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The interest rates are high because the risk is high. Many borrowers simply don’t pay the money back. So we should tolerate placing the burden of compensating

• forensic 16y ago
  You should start a charity.
  • jfager 16y ago
    Many already exist. I guess I don't understand your point?
    • istari 16y ago
      What are you going to do personally to address this evil that you seem so outraged by? Nothing.
      • jfager 16y ago
        It's completely dickish of you to assume you know the answer, but you ask a good question. I don't know. That is the hardest part of all this, isn't it? Figuring out what you're going to do to make an actual positive difference in the world. I do feel like calling out the bad when I see it is a start (it's incrementally more than most seem to do, anyways), but I admit that it's ultimately pretty weak. So, you know, fuck you, but sincerely, thanks for asking.
• mst 16y ago
  Yes. Because there's no way to tell who's responsible and who isn't at that level with a sufficiently small expenditure on getting that information to make it profitable. If it was, somebody would have done that and competed the current payday loan market out of business already. You don't mean it's "somehow okay", you mean "it's somehow morally right". No, it isn't morally right. The world isn't fair. The world isn't kind. However, not having this form of credit available at all would be even more unpleasant for those who need it, so all things considered I'd rather these businesses exist than not. I still remember earning under-18 minimum wage and being happy if my disposable income after rent and food was $15 a week. In those situations, credit of any kind is far better than no credit at all - if the person in question considers the terms unacceptably usurious they always have the option of not taking those terms. All regulation would achieve is to eliminate such businesses - effectively the government taking that choice away because somehow allowing people to choose is not "somehow okay". It isn't fair. It isn't morally good. It isn't pleasant. But it is what it is. Welcome to reality - sometimes it really sucks.
  • abhijitr 16y ago
    Maybe it would be less unfair if the taxpayer bore the risk? Typically when private industry can't provide a service that is deemed good for society in a cost-effective manner, the government steps in to fill that gap. Why not in this case?
  • jfager 16y ago
    Because there's no way to tell who's responsible and who isn't at that level with a sufficiently small expenditure on getting that information to make it profitable. Then maybe the loan shouldn't be getting made. If an industry can't ethically do business, maybe it shouldn't exist. If there's a serious problem that industry is solving (and there is), then maybe it's time for society to step in. Welcome to reality - sometimes it really sucks. I'd like to think that drawing attention to suckage could result in people doing something to make it suck less. We don't have to blindly accept our current reality, we can work to change it.
• gojomo 16y ago
  If it's possible to distinguish, beforehand, the people who will pay, a lender could offer them a lower interest rate and still make higher profits. But if you're a priori indistinguishable from people who have a default rate, yes, you will pay more. You can't be given a retroactive discount any moreso than the defaulters can be retroactively denied their loan. Them's the breaks. Knowledge is imperfect; time does not run in reverse.
  • jfager 16y ago
    Payday loan companies do track who pays and who doesn't. If you sufficiently establish that you don't pay, you will get cut off (and head to the competitor down the road). If you establish that you do pay, by your reasoning, you would expect that your rate would go down. But that's just simply not the case in reality. One step would be mandating that payday loan makers actually report prompt payments to credit rating agencies, allowing someone to actually establish or repair a credit score, so that they can eventually step up into a credit card. Some places do this, but the majority don't, because it's not in their financial interest to do so - those are the people covering the no-fee, no credit-check teaser loans they're making to first time customers, and where any and all profit they do make comes from.
    • gojomo 16y ago
      Requiring reliable-payment reporting to outside agencies strikes me as a good, fair idea. But even that reform is double-edged: by cleaving away the clearly reliable it raises the effective rates for all those left behind at the worst categorization. And the repayment odds are unlikely to be binary, or stable: someone who repays one loan (but still looks like a defaulter in other respects) may be nearly as likely to default on a subsequent loan. A borrower may at some point even consider a default their 'due', if they look at all the fees they've paid. So the idea that one agency would just specialize in the 'hardest' cases, and never reclassify someone, may make good business sense without being irrational or malicious. The proper 'escape' is then going to another lender (or even better to stop borrowing), rather than renegotiating with a bottom-predator.
• Nate75Sanders 16y ago
  I think you should spend some time thinking about how insurance works.