Branding a Blatantly Bad Deal: Dollar Loan Center
When we set fingers to keyboard to excoriate First PREMIER Bank Platinum Mastercard for exorbitant fees and a 79.9% APR, we hoped it represented a low watermark for awful consumer credit offers. Unfortunately, we discovered a new ignominious winner: a 196.96% APR from Dollar Loan Center and dontbebroke.com.
We watched with some interest when a shuttered U.S. Bank branch recently reopened as a Dollar Loan Center just down Westwood Blvd. from BrandCulture HQ. Only time will tell, however, if this development portends a general decline in the financial stability of our neighborhood or an increase in denizens unwilling (or unable) to calculate simple interest.
Not that Dollar Loan Center encourages the practice. We received a piece of direct mail from Dollar Loan Center announcing its arrival as “YOUR COMMUNITY SHORT-TERM LENDER” along with the opportunity to procure $2,500 cash on the strength of our signature alone with “no hassles, no fouls[?], no fees” in less than an hour.
Dollar Loan Center bills itself as a fiscally responsible alternative to “Payday Lenders” and asserts the heartwarming headline, “It’s like borrowing from family, but without the guilt,” Come again? We don’t know about your family, but it would be a pretty awkward Thanksgiving dinner if our family charged us the same $4,245.21 in interest Dollar Loan Center charges borrowers holding the $2,500 for its full 65-week term. This sure feels like being more broke vs. not broke, and for the record, we’d accept a whole bunch of familial guilt to avoid a financial hit that would put us that much deeper in hock.
Not surprisingly, Dollar Loan Center downplays its confiscatory cost of money, but instead makes the case that the “Signature Loan” product is actually great because it is less bad than the other even more egregious Payday Lenders. Here’s entrepreneurial founder and larger-than-life, erstwhile rock and roll impresario CEO Charles C. “Chuck” Brennan:
Hmmm. Dollar Loan Center also emphasizes its community involvement, commitment to financial literacy(!), and Mr. Brennan’s eleemosynary largesse fueled by the tremendous success of Dollar Loan Center in which he maintains majority ownership.
Payday Lenders also argue that loan APRs are an unfair comparative metric because these loans are designed to be “short term.” But having the theoretical option of paying off a loan is of course not the same as having the ability to do so. Folks sufficiently impecunious or addled to agree to such loan terms a priori are unlikely to serendipitously find the resources to swiftly pay off the principal, let alone the accrued interest. And a recent study conducted by the Pew Charitable Trusts belies the claim that the $7.2 billion borrowed annually through these financial instruments are primarily used for short term exigencies: “Most borrowers use payday loans to cover ordinary living expenses over the course of months, not unexpected emergencies over the course of weeks. The average borrower is indebted about five months of the year.” Ooof.
The bottom line? No matter how cheerful the branding and polished the messaging, paying Dollar Loan Center (or another lender) almost 200% in annual interest when the Federal Funds Rate stands at 0.15% and the annual LIBOR stands at 0.90% is and will remain a super duper raw deal.
We will say this about Mr. Brennan and the fellow members of the “DLC Empire” — they throw a heck of a party. Here’s a clip from a recent Las Vegas Brennan bash featuring Alice Cooper’s “School’s Out.” Indeed. Clearly not a lot of math being studied here: