TED is an annual conference held in California (although the 2014 event will be held in Vancouver). Each year, 1200 or so people gather to hear inspiring, thought-provoking, sometimes controversial ideas—all in the form of 20-minute presentations held over four days. TED presenters range from the famous (Al Gore, Bill Gates, Peter Gabriel) to the not-so-well known. To attend TED, you not only have to be willing to pay the hefty fee (I think it’s up to $6,000, not including your travel costs), but you have to apply and persuade the conference organizers that you have something valuable to contribute to the conversation.
Thankfully, for us mere mortals, TED talks are available online. They are a great source of what I like to call “brain food.” The talks range from particle physics (for the non-scientist) to virtual choirs to using video cameras to capture human rights violations. There’s also a bit of fun along the way, including music.
Yesterday, TED came to the University of Notre Dame. TED has become such a powerful brand that people all around the country began holding their own local TED-style events. To foster these programs, TED licenses its brand and marks, which is how TEDxUND came into being. I was lucky enough to be selected in a lottery process for a seat at the event’s morning session, and it was terrific. Some of the highlights from the day:
- An anthropologist who explains that humans are not genetically wired for aggression.
- A computer science professor showing how easily social media can manipulate what shows up on CNN, Fox News, and other mainstream media source.
- A freshman who revealed that in her fourth week on campus, she was sexually assaulted and photographed during the assault—yet she continues to use photography as a therapeutic tool. (This was probably the most powerful talk of all.)
One talk in particular, given by senior Peter Keon Yoo, took the wraps off of the payday loan industry. Many of us lawyers know the facts: payday loan operations are little more than legalized loan sharks charging interest rates that work out to over 500% per year. The prey upon the working poor who need a few hundred bucks for immediate needs, like a car that has broken down. The industry is so lucrative that there are more payday loan storefronts in the U.S. than the number of Starbucks and McDonalds restaurants combined. And when I say lucrative, I mean lucrative.
Here’s a simple example. A person takes out a loan for $300, to be repaid on his or her next payday, with $45 paid on top as the cost of borrowing the $300. But when payday comes around on Friday, the person finds that she can’t repay the entire loan. But it’s no problem: for another $45 paid then and there, she can extend the repayment date until her next paycheck and pay the $345 then. Of course, by the next pay day, our consumer can’t afford to repay the loan, so she extends it for another $45 payment on that date. This can go on for week after week, each Friday bringing a $45 payment that pays nothing toward the principal amount. By the time our sample person can actually pay the loan off a few months later, she’s paid over $500 in interest on a loan of $300.
Statistics reveal that in my community there are approximately 7,000 people who use the “services” of payday loan shops. On average, these individuals pay $500 a year in interest alone, meaning $3,500,000 are being siphoned out of this community each year—from the working poor. As Peter Keon Yoon remarked, it’s expensive to be poor in this country.
The TEDxUND talk on this topic was not merely a well-deserved attack on predatory lending. Peter Keon Yoon and a good number of his colleagues are doing something to attack the problem: JIFFI, the Jubilee Initiative For Financial Inclusion. JIFFI uses the principle of micro lending to give local residents an alternative to the payday loan industry. JIFFI’s philosophy is that a loan should help people get out of a hole, not be pushed deeper into a hole.
JIFFI is not merely a low-interest lender. People approved for a JIFFI loan are given financial education as well so that they can avoid being in a crisis situation again.
During my career as an attorney, I handled a number of consumer bankruptcies. Some of them involved debtors whose entrepreneurial idea didn’t pan out. Others had huge medical bills that the insurance company decided to reject. But most of them had credit card debt that was staggering. In the late 1990s I began an annual informal experiment with my entertainment law students. I would ask the class how many of them had credit cards, and most hands would go up. I then asked how many carried a balance from month to month. Typically, all but one or two hands would stay up. I then walked students through an example to show them how paying the $40 monthly minimum on a $1,000 credit card balance with 18% interest (APR) would take them six years to pay off and cost them over $500 in interest. Students appeared to be shell shocked by this information.
If Notre Dame students, with their premier high school educations, aren’t getting this kind of financial education, it’s no surprise that thousands of people are being sucked into the payday loan quagmire.
JIFFI is a worthwhile effort by Notre Dame students to solve this problem on a local scale. JIFFI accepts donations, and I’m pleased to support their work. If you can, look for a similar program in your community and give it your support. You’ll be glad you did. (Yes, I recognize the irony of the fact that the donations are by credit card, but such is the way of modern commerce.)