Shameless Hustlers Preying on the Financially Troubled: Guess Who?

Item:
A few weeks ago, Al Sharpton (I was thinking of what to call him but couldn’t come up with anything nice) was hired to do commercials for LoanMax, an outfit thought by many to be an at least “opportunistic,” if not outright predatory, lender. LoanMax attempted to defend itself and Mr. Sharpton in a press release.

Follow-up:
Two weeks later, Sharpton withdrew from the ad campaign, which was to have paid him $20,000 a month for a year.

History repeats itself:
This is not the first time a “respected African-American leader” supposedly representing “oppressed people” has gotten in bed with a questionable lender. Six years ago, there was this doozy:

August 30, 1999
Auto Dealer Has an Offer for Drivers With Bad Credit, but There’s a Catch

DETROIT — A car dealer here is making a big push into leasing used cars to poor people with no credit or bad credit. But the deals come with streetwise terms: Miss a payment and the car won’t start.

The dealer, Mel Farr, the former Detroit Lions football player, leases the cars to anyone who can come up with at least $50 a week. The catch is that a payment is due every Friday night, and customers must pay up each week to get the code they need to punch into a device attached to the dashboard. Otherwise, the car stays parked.

So, does that make Farr an angel for making cars available to those who otherwise couldn’t afford them, for giving people a reliable way to get to work and an opportunity to reestablish their credit? Doing business with him isn’t cheap: Car buyers who qualify for bank loans can borrow at about 9 percent, and Farr charges more than twice that on comparable leases to customers with the coded device. So, does that make him a vulture getting top dollar for old, beat-up cars by preying on those who have nowhere else to turn?

It depends on whom you talk to. Farr, the owner of the Mel Farr Automotive Group, said the unusual arrangement is a boon to inner-city residents who might otherwise have to rely on spotty public transportation — or their feet. Customers seem to be generally satisfied, though two have filed a lawsuit contending that their engines shut down as they were driving the cars.

Farr’s biggest supporters are the country’s political and economic elite. Prodded by the Rev. Jesse Jackson, Wall Street recently showered Farr’s company, the biggest African-American-owned business in the United States, with $36.5 million in new financing that enables him to expand in urban markets. And, in a public-relations coup last month, President Clinton publicly thanked him for bringing cars “to every community in this country.”

Some critics, though, portray Farr less as a do-gooder than an exploiter. “It is a no-fault system of consumer oppression by an auto dealer who should know better,” said Ralph Nader, the consumer advocate. “It is an electronic form of consumer servitude.”

Follow-up on Farr:
What happened to Farr shouldn’t surprise anyone who has followed stories like these (about halfway through link; notice the generally positive tone of article):

….. he inked an impressive $36.5 million expansion deal on Wall Street, only to default on it within months. In a fatal blow to Farr’s auto superstore empire, the very strategy of his business relied on – offering loans to sub-prime borrowers with sketchy credit ratings – had backfired with brutal consequences. His business faced an uncertain future with a high loan-default rate, huge unpaid balances to creditors and a strained relationship with his largest partner, Ford. By the end of 2000, he had shut down a large number of his dealerships, including expansion sites in Baltimore and Houston and some of his largest outlets in Ohio and Michigan. In 2002 his last two dealerships closed and Ford began to auction out his fixture and equipment stores amid pleas (and threats) from Farr’s friends and admirers, including the Rev. Jesse Jackson. At that point, his slow but certain downward spiral had reached rock bottom.

I guess we should be thankful Mr. Sharpton severed his relationship with LoanMax before he tried to raise capital for them.

It’s astounding how people like Sharpton and Jackson seem to suffer no negative long-term consequences to their standing as alleged heroes for financial relationships like these.

If you’re curious: Car-shutoff arrangements like these have withstood legal challenges (about halfway through article at link) and are in use in some parts of the country. In May 2004, Mel Farr married Linda Johnson Rice, president and CEO of Johnson Publishing Co., publisher of Jet and Ebony Magazines. He is now President of a company called Triple M Acceptance, about which little information is available online. The couple is definitely High Society.
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UPDATE, Jan. 11, 2006: Based on this item about a Bill Clinton “New Markets Tour” of East St. Louis, IL in July 1999, Triple M Acceptance appears to have been the financing arm of Farr’s operation while he was a car dealer. I haven’t been able to learn what it does now that he is, from all appearances, not a car dealer.