Payday Loans in Nursing Homes???
As a consumer advocate, I have frequently written and advocated against payday loans. In Missouri, for example, where there is no law that restricts the interest rates these predatory lenders can charge, some lenders get annual percentage rates as high as 400 percent. Worse, because the loans are "secured" by a check written on a checking account, the payday lender simply runs the check when the borrower cannot pay, and has the prosecuting attorney handle the matter as a criminal matter when the borrower cannot pay the bad check. Thus, the borrower may not only have to pay the posecuting attorney a fee, and the bank a fee, but may also risk a misdemeanor or felony conviction for taking out a loan.
No one thinks payday loans are a good thing except the people who need money fast and don't care about consequences, and the people who prey on these often badly-deluded individuals. Often when a victim has four or five payday loans from multiple providers, their only option to escape jail is to seek bankruptcy protection. The result is that homes and cars are lost, income streams garnished for as long as five years, employment prospects significantly impacted, and the loan provider still gets most, if not all of its money back. From a business perspective the payday loan is a good investment. From the consumer's perspective it's a trip into hell.
Now two companies in Missouri are teaming up to offer payday loans to workers in nursing homes. In a recent story in the St. Louis Post Dispatch the newspaper reported that the presidents of two large chains of nursing homes are also the presidents of two large payday loan organizations offering loans to nursing home employees. Instead of relying on the prosecuting attorney, however, the nursing homes provide payroll deduction to the affiliated companies to satisfy the loans. If this is beginning to sound like a bad idea, that's because it is.
The approach taken by the two companies has the appearance of double-dipping. The facilities are not only making money off the residents who are obtaining skilled nursing care services, they make money off the employees providing those services. While there is likely nothing patently unlawful about the program, it is the kind of thing that creates an inherent conflict of interest for the nursing homes.
Suppose Sally Smith takes out a $200 payday loan on Monday, and on Tuesday is found slapping a patient. If the facility discharges the employee there is a good chance its partner loan provider loses money because there is no payroll deduction mechanism to fall back on. Does the facility fail or refuse to take action to protect its own economic interest in that situation? It should not, but there would be a significant temptation to look the other way, especially if the employee had been an otherwise good employee.
The real problem for these nursing homes, of course, is not that there would really be a conflict of interest, but simply that there would appear to be that conflict. Perception is reality for a jury, and if an injured plaintiff could make the argument that the facility could not afford to fire its workers because the workers were in debt, it might convince a jury that an otherwise honest and competent facility was in the wrong. For anyone with an appreciation of the history of labor in this country, this should be a wake up call.
In Sixteen Tons the late Tennessee Ernie Ford advises St. Peter not to call him home because "I owe my soul to the company store." Ford's song, released on October 17, 1955 sold 400,000 records within a few weeks and became the largest-selling record in Capitol Records history. The lyrics resonated because the coal miners portrayed in the song were real people who often received their pay in tokens that could only be spent in the company store. The company store in a place like Muhlenberg County, Kentucky, was often the only place the coal miners could shop for necessities. Without competition, a $5 personal item becomes at $10 personal item. The stores allowed the miners to charge more than their pay, in large part because the debt obligation kept the miners going back down into working conditions that were dangerous and sub-human. The labor reforms in coal mining industry of the 1950s and 1960s came about in large measure because of the public pressure generated by the song and several prominent mining disasters.
If the nursing home industry wants to invite greater scrutiny of its hiring practices and its relationships with its employees, marrying the lending business with the patient care business is the perfect way to achieve it. If, however, it wants to self-regulate, it needs to self-police. This putting payday loan providers in league with nursing home providers is a bad idea, and someone at the national level needs to stand up and say so.