Payday Lending’s Short Story In A Long Article

Posted by Admin | May 24th, 2010

BusinessWeek is carrying an interesting article on the evolution of payday lending stores–a phenomenon that has emerged in recent years and exploded nationwide recently. You know the stores–they lend against future paychecks. Think MoneyTree or Check Into Cash, both are payday lending stores of the type discussed in the article.

Allan Jones wasn’t looking to kick-start an industry when he flew his single-engine Piper Saratoga from his home in Cleveland, Tenn., to Johnson City in the spring of 1993. He only wanted to persuade a man to come work for him. Jones took over his father’s small collection agency when he was in his early twenties and built it into a multicity behemoth—”the largest in Tennessee,” he’d tell you. But it gnawed at him that nearly two decades later he had no presence in the northeast corner of the state. So when he heard that James Eaton, an old friend of his father’s, had been let go after years in the business, Jones jumped into his plane to go get his man.

Eaton was stately, a 56-year-old who wore glasses and smoked a pipe. “He looked to me kind of like Sherlock Holmes,” Jones recalls. That made it all the sadder when Jones found Eaton working out of an office in a dilapidated gas station. There, in a shack with paint peeling off the walls, Eaton had set up a meager-looking business called Check Cashing Inc. “I guess I’ve found myself my man in northeast Tennessee,” Jones told himself.

Sitting down to talk with Eaton, Jones discovered that the business was different than he thought. Eaton was loaning cash to people who needed a bridge until the next payday. The school janitor who needed $100 today, Eaton explained, would pay him back $120 when he received his next paycheck.

Jones had built a successful debt collection business with around 250 employees—but he didn’t enjoy it. Debt collection meant unhappy people. Watching Eaton run his payday shop and interact with his working class customers, Jones was struck by how friendly it all was. “People would thank him,” Jones says. “They would thank him and thank him and thank him.”

The story is well-worth the read, despite being very lengthy, both to discover the evolution of this important business trend and because it explores the story of Allan Jones, an exemplary businessman.