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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 dow
by 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 agoRequiring 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.