4 ms·

Payday loans are some of the things that the unbanked turn to. Using a payday loan shark does not make one banked.

shhehebehdh 8y ago
Your use of the term “loan shark” actually brings up an interesting question in my mind. I assume that some fraction of the people that would have otherwise gotten a payday loan will go to the black market. Do we know anything about these people and how numerous they are? Not saying that we should therefore allow paydays. Just curious about what the situation is.
patio11 8y ago
Payday loans structurally require you to be banked. The offering is "I will advance you $400 in cash today for a $415 check dated in a week. You can come back and buy your check back for $415. If you do not, I will deposit it." The security here _is the check drawn on your checking account_; without that the payday loan has markedly higher collection costs and markedly lower probability of collection. Also, they use the fact of writing a check to (in some jurisdictions) gain legal leverage that they would not otherwise have access to, because making someone a promise to pay and failing to follow through with it is generally under the notice of criminal law, but (in some jurisdictions) writing a check which one knows to be unbacked by funds is a criminal offense.
- carbocation 8y ago
  I am not at all an expert in this field, and this kind of topic seems closer to things you've thought about for years. But, I was under the impression that people who use payday loans and have bank accounts are considered "underbanked," while those who truly have no bank accounts are considered the "unbanked." Maybe the distinction doesn't matter that much. In truth, I don't know enough to have a strong opinion.
- juliusmusseau 8y ago
  I don't think they take cheques anymore. At least not in Canada? When I took out a payday loan they made me sign a PAD authorization (pre-authorized debit) that was timed to hit my account the same day as my next payroll. They also needed my last bank statement so they could 1.) verify my payroll was through direct deposit, and 2.) help them estimate the right date for their PAD. In other words: yup! You must be banked!

Your use of the term “loan shark” actually brings up an interesting question in my mind. I assume that some fraction of the people that would have otherwise gotten a payday loan will go to the black market. Do we know anything about these people and how numerous they are? Not saying that we should therefore allow paydays. Just curious about what the situation is.

patio11 8y ago

Payday loans structurally require you to be banked. The offering is "I will advance you $400 in cash today for a $415 check dated in a week. You can come back and buy your check back for $415. If you do not, I will deposit it." The security here _is the check drawn on your checking account_; without that the payday loan has markedly higher collection costs and markedly lower probability of collection. Also, they use the fact of writing a check to (in some jurisdictions) gain legal leverage that they would not otherwise have access to, because making someone a promise to pay and failing to follow through with it is generally under the notice of criminal law, but (in some jurisdictions) writing a check which one knows to be unbacked by funds is a criminal offense.

carbocation 8y ago
I am not at all an expert in this field, and this kind of topic seems closer to things you've thought about for years. But, I was under the impression that people who use payday loans and have bank accounts are considered "underbanked," while those who truly have no bank accounts are considered the "unbanked." Maybe the distinction doesn't matter that much. In truth, I don't know enough to have a strong opinion.
juliusmusseau 8y ago
I don't think they take cheques anymore. At least not in Canada? When I took out a payday loan they made me sign a PAD authorization (pre-authorized debit) that was timed to hit my account the same day as my next payroll. They also needed my last bank statement so they could 1.) verify my payroll was through direct deposit, and 2.) help them estimate the right date for their PAD. In other words: yup! You must be banked!