Just Business- or preying on the weak?

Dennis Behrens wants to talk about the payday-loan business. A wiry man with dark hair and intense eyes, the 43-year-old Behrens is infectiously optimistic. His demeanor draws people to him. But he looks tough, like a man who has learned some rough lessons. After talking to him awhile, one can see that his optimism has been hard-won through a life working for low wages at scores of unskilled jobs.

At 1 p.m., the crowd at Sidney's on Broadway is sparse; the lunch crowd is gone. A couple of coffee drinkers sit at the Formica counter. Diners eat alone and in pairs throughout the restaurant, newspapers and magazines next to their plates. Behrens makes his way past the counter and toward the back of the restaurant.

Sitting in a booth behind a chattering family, he taps his fingers to 1960s pop tunes blaring from the speaker above. Greeting the waitress, who's happy to see him, he orders coffee and a club sandwich.

Behrens turns away from the waitress. His face grows long and serious as he begins to talk about an industry in Missouri that provides short-term small loans for a price most people would never pay.

Behrens says he took a short, frenzied ride to the bottom when he became involved with payday loans. As alderman of the tiny village of Lake Annette, Mo., just east of Cleveland and south of Harrisonville, he says he should have known better. But he decided in February 1999 to use the small-loan industry to get himself and his wife of 20 years, Anna, past some unexpected closing costs on a new home.

"Things weren't coming together," he says, using his hands to make his point, index fingers landing in unison on his menu. "We were buying the house and needed just a few more dollars to make it work. We passed the credit checks, found a mortgage lender. You really can't do that to buy a house -- borrow money to ensure a house deal, I mean -- I know that now. But these payday loans aren't traceable. The owners aren't really accountable. There's nothing there that makes them report to the government or to a credit bureau, unless you can't pay back. At the time, I figured I would get us past the problem.

"I was just a few hundred from owning my own home. It was tough to face. It was easy to get the money, really easy. It got us past the house closing, and I thought everything was going to be just fine. I had every intention of paying those loans off."

Then things fell apart with one chance occurrence. Anna wrecked her car and needed transportation to work. The extra expense of a used car on an already tight budget forced Dennis to start renewing four loans he had for $100 every two weeks at $15 each.

"You know, $60 doesn't seem like much to some," he says. "But we were hooked. If you can't pay the original loan off, you have to renew them. Before we realized it, we were in trouble. I was running around town paying the $15 to the payday people and writing new checks all the time. I was spending sometimes four hours a day making sure all my bases were covered."

What Behrens got into is a young industry with virtually no state or federal oversight. "This is an outgrowth of Reagan-era, greed-is-good thinking," says consumer lawyer Bernard Brown, who is passionate in his opposition to the short-term lending industry in its present form. "Small-loan lenders are doing what used to be illegal. This kind of excess used to be called loan-sharking; now it's institutionalized.

"We have moved from Bedford Falls to Pottersville (a reference to the movie It's a Wonderful Life). Not that everything was perfect, but now it's plain mean-spirited. It has moved from a world that wasn't quite right to a world with a Kafkaesque atmosphere, where people who don't do the math, or can't, take it for what many call 'a lapse in personal responsibility.'"

Starting small Short-term lenders in Missouri basically worked out of a handful of small shops in urban areas before 1990. The small-loan business in the 1970s was mostly informal and was linked through a series of regional and state investigations to organized crime. Operators basically emerged from the back of saloons to run loan-sharking operations with city occupational licenses.

In 1979, Democrat Karen McCarthy, then a state representative from Kansas City, wrote legislation, which the General Assembly approved and the governor signed, stating that no business could charge a fee on less than $1,000 lent to an individual for household purposes. With later legislation the state allowed short-term lenders to charge a flat fee on loans but limited charges to cover the cost of lending the money.

The limits held profits down and kept many people out of the business. A couple of Kansas City lenders in the 1980s provided professional, clean service to clients who needed to fill a gap in their finances in a legitimate way. The rest -- no more than six or seven -- did business out of walk-in shops regulated only by the free market.

During the Bush administration, the short-term lending industry built a strong lobby that brought its interests to state legislatures. The industry began to grow in states that had begun to regulate the industry more formally, at the same time allowing higher interest and fees.