6 ms·

I hate to see entrepreneurs acting like predators. I like to think we are in it for noble reasons - advancement of humanity, crucial innovation - you know, chan

I hate to see entrepreneurs acting like predators. I like to think we are in it for noble reasons - advancement of humanity, crucial innovation - you know, changing the world. But cold hard cash rules for many. It makes a certain kind of sense that a guy who left Google for BMG would be capable of such a scummy company.

gcheong 16y ago
Easy to say it's predatory but I'm not convinced. These are high risk loans so who's to say that the interest rates and fees charged aren't reflective of that risk? On the other hand I am willing to entertain the idea that if the people who most often used these places don't have access to these loans at all maybe they would be better off.
- andrewljohnson 16y ago
  Who's to say crack isn't fun for some people? You're still a criminal and a drag on society if you sell it. It's not that I don't think the rates reflect the risk... it's that I think these rich bastards are saddling poor people with loans, and they expect a good portion of them to drown in the loans. They charge these rates so they can recover vast losses... in the end, the honest people get screwed and even the dishonest borrowers get buried in a tar pit of debt.
  - gcheong 16y ago
    Your analogy with drug dealing is quite apt. Because what happens when people can't get what they want through legal channels? Black market. Loansharking. Broken kneecaps. Payday loans may seem to reflect the worst of our society but in actuality they are a step up from other alternatives.
    - tptacek 16y ago
      Your argument is that loansharking would be just as prevalent as payday loans, once payday loans are outlawed? You can get a payday loan within walking distance of most every block in the city of Chicago. You can't even legally be a loan shark.
      - gcheong 16y ago
        I don't know if it would be just as prevalent, maybe not but I don't think the criminals are going to pass up a proven market opportunity so I think loansharking would increase from where it is now. I do think that for the people who use payday loans today, if they didn't have the option legally, then life for them could be worse overall either by having to deal with loansharks and/or because they end up in some pit that could have been avoided if they had the legal loan option.
    - andrewljohnson 16y ago
      Can you comment on my second argument? These companies know that XX% (not .XX%) will default. They intentionally drive some customers in debt, and then profit on the rest. This isn't providing loans for people in need... this is intentional destruction of people's lives and credit. There is a spreadsheet in ZestCash HQ with some truly despicable calculations in it.
      - Dylanlacey 16y ago
        That's a farcical argument. X% of people will also default on their home-loans. Ergo, no-one should offer them. X% of people will default on service payments. X% of people will never claim on their insurance. X% of your customers will never go from 'trial' to 'customer'. Every business requires examination of the risks and amortization via the costs. So yes, some of their clients will go bankrupt. The rest will be charged high fees. And the pay day loaner? They will make a moderate amount of money, because they DON'T GET BACK THE DEFAULTED LOANS. They're not taking someone's house when they don't pay back, they're just losing their loan amount entirely.
  - sneak 16y ago
    "I think these rich bastards are saddling poor people with loans, and they expect a good portion of them to drown in the loans." None of "these rich bastards" are forcing anyone to take payday loans. How are honest people getting screwed if they voluntarily take on the debt?
  - SoftwareMaven 16y ago
    Honestly, I think this applies more to student loans than to payday loans, given there is no way to discharge student loan debt, no matter how bad your life may get.
- tptacek 16y ago
  The ultimate cost of the loan doesn't simply reflect the risk on the loan; it also reflects a premium that the lenders are extracting for providing a no-questions-asked, 24/7 instant cash offering. Free market purists point out that payday loan customers can't access "traditional" loans. True. Many of them can't, because they have no income or collateral. And those people can't be loaned money ethically anyways. Meanwhile, a large fraction of people who currently avail themselves of payday loans can access better loans --- but they have to plan ahead (and fill out more paperwork) to do so.
  - gcheong 16y ago
    I'm not so much of a free-market purist (i.e no regulation) as a freedom of choice purist. I don't like seeing anyone get taken advantage of needlessly so if there are better alternatives for people I would want them to know about it. So, is the problem here that people just don't know about the alternatives or is it that they see the cost of the extra planning and paperwork as greater than the cost of the premium? I would also think that proper use of a payday loan would be in circumstances you didn't plan for, but some people will make bad choices and use them recklessly.
  - deleted 16y ago
    [deleted]
sneak 16y ago
Please read this: http://lesswrong.com/lw/65/money_the_unit_of_caring/ http://lesswrong.com/lw/65/money_the_unit_of_caring/

gcheong 16y ago

Easy to say it's predatory but I'm not convinced. These are high risk loans so who's to say that the interest rates and fees charged aren't reflective of that risk? On the other hand I am willing to entertain the idea that if the people who most often used these places don't have access to these loans at all maybe they would be better off.

andrewljohnson 16y ago
Who's to say crack isn't fun for some people? You're still a criminal and a drag on society if you sell it. It's not that I don't think the rates reflect the risk... it's that I think these rich bastards are saddling poor people with loans, and they expect a good portion of them to drown in the loans. They charge these rates so they can recover vast losses... in the end, the honest people get screwed and even the dishonest borrowers get buried in a tar pit of debt.
- gcheong 16y ago
  Your analogy with drug dealing is quite apt. Because what happens when people can't get what they want through legal channels? Black market. Loansharking. Broken kneecaps. Payday loans may seem to reflect the worst of our society but in actuality they are a step up from other alternatives.
  - tptacek 16y ago
    Your argument is that loansharking would be just as prevalent as payday loans, once payday loans are outlawed? You can get a payday loan within walking distance of most every block in the city of Chicago. You can't even legally be a loan shark.
    - gcheong 16y ago
      I don't know if it would be just as prevalent, maybe not but I don't think the criminals are going to pass up a proven market opportunity so I think loansharking would increase from where it is now. I do think that for the people who use payday loans today, if they didn't have the option legally, then life for them could be worse overall either by having to deal with loansharks and/or because they end up in some pit that could have been avoided if they had the legal loan option.
  - andrewljohnson 16y ago
    Can you comment on my second argument? These companies know that XX% (not .XX%) will default. They intentionally drive some customers in debt, and then profit on the rest. This isn't providing loans for people in need... this is intentional destruction of people's lives and credit. There is a spreadsheet in ZestCash HQ with some truly despicable calculations in it.
    - Dylanlacey 16y ago
      That's a farcical argument. X% of people will also default on their home-loans. Ergo, no-one should offer them. X% of people will default on service payments. X% of people will never claim on their insurance. X% of your customers will never go from 'trial' to 'customer'. Every business requires examination of the risks and amortization via the costs. So yes, some of their clients will go bankrupt. The rest will be charged high fees. And the pay day loaner? They will make a moderate amount of money, because they DON'T GET BACK THE DEFAULTED LOANS. They're not taking someone's house when they don't pay back, they're just losing their loan amount entirely.
- sneak 16y ago
  "I think these rich bastards are saddling poor people with loans, and they expect a good portion of them to drown in the loans." None of "these rich bastards" are forcing anyone to take payday loans. How are honest people getting screwed if they voluntarily take on the debt?
- SoftwareMaven 16y ago
  Honestly, I think this applies more to student loans than to payday loans, given there is no way to discharge student loan debt, no matter how bad your life may get.
tptacek 16y ago
The ultimate cost of the loan doesn't simply reflect the risk on the loan; it also reflects a premium that the lenders are extracting for providing a no-questions-asked, 24/7 instant cash offering. Free market purists point out that payday loan customers can't access "traditional" loans. True. Many of them can't, because they have no income or collateral. And those people can't be loaned money ethically anyways. Meanwhile, a large fraction of people who currently avail themselves of payday loans can access better loans --- but they have to plan ahead (and fill out more paperwork) to do so.
- gcheong 16y ago
  I'm not so much of a free-market purist (i.e no regulation) as a freedom of choice purist. I don't like seeing anyone get taken advantage of needlessly so if there are better alternatives for people I would want them to know about it. So, is the problem here that people just don't know about the alternatives or is it that they see the cost of the extra planning and paperwork as greater than the cost of the premium? I would also think that proper use of a payday loan would be in circumstances you didn't plan for, but some people will make bad choices and use them recklessly.
- deleted 16y ago
  [deleted]

sneak 16y ago

Please read this: http://lesswrong.com/lw/65/money_the_unit_of_caring/ http://lesswrong.com/lw/65/money_the_unit_of_caring/