7 ms·

with regards to Payday loans the take away is that regulation is often uneven in application and not timely, worse activities which were not expressly illegal c

with regards to Payday loans the take away is that regulation is often uneven in application and not timely, worse activities which were not expressly illegal can one day become so with prosecution of said activities at a much later date. Note, I am not excusing the behavior of the example cases. I am not a fan of reaching back so far to prosecute for actions that were not illegal unless it can be shown that an investigation was already in process and those performing them were notified their actions were irregular and subject to legal action

fennecfoxen 11y ago
There's a bit of a Moral Crusade against payday lenders, because the rates they charge are exorbitant and their customers are poor, and people find that shocking. Since they're so obviously Bad Guys, then it's okay to do things like this to Get Them, right? Never mind that a payday loan may be a much better deal than a late payment on something important (or, for instance, if your car has been towed and is accruing storage fees by the hour). Never mind that the money lent stands a substantial risk of being lost forever and that economic studies find the actual profit margins on loans are often in the ~3.5% range, consistent with many other businesses. No, there's prima facie evidence that this is EVIL USURY; burn it with fire.
- rm_-rf_slash 11y ago
  Perhaps the problem is that because rates are so high, and people who need them so desperate, it is a no-brainer why the profit margins are low. Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. Why subsidize loans to this degree? Because there are many, many people that are so poor, payday loans can be their only option, burrowing them into crippling debt, which makes them scarcer consumers (less tax from commerce), economically precarious (more likely to require welfare of some kind), and societally corrosive (what happens when the children of severely indebted parents grow up? Another generation of poverty, most likely). By all means, let payday lenders do their thing, but they need competiton. Before homeownership policies of the mid 20th century, you would have to be rich to afford a house (when a 50% down payment was normal). Now it's an expectation of middle class life. Competiton is a good thing, and so is letting the government compete.
  - SilasX 11y ago
    >Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. Because people who exhaust their existing credit as if it were free money won't exhaust this? The Vimes problem [1] is well known and yet no one can come up with a systematic way to break the cycle and create a virtuous upward cycle by making the kind of small cheap loan you're describing. [1] The oft repeated meme that not being able to afford some long-term-cheaper option because you can't front the cash, thus making you even poorer.
  - Karunamon 11y ago
    Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. This solves nothing - the people who are generally signing up for payday loans almost certainly don't have great credit. (If they did, they'd be a lot more likely to be able to get a real loan or put the short term needs on a card) And as I put my anecdata hat on: There's plenty of competition among payday lenders. I live in what barely qualifies for a city, and there are at least 10 different outfits within about 5 minutes drive, some standalone, some pawn shops.
    - rm_-rf_slash 11y ago
      The people who need credit the most obviously don't have any. Insisting that the only alternative to missing payments is with obscene-interest loans is like a doctor giving you the option of dying or sticking you with leeches.
      - Karunamon 11y ago
        I'm still of the opinion that using APR's to describe a loan held for ~a week is about as useful as the weatherman giving you the forecast in degrees kelvin: technically correct, but completely worthless. "Get $300, pay it back plus $30 a week later" is much more relatable. And isn't a bad deal, when you need cash now. Think medical, car impound, etc. "Missing a payment" isn't even a thing you can have happen on most classes of payday loan. You have to provide a pay stub, and a post-dated check, and the money just gets taken out on the day of. Regarding leeches: http://www.livescience.com/203-maggots-leeches-medicine.html http://www.livescience.com/203-maggots-leeches-medicine.html - when the options are lose a foot or put a couple of sanitary bugs on it, I'll pick the leeches every time :)
- deleted 11y ago
  [deleted]
- thomaskcr 11y ago
  People on that moral crusade never seem to take the time to actually think about what those words and numbers mean. If a friend let you borrow $100 for 2 weeks, I don't think a 6 pack of beer ($8) would be an unreasonable "thank you"/interest payment when you pay them back. That would be a 192% APR. These are small, short term loans. Of course the rates become insane when you extrapolate to a year. The other side is a lot of people seem to assume they're compounding rates, I have never seen one with compounding interest. Sure, the fees keep accumulating but they are not compounding.
- st3v3r 11y ago
  A payday loan being better than those alternatives does not change the fact that payday loans are absolutely terrible, and should not be allowed to operate the way they are.
  - Lawtonfogle 11y ago
    The alternative is to just tell them they can't get the money. Hope they didn't really need it.
    - st3v3r 11y ago
      No, that is not true at all.
      - Lawtonfogle 11y ago
        If they had another source for money they would've already used it. Maybe not for the first payday loan, but once they noticed the cycle they would've gone to the other source of money. People only pick the worst option when it becomes the only option.
- crdoconnor 11y ago
  >There's a bit of a Moral Crusade against payday lenders, because the rates they charge are exorbitant and their customers are poor, and people find that shocking. Since they're so obviously Bad Guys, then it's okay to do things like this to Get Them, right? It absolutely is. They're bottom feeding scum whose profits are driven by the irrational financial decisions that occur under conditions of desperation and panic. >Never mind that a payday loan may be a much better deal than a late payment on something important Never mind that they capitalize on two very common cognitive biases: * Shortened time horizons of the financially distressed (your limbic system kicks in when you panic, causing people to make irrational decisions). * A bias towards optimism in emotionally healthy adults. When payday lenders are prohibited (like in Ohio) the poor end up better off in the long run. Only if you believe the neoclassical, neoliberal fairy tale that is the eternally rational consumer would it make sense to support these scum.
FireBeyond 11y ago
Those example cases are not 'retroactive' illegalization. They're examples of uneven enforcement. Usury was entirely illegal throughout the life of the two businesses in question. Both businesses made multiple explicit attempts to evade the laws in question (using tribal sovereignty) which says they knew perfectly well their actions were illegal. They just weren't enforced very well.

fennecfoxen 11y ago

There's a bit of a Moral Crusade against payday lenders, because the rates they charge are exorbitant and their customers are poor, and people find that shocking. Since they're so obviously Bad Guys, then it's okay to do things like this to Get Them, right? Never mind that a payday loan may be a much better deal than a late payment on something important (or, for instance, if your car has been towed and is accruing storage fees by the hour). Never mind that the money lent stands a substantial risk of being lost forever and that economic studies find the actual profit margins on loans are often in the ~3.5% range, consistent with many other businesses. No, there's prima facie evidence that this is EVIL USURY; burn it with fire.

rm_-rf_slash 11y ago
Perhaps the problem is that because rates are so high, and people who need them so desperate, it is a no-brainer why the profit margins are low. Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. Why subsidize loans to this degree? Because there are many, many people that are so poor, payday loans can be their only option, burrowing them into crippling debt, which makes them scarcer consumers (less tax from commerce), economically precarious (more likely to require welfare of some kind), and societally corrosive (what happens when the children of severely indebted parents grow up? Another generation of poverty, most likely). By all means, let payday lenders do their thing, but they need competiton. Before homeownership policies of the mid 20th century, you would have to be rich to afford a house (when a 50% down payment was normal). Now it's an expectation of middle class life. Competiton is a good thing, and so is letting the government compete.
- SilasX 11y ago
  >Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. Because people who exhaust their existing credit as if it were free money won't exhaust this? The Vimes problem [1] is well known and yet no one can come up with a systematic way to break the cycle and create a virtuous upward cycle by making the kind of small cheap loan you're describing. [1] The oft repeated meme that not being able to afford some long-term-cheaper option because you can't front the cash, thus making you even poorer.
- Karunamon 11y ago
  Perhaps a better alternative would be a general credit line available to all Americans managed by the CFPB. The credit limit would be rather small, in the low hundreds, but would be higher for citizens with better credit scores. This solves nothing - the people who are generally signing up for payday loans almost certainly don't have great credit. (If they did, they'd be a lot more likely to be able to get a real loan or put the short term needs on a card) And as I put my anecdata hat on: There's plenty of competition among payday lenders. I live in what barely qualifies for a city, and there are at least 10 different outfits within about 5 minutes drive, some standalone, some pawn shops.
  - rm_-rf_slash 11y ago
    The people who need credit the most obviously don't have any. Insisting that the only alternative to missing payments is with obscene-interest loans is like a doctor giving you the option of dying or sticking you with leeches.
    - Karunamon 11y ago
      I'm still of the opinion that using APR's to describe a loan held for ~a week is about as useful as the weatherman giving you the forecast in degrees kelvin: technically correct, but completely worthless. "Get $300, pay it back plus $30 a week later" is much more relatable. And isn't a bad deal, when you need cash now. Think medical, car impound, etc. "Missing a payment" isn't even a thing you can have happen on most classes of payday loan. You have to provide a pay stub, and a post-dated check, and the money just gets taken out on the day of. Regarding leeches: http://www.livescience.com/203-maggots-leeches-medicine.html http://www.livescience.com/203-maggots-leeches-medicine.html - when the options are lose a foot or put a couple of sanitary bugs on it, I'll pick the leeches every time :)
deleted 11y ago
[deleted]
thomaskcr 11y ago
People on that moral crusade never seem to take the time to actually think about what those words and numbers mean. If a friend let you borrow $100 for 2 weeks, I don't think a 6 pack of beer ($8) would be an unreasonable "thank you"/interest payment when you pay them back. That would be a 192% APR. These are small, short term loans. Of course the rates become insane when you extrapolate to a year. The other side is a lot of people seem to assume they're compounding rates, I have never seen one with compounding interest. Sure, the fees keep accumulating but they are not compounding.
st3v3r 11y ago
A payday loan being better than those alternatives does not change the fact that payday loans are absolutely terrible, and should not be allowed to operate the way they are.
- Lawtonfogle 11y ago
  The alternative is to just tell them they can't get the money. Hope they didn't really need it.
  - st3v3r 11y ago
    No, that is not true at all.
    - Lawtonfogle 11y ago
      If they had another source for money they would've already used it. Maybe not for the first payday loan, but once they noticed the cycle they would've gone to the other source of money. People only pick the worst option when it becomes the only option.
crdoconnor 11y ago
>There's a bit of a Moral Crusade against payday lenders, because the rates they charge are exorbitant and their customers are poor, and people find that shocking. Since they're so obviously Bad Guys, then it's okay to do things like this to Get Them, right? It absolutely is. They're bottom feeding scum whose profits are driven by the irrational financial decisions that occur under conditions of desperation and panic. >Never mind that a payday loan may be a much better deal than a late payment on something important Never mind that they capitalize on two very common cognitive biases: * Shortened time horizons of the financially distressed (your limbic system kicks in when you panic, causing people to make irrational decisions). * A bias towards optimism in emotionally healthy adults. When payday lenders are prohibited (like in Ohio) the poor end up better off in the long run. Only if you believe the neoclassical, neoliberal fairy tale that is the eternally rational consumer would it make sense to support these scum.

FireBeyond 11y ago

Those example cases are not 'retroactive' illegalization. They're examples of uneven enforcement. Usury was entirely illegal throughout the life of the two businesses in question. Both businesses made multiple explicit attempts to evade the laws in question (using tribal sovereignty) which says they knew perfectly well their actions were illegal. They just weren't enforced very well.