A Life on the New Planatation Thread: PayDay Lending

[fromderinside]

Only for people who choose to navigate them while blindfolded and deafened.

Like Martin Bashir?

Pulled gun. fired. Then when someone mentioned you might have shot a black guy you thought about aiming, thought better of it, and blamed the guy you shot.

 

[AthenaAwakened]

Not necessarily. A lot of poor people have no credit. They may pay their bills on time, but lack credit cards or bank accounts.

And the banks aren't exactly welcoming to people with no credit. You don't even have to be poor. When I needed a loan to buy a car - not a new car, but a used car from a guy where I worked - no bank would give me the money. I was working as a cook, had been at the same job for awhile, but didn't have any credit history. No bad credit, no bankruptcies, just no credit, so they wouldn't cough up a dime. I managed to get a loan from a credit union eventually, but the rate was pretty high.

A few years later I moved to a new town and tried to open an account at the bank down the street. Since I had just the one loan on my credit history and not much else, the only account they would open was one with a minimum balance bigger than my meager paycheck. Again, not poor, just not making a lot of money and no credit.

So I wound up using a check cashing place when I got paid. They took a percentage of my little paycheck and charged for the money orders I bought to pay my bills. If I'd had any kind of emergency like a medical problem or a car wreck I'd have been screwed. It took awhile to get on my feet, but I did. That was over 20 years ago, and it is worse now. Want to rent an apartment? Credit check. Open a bank account? Credit check. Employers are running credit checks now, too, so you may not even be able to get a job to put money in the bank that won't take your business.


So financially you can hit rock bottom without ever leaving the ground...and that's where the vultures from the payday loan industry circle.

Speak the truth and shame the Devil!

 

[braces_for_impact]

I'll just point out that it's true, no one is putting a gun to their head to take these loans. But, when your baby is crying because she's hungry, they may as well be.

 

[Trausti]

I'll just point out that it's true, no one is putting a gun to their head to take these loans. But, when your baby is crying because she's hungry, they may as well be.

An appeal to extremes is a logical fallacy. How many borrowers actually have crying and hungry babies (and somehow don't have access to public assistance) as opposed to those who are spendthrifts? If the borrower with the crying baby comes up against the statutory borrowing limit, what then? In any given situation or circumstance you could divine an extreme example. Doesn't add any persuasive weight to an argument.

 

[dismal]

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.

*in Bashir's case ex-commentators.

 

[braces_for_impact]

Well, we would have to look at the data to see if the example I have given is extreme. With public benefits being cut at every turn, unemployment, not to mention the shady business practices of these organizations (I know I have dealt with them) it may not be as far from the median as you think.

 

[Loren Pechtel]

The terms on these loans are awful, sure, but they are targeted toward people that ruined their credit and nobody else would lend to.
Furthermore, nobody is holding a gun to their head and it's their responsibility to read all the terms and conditions before signing their name on the dotted line. So comparing it to slavery ("new plantations") is ridiculous.

Exactly. The choice is terrible loans vs no loans. In practice such people are almost certain to go bankrupt at some point, the payday lenders know this and have to factor the bad debt into the interest rates.

 

[Loren Pechtel]

Not necessarily. A lot of poor people have no credit. They may pay their bills on time, but lack credit cards or bank accounts.

And the banks aren't exactly welcoming to people with no credit. You don't even have to be poor. When I needed a loan to buy a car - not a new car, but a used car from a guy where I worked - no bank would give me the money. I was working as a cook, had been at the same job for awhile, but didn't have any credit history. No bad credit, no bankruptcies, just no credit, so they wouldn't cough up a dime. I managed to get a loan from a credit union eventually, but the rate was pretty high.

A few years later I moved to a new town and tried to open an account at the bank down the street. Since I had just the one loan on my credit history and not much else, the only account they would open was one with a minimum balance bigger than my meager paycheck. Again, not poor, just not making a lot of money and no credit.

So I wound up using a check cashing place when I got paid. They took a percentage of my little paycheck and charged for the money orders I bought to pay my bills. If I'd had any kind of emergency like a medical problem or a car wreck I'd have been screwed. It took awhile to get on my feet, but I did. That was over 20 years ago, and it is worse now. Want to rent an apartment? Credit check. Open a bank account? Credit check. Employers are running credit checks now, too, so you may not even be able to get a job to put money in the bank that won't take your business.


So financially you can hit rock bottom without ever leaving the ground...and that's where the vultures from the payday loan industry circle.

Worse now? There are online accounts with no minimums, no fees.

And the normal route to starting out is either as an authorized user on a parental card or to get a secured card. The best deal I found in this regard was Wells Fargo--$25/yr, no other fees. In something like a year of paying your bills it converts to a regular card.

 

[Jimmy Higgins]

The terms on these loans are awful, sure, but they are targeted toward people that ruined their credit and nobody else would lend to.
Furthermore, nobody is holding a gun to their head and it's their responsibility to read all the terms and conditions before signing their name on the dotted line. So comparing it to slavery ("new plantations") is ridiculous.

Exactly. The choice is terrible loans vs no loans. In practice such people are almost certain to go bankrupt at some point, the payday lenders know this and have to factor the bad debt into the interest rates.

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

 

[Ford]

Exactly. The choice is terrible loans vs no loans. In practice such people are almost certain to go bankrupt at some point, the payday lenders know this and have to factor the bad debt into the interest rates.

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.

 

[Nice Squirrel]

And the banks aren't exactly welcoming to people with no credit. You don't even have to be poor. When I needed a loan to buy a car - not a new car, but a used car from a guy where I worked - no bank would give me the money. I was working as a cook, had been at the same job for awhile, but didn't have any credit history. No bad credit, no bankruptcies, just no credit, so they wouldn't cough up a dime. I managed to get a loan from a credit union eventually, but the rate was pretty high.

A few years later I moved to a new town and tried to open an account at the bank down the street. Since I had just the one loan on my credit history and not much else, the only account they would open was one with a minimum balance bigger than my meager paycheck. Again, not poor, just not making a lot of money and no credit.

So I wound up using a check cashing place when I got paid. They took a percentage of my little paycheck and charged for the money orders I bought to pay my bills. If I'd had any kind of emergency like a medical problem or a car wreck I'd have been screwed. It took awhile to get on my feet, but I did. That was over 20 years ago, and it is worse now. Want to rent an apartment? Credit check. Open a bank account? Credit check. Employers are running credit checks now, too, so you may not even be able to get a job to put money in the bank that won't take your business.


So financially you can hit rock bottom without ever leaving the ground...and that's where the vultures from the payday loan industry circle.

Worse now? There are online accounts with no minimums, no fees.

And the normal route to starting out is either as an authorized user on a parental card or to get a secured card. The best deal I found in this regard was Wells Fargo--$25/yr, no other fees. In something like a year of paying your bills it converts to a regular card.

At one point I couldn't even get a secured credit card. And not everyone has reliable access to a computer for banking.

I still loved it when I was turned down for a car loan by Chase. The stated reason: "Your credit score is 886 out of a possible 888. Here are some ways Chase can help you build your credit." Real reason: They were competing with firms offering 2% APR interest.

 

[Sarpedon]

I don't think Sharpton would object to comparing what I described to slavery. I comparing what is happening now to something that can be compared to slavery is not the same as comparing the first thing to slavery.

Not that I really care what Sharpton thinks.

I remember when I bought a house, and it turns out I had a high credit score, all because I got a credit card to get a discount on something, and never used the damn thing.

But people certainly make dumb money decisions. I once went into a furniture store, and the guy started telling me about loans...And I couldn't help being shocked that someone would take out a loan to buy a couch. My first couch I dumpster dove. My current couch I bought off someone who was moving out of my apartment building at the same time I was moving in. It would never occur to take out a loan to buy furniture. If I didn't have enough money to buy a piece of furniture, I would go dumpster diving, or buy a fucking mat and sit on the fucking floor, as so many people around the world do.

 

[Nice Squirrel]

And I couldn't help being shocked that someone would take out a loan to buy a couch.

http://www.restorationhardware.com/...p?productId=prod2701958&categoryId=cat4000099

*Hangs head in shame.*

And then I bought another couch for $20 the next day.

 

[Sarpedon]

Ok, fine, I was shocked that someone would take out a loan to buy couches like the ones that were on display in that store.

Sheesh.

 

[NobleSavage]

Not necessarily. A lot of poor people have no credit. They may pay their bills on time, but lack credit cards or bank accounts.

And the banks aren't exactly welcoming to people with no credit. You don't even have to be poor. When I needed a loan to buy a car - not a new car, but a used car from a guy where I worked - no bank would give me the money. I was working as a cook, had been at the same job for awhile, but didn't have any credit history. No bad credit, no bankruptcies, just no credit, so they wouldn't cough up a dime. I managed to get a loan from a credit union eventually, but the rate was pretty high.

A few years later I moved to a new town and tried to open an account at the bank down the street. Since I had just the one loan on my credit history and not much else, the only account they would open was one with a minimum balance bigger than my meager paycheck. Again, not poor, just not making a lot of money and no credit.

So I wound up using a check cashing place when I got paid. They took a percentage of my little paycheck and charged for the money orders I bought to pay my bills. If I'd had any kind of emergency like a medical problem or a car wreck I'd have been screwed. It took awhile to get on my feet, but I did. That was over 20 years ago, and it is worse now. Want to rent an apartment? Credit check. Open a bank account? Credit check. Employers are running credit checks now, too, so you may not even be able to get a job to put money in the bank that won't take your business.


So financially you can hit rock bottom without ever leaving the ground...and that's where the vultures from the payday loan industry circle.

Our employees all go to Walmart on Friday to cash their paycheck. I think they just like having the cash. No idea why they don't use a bank. There are plenty of places that would give them an account.

I have a semi-homeless friend who has a bank account so he can get his disability check.

 

[Ford]

I remember when I bought a house, and it turns out I had a high credit score, all because I got a credit card to get a discount on something, and never used the damn thing.

I'm gonna take a wild guess here and say that the target demo of payday lenders isn't folks who inadvertently discovered they had a high credit score when they went to buy a house.

But people certainly make dumb money decisions. I once went into a furniture store, and the guy started telling me about loans...And I couldn't help being shocked that someone would take out a loan to buy a couch.

Well since I've done just that, here's how it works. After years of either picking up worn out furniture off the street, living in furnished apartments, or getting stuff from the Goodwill, you think "maybe I don't want my kid sleeping on someone else's urine soaked mattress" or maybe you're making enough to where you could afford to put it on a Master Card, but you don't have one of those. The furniture you're looking at is in one of those down market places (let's say the Room Store for example) and is $600 bucks for a set. Not great, but the catch is you don't have $600 bucks.

So you can go dumpster diving ("dad, Timmy's mom says he can't come over anymore because our couch gave him a rash") or you can do the math. Maybe you don't have $600, but you can afford to pay 50 bucks a month. Just so happens the store credit card is 12 months same as cash. Of course you could live like it is a third world country and just throw down a mat until you've got the money, but maybe...just maybe your goal is to inadvertently discover someday that you've got good credit. So you sign up for the card. If you fail to pay it off in 12 months, you are hit with a year of accumulated interest at 24 percent. If you do manage to pay it off, then you've got 1 year old furniture and a boost to your credit.

Is that a dumb money decision? If you can't afford the payments, yes. However if you have been broke, and are looking to honestly build credit, then it can be a smart decision.


I made that decision. That was the first step in a process from broke with no credit to having a credit score that made it possible to buy a house.

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.

 

[Shadowy Man]

I'll just point out that it's true, no one is putting a gun to their head to take these loans. But, when your baby is crying because she's hungry, they may as well be.

I'm guessing your debate opponents would say that they should have thought about that before having a baby.

 

[Loren Pechtel]

Worse now? There are online accounts with no minimums, no fees.

And the normal route to starting out is either as an authorized user on a parental card or to get a secured card. The best deal I found in this regard was Wells Fargo--$25/yr, no other fees. In something like a year of paying your bills it converts to a regular card.

At one point I couldn't even get a secured credit card. And not everyone has reliable access to a computer for banking.

Huh? Who gets turned down for a secure card?

I still loved it when I was turned down for a car loan by Chase. The stated reason: "Your credit score is 886 out of a possible 888. Here are some ways Chase can help you build your credit." Real reason: They were competing with firms offering 2% APR interest.

Something must have been wrong with their system.

FICO scores don't go to 888 in the first place and virtually perfect scores are all but unheard-of anyway.

The systems aren't perfect, I've seen my score take a ding for 0% utilization when in reality it was simply under 1%.

 

[Loren Pechtel]

But people certainly make dumb money decisions. I once went into a furniture store, and the guy started telling me about loans...And I couldn't help being shocked that someone would take out a loan to buy a couch. My first couch I dumpster dove. My current couch I bought off someone who was moving out of my apartment building at the same time I was moving in. It would never occur to take out a loan to buy furniture. If I didn't have enough money to buy a piece of furniture, I would go dumpster diving, or buy a fucking mat and sit on the fucking floor, as so many people around the world do.

Exactly. Most financial troubles are self-inflicted.

- - - Updated - - -

Ok, fine, I was shocked that someone would take out a loan to buy couches like the ones that were on display in that store.

Sheesh.

If you can't afford to pay cash for a couch like that one then you shouldn't be buying it in the first place.

 

[Loren Pechtel]

So you can go dumpster diving ("dad, Timmy's mom says he can't come over anymore because our couch gave him a rash") or you can do the math. Maybe you don't have $600, but you can afford to pay 50 bucks a month. Just so happens the store credit card is 12 months same as cash. Of course you could live like it is a third world country and just throw down a mat until you've got the money, but maybe...just maybe your goal is to inadvertently discover someday that you've got good credit. So you sign up for the card. If you fail to pay it off in 12 months, you are hit with a year of accumulated interest at 24 percent. If you do manage to pay it off, then you've got 1 year old furniture and a boost to your credit.

Is that a dumb money decision? If you can't afford the payments, yes. However if you have been broke, and are looking to honestly build credit, then it can be a smart decision.

If you need to make payments on $600 you don't have enough of a margin to be taking on obligations without necessity.

You can build credit without doing things like this. A simple formula: Get a card, secured if you have to, and use it at least once a month. Use it to buy something you were going to buy anyway. When the bill arrives (and not before then--if you pay before the reporting date you'll lose the benefit) pay it off in full. Presto, a paid-as-agreed on your credit report. Collect those. Do not get any dings. Your credit rating goes up.

We pay $0 in interest and have credit ratings that are generally above 800. (And when they dip it's either due to hard pulls or utilization spiking too high--and the latter goes away next month when you pay it off.)

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.