It would be illegal to open a shady lending company charging poor people 700% interest on loans—unless you lived on certain Indian reservations. In that case, respectable investors would be knocking down your door.
The payday loan industry is perhaps the most execrable example of financial services serving as bloodsuckers of the poor. Today, many payday loans can be found online—easily accessed by anyone, but only subject to the laws where they are physically based. A neat trick for avoiding regulation. In Bloomberg today, Zeke Faux has a story about the proliferation of lending operations based on Indian reservations, which are sovereign and therefore able to get around the usury laws that would normally prevent you from charging someone "$30 every two weeks per $100 borrowed, equivalent to about 700 percent a year."
There is no excuse for these businesses. They are immoral and exploitative. But at least if they were being run by impoverished American Indian tribes that were using the profits to mitigate the terrible needs on their reservations, there would be a sort of excuse. In fact, though, Faux profiles companies based on Indian land that give the tribe only tiny percentage of profits. The big money goes to—and this is the most sickening part—a variety of extremely "respectable" Wall Street firms and venture capitalists, who invest in these awful, bloodsucking businesses. (Some of the money invested in these things originates in pension funds, meaning regular working people, city employees, are indirectly subsidizing businesses that directly prey on other working people.) One of the investors mentioned is Sequoia Capital, one of the most prominent venture capital firms in Silicon Valley.
Sequoia Capital, a venture-capital firm that backs Think Finance, declined to comment. Jennifer Burner, a spokeswoman for Think Finance, said the companies cited in the complaint are legal, licensed and follow tribal law.
"We're proud to be a service provider to Native American e-commerce lending businesses," she said in an e-mail.
"Tribal law," in this case, means "we are so desperate for money that we will legally sanction any fucking outrageous form of usury."
Anyhow, entrepreneurs are the heroes of America.