Eakes had testified no fewer than eight times in favor of an antipredatory lending bill. ”People say I work hard,” Mike Calhoun said, ”but he put me to shame in that fight.” The initiative was supported by a group calling itself the Coalition for Responsible Lending. The coalition included such mainstream advocacy groups as the NAACP and AARP but the political establishment in Raleigh could be forgiven for thinking this legislative battle was brought to them and sponsored by Martin Eakes and the people of Self-Help.

Calhoun, whom Bill Brennan described as ”the smartest lawyer I've ever worked with,” was the resident expert on consumer law within Self-Help, so it fell to him to type out a draft of the legislation. (”You're not going to see a lot of clerical staff at Self-Help,” Calhoun sighed.) The aim of the bill was to impose limits on what a subprime lender could charge its customers. Roy Cooper, the senate majority leader and a Democrat, agreed to sponsor the bill. ”We were beginning to see complaints filed by consumers and we began to hear concerns voiced by lawyers seeing these unfair terms at closings,” said Cooper, who had been elected to his second term as North Carolina attorney general by the time I visited him in the fall of 2008. ”So we realized we needed to put some bright-line limits on the amount of charges a.s.sociated with the loans.” Years later Cooper still remembered Freddie Rogers-not just his name but also his exact hourly wage and other details of his case.

Initially a long list of senators joined Cooper as co-sponsors, but after the lobbyists weighed in, Cooper ended up as its sole sponsor in the Senate. ”North Carolina is the second-largest banking state in the country, so the banking industry is a significant economic engine here,” Cooper said. ”They had a significant influence over the legislature and government process.” The key was to bring the banks around, or at least convince them to remain on the sidelines. That would be no easy task given the hundreds of millions in profits a local giant like NationsBank was booking selling subprime loans.

A year after the predatory lending fight was over, Eakes asked Keith Corbett, an executive at North Carolina Mutual, the nation's oldest black-owned insurance company, to join them at Self-Help. ”We don't pay a lot in salary,” Eakes told Corbett. ”But if we see someone who's been mistreated, we're willing to spend two to three million dollars to right that wrong.” Corbett was sold. year after the predatory lending fight was over, Eakes asked Keith Corbett, an executive at North Carolina Mutual, the nation's oldest black-owned insurance company, to join them at Self-Help. ”We don't pay a lot in salary,” Eakes told Corbett. ”But if we see someone who's been mistreated, we're willing to spend two to three million dollars to right that wrong.” Corbett was sold.

That's exactly what happened in the case of Freddie Rogers. Mike Calhoun was among those working out an out-of-court settlement with a.s.sociates that allowed Rogers to refinance with Self-Help under terms he could afford. A few years later, a developer seeking to gentrify Rogers's neighborhood paid him a substantial bounty for his home. By that time he had remarried.

Over the years Eakes had made his share of political enemies in Raleigh. ”Imam” or ”ayatollah” were among the less flattering nicknames given to him inside the state capitol by those resenting his sermonizing and righteousness, but there was also no denying his effectiveness. ”He got along with a lot of my Republican colleagues, maybe better than I did,” Wib Gulley said. To his activist allies he might have been the accidental banker who was still one of their own, but for political purposes he was a subprime mortgage banker horrified by the lending practices of some of his more unscrupulous rivals. He was also a man on a first-name basis with the CEOs of some of the state's largest lending inst.i.tutions. He made the same pitch to each: The bad practices of the worst subprime lenders hurt the reputations of all in the mortgage business. Eventually even the North Carolina Bankers a.s.sociation supported the reform bill. ”That was Martin,” Roy Cooper said. ”Working and working and working to bring the industry into the fold.”

The political fighting over the antipredatory lending bill raged for the better part of a year. The bill was modified, for instance, to allow a lender to charge a borrower as much as 5 percent in up-front fees. ”If your parents paid five points on a loan, you wouldn't be very happy,” Calhoun said. But the legislation banned prepayment penalties on any mortgage less than $150,000 and made it illegal to roll into a loan the cost of credit insurance (credit insurance itself, with separate monthly payments, was still legal). Lenders could charge interest rates well above the rates enjoyed by prime customers but anyone wanting to sign a deal that would have them pay rates more than ten percentage points higher than a Treasury bill would be required to meet with a credit counselor. The bill was signed into law in July 1999.

Even with its limitations, consumer advocates hailed the law as a significant breakthrough. Inside Self-Help's offices, the phone was now ringing with activists from places such as New Jersey, Chicago, and Dayton eager to pa.s.s something similar in their locale. ”Initially we thought we pa.s.sed this predatory lending bill, okay, good, we're done, now we can go back to our day jobs,” said Mark Pearce. ”But people wanted to know how we did it, especially as North Carolina wasn't exactly seen as the most liberal, consumer-friendly state in the country.”

Six.

The Great Payday Land Rush SPARTANBURG, SOUTH CAROLINA, THE LATE 1990s 1990s Allan Jones parks in front of his old office building and a sly smile appears on his face, like someone antic.i.p.ating the punch line of a favorite joke. He points his chin at a drab, low-slung cement bunker of a structure sitting in the corner of a shopping center parking lot. This is where he played host, he tells me, when all those investment bankers flew south to see him in the late 1990s to talk about taking Check Into Cash public. They would arrive dressed in Bill Bla.s.s and Brooks Brothers and Armani. He would be wearing an off-the-rack suit he bought at a discount place in town. He would then usher them into his ”conference room”-maybe ten metal chairs around a banged-up, folding banquet table-where he would make his presentation. Check Into Cash's revenues were on pace to more than double in 1998; its profit margins were well above 20 percent. At that point, Jones said, they could have cared less had he been naked and standing in a cave: ”Them numbers are all they ever noticed,” he said.

CIBC Oppenheimer agreed to serve as the lead underwriter on Check Into Cash's IPO. CIBC wasn't Goldman or Morgan but it was a large bank, respectable and legitimate. He even got to New York and rode the subway, where he saw a man with a hairdo he later learned was called a Mohawk. For months he entertained Doughball and the rest of the boys with stories about life up north. I must have arrived, he would say mockingly, because now I have me a real-life lawyer with a Park Avenue address.

Jones claims to have been relieved rather than disappointed when CIBC put the IPO on hold. They told him it was temporary, a short-term setback while the market recovered from a financial crisis everyone was calling the Asian flu, but the compet.i.tion was heating up and he was anxious for his money. In Cleveland (Ohio), an old-time bank called National City was awakening to the profit potential of subprime and he convinced officials there to loan him the $50 million he had planned to raise through a public offering. The IPO would have meant $50 million in the bank while borrowing from NatCity meant paying back the loan with interest, but remaining private had its own rewards. He was not a man who liked answering to anyone but himself.

”We have board meetings at Check Into Cash,” Jones likes to joke, ”but I win every vote one to nothing.” He mentioned a compet.i.tor named Billy Webster, whose company, Advance America, has traded shares on the New York Stock Exchange since 2004. ”How much of his company does Billy own?” Jones asked. ”How much of my company do I own? Go ask Billy and I'll bet he'll tell you: His shareholder meetings are a lot longer than mine.”

William M. Webster II lost everything during the Depression. His son, William M. Webster III, started from scratch, turning a single gas station in Greenville, South Carolina, into a modest-sized empire of twenty stations that he would sell to Marathon Oil in the 1970s at a handsome profit. Yet in the eyes of his son, William M. Webster IV, whom everyone called Billy, his father could have accomplished so much more. Billy Webster spent a good part of his teen years working for his old man, pumping gas and thinking how he would be different. His father had inherited his grandfather's skittishness and worry about taking risks. He vowed that would never be him.

While he was still in college Billy Webster bought a laundry and charged other students a fee to wash their clothes. A Fulbright scholars.h.i.+p took him to Germany to spend a year studying Romantic poetry, but it was while he was studying law at the University of Virginia that his father started talking about the long lines of people queuing up at the Bojangles chicken shack near one of his old gas stations. That spelled the end of his legal career. ”I graduated law school on a Sat.u.r.day and Monday night I'm in the back of a Bojangles, learning how to fry chicken, being taught by a sixteen-year-old black guy from Frogmore, South Carolina,” Webster said. Ten years later, Webster and his father sold their holdings back to Bojangles; the pair were operating two dozen stores generating a combined $24 million in annual sales. By almost any standard, though not his own, Billy Webster was a rich man.

For a time Webster got into politics. Again his father proved the catalyst. He had grown up with d.i.c.k Riley, who would serve two terms as South Carolina's governor (the elder Webster had served as chairman of Riley's first political campaign). Riley introduced Billy Webster to Bill Clinton, and when the new president appointed Riley to serve as education secretary, Riley brought Webster to Was.h.i.+ngton to serve as his chief of staff. Webster resigned after two years, intent on returning to the private sector, but then Clinton invited him for a run around the Mall. My scheduling office is a mess, the president told him, and I think you're the man to help me straighten it out. So Webster spent one more year in Was.h.i.+ngton before returning to South Carolina to figure out what he would do next.

”I'm not an engineer,” Webster told himself. ”I'm not a software guy.” It was the mid-1990s but starting a technology company was out. This man who had made his money selling fried chicken and was.h.i.+ng other people's clothes reminded himself to keep it simple. He thought of his father's friend, George Dean Johnson, Jr. He had gotten into the garbage collection business before selling it to Waste Management and then jumped into the video rentals market, opening more than two hundred Blockbuster stores before selling them back to the parent company for $156 million. The key was to find a field before it came under the control of its Blockbuster or Home Depot and then aggressively attack it with money, MBAs, and an all-or-nothing aggressiveness.

Webster went to visit Johnson, who by that time had moved back home to Spartanburg. Johnson, who had served three terms in the South Carolina legislature when he was younger (the first as a Democrat, the second as a Republican, the third as a declared Independent), was already on to his next business, Extended Stay Hotels, but he told Webster he would be happy to provide him with financial backing. You find a business that you think you can run, he told him, and I'll take care of the money.

Webster mulled a return to the food business. He contemplated starting an automotive supplies company and thought about creating a compet.i.tor to the Sylvan Learning centers. Sometimes he would drive around town looking for businesses that had lines of people wanting to buy what they were selling. The idea for getting into the payday lending business came when George Johnson suggested Webster go talk to someone at Stephens, Inc., a boutique investment bank based in Little Rock, Arkansas, that had staked out the ”specialty finance” sector as its own. There Webster spoke to a junior banker gung-ho about the moneymaking potential of the cash advance business. It was Jerry Robinson, who had moved to Tennessee to help Toby McKenzie take his rent-to-own company public but ended up helping him get into payday loans. We have a relations.h.i.+p with one of the industry's top players, Robinson told Webster. He'd be happy to make the introductions.

Webster didn't know what to think about payday when he first heard about the idea in 1996. He was intrigued, though, so he flew to Tennessee to spend the day parked outside one of McKenzie's stores. He was struck by the sheer number of people visiting this one small outpost on the outskirts of Cleveland and asked Robinson to approach McKenzie about letting him see the operations from the inside. If that first trip to Tennessee left him eager to learn more, then the three weeks Webster worked the counter at a National Cash Advance storefront convinced him he had found what he was searching for. ”I didn't see an unhappy human being in my three weeks working there,” Webster said.

Back home Webster worked the phone. There were budding chains of 100 or 200 stores, he discovered, ”but there was no dominant national player who could leverage efficiencies over hundreds and hundreds, if not thousands and thousands of operating units.” Those who had arrived before him in these low-rent credit fields hardly struck him as invincible. Jones and McKenzie, from what he could tell, were payday's ”Hatfields and McCoys,” two men with high school degrees building their businesses with one eye on the other and by the seats of their pants. In Cincinnati, the Davis brothers, with access to their father's connections and his millions, could prove a more formidable team but already Webster was picking up reports of strife inside the family. ”It didn't take too much to figure out everyone was distracted,” said Webster, who then dryly added that ”distracted” is ”an understatement.” The opportunity seemed that much more bright given the sorry state of the typical payday outlet-”storefronts with a hole cut in the wall,” he said.

It didn't take much effort for Webster to sell George Johnson on the idea, nothing more than two lines on a piece of paper. One line was the cost of a payday loan and the other depicted the rising costs of a bounced check or credit card late fee. ”When those lines crossed,” Webster explained for Johnson, when the penalties a bank charged started costing more than these short-term quick loans, ”the industry just grew and grew and grew.” Both put up money (Johnson invested the lion's share) to start a company they called Advance America. Using their connections, the pair secured sizable lines of credit at Wells Fargo, Wachovia, and NationsBank. ”We basically borrowed forty or fifty million dollars before we made anything,” Webster said. ”We had an infrastructure for five hundred stores before we had even one.”

Advance America opened 300 stores in 1997 and then opened another 400 the next year. In 1999, Webster started calling compet.i.tors to see who might be interested in selling. Jones turned him down, LBJ-style, while soaking naked in a tub in a summer home he owned outside Cleveland, but McKenzie jumped at the chance, selling to Advance America for $150 million. Advance America opened 300 more stores in 1999 on top of the 450 or so they had bought from McKenzie. By the start of 2000, Advance America was operating more than 1,400 stores, including 250 in California, 150 in Florida, and another 120 in Ohio, each looking identical.

In the early days, payday could sometimes seem like something out of a Quentin Tarantino film rather than a burgeoning industry. Those touting the business had been excited when the Wall Street Journal Wall Street Journal sent a reporter to Tennessee to do one of the first big profiles of payday lending-and then Jones hooked up the guy with a store manager who, when asked if he was worried about people paying him back, pointed over his shoulder to the baseball bat he kept prominently displayed behind the counter and said, ”I like to call that an att.i.tude adjustor.” McKenzie could be even more of a loose cannon. When an Indiana legislator floated a bill that would have lowered the rates lenders could charge (back then, at least, Indiana allowed lenders to charge as much as $33 for every $100 they loaned out), McKenzie rushed north to lend a hand-and then handed his foes a fat gift when he was caught boasting in front of a meeting of his employees that ”I've never seen a legislator I couldn't buy.” The jobs of all those working to promote payday would be easier with George Johnson, a former state legislator, and Billy Webster, the friend of a sitting president, atop the industry's largest company. ”You would hear people say, 'Payday can't be too bad if Billy Webster is involved,'” Martin Eakes said. sent a reporter to Tennessee to do one of the first big profiles of payday lending-and then Jones hooked up the guy with a store manager who, when asked if he was worried about people paying him back, pointed over his shoulder to the baseball bat he kept prominently displayed behind the counter and said, ”I like to call that an att.i.tude adjustor.” McKenzie could be even more of a loose cannon. When an Indiana legislator floated a bill that would have lowered the rates lenders could charge (back then, at least, Indiana allowed lenders to charge as much as $33 for every $100 they loaned out), McKenzie rushed north to lend a hand-and then handed his foes a fat gift when he was caught boasting in front of a meeting of his employees that ”I've never seen a legislator I couldn't buy.” The jobs of all those working to promote payday would be easier with George Johnson, a former state legislator, and Billy Webster, the friend of a sitting president, atop the industry's largest company. ”You would hear people say, 'Payday can't be too bad if Billy Webster is involved,'” Martin Eakes said.

”You don't normally want compet.i.tion,” Jared Davis said, ”but in this case, we think Billy's been a big help to the industry. From a lobbying perspective. From a legitimacy perspective.”

For a year or two it was enough for Advance America to build in states where others had gone before them but a company that ambitious could play fill-in for only so long. Before the end of that first year Webster was already staffing up a government affairs office. ”There was always an overt business objective-to broaden the geography,” Webster said. In 1998, South Carolina legislators welcomed payday lenders into their state, as did elected officials in Mississippi, Nevada, and the District of Columbia. By the end of 2000, twenty-three states had legalized payday lending, and the likes of Advance America and Check Into Cash were operating in eight more because there was no law specifically forbidding them from doing so. Where a traditional lender was earning a return on investment of between 13 and 18 percent, Jerry Robinson, the investment banker who had worked for Toby McKenzie before taking a job with Stephens, Inc., told Business Week that the average payday lender was earning an average return of 23.8 percent.

At first reporters scratched their heads over this odd new business. ”I don't know how someone who just does payday advance is going to make it,” a local check casher told a reporter with the Sacramento Business Journal Sacramento Business Journal who was trying to figure out how a South Carolinabased company had opened twenty stores in the greater Sacramento area in a matter of months. Each would need to attract a ”high volume” of customers, the check casher posited, just to cover the rent and labor costs; otherwise more than a few would be closing their doors as suddenly as they had opened them. who was trying to figure out how a South Carolinabased company had opened twenty stores in the greater Sacramento area in a matter of months. Each would need to attract a ”high volume” of customers, the check casher posited, just to cover the rent and labor costs; otherwise more than a few would be closing their doors as suddenly as they had opened them.

But quickly a new story line emerged: the payday client who had gotten him or herself into deep financial trouble availing themselves of a product pitched as requiring no credit check. Reporters never seemed to have much trouble finding unhappy customers. Readers of the New York Times New York Times would meet three when the paper turned its attention to the payday loan in 1999, including a thirty-nine-year-old woman named Shari Harris who earned $25,000 a year working computer security in Kokomo, Indiana. Harris had borrowed $150 from the Check Into Cash store near her home after the father of her two children stopped paying child support-six months later she owed $1,900. An a.s.sociated Press article that appeared around the same time featured a woman named Janet Delaney, a $16,000-a-year hospital food worker from Cleveland, Tennessee, who borrowed $200 from a Check Into Cash after falling behind on some bills. One year later, Delaney had paid nearly $1,000 in fees but had yet to pay back the original $200. ”I'm just lucky,” that same AP article quoted Allan Jones as saying. ”I hit on something that's very popular with consumers.” would meet three when the paper turned its attention to the payday loan in 1999, including a thirty-nine-year-old woman named Shari Harris who earned $25,000 a year working computer security in Kokomo, Indiana. Harris had borrowed $150 from the Check Into Cash store near her home after the father of her two children stopped paying child support-six months later she owed $1,900. An a.s.sociated Press article that appeared around the same time featured a woman named Janet Delaney, a $16,000-a-year hospital food worker from Cleveland, Tennessee, who borrowed $200 from a Check Into Cash after falling behind on some bills. One year later, Delaney had paid nearly $1,000 in fees but had yet to pay back the original $200. ”I'm just lucky,” that same AP article quoted Allan Jones as saying. ”I hit on something that's very popular with consumers.”

One theory offered to explain the immense and sudden popularity of payday loans was that ours is an instant-gratification society where almost anything we desire is only a few clicks away. Others pointed to a society at once comfortable with, and addicted to, debt; in a country where so many middle-cla.s.s people were willing to mortgage the future for a new bathroom or a large flat-screen TV, was it any wonder that those of modest means might likewise avail themselves of these corner lenders? But there were deeper structural reasons for payday lending's popularity, financial in nature rather than cultural, starting with the widening gap between the haves and have-nots. A full-time worker at Walmart, the country's largest private employer, might make $15,000 or $16,000 her first year on the job, and polling showed that nearly one in two Americans was living paycheck to paycheck. The problem was particularly acute among the bottom 40 percent, whose income growth was flat in terms of real dollars throughout the 1990s while the cost of everything from health care, heating oil, and housing soared. For those living on the economic margins, payday offered a simple solution they could squeeze in after work, between the grocery shopping and making dinner for the kids. ”Our motto is 'quick, easy, and confidential,'” Jones had told the Wall Street Journal Wall Street Journal. ”We can get people in and out in thirty seconds.”

Opposition was inevitable, of course. Before Martin Eakes there was Jean Ann Fox at the Consumer Federation of America. Fox's first a.s.sault on what she originally called ”delayed deposit check loans,” or ”check advance loans,” was called ”The Growth of Legal Loan Sharking.” This report, released in 1998, and subsequent ones provided an early chronicle of an industry largely getting its way in state legislatures around the United States. But Fox's main contribution to the debate was adding an element of math. As she read it, the Truth in Lending Act, pa.s.sed in 1968, required any business to express the cost of a loan not only in dollar terms but also as an annual percentage rate, or APR. The $15 per $100 that payday lenders could charge in stricter states like Ohio and Was.h.i.+ngton worked out to an APR of 391 percent. In Arkansas, where payday lenders could charge as much as $21 for every $100 borrowed, the APR was 546 percent, and in Colorado, where the going rate was $25 per $100, 650 percent. Borrowers in Indiana, with its $33 per $100 cap, were paying the equivalent of 858 percent on a two-week loan.

In Spartanburg, Webster tried not to get angry as he read Fox's reports. Instead he flew to Was.h.i.+ngton to meet with her. Webster prides himself on his ability to get along with anyone but he confessed Fox proved the exception. ”A person says stuff like 'legalized loan-sharking,'” he said, ”and it's hard not to take this stuff very personally.” But he had to agree with Fox on at least one point: the need to state the cost of their loans as an annual percentage rate. That was what Advance America's general counsel had concluded after researching the law. Webster could have overruled her, but he figured people didn't care about the APR, they only cared that they could have $300 today and what they would owe in two weeks. And so Advance America, alone among the big chains, started posting its rates not only as a dollar figure but also as an APR.