Another Tale From The Oligarch Recovery: Why The Poor Pay $4,150 For A $1,500 Sofa

Tyler Durden's picture

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don’t have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy’s fringes

 

In some ways, the business harkens back to the subprime boom of the early 2000s, when lenders handed out loans to low-income borrowers with little credit history. But while people in those days were charged perhaps an interest rate of 5 to 10 percent, at rental centers the poor find themselves paying effective annual interest rates of more than 100 percent. With business models such as “rent-to-own,” in which transactions are categorized as leases, stores like Buddy’s can avoid state usury laws and other regulations…

 

By the next day, the Abbotts had a remade living room, two companion pieces, both of the same blended material, 17 percent leather. The love seat and sofa retailed, together, for about $1,500. Abbott would pay for hers over two years, though she still had paying the option to pay monthly or weekly. The total price if paid weekly: $4,158.

 

“I’ve never seen a customer base or an economy like this,” Gazzo said in a telephone interview from the company’s headquarters in Tampa.

 

– From the Washington Post article: Rental America: Why the Poor Pay $4,150 for a $1,500 Sofa

When you bail out financial criminals and predators, you get a criminal and predatory economy. If there’s one clear lesson from the 2008 crisis and its aftermath, that should be it.

Earlier this week, I published an article titled, Land of the Debt Serf – How “Auto Title Loan” Companies are Ruthlessly Preying on America’s Growing Underclass. In it, we saw how efficiently the Fed’s 0% interest rate policy trickles down to the poor. In fact, preying on the poor for profits has been one America’s most vibrant business models since the “recovery” took hold. We learned that:

Short-term lenders, seeking a detour around newly toughened restrictions on payday and other small loans, are pushing Americans to borrow more money than they often need by using their debt-free autos as collateral.

 

Their hefty principal and high interest rates are creating another avenue that traps unwary consumers in a cycle of debt. For about 1 out of 9 borrowers, the loan ends with their vehicles being repossessed…

 

But Jordan said it wouldn’t make a loan that small. Instead, it would lend her $2,600 at what she later would learn was the equivalent of 153% annual interest — as long as she put up her 2005 Buick Rendezvous sport utility vehicle as collateral.

 

State law limits payday loans to $300, minus a maximum fee of $45. California also caps interest rates on consumer loans of less than $2,500 on a sliding scale that averages about 30%. Consumer loans above $2,500 have no interest rate limit.

 

For that reason, essentially all auto title loans in the state are above that level, according to the state’s business oversight department.

That article was a follow up to the piece published the week before, titled: Use of Alternative Financial Services, Such as Payday Loans, Continues to Increase Despite the “Recovery.” 

In today’s piece, we examine a the booming business of rent-to-own. This is where people too broke to buy things such as furniture and electronics, agree to buy these items via weekly payments. Of course, they typically never end up owning anything, as 75% of the time the items are repossessed or returned within weeks of the transaction. Those who do end up owning the items, pay multiples of the retail price.

Now, from the Washington Post:

CULLMAN, Ala. — The love seat and sofa that Jamie Abbott can’t quite afford ended up in her double-wide trailer because of the day earlier this year when she and her family walked into a new store called Buddy’s. Abbott had no access to credit, no bank account and little cash, but here was a place that catered to exactly those kinds of customers. Anything could be hers. The possibilities — and the prices — were dizzying.

 

Five years into a national economic recovery that has further strained the poor working class, an entire industry has grown around handing them a lifeline to the material rewards of middle-class life. Retailers in the post-Great Recession years have become even more likely to work with customers who don’t have the money upfront, instead offering a widening spectrum of payment plans that ultimately cost far more and add to the burdens of life on the economy’s fringes.

What national economic recovery? It is an oligarch recovery. Nothing more, nothing less.

The poor today can shop online, paying in installments, or walk into traditional retailers such as Kmart that now offer in-store leasing. The most striking change in the world of low-income commerce has been the proliferation of rent-to-own stores such as Buddy’s Home Furnishings, which has been opening a new store every week, largely in the South.

 

In some ways, the business harkens back to the subprime boom of the early 2000s, when lenders handed out loans to low-income borrowers with little credit history. But while people in those days were charged perhaps an interest rate of 5 to 10 percent, at rental centers the poor find themselves paying effective annual interest rates of more than 100 percent. With business models such as “rent-to-own,” in which transactions are categorized as leases, stores like Buddy’s can avoid state usury laws and other regulations.

 

And yet low-income Americans increasingly have few other places to turn. “Congratulations, You are Pre-Approved,” Buddy’s says on its Web site, and the message plays to America’s bottom 40 percent. This is a group that makes less money than it did 20 years ago, a group increasingly likely to string together paychecks by holding multiple part-time jobs with variable hours.

 

“Basically, the market pulled back from all low-income borrowers instead of trying to figure out how to serve them,” said Michael Barr, a University of Michigan law professor and author of “No Slack: The Financial Lives of Low-Income Americans.”

Let’s see. How do I make this abundantly clear.

Bernanke and the Federal Reserve are nothing but criminal butlers for the oligarchy. The proof is undeniable at this point. While this unaccountable banking cartel promised us that 0% rates would help the economy, America’s growing underclasses are paying 100% rates for loans to buy sofas and pay for food, more than five years into this so-called “recovery. Meanwhile, the only segment of society with access to low interest rates are the very wealthy financial oligarchs who leverage this cheap money to speculate on financial assets and real estate. So yes, the Fed (Central Banking in general) is completely to blame for the world’s growing inequality, as are their submissive, compliant defenders in academia, “journalism” and within the halls of power in Washington D.C.

Inside Buddy’s, Abbott walked over to a brown Ashley Furniture model, something she and her husband agreed would fit the colors of their Buccaneer trailer. The love seat had a cup-holder console in the middle and the cushions were plush, and when they took turns testing the feel, they realized it could pivot like a rocking chair.

 

By the next day, the Abbotts had a remade living room, two companion pieces, both of the same blended material, 17 percent leather. The love seat and sofa retailed, together, for about $1,500. Abbott would pay for hers over two years, though she still had paying the option to pay monthly or weekly. The total price if paid weekly: $4,158.

 

Most falter. At the Buddy’s in Cullman, some 75 percent of items are returned or repossessed within weeks of the transaction, store manager Angela Shutt says. And nationally, the percentage of returns has been gradually ticking upward — a sign of growing struggles for lower-income workers, said Joe Gazzo, the president of Buddy’s.

 

“I’ve never seen a customer base or an economy like this,” Gazzo said in a telephone interview from the company’s headquarters in Tampa. “You may have five people open an account in a day, but five people return in a day. You almost become like a Blockbuster.”

 

The Cullman store is one of Buddy’s best performers, and the five employees there empathize with their customers. Derek Bland, who drives around the county repossessing items from derelict renters, just left a job at Papa John’s. Brandy Day, one of the saleswomen, winces when talking about the jewelry that Buddy’s keeps near the register. “Take away a 42-inch TV from somebody, that’s one thing,” Day says. “But a wedding ring?”

 

In 2008, Buddy’s had 80 stores. Now it has 204. By 2017 it wants to have 500. Gazzo said that company revenue is rising at double-digit levels annually, even as it contends with a new wave of rent-to-own Web sites.

Totally normal that businesses which specialize on increased destitution would be booming half a decade into an economic recovery.

“The industry as a whole is in the biggest fight we’ve had, because we have to compete with everybody,” Gazzo said. “And the customer doesn’t have as much money as they used to.”

I don’t call it the “oligarch recovery” for nothing.

“We’ve always talked about the benefits and costs,” she said on the drive home. “Because with a family you can’t just say, ‘I want this, I’m going to get it.’ But growing up having the chair, the recliner, the love seat, the couch and everything, you just get used to the normal stuff. Sometimes it’s hard to break from the normal stuff and get to reality.”

As mentioned in an interview from last year, Serfdom is the New Normal. Don’t forget to send out your thank you notes:

Screen Shot 2015-06-08 at 10.32.14 AM

 

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Jugdish787's picture

Fuck you Bernank!

explosivo's picture

Has there ever been a more punchable face?

Pool Shark's picture

 

 

The banksters have indeed screwed us all, BUT...

I'm getting sick of these stories about "poor" families who can't afford NEW furniture, so they have to finance it.

No they don't.

Here's a thought:

DON'T BUY CRAP YOU CAN'T AFFORD TO PAY CASH FOR!!!

If you can't afford the $1,500 NEW sofa, then buy a $200 USED sofa, or better yet: survive without a sofa for a few months while you SAVE the money to buy the NEW one!

We live in a generation of INSTANT GRATIFICATION.

Past generations would look at us with pity and disgust...

 

Abstineo Emptor...

[Let the buyer refrain]

 

 

Four chan's picture

the poor are stupid and it's a perminant condition.

Pool Shark's picture

 

 

That's why most of them are poor; I see it every day.

 

I remember taking a productivity-management course 30 years ago. The speaker cited a study which found that if you could gather every single American under one roof, take all their assets and redistribute them equally among the entire population; within 20 years, most of the wealth would once again be in the hands of a small percentage of the population.

Giving money to an irresponsible person doesn't magically make them responsible.

Lottery winners, anyone?

 

You're right: you can't fix stupid...

 

TrumpXVI's picture

As the Duke once observed, "Life's hard.  It's harder if you're stupid."

Ness.'s picture

My Dad used to tell me there are two types of people in this world... 

 

"Those that owe, and those that own - strive to be the latter."

 

 

Billy the Poet's picture

Gilligan's Island Polonius' Advice to Laertes sung to the Toreador Song

 

https://www.youtube.com/watch?v=bXId5jOTxdg

mastersnark's picture

Your dad reads a lot of IHOP menus

daveO's picture

Athletes and rap singers come to mind.

"Thank you for blessing me with a mind to rhyme"

http://www.youtube.com/watch?t=125&v=otCpCn0l4Wo

http://www.youtube.com/watch?v=cJe6-afGz0Q

spastic_colon's picture

one of my favorite sayings....."I've been broke, but never been poor.  Broke is temporary, poor is a state of mind".

ebear's picture

So true.  Several times I've been broke, but then I just....

Pick myself up

Dust myself off

And start all over again!

steelhead23's picture

Don't conflate ignorance with intelligence.  It would be more accurate to state that many, perhaps most, Americans are delusional.  The delusion is partly attributable to a false image of normalcy - that it is normal, even desirable to be in debt.  "You can have it all," screams the TV.  And they buy it.

This should concern us all.  Let us recall that the "liar loans" at the base of the fraud pyramid in 2006 were mostly issued to the working poor.  It was their inability to make payments or refinance during a modest housing slump that caused the sub-prime bubble to burst.  Hence, financial ignorance among the working poor is a systemic risk to the U.S. and global economies and is something we should fix - rather than laugh at.

Billy the Poet's picture

Financial ignorance is a result of Keynesianism pervading economics, government and eduction. The people who take out payday loans dance to Krugman's tune at least until its time to pay the piper. Not to say that those folks have even heard of Krugman but it's a zeitgeist kind of thing. Back in the day they had Horatio Alger and things were different.

ebear's picture

Ignorance and stupidity are indistinguishable unless you're aware of your ignorance.  Most people aren't.

Concrete example:  

Poster a few articles back "corrects" my spelling of a proper noun.  I point out his mistake.  No follow up to the effect of "I stand corrected."  Guess he "knew" he was right and just moved on.

So, presuming to know something without actually checking.

Is that ignorance, or just stupidity?

<edit>

Some facts are harder to check than others, but when you have the internet at your fingertips, it's just plain stupid to not check facts, especially with something as basic as spelling.

exi1ed0ne's picture

But which facts?  There is so much disinformation out there that deliberately muddies the waters it's almost impossible to break out of confirmation bias for most people.

ebear's picture

True, but basic facts, such as how a word is spelled?  

Here's another example:

From the Kraftwerk song, "Radioactivity"

"discovered by Madame Curie"

How many Kraftwerk fans think Curie discovered radiactivity and that Kraftwerk weren't just looking for a word that rhymed?

"Radioactivity"

"discovered by Henri Becquerel"

Doesn't work, does it?

and so it goes....

11b40's picture

Your are mixing up stupidity with carelessness or indifference.  

The poster may be indeed be highly intelligent, very busy, and totally indifferent to what you think.

ebear's picture

'.....very busy, and totally indifferent to what you think."

That sounds like a formula for NOT posting

try again

daveO's picture

Exactly. I'll bet people that stupid get a disability check from Uncle Obama. People used to buy bean bag chairs. Now, they can buy these;

http://www.ebay.com/sch/i.html?_from=R40&_trksid=p2050601.m570.l1313.TR3...

Toronto Kid's picture

This was the biggest lesson my parents taught me - don't buy it on lease. Save up and buy it. All they had to do is wait 9 months, pay for the sofas with cash, and then have over $2000 left over for other stuff, like an emergency fund.

True story: grandparents went to visit his mother's for dinner. My grandmother and great-grandmother did not get along, but that night, great-grandma insisted they stay the night. They went back home the next morning and found the house, and all the things within (got on lease), gone. WW2 bomb had taken the house, and neighbours were going through the remains looking for their bodies. They paid their loans off, despite their things being destroyed.

No one in the family has ever got things on lease ever again. But we were European, and North Americans didn't go through those sorts of times, not within living memory.

Billy the Poet's picture

When they call in the Luftwaffe to do a repo -- that's harsh.

Guinny_Ire's picture

For most it's too beneath them, but youtube has a plethora of videos of turning pallates into furniture (I looked for shed information) and there is some really neat stuff.

Pool Shark's picture

 

 

+1 for the avatar.

Hmmm... A snakebite sounds really good right now.

 

On second thought; make that a 'black & tan.' I have work to do...

 

 

Billy the Poet's picture

For most it's too beneath them, but youtube has a plethora of videos of turning pallates into furniture

 

I often enjoy having furniture that's beneath me, notably chairs, sofas and beds.

kchrisc's picture

It really is a vicious cycle, an intentional vicious cycle.

The elites dumb down education, remove any focus on thinking skills, while Zion's grifting banksters steal the people's economic futures. Those closest to the bottom are then herded into welfare and ghetto warehouses, while eduction is further dumbed down. Now the trap is set, those enterprising enough take up the only thing they can, selling drugs, which puts them more often than not in the prison-industrial-complex (PIC). Those not being used as slaves in the PIC, may also reach for a taste of a better life, if just a bit, by taking a bite of the banksters' poisoned apple, high cost fiat-debt.

Regardless, one should never forget that the banksters, on behalf of their Zionist owners, "printed" the counterfeit lucre they have loaned to the poor, dumbed down, and unsuspecting--the banksters utilize them as a fence of their depositors' wealth.

They steal their humanity. Then they steal their wealth and futures. Then they come for their souls. And one day soon, they will come for their bodies.

And since the bottom is getting bigger, each year this system of grift and death applies to more and more.

Liberty is a demand. Tyranny is submission..

 

r101958's picture

The other problem is that we used to teach personal responsibility and now we don't. That is one of the big problems with 'Nanny statehood'. During the last depression there was a saying 'use it up, wear it out, make do, do without' (-learned that from my Grandmother - born 1911). How often do you hear that type of saying now? Answer: never.

exi1ed0ne's picture

Personal responsibility is only applicable when both parties are honest in a transaction, and no transaction can be honest when the currency system itself is a sham.  Re-loan money gained from a discount zero or neg interest?  People lack moral fiber by borrowing for consumption, the lenders lack and moral fiber for such insane markups, but the real decay is the fed as the true enablers.  Free money that can be loaned out for a near infinite return?  Few mortals could resist perpetuating and even protecting that kind of system, and the money printers know this.

The only ones hurt in such a system ARE those that have personal responsibility and pay their debts.  Talk about perverse incentives.

kchrisc's picture

"Personal responsibility is only applicable when both parties are honest in a transaction,"

You read my mind.

If the banksters, and the zero-sum system of grift they spawn aren't held responsible, then why should anyone else?!

Liberty is a demand. Tyranny is submission..

ebear's picture

"remove any focus on thinking skills"

I question whether you can teach someone to think that doesn't already have the inclination.

case in point:

My grade 10 history class was given the choice of Medieval England or Ancient Egypt by a teacher who really hadn't thought it through.  The class voted en masse for Medieval because they'd studied it in grade 9, and could fake their way through with last year's notes.  A mere handful of us voted for Egypt because we wanted something new we hadn't learned already.  

I reckon that class was typical of humanity as a whole.

RaceToTheBottom's picture

Greenspam, he primed and legitimized the pump

e_goldstein's picture

 Has there ever been a more punchable face?

 Hank Paulson, but he's a giant so you'd need to use a long thick stick.

Mercuryquicksilver's picture

Corpses all hang headless and limp

BullyBearish's picture

criminal butlers for the oligarchy = Banker's Whores

hangemhigh77's picture

The Hero? More like The Zero. Up your ass Berfucktard

robertsgt40's picture

Must be about time for an IPO 

drink or die's picture

These people are poor for a reason (being stupid).  It's not someone else's fault.

 

Maybe if we taught about money and finance in schools instead of some of the other crap being taught, things like this would be less common.

Normalcy Bias's picture

Money and finance isn't being taught in schools for a reason.

El Vaquero's picture

I know I had to figure it out on my own.

BeaverCream's picture

Teaching people what to do and them actually doing it are two very different things.  Education doesn't make stupid people more intelligent.

Normalcy Bias's picture

True, but watch this and it may open your eyes a little.

George Carlin on American Owners and Education

https://www.youtube.com/watch?v=4jQT7_rVxAE

exi1ed0ne's picture

Went back to school a few years ago to finish off my degree.  College level econ course, and props to the professor, actually did a really awesome job explaining where money comes from.  I've never seen an entire room of adults so thunderstruck.  These were all relatively smart middle class people in their late 20s and 30s.  Some of them sincerely believed that money was still backed by gold.

Disinformation has actualy done more damage than just ignorance ever could.

autofixer's picture

Poor people can't do math.  

ILLILLILLI's picture

"Maffs"...learn to speak "poor".

Normalcy Bias's picture

'Da hell you say!

 

L.A. Math test
City of Los Angeles
High School Math Proficiency Exam

Name:____________________
Gang:________________________

1. Duane has an AK47 with a 30 round clip. If he misses 6 out of 10 shots and shoots 13 times at each drive by shooting, how many drive by shootings can he attempt before he has to reload?

2. If Jose has two ounces of cocaine and he sells an 8 ball to Jackson for $320 and 2 grams to Billy for $85 per gram, what is the street value of the balance of the cocaine if he doesn't cut it?

3. Rufus is pimping for three girls. If the price is $65 for each trick, how many tricks will each girl have to turn so Rufus can pay for his $800 per day crack habit?

4. Jarome wants to cut his 1/2 pound of Heroin to make 20% more profit. How many ounces of cut will he need?

5. Willie gets $200 for stealing a BMW, $50 for a Chevy and $100 for a 4x4. If he has stolen 2 BMW's and 3 4x4's, how many Chevy's will he have to steal to make $800?

6. Raoul is in prison for 6 years for murder. He got $10,000 for the hit. If his common law wife is spending $100 per month, how much money will he have left when he gets out of prison and how many years will he get for killing her since she spent his money?

7. If the average spray paint can covers 22 square feet and the average letter is 3 square feet, how many letters can a tagger spray with 3 cans of paint?

8. Hector knocked up six girls in his gang. There are 27 girls in the gang. What percentage of the girls in the gang has Hector knocked up?

El Vaquero's picture

They maybe poor for a reason, but when the business model preying on them collapses, I don't want to hear the bitching about how the company that tried to get blood from a stone went under.

daveO's picture

...walk into traditional retailers such as Kmart that now offer in-store leasing. 

Kmart is wising up.

Richardk888's picture

If you cant afford it, then dont buy it!!!

I just got a nice new mattress set.  I was going to pay cash, but financed it for a year interest free.  Where are these fools shopping!?