opinion

Mob sharks: Better rates than Alabama payday lenders

In September 2000, record promoter and movie producer Joseph Isgro was sentenced by a district court judge in California to 50 months in federal prison for running a loan-sharking business out of a Beverly Hills shopping center.

Isgro, who was connected to the Gambino crime family, drove a Cadillac, lived in a Beverly Hills mansion and was, by all accounts, doing quite well when he was arrested.

The lone source of his income for at least a five-year period was the interest he made charging down-on-their-luck borrowers an exorbitant interest rate.

According to court records, prosecutors told the jury that Isgro "preyed" upon his borrowers by charging as much as 5 percent per week.

For that crime in California, Isgro went to federal prison for four years.

In Montgomery, and around Alabama, he would've been the cheapest game in town.

A payday lender in this state can charge a rate that amounts to nearly 9 percent per week. Legally.

That's an annualized rate of 456 percent, nearly double the rate for which police in upstate New York arrested a mob-connected loan shark last September. In a widespread crackdown on organized crime there, barbershop owner Anthony "Harpo" DePalma was picked up for charging 200 percent interest.

That's what those guys get for conducting their shady business in states that care about their citizens, I guess.

Luckily, the worse-than-mob-loan sharks payday lenders in Alabama have no such concerns.

Because like the old-school mafia guys, today's payday and title loan lenders learned the secret to conducting a successful shady business: greased palms make people look the other way.

Over the last few election cycles, lobbyists for Alabama's legal loan sharks dumped more than $500,000 into the campaign accounts of legislators, especially those who serve on the Senate's banking and insurance committee and the House's financial services committee.

Last year, a bill that would have capped rates at 36 percent was killed in the House committee – a committee where seven of the nine members had accepted contributions from the businesses they were to regulate.

Just so we understand the nature of today's politics: former Alabama Gov. Don Siegelman is wilting away in federal prison for allegedly accepting a campaign contribution in exchange for reappointing a guy to a board he had served on under three previous governors, but these dudes – Democrats and Republicans – are within the law to accept contributions from the businesses they regulate.

Swell, right?

If I'm not mistaken, that's the sort of nonsense that led to a total collapse of our financial system in 2008. Regulators were far too chummy with the banking executives they were supposed to regulate, leading to one missed warning sign after another, until finally the whole thing came crashing down.

That crash led to Democrats pushing through the formation of an oversight group – the Consumer Financial Protection Bureau – that has the responsibility of protecting consumers from predatory lenders and outrageous schemes.

On Thursday, President Obama was in Birmingham to push the CFPB's plan to establish rate caps for payday lenders. And why wouldn't he come to Alabama to do that? As Obama mentioned, this state has more payday lenders than McDonald's.

Let that sink in.

Of course, Republicans in Congress have targeted the CFPB, because there apparently is no government entity or law that protects the country's middle class or poor that shouldn't be immediately abolished.

And the same holds true in Alabama.

Even with more than half of the House signed on as sponsors to that payday bill last year – the one that capped rates at 36 percent – it didn't make it out of committee for a floor vote.

In the meantime, these same men and women trip over themselves to lower the "unfair" tax rates imposed on multi-million dollar businesses and any mention of raising the ridiculous property taxes that have left billionaires paying less for their acres than a middle-class homeowner is met with outrage.

But a poor guy who's paying a 456 percent interest rate, which is literally higher than the mob charged, on a $500 loan he took out to fix his car so he could get to work – a loan that he's now paid more than $1,000 in interest alone on – is perfectly OK.

Well, I should say, it's OK so long as a little bit of that vig goes towards making the right lawmakers fuhgetaboutit.