When journalists praise 'bottom feeders'

Gary Lamphier's column of August 18, 2010 ('Cash Store rings in new phase of success') failed to elucidate how companies that charge high interest rates for short-term loans operate nor provide details of the legal troubles of Cash Store, which once operated as Rentcash and Instaloans.

Indeed, Lamphier's column reads as a promo for Cash Store. All he reveals about the business and its background is that

• Some provinces have established clear interest rate caps for short-term loans
• Loan rollovers have ended, and several class-action lawsuits have resolved, all of which "have finally cleared the air for Cash Store's investors."

He assumes readers are well versed in the nontraditional loan business and omits the company's past business practices that allow the vulnerable to quickly run up huge debts and that led to class action lawsuits. Would readers know that, when combined with interest, cheque cashing and broker's fees, the rate of interest charged by such companies can range to over 1000%? See

• Parliament background paper on the payday loan industry (2006)

As well as profiling such businesses, details of the company's history of being sued would have provided readers with valuable insight. As but one example, in 2008 Rentcash settled an Ontario class action suit for $3 million.

The lawsuit alleged that brokerage fees, in combination with interest charged by The Cash Store and Instaloans on customer loans, constituted interest in excess of the maximum rate prescribed by the Criminal Code of Canada, which forbids charging interest rates of over 60% per year.

The fact that such services are legal, and that they serve a segment of the population, does not change the fact that cash-loan firms profit specifically from those in poverty. Among its services, Cash Store offers short-term cash advances for up to 50% of customers take-home pay and short-term loans against their Child Tax, Disability, Old Age Pension, and Employment Insurance. Clients are those who cannot exist from payday to payday, including the disabled and old age pensioners.

Cash Store says it provides full disclosure of fees, but a search of its website shows no information on interest rates and other charges. Cash Store may have altered its most exorbitant interest rates and fees, but it did so after being faced with lawsuits and changes in provincial regulations.

Readers may disagree on whether, at their core, such businesses are predatory and inherently unethical. To assess their services and record of behavior, we need information and context. Some say such companies provide a needed service. That could be said of drug dealers and loan sharks too. The only real difference is that payday loan companies are legal.

All Lamphier does is spread the word that Cash Store has become successful. Too often business reporters just keep score of who is winning and losing and gladly 'pimp' for the winners, even if they are 'bottom feeders' like Cash Store.

While it no doubt helps a reporter to be nice to those reported on, providing context would be appreciated. Otherwise, the public is surprised by events like the subprime mortgage crisis that led to a global banking meltdown while reporters were asleep at the switch. More analysis please and less cheer leading:

• Most journalists failed to pick up the worldwide crunch that was to rock capitalism. Were they lazy, or embedded with the bankers? (British Journalism Review 2009 20(1):19-26.)