A Life on the New Planatation Thread: PayDay Lending

[Ford]

We pay $0 in interest and have credit ratings that are generally above 800.

And how did you get there?

Because it seems to me that you and a couple other people in this thread are looking down from a financial perch that the victims of payday loans haven't arrived at and are offering solutions that broke or poor people don't have access to. "Just pay cash" or "just get a credit card" are not options for people at the bottom end of the income ladder.

 

[laughing dog]

We pay $0 in interest and have credit ratings that are generally above 800.

And how did you get there?

Because it seems to me that you and a couple other people in this thread are looking down from a financial perch that the victims of payday loans haven't arrived at and are offering solutions that broke or poor people don't have access to. "Just pay cash" or "just get a credit card" are not options for people at the bottom end of the income ladder.

But but those people chose the path to be on the bottom of the income ladder. So they have getting what their just desserts.

 

[Toni]

And how did you get there?

Because it seems to me that you and a couple other people in this thread are looking down from a financial perch that the victims of payday loans haven't arrived at and are offering solutions that broke or poor people don't have access to. "Just pay cash" or "just get a credit card" are not options for people at the bottom end of the income ladder.

But but those people chose the path to be on the bottom of the income ladder. So they have getting what their just desserts.

Now wait a minute: how can you afford any dessert if you're at the bottom of the ladder? Spendthrift ways such as this are to blame.

 

[Jimmy Higgins]

The people who need these loans can't afford them, so why are they allowed to get them?

Because they are "such people." Remember, the only people who ever have need of a payday loan are the irresponsible layabouts who ruined their credit (probably because of drugs) and are not worthy, upstanding, Republican-voting members of society. Nobody else uses them. Not a poor individual starting out who maybe was never taught about credit and responsibly handling money. Not a minimum wage worker who suddenly needed a thousand bucks to pay for an injury that would have kept them from working. Not a single mom who'd just left her abusive boyfriend and needed some cash to get into a new place.

No, all the people who take out these loans are the useless dregs of society, and as such it is morally justifiable to exploit them for a few thousand dollars on a few hundred dollars worth of loans. It is their fault for not having sound financial advice, after all.

Ah. Well that explains that then!

 

[ksen]

Loren, tell these guys about how you can bank a cool million bucks by quitting smoking.

 

[Jimmy Higgins]

A payday loan is nothing like that. There is no good that can come from it. No chance to build credit, no reward for paying it off, and interest rates that make the folks peddling the furniture store credit cards seem like saints. They are predatory and should be illegal.

Payday loans are better than loan sharks, though.

How so?

What I don't understand is that the interest has to be so high because they know enough people won't pay them back in full. So why are they giving out these loans? Oh wait... they are making money after all. I did a quick look and found a pro-Payday store site. They claim upwards of 6 whomping percent won't payback their loans.

 

[Ford]

Payday loans are better than loan sharks, though.

How so?

Because a loan owed to a loan shark is just a loan.

What we're dealing with here is not loans, but commodities. If the financial crisis has taught us anything, it is that even bad debt can be a valuable commodity. If you owe money to Vinny the shark, all he can do is take a baseball bat to your knees when you don't pay. If he really wanted to cause some damage, he'd sell your loan to someone else.

 

[Bomb#20]

Don't automatically assume that debt ISN'T a form of slavery, just because on the face of it, it is voluntary.
...
And then they made sure that the workers would have to borrow (from the company) in order to live? And if they tried to leave without paying their debt, they could be thrown into prison?

My point is that debt CAN be used to enslave people.

That's rather like saying cigarettes are a form of slavery because there's a Chinese city that funds its municipal government with cigarette taxes and fines people for not smoking. Debt isn't a form of slavery. Debt is not being used to enslave people. What's being used to enslave people is the police department throwing people into prison for trying to leave. The debt is beside the point. If you leave with unpaid debts the company's legal recourse is to force you into bankruptcy and seize your assETS. If they seize your ass they're in violation of the 13th Amendment, whether you owe them money or not.

 

[Trausti]

Payday loans are better than loan sharks, though.

Well, they are because they are regulated. There are statutory limits on how much can be borrowed, the length of the loan, the interest that can be charged, and in some instances statutory payment plans if the borrower gives timely notice that re-payment will be late. Facts which seem to be completely absent from this thread.

 

[Bomb#20]

Payday loans are better than loan sharks, though.

How so?

Payday loan stores don't break your arm when you default.

What I don't understand is that the interest has to be so high because they know enough people won't pay them back in full. So why are they giving out these loans? Oh wait... they are making money after all. I did a quick look and found a pro-Payday store site. They claim upwards of 6 whomping percent won't payback their loans.

Are you suggesting that the mere fact that they're making money means they're charging too much? I.e., that people ought to go into the line of work of alleviating other people's credit problems, as charity? If that's what you mean, have you chosen to go into a line of work you don't get paid for?

If your contention is not that payday lenders are being bad merely because they're profitable, but that they're being bad because they're excessively profitable, you can do something about that. You, along with all the people who think payday lending is a lot more profitable than ordinary non-predatory businesses, can kick in a few hundred bucks apiece and become shareholders in a newly formed payday lending company with a different business model, where you charge reasonable interest rates. Those who need payday loans will flock to your company, it will grow like gangbusters, you'll make a reasonable profit just as if you'd invested in some random S&P 500, and the greedmeisters currently in the profession will either match your rates or go under for lack of customers.

The fact that you and the others haven't done this, and that not even profit-seeking do-gooders like George Soros have done this, indicates that payday lending isn't excessively profitable and the payday lenders aren't the problem. The problem is that there's a need for the service in the first place. The problem is that we've enacted policies that reward use of credit and punish use of cash without first making sure credit is a workable option for everybody, so we've put a lot of unfortunates in the position of being screwed by the system. So (hey, miracles happen) ksen has it right. We need to bring back postal banking.

 

[Bomb#20]

Don't automatically assume that debt ISN'T a form of slavery, just because on the face of it, it is voluntary.

I am just going by what Martin Bashir, Al Sharpton and assorted MSNBC commentators* tell me. Comparing debt to slavery is racist.

It appears you misunderstood what they were telling you. What's racist is comparing slavery to exploitation of their outgroups. Comparing slavery to exploitation of their ingroups is perfectly accurate.

 

[AthenaAwakened]

http://www.dailyfinance.com/2012/08/30/debtors-prison-is-back-and-just-as-cruel-as-ever/

First, explains St. Louis Post-Dispatch, the creditor gets a judgment in civil court that a debtor hasn't paid a sum that he owes. Then, the debtor is summoned to court for an "examination": a review of their financial assets.

If the debtor fails to show up for the examination -- as often happens in such cases -- the creditor can ask for a "body attachment" -- essentially, a warrant for the debtor's arrest. At that point, the police can haul the debtor in and jail them until there's a court hearing, or until they pay the bond. No coincidence, the bond is usually set at the amount of the original debt. As the Dispatch notes:


"Debtors are sometimes summoned to court repeatedly, increasing chances that they'll miss a date and be arrested. Critics note that judges often set the debtor's release bond at the amount of the debt and turn the bond money over to the creditor -- essentially turning publicly financed police and court employees into private debt collectors for predatory lenders."

Standing Up for Those Who Can't Pay

The practice -- in addition to putting an additional squeeze on poor people -- turns courts and police into enforcers for private creditors, from payday lenders to health care providers. The situation prompted Illinois legislators in July to pass a bill "to protect vulnerable consumers from being hauled to jail over unpaid debts," in the words of state Attorney General Lisa Madigan. The Debtors' Rights Act of 2012 requires two "pay or appear" court notices to be sent to debtors before an arrest can be made, and also prevents creditors from calling for multiple examinations unless the debtor's financial state has significantly changed.




Many of the victims, Madigan noted at the time, were living on funds that are legally protected from being used for outstanding debt judgments, such as Social Security, unemployment insurance or veterans' benefits. In one case she cited, an Illinois court brought a "pay or appear" order against a mentally disabled man living on legally protected disability benefits of $690 a month. The man told the court of his circumstances but was still ordered to pay $100 a month or appear in court once a month for a three-year period.

"It is outrageous to think in this day and age that creditors are manipulating the courts, even threatening jail time, to extract whatever they could from people who could least afford to pay," Madigan said. "This law corrects that gross oversight and puts a stop to throwing people in jail for being poor while still allowing fair debt collection when people have the means to pay their debts."

Illinois notwithstanding, the modern-day debtors' prison probably isn't going away anytime soon given the current economic climate: More than a third of U.S. states allow borrowers who can't or won't pay their debts to be jailed.

 

[braces_for_impact]

What I find interesting about this issue (and also a lot of financial or public assistance type issues actually) is that so many people view them as black and white. So many won't so much as admit to a gray area. Yes, there are people that use the loans irresponsibly for one reason or another. Like it or not, there are different reasons for doing so. Ignorance of basic finance, failure to read the fine print, personal irresponsibility, etc. On the other hand, a LOT of these payday lenders are incredibly shady. We KNOW they should know better.

I would advise anyone actually interested to look up the terms these firms offer on the web. After all, they're everywhere. (Even on Indian reservation land in order to avoid State laws, as was mentioned). Unfortunately, they don't actually disclose the terms of the loan until just before you click the "accept" button. Yep, it doesn't have to be in person, you can do it right over the Internet. Even at the brick and mortar places, it's a pain in the ass. There's very little training in many areas of this country in any kind of finance in public school. When you're considering one of these loans, they can and will outright lie to you. They can do this because once you're just about to collect your cash, they hand you the contract and tell you to read it over and sign it indicating your understanding and agreement to the terms. It's usually on the order of several pages of fine print. There are lots of legal and financial terms that many people simply do not understand, and the really ugly stuff is hidden within this hot mess.

When I went (and forgive me, this was awhile ago, so I'm doing this from memory) I was in a situation and went inside to check it out. I wanted to borrow $300.00. I (thought) I read over the terms, which basically seemed to say (along with a very simple sign on the wall in huge print) that the $300.00 loan would require me to pay back $380.00 on my next payday. OK. I could swing that. There was what I thought was an offer to pay back the loan in 6 installments, but I asked if I could just pay off the entire thing at once. I was told yes, but the amount owed would still be the same. So, I signed.

So, a week and a half later I go in to pay off my $380.00 and as I do, the lady says "See you next payday!" She tries to hand me money. I respond that no thanks, I don't need another loan. This was simply a one time deal for me. What I had neglected to understand was that couched in the terms I had signed wasn't the possibility to pay back in 6 installments, but that I was required to make another 6 further payday loans on the same terms. $380.00 for $300.00, then the loan would be satisfied. So the cost of my initial $300 loan was actual $480.00 over 12 weeks. I refused and I left. These people called and harassed me and my family (you're required to give them family and friends contact info) like you wouldn't believe. They tried to automatically draft the money from my checking account. (I had closed the account, I'm not that stupid). They threatened me every way you could imagine, but it never went any further than that. Fuck them, I'm never paying. That was years ago. They finally gave up after sending me fake lawyer and court documents (which was stupid since that gave me evidence I could use against them if they ever actually did try to take me to court.) I learned my lesson, but how many people are intimidated into trying to make these payments?

 

[Jimmy Higgins]

How so?

Payday loan stores don't break your arm when you default.

Only 6% of people allegedly default with Payday Loan stores. So lets try this again. Why is a Payday Loan store better than a loan shark?

What I don't understand is that the interest has to be so high because they know enough people won't pay them back in full. So why are they giving out these loans? Oh wait... they are making money after all. I did a quick look and found a pro-Payday store site. They claim upwards of 6 whomping percent won't payback their loans.

Are you suggesting that the mere fact that they're making money means they're charging too much? I.e., that people ought to go into the line of work of alleviating other people's credit problems, as charity? If that's what you mean, have you chosen to go into a line of work you don't get paid for?

I'll assume that was sloppy reading on your part. What I said was 6% default, but the excuse for the uber high rate of loans is all of the people defaulting, but it is "only" 1 in 16. That'd be notably high for a bank bank, but the image given to people who use payday loan stores is that everyone is defaulting. So the question becomes, are the rates actually being charged usury because the threat of defaulting is overstated.

If your contention is not that payday lenders are being bad merely because they're profitable, but that they're being bad because they're excessively profitable, you can do something about that. You, along with all the people who think payday lending is a lot more profitable than ordinary non-predatory businesses, can kick in a few hundred bucks apiece and become shareholders in a newly formed payday lending company with a different business model, where you charge reasonable interest rates.

Ah yes... the capitalist screed of "Just start your own company".

Those who need payday loans will flock to your company, it will grow like gangbusters, you'll make a reasonable profit just as if you'd invested in some random S&P 500, and the greedmeisters currently in the profession will either match your rates or go under for lack of customers.

The loans are extremely dangerous and predatory. That doesn't change because of the Capitalist Screed.

 

[Loren Pechtel]

We pay $0 in interest and have credit ratings that are generally above 800.

And how did you get there?

Because it seems to me that you and a couple other people in this thread are looking down from a financial perch that the victims of payday loans haven't arrived at and are offering solutions that broke or poor people don't have access to. "Just pay cash" or "just get a credit card" are not options for people at the bottom end of the income ladder.

Who gets denied a secure card? The option is there.

And we are saying that you if you can't pay cash you probably should be buying something cheaper instead.

Yes, we are looking at it from a perch--but we climbed our own way up and we are talking about how we did it.

 

[Trausti]

So lets try this again. Why is a Payday Loan store better than a loan shark?

Because it's regulated. There are laws in place protecting consumers from lenders who deviate from the statutory permitted amount and form of the loans and collection practices. And you can sue a payday lender if they violate these laws. In most states that means treble damages and attorney's fees. With a loan shark, none of that applies.

 

[Trausti]

We pay $0 in interest and have credit ratings that are generally above 800.

And how did you get there?

Because it seems to me that you and a couple other people in this thread are looking down from a financial perch that the victims of payday loans haven't arrived at and are offering solutions that broke or poor people don't have access to. "Just pay cash" or "just get a credit card" are not options for people at the bottom end of the income ladder.

I'd say the folks "looking down" are those who assume that people are too stupid to make their own financial decisions. Most people are rational and would understand the pros and cons of a payday loan. Payday loans are not that complicated. People don't need the paternalistic do-gooder intervening under the veneer that the do-gooder knows what's best for them better than they do.

 

[Loren Pechtel]

Payday loan stores don't break your arm when you default.

Only 6% of people allegedly default with Payday Loan stores. So lets try this again. Why is a Payday Loan store better than a loan shark?

But is that 6% of people or 6% of loans? Loans that are rolled over again and again before they finally go bankrupt? (Remember, if they can't get another loan at place A they very well might get it at B.)

 

[Bomb#20]

Payday loan stores don't break your arm when you default.

Only 6% of people allegedly default with Payday Loan stores. So lets try this again. Why is a Payday Loan store better than a loan shark?

So, you're asking why somebody who breaks only 0% of his customers' arms is better than somebody who breaks only 6% of his customers' arms? Pretty much the same reason a hitchhiker who doesn't kill anybody is better than a hitchhiker who only kills 6% of the drivers who pick him up.

What I don't understand is that the interest has to be so high because they know enough people won't pay them back in full. So why are they giving out these loans? Oh wait... they are making money after all. I did a quick look and found a pro-Payday store site. They claim upwards of 6 whomping percent won't payback their loans.

Are you suggesting that the mere fact that they're making money means they're charging too much? I.e., that people ought to go into the line of work of alleviating other people's credit problems, as charity? If that's what you mean, have you chosen to go into a line of work you don't get paid for?

I'll assume that was sloppy reading on your part. What I said was 6% default, but the excuse for the uber high rate of loans is all of the people defaulting, but it is "only" 1 in 16. That'd be notably high for a bank bank, but the image given to people who use payday loan stores is that everyone is defaulting.

Well, no, it isn't; but hyperbole is always good fun. Were you or were you not offering the fact that they're making money as a reason to think the interest rates are excessive? If you weren't, what point were you trying to make by saying they are making money after all?

Or perhaps you weren't making a point, just an emotional appeal to your choir's hostility to profit. If that's all, and your only actual argument is "6% default", do you know how profitable payday loan stores are? Do you know what all their expenses are? Do you know how high their interest rates need to be in order for them to make enough profit to attract investment? I don't know these things; I suspect you don't either. If you don't know these things, what makes you think "6% default" is a good argument?

So the question becomes, are the rates actually being charged usury because the threat of defaulting is overstated.

Does the usury law specify that the maximum non-usurious rate depends on the threat of defaulting? That would be an extraordinary claim; if that's what you're contending, quote the statute. Or do you mean "usury" in some non-legal sense, like as a synonym for "outrageous"? If that's what you mean, what rate do you think they should charge?

If your contention is not that payday lenders are being bad merely because they're profitable, but that they're being bad because they're excessively profitable, you can do something about that. You, along with all the people who think payday lending is a lot more profitable than ordinary non-predatory businesses, can kick in a few hundred bucks apiece and become shareholders in a newly formed payday lending company with a different business model, where you charge reasonable interest rates.

Ah yes... the capitalist screed of "Just start your own company".

I'm sure James Randi gets 'Ah yes, the skeptic screed of "Show me the evidence".' quite a bit. It isn't capitalists' fault that anti-capitalists make so many different unreasonable claims that can all be refuted with the same reply -- "If you were right then that would imply there's a huge untapped money-making opportunity going unnoticed." -- that the anti-capitalists get tired of hearing it. Calling our response a "screed" doesn't magically make your claims not imply what they imply. (Incidentally, do you know what "screed" means? "Just start your own company" is about three orders of magnitude too short to qualify.)

The loans are extremely dangerous and predatory.

So if they were outlawed, what would happen? Would that cause investors to line up to offer the people who need payday loans better terms? Would the borrowers go to loan sharks? Would they go hungry until payday? Do you have a solution? Are you going to stitch up the patient's wounds, or are you just ripping off his bandages?

 

[Ford]

And we are saying that you if you can't pay cash you probably should be buying something cheaper instead.

So nobody should ever take out a mortgage, an auto loan, or any other type of credit unless they can pay cash?

That might put a dent in home ownership.