Stanton: Utilities send poor into the lion's den
Tucson Electric Power, SW Gas direct people who need to pay their bills quickly to payday lenders
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More info
• National Consumer Law Center report, "Utilities and Payday Lenders: Convenient Payments, Killer Loans": www.nclc.org/reports/content/payday_utility.pdf
• Southwest Center for Economic Integrity: www.economicintegrity.org
• Reason Online article "Legal Loan Sharking or Essential Service?": www.reason.com/news/show/28380.html
• Consumer Federation of America: www.consumerfed.org
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If you're so poor or broke that it's tough to pay your utility bills, the last thing you need is a payday loan with interest of 360 percent or more.
But payday lenders are where two utilities send folks who need to pay in cash, quickly, before the gas or electricity is shut off.
Tucson Electric Power Co. and Southwest Gas Corp. say payday lenders are the only widely and conveniently located sites that will take cash payments.
Eddie Basha isn't buying it, and neither am I.
His Food City and Bashas' are the only Arizona grocery stores that take cash payments from utility customers.
"It's costly to do it, because in the grocery business, everything revolves around labor," Basha says.
Still, it depends on what kind of business you want to run.
"It really is, more than anything else, a convenience for the customer," he says. "And whatever way we can best serve our customers, we try to do it."
That's what utilities claim, too. But they're not doing customers any favors by sending them to payday lenders.
Yet utilities nationwide are doing just that, the National Consumer Law Center reported last week.
At ACE Cash Express, Tucson's top taker of such payments, employees' pay is partly based on how many loans they make, says its federal securities Form 10K.
ACE's Web site invites customers to also pay telephone bills from T-Mobile, Verizon Wireless and Sprint PCS.
But convenience can be costly. A Gallup, N.M., cashier who borrowed $200 to pay her electric bill because "it was so easy to do" wound up paying $510 in fees on the payday loan over six months, The New York Times reported Dec. 23.
Nationwide, almost 1 in 4 utility bills is paid in person, says Dennis Smith of Chartwell Inc., an industry research firm.
They're usually cash, paid by customers with low incomes and education, and by minorities - all people less likely to have bank accounts, the law center reports.
Their communities have limited banking services - unless you count payday lenders, which are ubiquitous in poor neighborhoods.
In 2000, when TEP moved its headquarters to a downtown high-rise without lobby space or convenient parking, it arranged for payments to be taken by check-cashing stores, spokesman Joe Salkowski said.
Arizona legalized payday lending the same year, and check cashers quickly morphed into payday lenders.
TEP, which gets about 5 percent of its payments from this venue, now is seeking different pay stations, Salkowski said.
"We work closely with our low-income (people's) advocates, and we've heard the concern they've raised," he said.
Not so Southwest Gas.
It contracts with Western Union to set up payment sites, and 37 percent of its 648 pay stations statewide are payday lenders, spokeswoman Libby Howell said.
Arizona utility customers pay a $1 fee per bill payment for this service.
If people "merely come in to pay their gas bill," Howell said, "we don't want them to be solicited for a loan. However, we've received no customer complaints."
Reminded that unsophisticated poor people are unlikely to complain, Howell merely murmured assent.
Among Southwest Gas pay stations, 33 percent are at Bashas' and Food City, and 11 percent are at small markets and convenience stores.
If some convenience stores take the payments, why not all?
If Bashas' and Food City can, why not all grocery stores? Why not Walgreens stores, which pepper Tucson?
And for customers with checking accounts, why not their bank or credit union?
"How hard would it be?" asked Kelly Griffith, deputy director of the Southwest Center for Economic Integrity.
It's easy for payday lenders, which continue to proliferate in poor neighborhoods in the 38 states that permit them.
These lenders, whose 24,000 U.S. outlets made $40 billion in loans in 2005, cite high risks.
The industry, which gave $2.9 million to political campaigns and committees last year, lobbies on the need to protect "consumer choice," "financial rights" and "your control of your money."
Arizona legislators heard those arguments this year when Rep. Marian McClure, R-Tucson, unsuccessfully pushed reforms.
Despite their arguments, though, payday lenders near military bases wreaked such havoc that a federal law enacted last year limits interest to 36 percent on loans to military personnel.
Civilian poor people be damned, evidently.
Utilities' practice of sending poor customers into the lion's den is an outrage.
"Your most vulnerable consumers are the exact folk payday lenders are looking for," Griffith said. "And it's unconscionable."
Tucson Citizen Editorial Board blog: Legislators' shameful behavior
Billie Stanton may be reached at 573-4664 and bstanton@tucsoncitizen.com.
They exist for people who need a little bit of cash quickly, a short-term advance. Some people unwisely try to substitute them for a bank or credit card.