Seven years ago, Mandisa Bruce of Muskegon purchased a 1996 Oldsmobile Aurora for $11,831.
Today, she is being sued for $16,711 by a Southfield "sub-prime" auto loan company although the vehicle, which had sat unused in her driveway for years, was stolen and left burnt-beyond-use in Muskegon Township in 2006.
"I knew I spent too much for it when I bought it," said Bruce. "But I had just gotten a job in Grand Rapids and I needed transportation. I had bad credit so I knew it wasn't going to be cheap, but I didn't have a choice. I couldn't take the (MATS) bus to my job in Grand Rapids.
"But to pay $16,000 for a car that was five years old at the time and had more than 100,000 miles on it doesn't seem fair."
Such is the plight of the working poor who, because of lack of wages and good credit, are forced to work with those in the so-called "poverty business." Needing a quick fix, they often spiral deeper and deeper into debt.
From pawn shops to rent-to-own outlets to pay-day advance companies and urban corner stores with high-priced groceries, the "poverty business" is flourishing in the country and throughout West Michigan as the economy worsens and gas prices rise.
The Muskegon area has at least nine cash-advance outlets, four rent-to-own stores and four pawn shops that profit from charging high prices, fees or interest rates on the backs of people who have nowhere else to turn.
"People are in desperate situations when they walk in the doors of these businesses," said Tim Burgess, executive director of the Neighborhood Improvement Association, which works with low-income homebuyers in Muskegon.
"Some of what is done is legal and legit but evil," Burgess said. "They know they are taking advantage of those that are in need of real help."
BusinessWeek magazine in a story last year on the "poverty business" reported that payday lending companies have grown from 300 in the early 1990s to more than 25,000 today, with five of them major corporations traded on the New York Stock Exchange or NASDAQ. The "alternative financial services" sector, which services people with no credit or bad credit, represents more than $250 billion a year in loans, the magazine reported.
The question begs: Are businesses such as Golddiggers pawn shop on East Laketon or J.D. Byrider -- the national sub-prime auto king with an outlet in Muskegon -- serving the working poor who need quick access to cash, goods or cars or are they "preying" on their financial desperation?
It depends on who you talk to.
The woman who brought in a "mother's ring" to be pawned at Golddiggers on Monday was thankful for the $8 she received, though store owner Adam Pollock explained he couldn't pay more.
"I'll take it," said the woman, who asked not to be identified. "I need gas for my car."
When people take goods to a pawn shop, they are putting an item up for collateral for a cash loan and given so many days to recover the item at a stiff interest rate -- 35 percent at Golddiggers. Some just want the cash and never return to pick up their pawned items.
But Pollock said he is providing a service -- "I'm helping people get money so they can buy gas to go to work. You couldn't go to a bank and get a small loan of $100."
Pollock said it is a myth that people like him are getting rich at the expense of the poor. He said he gave $116,000 in loans last year, but after paying rent, his two employees -- who he pays $10 or $11 an hour -- had a better income than he.
Pay big, or do without
Mandisa Bruce, who also was housing her brother and his son, bought the Oldsmobile at MD Auto Sales, 5710 Holton with a "sub-prime" auto loan that was eventually sold to Automotive Credit Corp. of Southfield, Mich. Automotive Credit has been in the sub-prime auto loan business since 1992, purchasing loan contracts from independent dealers for "consumers with limited or challenged credit histories who are unable to obtain financing from traditional sources," according to the company Web site.
The loan agreement was for $10,350 after Bruce put $1,500 down on the five-year-old car. The 36-month loan had a 25 percent interest rate -- the legal limit under Michigan's usury laws -- for a monthly payment of $411.51.
That interest rate is typical for many local people seeking transportation, said MD Auto Manager Nick Davis.
"Due to the economy, our customer's credit is getting worse and worse," Davis said. "(Interest) rates go up when you have credit problems. It's like trying to get low insurance rates with two (drunk driving charges)."
For many low-income auto buyers, the option is to pay 25 percent interest rates or go without a car, which often is critical to keeping a job.
