4 ms·

Well, it is unfair, but not necessarily because it's corrupt. It's just another example of the sad fact that our economic system in general places a disproporti

by Cushman 16y ago

Well, it is unfair, but not necessarily because it's corrupt. It's just another example of the sad fact that our economic system in general places a disproportionate financial burden on the poor. Someone who desperately needs $200 to see them through the end of the month is someone who is a lot less likely to be able to pay it back at the end of the month. So the lender needs to charge them a more. It might only be $10— but of course, to someone who desperately needs $200 to see them through the end of the month, $10 is a lot of money. Meanwhile, someone borrowing a hundred times as much to buy a new car can pay a hundredth of the interest, because they have the income to afford it. And there really isn't any way around that. At least, not in this political climate.

harryh 16y ago
What does the political climate have to do with it? Bigger credit risks require a bigger interest rate to make up for the risk.
- Cushman 16y ago
  Obviously this isn't the place to go into it, but I'm talking about effective social support. I don't think anyone thinks it's unfair that someone who simply can't wait to get that new gadget should pay a premium, but there's no rational reason that someone living in a first-world country should have to choose between letting their kids go hungry, going hungry themselves, and becoming a "big credit risk".
  - harryh 16y ago
    Ah, fair enough. 100% agree that some sort of institutional support so that people never have to rely on a payday loan to meet basic human needs (food, shelter, etc) would be a great thing. Don't regulate the market, eliminate the demand for it entirely.
    - christianwright 16y ago
      Well, sadly, Wal-Mart doesn't think the demand's going to let up. They've been removing otherwise profitable (I presume) service franchises from their stores and have been replacing them with pay day loan centers. http://www.economist.com/blogs/freeexchange/2010/03/payday_lending http://www.economist.com/blogs/freeexchange/2010/03/payday_l... A friend in Nevada was using a mail center inside a Super Wal-Mart to get his mail (he travels a lot) and was told by the manager that it was being shut down even though it was profitable because corporate told them to put in the pay day loan center. Kinda depressing really.
      - Cushman 16y ago
        This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good. Weird. Well, apart from the whole shutting down other profitable services thing :P
        matwood 16y ago
        WM isn't all bad. In their effort to drive down prices they actually provide the least expensive option for fresh fruit, veggies, and other healthy foods that lower income people typically forgo because of the cost. Studies have found that when given less expensive options for healthy food people will pick it over the junk.
        Tuna-Fish 16y ago
        > This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good. Walmart using it's clout to drive profit margins down is always an unequivocal good. The sole reason a free market is better than the alternatives is that given enough time, margins trend as low as they can possibly go.
        Cushman 16y ago
        That's precisely the point— when one company is deciding which products they want to sell, and that single company's business makes up 30% of your market, more than your profit margin, and they're telling you that you need to lower your prices by two cents this year or they're going to start buying from someone else and you'll have to fire seven hundred people or else go out of business... How is that a free market? The whole problem is that Wal-Mart is big enough to drive margins below what is sustainable. Forced reduction in margins leads to lower quality products, layoffs, and eventually the outsourcing of entire manufacturing sectors— and what good is a socket set for 15¢ less than the competition when the socket set company that used to pay you $35,000 a year moves to Indonesia and now pays you $0? I would call that "good" quite equivocal.
- tptacek 16y ago
  Yes. In other words, payday lenders drive marginal people further into poverty to make up for the totally insolvent people they (also) snooker into taking loans. That much is clear.
riffraff 16y ago
isn't it also an example of how the system in general fails to educate people not to live over their possibilities? Why did the person end up desperately needing $200 more than she earned at the end of the month in the first place? Why does he have no savings put aside for the rainy days? Why doesn't this person have a safety net of some kind, be it family, friends, a boss that can pay in advance etc.. and yet ends up with debts at the end of the month? (there are obviously many reasons for finding yourself in a shitty situation, but from the outside the size of irresponsible personal finance management in the US seems crazy)
- ErrantX 16y ago
  Agreed. Having done it it is entirely possible to live on minimum wage quite comfortably. The problem is consumerism, and the real problem is people desperate for stuff they can't really afford (like, a big TV) and not accepting they simply cannot afford it. This sucks, ideally everyone should have what they want. But life is unfair, and for most it just does not work out.
  - pmichaud 16y ago
    I think you're deluded about how possible it is. Maybe for a single, young, healthy male with very limited space and nutrition requirements it's possible, but add a couple kids to the mix, especially if you're a single parent, then add a medical issue or two, and the situation very quickly becomes untenable. If you're bright you can figure out a way to scrape... until your tire goes flat.
    - ErrantX 16y ago
      Obviously it is not a generality. However a large number of people in severe debt and money management are there as a result of the reasons I highlighted. It is misdirection to list the example of "single, kids, illness" as proof of anything. Almost anyone can get ill and hit financial trouble; it is an unexpected and perfectly legitimate problem that can lead you to financial problems, especially if stacked on top of your current circumstances. Just a single mum with two kids? sure it's not going to be luxurious but I know plenty of people who manage and are perfectly happy. Then again, I also know plenty of single mums who waste money like water. I think such circumstances are often irrelevant to the families ability to get by. My argument is this; once you throw consumerism, poor money management and an inability to accept the unfairness into the mix it tips the balance in favour of "generally in debt".

by Cushman 16y ago

harryh 16y ago

What does the political climate have to do with it? Bigger credit risks require a bigger interest rate to make up for the risk.

Cushman 16y ago
Obviously this isn't the place to go into it, but I'm talking about effective social support. I don't think anyone thinks it's unfair that someone who simply can't wait to get that new gadget should pay a premium, but there's no rational reason that someone living in a first-world country should have to choose between letting their kids go hungry, going hungry themselves, and becoming a "big credit risk".
- harryh 16y ago
  Ah, fair enough. 100% agree that some sort of institutional support so that people never have to rely on a payday loan to meet basic human needs (food, shelter, etc) would be a great thing. Don't regulate the market, eliminate the demand for it entirely.
  - christianwright 16y ago
    Well, sadly, Wal-Mart doesn't think the demand's going to let up. They've been removing otherwise profitable (I presume) service franchises from their stores and have been replacing them with pay day loan centers. http://www.economist.com/blogs/freeexchange/2010/03/payday_lending http://www.economist.com/blogs/freeexchange/2010/03/payday_l... A friend in Nevada was using a mail center inside a Super Wal-Mart to get his mail (he travels a lot) and was told by the manager that it was being shut down even though it was profitable because corporate told them to put in the pay day loan center. Kinda depressing really.
    - Cushman 16y ago
      This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good. Weird. Well, apart from the whole shutting down other profitable services thing :P
      - matwood 16y ago
        WM isn't all bad. In their effort to drive down prices they actually provide the least expensive option for fresh fruit, veggies, and other healthy foods that lower income people typically forgo because of the cost. Studies have found that when given less expensive options for healthy food people will pick it over the junk.
      - Tuna-Fish 16y ago
        > This might actually be a place where Wal-Mart using its clout to drive profit margins down is an unequivocal good. Walmart using it's clout to drive profit margins down is always an unequivocal good. The sole reason a free market is better than the alternatives is that given enough time, margins trend as low as they can possibly go.
        Cushman 16y ago
        That's precisely the point— when one company is deciding which products they want to sell, and that single company's business makes up 30% of your market, more than your profit margin, and they're telling you that you need to lower your prices by two cents this year or they're going to start buying from someone else and you'll have to fire seven hundred people or else go out of business... How is that a free market? The whole problem is that Wal-Mart is big enough to drive margins below what is sustainable. Forced reduction in margins leads to lower quality products, layoffs, and eventually the outsourcing of entire manufacturing sectors— and what good is a socket set for 15¢ less than the competition when the socket set company that used to pay you $35,000 a year moves to Indonesia and now pays you $0? I would call that "good" quite equivocal.
tptacek 16y ago
Yes. In other words, payday lenders drive marginal people further into poverty to make up for the totally insolvent people they (also) snooker into taking loans. That much is clear.

riffraff 16y ago

isn't it also an example of how the system in general fails to educate people not to live over their possibilities? Why did the person end up desperately needing $200 more than she earned at the end of the month in the first place? Why does he have no savings put aside for the rainy days? Why doesn't this person have a safety net of some kind, be it family, friends, a boss that can pay in advance etc.. and yet ends up with debts at the end of the month? (there are obviously many reasons for finding yourself in a shitty situation, but from the outside the size of irresponsible personal finance management in the US seems crazy)

ErrantX 16y ago
Agreed. Having done it it is entirely possible to live on minimum wage quite comfortably. The problem is consumerism, and the real problem is people desperate for stuff they can't really afford (like, a big TV) and not accepting they simply cannot afford it. This sucks, ideally everyone should have what they want. But life is unfair, and for most it just does not work out.
- pmichaud 16y ago
  I think you're deluded about how possible it is. Maybe for a single, young, healthy male with very limited space and nutrition requirements it's possible, but add a couple kids to the mix, especially if you're a single parent, then add a medical issue or two, and the situation very quickly becomes untenable. If you're bright you can figure out a way to scrape... until your tire goes flat.
  - ErrantX 16y ago
    Obviously it is not a generality. However a large number of people in severe debt and money management are there as a result of the reasons I highlighted. It is misdirection to list the example of "single, kids, illness" as proof of anything. Almost anyone can get ill and hit financial trouble; it is an unexpected and perfectly legitimate problem that can lead you to financial problems, especially if stacked on top of your current circumstances. Just a single mum with two kids? sure it's not going to be luxurious but I know plenty of people who manage and are perfectly happy. Then again, I also know plenty of single mums who waste money like water. I think such circumstances are often irrelevant to the families ability to get by. My argument is this; once you throw consumerism, poor money management and an inability to accept the unfairness into the mix it tips the balance in favour of "generally in debt".