The New Loan Sharks

by Susanne Soederberg

The dependence of the poor on payday loans is neither natural nor inevitable. It is the result of neoliberal policies.

Before World War I, American wage earners who couldn’t make ends meet before their next paycheck relied on an insidious form of loan sharks known as salary lenders. These predators lent money at an illegal rate of interest and without collateral. They often charged annual interest rates in excess of 1,000 percent. State sanctions against salary lenders were not rigorously imposed, and the industry thrived not through the threat of physical violence, but the illusion of a legal obligation.

Fast-forward one hundred years, and salary lending has expanded, but under a different name: payday lending, a wildly lucrative industry that occupies more storefronts than McDonald’s and Starbucks combined. These new loan sharks operate under the same logic as salary lenders, but specifically target more vulnerable populations like welfare recipients, and are armed with new techniques to squeeze as much surplus as possible from debtors.