Business that profits off people's misfortune declares bankruptcy

Most of the time, the Payday America operations are housed next-door to a Pawn America, as seen at this location in Duluth.

Most of the time, the Payday America operations are housed next-door to a Pawn America, as seen at this location in Duluth. GoogleEarth

Pawn stores and payday lenders make their money taking advantage of people's worst moments, when they need money fast and have nowhere else to turn.

Think of it as profiting from poverty. The individual can't get a bank to give out a loan, and either can't or won't ask for government assistance. Instead, in desperation, they give themselves up to the vultures.

Where do the vultures go when the bone business dries up? 

Why, to the United States government, where they can ask for "protection" from the financial mistakes they've made. A chance to "reorganize," and get back on their feet. If only their "customers" had it so easy.

Pawn America filed for Chapter 11 bankruptcy on Wednesday, the Star Tribune reports, declaring debts of "between $10 million and $50 million," owed to "fewer than 1,000 creditors." Chain founder/owner Brad Rixmann informed branches of the news in a letter, assuring them its stores would "remain open for business, serving customers." 

Pawn America currently has about 450 employees, down from about 500 not long ago, but way up from the 100 or so people it employed in 2008.

Rixmann says the pawn chain will come back "stronger and better able to compete in the marketplace." A company spokesman blamed the chain's current condition on similar market pressures that are hurting big department stores like Wal-Mart, Target, or J.C. Penney.

Maybe so. One difference: Those department stores buy in bulk from other big-time vendors, then mark prices up before selling directly to consumers. Pawn shops accumulate their wares bit by bit, taking people's stuff as collateral in a "secured loan," then selling it for a profit if they can't repay. 

This is still a more honorable trade than Rixmann's other business venture: Payday America, creators of cynically predatory short-term loans for people who need money, and don't have a moment to spare for understanding the fine print, which often takes the form of a blood-letting knife. Payday issues loans upon loans to the same (still-poor) people, who will soon find they're paying an average of 277 percent interest on their debt, according to a 2015 Star Tribune story.

Don't expect Rixmann to agree to that kind of debt deal himself. He knows how the game's played: Rixmann has protected the payday loan business model with upward of a half-million dollars in political donations, a Star Tribune analysis found. Those contributions are credited for effectively snuffing out a bill proposal to crack down on payday loan practices (and Rixmann's profits) in 2014.

Minnesota House Speaker Kurt Daudt thought the bill was unfair to Rixmann, whom he thought Democrats were personally targeting "for political reasons," given his status as a generous donor to Republicans.

Isn't it possible Rixmann was being personally targeted for, you know, the previous 20 years of predatory business practices?

Whether Pawn America's bankruptcy will affect any of its 14 evil-stepsister payday loan stores remains to be seen. Rixmann assured his employees that the filing was "not a shutdown" or a "liquidation," and is merely a "reorganization." Though, should any of his employees get "reorganized" out of a job, Rixmann knows a great place they can score a quick loan to help them make rent.

"This," Rixmann said, "is an unfortunate circumstance."

Probably the first one he didn't like.