May 11, 2005

Let's screw the poor people. Again.

From time to time, this magpie likes to call your attention to news reports in which the real story is buried somewhere in the middle of a bunch of less important information. Today, we found a good example in the business press.

More than forty US cities have a business paper owned by American City Business Journals. Where this magpie lives, the paper is the Portland Business Journal. Each paper has a daily feature on entrepreneurs — which, not so incidentally to the point of this post, is sponsored by MasterCard.

Today's entrepreneur story focuses on the success of a San Francisco business called RentPayment. The company was founded in the late 1990s, and makes its money by providing a service that allows tenants to pay move-in deposits and monthly rent using a credit card. For each transaction, RentPayment collects a fee.

While the article focuses on the convenience that RentPayment provides: Landlords can accept credit cards without transaction charges; tenants can have put move-in deposits and rent on plastic. Only the tenants pay a fee, of course.

Buried in the middle of the article is, as Frank Zappa used to say, the crux of the biscuit:

RentPayment used to charge a convenience fee of 2.95 percent to the tenant, but will adopt a flat fee model of $12.95 per transaction starting next month. This means a big boost in revenue from lower rent areas where the market is developing rapidly.
Let's take each of these sentences in turn.

In the first, we see that while RentPayment's fees used to be based on the amount of rent paid, the company is now charging a flat fee. To show the effects of this change, let's take two hypothetical renters, one paying US $1800 a month and the other paying US $600 a month. Under the old 2.95% fee, the renters would pay US $53.10 and US $17.70 to RentPayment each month. Under the new schedule, both tenants pay $12.95. While they both pay less in monthly fees, it's obvious who gets the greater benefit from the change: the higher-income renter. Kind of like Dubya's changes to the income tax, isn't it?

But it's the second sentence that's the really scary one, and which shows where RentPayment's services are really being aimed. When the article talks about the company expecting a 'big boost in revenues' from expansion into 'lower rent areas,' what it really means is that the company is looking to make money off people who are more likely than higher-income renters to have trouble making their rent payments each month. Now, those tenants will be able to charge their rent, piling up both fees and unsecured debt.

While this magpie wouldn't put RentPayment in the same class of business as "rent-to-own" companies or payday loan outfits, it's clear to us that the company is largely in the same business: charging poor people for the misfortune of being poor. The Business Journal puff piece on RentPayment managed to avoid even the faintest hint that making it possible for people to put their rent payment on plastic could be a form of exploitation. But then, we wouldn't expect something upleasant like that to appear in a section of the paper sponsored by a credit card company, would we?

You can find RentPayment's website here.

Posted by Magpie at May 11, 2005 04:03 PM | Media | Technorati links |

Well, moron, before you write something, learn the details. The company changed its fees because the credit card companies made it do so. All card transaction charges come with a fee...who do YOU think should pay it? Landlords certainly won't eat it, so that leaves you with a choice - pay the rent the regular way, or stop whining.

Posted by: Audrey at May 30, 2005 04:45 AM