America’s Nastiest Lender

I see a new reality show here: Predatory lender survival

Put them on an island with no food so they have to eat each other.

America’s Nastiest Lender

These two men helped create the payday loan business that preys on the poorest Americans. Gary Rivlin on the outrageous lives and businesses of Jared Davis and Allan Jones.

by Gary Rivlin | June 25, 2011 11:57 AM EDT

Jared Davis or Allan Jones?

I think about some of the more odious characters I met in my two years hanging out on America’s subprime fringes and those two would be my finalists.

If forced to choose between them, I’d give the nod to Jones as the most repellant of them all. But in doing so I know I might well be short-changing Davis.

After all, I spent two days with Jones, listening to him rationalize a business, Check Into Cash, that earns him 400 percent or more interest on loans to those who can least afford it. We spent hours together locked in a car as Jones gave me a driving tour of his life and expounded on race and other issues. We shared a couple of meals, he showed me the house he built for himself modeled on the famous 250-room Biltmore mansion. His version includes two elevators, a pair of man-made lakes, and a regulation-sized football field complete with light, bleachers, and field house. We hung out at a bar as Jones sipped on what he calls a “Scotch slurpee” (the expensive single malt he has a bartender pour over shaved ice in the plastic cup they keep for him behind the bar) and he and his friends told jokes that landed with a thud on the wrong side of propriety.

Nikki Fox / Daily News-Record / AP Photo

Mainly, though, I listened to Jones complain. He’s clearing $20 million a year post-taxes making loans to hotel housekeepers, home health care workers, and others barely getting by each month. He owns two private jets and when the 136-foot yacht he bought from the king of Spain burned in a fire, he replaced it with a 157-foot vessel that Yachting magazine described as having “an abundance of exquisite and highly detailed woodwork… and 10 big-screen TVs.” But for a good portion of the 14 hours we spent together I endured his belly-aching about how much more he’d be making if he didn’t have to contend with the pointy-headed liberals and other critics who want to put a cap on how much he could charge.

Jared Davis could be just as sour as Jones and equally as greedy. He, too, pulls in around $20 million a year making loans of $300 or $400 or $500 a year to the working poor but he had brought his brother into the business and it was his father’s money that had gotten him started. He needed to share his spoils. “I don’t consider myself wealthy,” he tells me.

Davis is huge, a pear-shaped man who stands around 6 foot 5 inches tall. A “big old goofy-looking dude who always needs a shave” is the way Allan Jones describes him. There were photos around his office of him shaking hands with George W. Bush and John McCain and behind his desk hung stylish black-and-whites of his young children blown up so large that they were distracting. I watched the YouTube videos made by former Davis employees who felt horrible about how they made their money (“I resigned because I could no longer stomach the lies, and I could no longer continue exploiting customers, making hard lives even harder,” one said), I had spent the better part of a day with a former store manager who had saved some of the crass directives she had received from management (lend “to anyone getting social security,” one read, even if a customer only had “one dime to their name”). I’m sure I wou ld have found Jared Davis similarly loathsome if our time together had not been so limited. I only got to spend two hours with him before I was shown the door—barely enough time to even get into the lawsuit his father has filed against his two sons charging them with bilking him out of money.

It was Davis who followed Jones into the cash advance business. So Jones gets extra points on the loathsomeness scale for giving the country the payday loan industry. Jones was making good money as a small-town debt collector when he got the bright idea of selling fast and easy two-week loans to all those janitors and warehouse workers and mall clerks forever falling short of cash before the end of the month. He’d charge $20 for every $100 borrowed and he’d let you pay another $20 per $100 if you couldn’t pay him back in full in two weeks. At those rates, he was making more than 500 percent interest on his money. But what choice did people have when a bounced check would end up costing them more?

Jones opened his first payday store in 1993 in his hometown of Cleveland, Tennessee. By 2006, payday was a $40-billion-a-year industry with more storefronts scattered around the country than McDonalds and Burger Kings combined.

(And these stores are about as healthy for you, financially speaking, as a weekend spent binging on Big Macs: each year around 2 million customers end up owing a payday loan for most of the year, meaning the same $500 loan ends up costing them $2,000 in fees.)

“

That’s how Jones saw it. “You’re comparing me with Jared Davis and them all at Check ‘n Go?” he asked me incredulously. “There’s things they’ve done over there,” Jones said, sounding genuinely offended, “that we’d never do here.”

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Jared Davis was a 26-year-old rich kid from Cincinnati casting about for something to do when he learned about the payday loan business. Only 14 months had passed since Jones opened that first store so the entire country was still up for grabs. Davis’ father was the CEO and president of Provident Bank, Cincinnati’s second largest. He didn’t need much convincing about the wisdom of investing in his son’s startup. You’d just have to open a store and a few months later you’d recoup your investment costs. Then you’d start clearing profits of 50 percent.

Broke, USA: From Pawnshops to Poverty, Inc.—How the Working Poor Became Big Business By Gary Rivlin. 368 pages. HarperCollins. $15.99.

If nothing else, Jones and Davis had good timing. At the start of the 1990s, the price of everything from housing to heating oil to health care was going up while the wages of the bottom half were stagnating. For those living on the economic margins, a stop at the local payday store offered an easy solution they could squeeze in between work and picking up the kids.

“Loaning people small amounts of money against their next paycheck?” Davis told me. “I liked the business. I liked it a lot.”

Davis had lawyers on retainer researching state laws to find where they might legally make these high-priced loans (loan sharks, after all, typically charge about 150 percent interest and loan sharking is illegal). So, too, did Jones. Both employed small legions of lobbyists, both gave liberally to elected officials in the hopes they’d support legislation that allowed them to operate legally in that state.

“It got unbelievably competitive,” Jared Davis said. “It was literally a race from space to space.” Eventually both Jones and the Davises opened around 1,300 stores each. A loan shark I met with in Cleveland, Tennessee whistled with admiration over what Jones, who he has known since they were both young, had pulled off. He had taken the loan shark’s basic business model and gone national with it, making hundreds of millions of dollars in the process. Jones didn’t have his people breaking kneecaps (instead they’d harass you and your references with daily phone calls if you were late) but then he was also charging more than twice the rate.

“The thing about the poor people’s economy,” the loan shark told me, “is that basically it’s recession proof. You’re always going to have people who need $100 or $200 real quick.”

Jones added points on the odious scale while driving me around town and sharing his views on race. His town has just enough blacks to put together a decent basketball team and win some football games, he told me—but not so many that the good people of Cleveland, Tennessee need to worry about crime.

“That's why I can leave my keys in the car with the door unlocked,” he explained. Every Thursday afternoon, a former Jones employee told me, the big boss and his top executives pad around the office in their socks. Why? That’s when a black man named Randy, whom Jones and his cronies call the “Little Chocolate Man,” comes to shine their shoes.

On the other hand, race might be one of those topics that underscores that maybe I’m shortchanging Davis by relegating him to second place. A district director who used to work for him called a press conference a few years back to talk about the company’s methods for choosing new store locations. “I have been responsible for selecting sites for new stores in D.C. and northern Virginia,” he said—and to those who claim the company doesn’t target minority communities, “I can tell you emphatically that it does.”

When I asked Davis about his former employee’s claim, he impugned the man’s character and denied his charges. Then he acknowledged that the former employee might have been speaking the truth.

“Do we go after the minority customer?” Davis asked. “In D.C., you’re right, that’s all that live there. We go after that population. If it’s a Mexican population, we go after Mexicans. If it’s a white population, it’s whites we go after.”

Jones doesn’t seem well liked in his hometown. He’s crass, a local businessman offered. Another business owner told me the story of a delivery person he knows whom Jones tried to get fired because apparently he didn’t think she had shown him enough deference. “He lords himself over everyone,” a teacher who has known him since grade school confided in me. He gives the school the smallest donation, she said, and still adds strings to his gift: “Basically, he gives money to the school for wrestling and nothing else.” A few years back, Jones planted some trees in the town plaza– and now there’s a granite marker in the town square that tells passersby that W. A. ‘Allan’ Jones, Jr. dedicates these trees to all the citizens of the local county.

That’s Jones, a woman has known him since they were both children tells me. “He does one little thing and he has to build a marble statue in his honor,” she said, adding, “He was a prick then, he’s a prick now.” That seems the general consensus at a website called RateYourBoss.com, where entry after entry describes Jones as precisely the kind of chief executive for whom you would never want to work. “He constantly berates people, makes people cry, and bullies them,” one post reads. “He is horrible!”

Yet maybe Jared Davis deserves the nod after all. In my two years exploring the subprime fringes, I spent time with the founders of most of the country’s biggest payday lending companies. I spoke with entrepreneurs behind some of the smaller chains that must compete with the big boys. Hands down Check ‘n Go was the consensus choice for the payday chain that exhibited the least scruples.

That’s how Jones saw it. “You’re comparing me with Jared Davis and them all at Check ‘n Go?” he asked me incredulously during our second day together. “There’s things they’ve done over there,” Jones said, sounding genuinely offended, “that we’d never do here.”