8 ms·

Anytime I see people defend this kind of practice, the John Ruskin quote comes to mind: “The dullest of all excuses for usury is that some kind of good is done

by firasd 8y ago

Anytime I see people defend this kind of practice, the John Ruskin quote comes to mind: “The dullest of all excuses for usury is that some kind of good is done by the usurer.”

towelr34dy 8y ago
I've had to take out loans for my business that were at usury rate. It saved me. If it wasn't there, if it was regulated out of existence; I'd have gone to a shark. I was not going to let cash flow cause me failing. Having said that, I'm very happy there was a lender of last resort that won't break my legs. Despite them screwing me in fees. Honestly, I've never understood people who suffer from legislitis: They see a population suffering so bad they get desperate and do something bad to get relief from their suffering. The population that isn't suffering then decides that it's too horrible to watch the population that suffers do desperate bad things to get relief. So then they decide to: Ban the bad thing people do for relief when they are desperate. All while not ameliorating the suffering that cause the desperate bad relief efforts. Whether it's drugs, bad lending, prostitution, whatever. If someone is desperate enough to want to get into that, why make it harder? History has shown these consenting adults are going to do it in their private property (despite the horror of those who are well off enough to not feel desperate enough to engage in such situations) I mean, no where do they seem to be hinting at creating a government agency for lending of last resort. We already basically create money out of thin air. We COULD be lending it out at whatever usury rates, but by the government, and given equally to the whole population maybe? This could create a floor and a large enough competitor to drive the worst offenders out of business. I don't know. Just seems like there could be things done to help people. But the efforts seem focused on restricting people.
- dajohnson89 8y ago
  The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation. When I had my first real job out of college, I didn't manage my money well and ran out of cash well before my next payday. I went to a check-cashing type of place to try and get a payday loan, but the state had outlawed them a couple of years prior. Had I been granted a payday loan, there's a good chance I'd still be in a cycle of debt stemming from that.
  - robertAngst 8y ago
    I had to use it because tuition for school + new apartment rent was crazy, and I had just started my new salary job(1/mo payment). Fees arent bad if you have your shit together. But I did the math ahead of time.
  - towelr34dy 8y ago
    If you really ever needed money, you'd have gotten it. I grew up poor in the 3rd world. Loan sharks, prostitutes, druggies... that's part of life there. Honestly, your judging something from a certain position that's pretty obviously removed from ever really being needing money (in poor areas there are a options to get money, restricting those would be blessing to the illegal loan sharks that already operate in most desperate places) I have to say, if you really ever were in such a situation, you'd be advocating not for restrictions, but for options. Saying we should restrict it because it can be bad... well you should be arguing about restricting alcohol then... there are plenty of alcoholics. Maybe also restrict driving. And fatty foods. And salt. Maybe sugar? Keep at it. The critics are 100% right. Sorry to say, but it seems you are annoyed at the sneezing, not REALLY caring about the sick.
    - bilbo0s 8y ago
      >Loan sharks, prostitutes, druggies... that's part of life there... Just saying as someone who grew up poor here in the (???) "first world" (I guess?), those things are part of life here. And our police are generally very aggressive in reminding us that all of them are illegal. Payday loans are like the drug dealers. There really is no difference. They happily give you access to their product as long as you pay them, and then when you can't pay them, you're left in a worse situation than you were at the start. And worse, a lot of people start committing their own crimes to be able to afford those things again. Because they are hooked. (Actually, nowadays I guess with the drug of choice being opioids a lot of the people just overdose eventually and die so they never get to that point of committing other crimes to get the drugs. So maybe the loan sharking is not quite as bad as the drugs? But it's still pretty bad.)
      - 8y ago
- Arbalest 8y ago
  I'm sorry to dismiss this more or less out of hand, but this is a case of anecdotal evidence. Using your case to generalise to greater choice is falling victim to the assumption that all players are rational actors.
  - kortilla 8y ago
    >the assumption that all players are rational actors. A.k.a the assumption that people should have agency
    - kelnos 8y ago
      Not at all. Just because you have agency, it doesn't mean you'll wield it rationally, or even responsibly. And so you get the central question: in what cases should you protect people from themselves? It's a hard question to answer. Given that financial education in the US is nearly nonexistent, I would personally err on the side of protections in the financial sphere. Does that mean that some legitimate cases get denied? Probably. Is that a worse outcome? I don't know the answer to that.
      - towelr34dy 8y ago
        So by protection, you mean the bill as it was, that would 'remove pay day lending'. Maybe we'll copy what we did with drugs. Hmm... what guarantees mob option will stop existing? That's what's happened with drugs. Drugs are easily available. Or are you suggesting creating another lender of last resort? I'm sorry, I'm not sure your offering a solution. It seems what is offered is a blind restriction to satiate your own feelings of 'protecting others'. Like we've done with drugs. It doesn't work because it doesn't address the problem, just the symptom. It's arrogant and short sighted.
        kelnos 8y ago
        I wasn't coming down for or against the bill as-is at all; merely on the assertion about agency the parent commenter made. I suggest you calm your anger and finger pointing and avoid reading things that I did not write. I too agree that the War on Drugs is a boondoggle and has caused more harm and created more criminals (legitimate and otherwise) than we'd have without it. But I think we can agree that having a lot of people (for example) suffering and dying from opioid abuse isn't great either. Rehabilitation programs are the obvious answer, not just jailing people. Payday lending is a totally different beast. I'm not sure what a great solution might be. While it's physically safer to take a loan from a payday lender than from an illegal, shady, mob-run loan shark, payday lending can still be incredibly harmful. Outright banning probably isn't the answer, but allowing them to run as they have been isn't great either.
- SilasX 8y ago
  >I've had to take out loans for my business that were at usury rate. So has Google, when it started out. (Servers bought on the founder's overstretched credit cards.)
- m463 8y ago
  It would be more ethical on all sides if there were hard limits on the "usury rate". I think it was acceptable in the past when credit cards had a hard limit on the interest percentages (I recall maybe 12%?). I was kind of appalled when the percentages were relaxed years back and when 24% and 36% became possible, they were immediately the norm. Availability of capital is great, but not at the expense of perpetual indentured servitude.
  - dannypgh 8y ago
    In these products, the stated interest rate is often low, but when you factor in fees the effective interest rate is astronomical. Fees are also why payday loans can be attractive over real banks - a payday loan is likely cheaper than a checking account overdraft.
- quickben 8y ago
  >"I'm very happy there was a lender of last resort that won't break my legs" All of your support and encouragement of a superbly predatory practice comes from that line. You were happy that nobody broke your legs. Do compare that with the history of slavery, where outside of conquest, people became slaves because they couldn't fulfill their financial obligations. > "I mean, no where do they seem to be hinting at creating a government agency for lending of last resort" North Korea has a government agency that is a collector of debts of last resort. For the debtor, or their immediate or extended family, or friends.
  - towelr34dy 8y ago
    Ah the outrage mob. So tell me, oh wise one; how do you deal with people who need a lender of last resort? I mean, in your kind, humanitarian and knowledgeable opinion that takes into consideration the reality of people with cash flow issues?
    - quickben 8y ago
      The reality is that instead of people going to a public kitchen , or a shelter, they will get even more in the hole, financial and social. Why are you so interested in getting the vulnerable category even more indebted? >"oh wise one" You'll have a hard time in life with that attitude.
      - towelr34dy 8y ago
        Let me see if I understand: so when we ban pay day loans and all the loan sharks come out, this is the message you have for poor people: Don't take the loan shark desperate option, accept homelessness/bankruptcy instead of trying to stay afloat. Then you can try and work up from there because it is easier. I honestly can't believe you want to make the lender of last resort worse for poor people in an effort to get them to hit rock bottom so they can then climb. I might have had a hard time in life (I've actually taken out short term loans to stay afloat) and I might have an attitude from it, but I can tell you have little compassion for those who were in my situation; so you'll have to excuse the fact that this is personal. A 19 year old me would have been homeless with people like you. I actually am happy I wasn't. I'm happy there are 'exploitative capitalists' and not just 'warm hearted well wishers' up on high horses.
- jakelazaroff 8y ago
  > So then they decide to: Ban the bad thing people do for relief when they are desperate. All while not ameliorating the suffering that cause the desperate bad relief efforts. There's another option, of course: create regulations to limit only the harmful effects of the thing. It's not like there's some law of economics that says we can't find a way to make loans accessible to people who need money without also enabling predatory lending.
  - towelr34dy 8y ago
    Except... we have regulations. It's state by state. Meaning, the laws adapt to the needs of the people of each state. The new laws would have removed 90% of the industry, including my ability to have participated. I fully supported the limitation of debiting end user accounts, which was part of the legislation. I'm completely against the need to 'verify someone can pay'... which I read as basically requiring credit scores. Which again, don't really protect people as they have little to do with your ability to pay (just your previous history of payment) I'm seeing this as filled with details that need to be considered and making decisions to support or oppose based on that. But please, don't let details or getting to know what you are talking about get in the way of your decision to support something or not.
    - jakelazaroff 8y ago
      I wonder why payday loans are widely regarded as predatory if existing regulations are sufficient.
      - towelr34dy 8y ago
        Because they are. But that doesn't stop making them a service. Listen, if you could figure out how to charge even 40% yearly interest on a $100 one week loan (i.e. you'll make $0.7 gross) then you should do it and offer a better service. Restricting people from accessing the service because you read some outrage entertainment (the news) is not good. To be clear, that is what this law did. It's like lottery. It's basically a tax on the poor. I hate it. But if it was overly regulated, we'd see the numbers racket come up again. And personally, I prefer regulated markets over black markets. And to be clear; I think lottery should be further regulated by limiting advertising, and even creating an opt out system for problem gamblers. But if a legislation was passed that had those elements WITH elements that would drive the industry underground, I'd 100% be against it.
- ghufran_syed 8y ago
  Same, I think I wrote about this before on HN, but I once had my bank freeze the funds in my account, while driving across the country with my kids. We would have ended up sleeping in a park if we couldn't use a 24-hour pawn shop (yay Las Vegas!) with a super-high interest rate to get some cash overnight to pay for the hotel. We paid it back the next day, and we're still super grateful it was available. When you ban these things, you're imposing your value judgement on others, because you think you know better than "them poor folk". I am fine with some regulation to make it clear what the cost is, something like: "you are borrowing $100, if you pay it back in 1 month, you will have to pay back $130. If you pay it back in 2 months, touch will pay back a total of $170 etc. ..."
  - thaumaturgy 8y ago
    It is unbelievably arrogant of so many people to keep ascribing motivations to other folks they haven't even talked to. Hey, it's great that a pawn shop helped you out in your case, where you didn't have a credit card or apparently any other option. That doesn't even a little bit offset the predatory nature of payday loan outfits, and they are predatory. I have no problem with people who want to loan money to other people who have trouble getting loans. I do have a problem with turning it into a business practice that brazenly targets poorer communities and levies fees and interest rates that ensure that poor people stay poor. But, if it helps make this a more black-and-white issue in your mind, sure, keep believing that people like me are in favor of payday loan regulation just because of our moral superiority complex.
    - towelr34dy 8y ago
      Actually you are being viewed as arrogant not because you support the legislation. I support one part of the legislation (limiting debits to user accounts). I don't support another part of the legislation that would basically create a regulatory burden that would make payday lending more akin to credit cards. As a thinking person, I research what I support and don't. I look into whether what I support will actually help. This should apply doubly if I'm supporting congress to limit someone else's freedom to associate and engage in 'in state commerce'. I'm supporting something based on my own personal experience. Details matter. Let's not keep it at the level some people seem to not be able to get past: "pay day loan bad, people suffer, make illegal, people not suffer". This requires two assumptions: 1- all/the vast majority of pay day users are suffering because of they are stupid and NEED your smart help and 2: no one will offer pay day loans illegally and collect with a bat.
amvalo 8y ago
Not clear to me what that quote is saying. Doesn't that just encompass any possible excuse?
- firasd 8y ago
  He means that dressing it up as a virtue is worse than just admitting that you want to make a profit.
  - kortilla 8y ago
    Same thing could be said about people wanting to make a living as a professional doctor. It’s a pretty dumb quote.
pitaj 8y ago
Many people make use of payday loans. If you remove that option, those people aren't any better off. Restricting or prohibiting payday loans is politicians saying they can make better choices than the people they're claiming to help. Does it come from good intentions? Of course. But it's also fundamentally elitist.
- sangnoir 8y ago
  > Many people make use of payday loans. If you remove that option, those people aren't any better off. This is a false dichotomy - the options are wider than "unregulated lenders" and "non-existant lenders". Imagine saying in 1850: "Many 8 year olds work in coal mines. If you remove that option, those kids aren't any better off."
  - candiodari 8y ago
    They did not remove that option. They provided schools, as an option, without forcing people, then made them free (mostly because the church was out competing them, but ... it's not like that still matters). Kids were widely expected to work on the fields during school holidays as recently as the 70s. For that matter, ever notice how if you wanted your kid to work the fields, that school holidays sure have mighty convenient dates ? That's not a coincidence ... So they very much did not remove the option of having kids work in the coal mines and on the fields. Not for a LOOOONG time after the 1850s. https://en.wikipedia.org/wiki/Child_labor_laws_in_the_United_States https://en.wikipedia.org/wiki/Child_labor_laws_in_the_United... You could apply that here: the government could get into the payday lending business and enforce a maximum interest rate that way.
    - dsfyu404ed 8y ago
      >mostly because the church was out competing them, but ... it's not like that still matters I disagree that it does not still matter. For the past few centuries or so (depending on what country you're looking at) the church had the monopoly on morals and the state had the monopoly on violence. It seems to have in the last 100yr (in the US at least) the government, and to a lesser extent corporations, have replaced the church as the source of morals for a great deal of the population in Europe and North America. Public education is a great net good but we need to be careful with it because the line between education and indoctrination is a fine one. I think that the replacement of church provided education with public education poses a slow long term risk to secular societies. You do not want the entity that has a monopoly on violence also controlling education and with it morality. That's how you get the crusades, the USSR, etc. I'm not sure what the solution is. I don't think increased religion is it. FWIW I am not religious.
bko 8y ago
From another article: > A typical two-week payday loan comes with a $15 fee for every $100 borrowed and has an annual interest rate of nearly 400%, according to the CFPB. Over It's technically 400% APR, but its because the amount borrowed is very low. What should the rate be? 10% or ~$0.40 for the two week loan? There is a certain amount of overhead in processing a loan. Especially considering that the clientele often prefers a brick and mortar location and personalized service.
- hobs 8y ago
  Then they could offer a flat fee instead of an ever compounding one that is predatory to their clients (but they dont.)
  - pochamago 8y ago
    That sounds very preferable for me as a consumer, you should start a company and see if it keeps you in business
  - bko 8y ago
    It is a flat fee... $15 per two weeks
- clairity 8y ago
  > “amount borrowed is very low.... There is a certain amount of overhead in processing a loan.” this is the crux of the business challenge here, and it’s common for long-tail businesses like payday lending. fixed and marginal costs are high relative to marginal revenue and to loan amounts. but the social and ethical issue is rooted in bias and discrimination mediated through the credit bureaus who have a poor track record with low-information and/or highly-dynamic credit landscapes. they apply a static model that works fine for the affluent while shutting out the poor. payday lenders transfer default risk to borrowers through high fees rather than relying on imperfect creditworthiness models applied to borrowers that often have little credit history or bad credit from difficult life circumstances. in that situation, is it possible to create credit models that better predict default risk based on information available in our interconnected age? some startups tried using social media data for this, but none seem to have emerged victorious.
golergka 8y ago
Freedom is nothing without freedom to make mistakes.
- analog31 8y ago
  Oddly enough, people who are more successful, tend to have more of a safety net that protects them from the worst mistakes. They do have more freedom, usually provided by their parents. De-criminalizing financial mistakes is one of the great breakthroughs of modern society.
bedhead 8y ago
If it is so awful, why do so many people use it? Most critics don't understand the depressing reality that payday lenders are often better than the alternative. I would also point out that the companies vary in profitability, and they're not particularly good businesses. Default rates are so high that the lenders often generate returns on equity below many regular banks, or just on par.
- deleted 8y ago
  [deleted]
Spooky23 8y ago
Well get ready. A platoon of John Galts are on the way with lots of dull excuses.
pps43 8y ago
There is a good reason why payday loan rate is so high: the loss rate is also high. Otherwise competition would drive the rates down, just like with mortgages or credit cards. This has nothing to do with morals, it's just economics.

by firasd 8y ago

Anytime I see people defend this kind of practice, the John Ruskin quote comes to mind: “The dullest of all excuses for usury is that some kind of good is done by the usurer.”

towelr34dy 8y ago

I've had to take out loans for my business that were at usury rate. It saved me. If it wasn't there, if it was regulated out of existence; I'd have gone to a shark. I was not going to let cash flow cause me failing. Having said that, I'm very happy there was a lender of last resort that won't break my legs. Despite them screwing me in fees. Honestly, I've never understood people who suffer from legislitis: They see a population suffering so bad they get desperate and do something bad to get relief from their suffering. The population that isn't suffering then decides that it's too horrible to watch the population that suffers do desperate bad things to get relief. So then they decide to: Ban the bad thing people do for relief when they are desperate. All while not ameliorating the suffering that cause the desperate bad relief efforts. Whether it's drugs, bad lending, prostitution, whatever. If someone is desperate enough to want to get into that, why make it harder? History has shown these consenting adults are going to do it in their private property (despite the horror of those who are well off enough to not feel desperate enough to engage in such situations) I mean, no where do they seem to be hinting at creating a government agency for lending of last resort. We already basically create money out of thin air. We COULD be lending it out at whatever usury rates, but by the government, and given equally to the whole population maybe? This could create a floor and a large enough competitor to drive the worst offenders out of business. I don't know. Just seems like there could be things done to help people. But the efforts seem focused on restricting people.

dajohnson89 8y ago
The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation. When I had my first real job out of college, I didn't manage my money well and ran out of cash well before my next payday. I went to a check-cashing type of place to try and get a payday loan, but the state had outlawed them a couple of years prior. Had I been granted a payday loan, there's a good chance I'd still be in a cycle of debt stemming from that.
- robertAngst 8y ago
  I had to use it because tuition for school + new apartment rent was crazy, and I had just started my new salary job(1/mo payment). Fees arent bad if you have your shit together. But I did the math ahead of time.
- towelr34dy 8y ago
  If you really ever needed money, you'd have gotten it. I grew up poor in the 3rd world. Loan sharks, prostitutes, druggies... that's part of life there. Honestly, your judging something from a certain position that's pretty obviously removed from ever really being needing money (in poor areas there are a options to get money, restricting those would be blessing to the illegal loan sharks that already operate in most desperate places) I have to say, if you really ever were in such a situation, you'd be advocating not for restrictions, but for options. Saying we should restrict it because it can be bad... well you should be arguing about restricting alcohol then... there are plenty of alcoholics. Maybe also restrict driving. And fatty foods. And salt. Maybe sugar? Keep at it. The critics are 100% right. Sorry to say, but it seems you are annoyed at the sneezing, not REALLY caring about the sick.
  - bilbo0s 8y ago
    >Loan sharks, prostitutes, druggies... that's part of life there... Just saying as someone who grew up poor here in the (???) "first world" (I guess?), those things are part of life here. And our police are generally very aggressive in reminding us that all of them are illegal. Payday loans are like the drug dealers. There really is no difference. They happily give you access to their product as long as you pay them, and then when you can't pay them, you're left in a worse situation than you were at the start. And worse, a lot of people start committing their own crimes to be able to afford those things again. Because they are hooked. (Actually, nowadays I guess with the drug of choice being opioids a lot of the people just overdose eventually and die so they never get to that point of committing other crimes to get the drugs. So maybe the loan sharking is not quite as bad as the drugs? But it's still pretty bad.)
    - 8y ago
Arbalest 8y ago
I'm sorry to dismiss this more or less out of hand, but this is a case of anecdotal evidence. Using your case to generalise to greater choice is falling victim to the assumption that all players are rational actors.
- kortilla 8y ago
  >the assumption that all players are rational actors. A.k.a the assumption that people should have agency
  - kelnos 8y ago
    Not at all. Just because you have agency, it doesn't mean you'll wield it rationally, or even responsibly. And so you get the central question: in what cases should you protect people from themselves? It's a hard question to answer. Given that financial education in the US is nearly nonexistent, I would personally err on the side of protections in the financial sphere. Does that mean that some legitimate cases get denied? Probably. Is that a worse outcome? I don't know the answer to that.
    - towelr34dy 8y ago
      So by protection, you mean the bill as it was, that would 'remove pay day lending'. Maybe we'll copy what we did with drugs. Hmm... what guarantees mob option will stop existing? That's what's happened with drugs. Drugs are easily available. Or are you suggesting creating another lender of last resort? I'm sorry, I'm not sure your offering a solution. It seems what is offered is a blind restriction to satiate your own feelings of 'protecting others'. Like we've done with drugs. It doesn't work because it doesn't address the problem, just the symptom. It's arrogant and short sighted.
      - kelnos 8y ago
        I wasn't coming down for or against the bill as-is at all; merely on the assertion about agency the parent commenter made. I suggest you calm your anger and finger pointing and avoid reading things that I did not write. I too agree that the War on Drugs is a boondoggle and has caused more harm and created more criminals (legitimate and otherwise) than we'd have without it. But I think we can agree that having a lot of people (for example) suffering and dying from opioid abuse isn't great either. Rehabilitation programs are the obvious answer, not just jailing people. Payday lending is a totally different beast. I'm not sure what a great solution might be. While it's physically safer to take a loan from a payday lender than from an illegal, shady, mob-run loan shark, payday lending can still be incredibly harmful. Outright banning probably isn't the answer, but allowing them to run as they have been isn't great either.
SilasX 8y ago
>I've had to take out loans for my business that were at usury rate. So has Google, when it started out. (Servers bought on the founder's overstretched credit cards.)
m463 8y ago
It would be more ethical on all sides if there were hard limits on the "usury rate". I think it was acceptable in the past when credit cards had a hard limit on the interest percentages (I recall maybe 12%?). I was kind of appalled when the percentages were relaxed years back and when 24% and 36% became possible, they were immediately the norm. Availability of capital is great, but not at the expense of perpetual indentured servitude.
- dannypgh 8y ago
  In these products, the stated interest rate is often low, but when you factor in fees the effective interest rate is astronomical. Fees are also why payday loans can be attractive over real banks - a payday loan is likely cheaper than a checking account overdraft.
quickben 8y ago
>"I'm very happy there was a lender of last resort that won't break my legs" All of your support and encouragement of a superbly predatory practice comes from that line. You were happy that nobody broke your legs. Do compare that with the history of slavery, where outside of conquest, people became slaves because they couldn't fulfill their financial obligations. > "I mean, no where do they seem to be hinting at creating a government agency for lending of last resort" North Korea has a government agency that is a collector of debts of last resort. For the debtor, or their immediate or extended family, or friends.
- towelr34dy 8y ago
  Ah the outrage mob. So tell me, oh wise one; how do you deal with people who need a lender of last resort? I mean, in your kind, humanitarian and knowledgeable opinion that takes into consideration the reality of people with cash flow issues?
  - quickben 8y ago
    The reality is that instead of people going to a public kitchen , or a shelter, they will get even more in the hole, financial and social. Why are you so interested in getting the vulnerable category even more indebted? >"oh wise one" You'll have a hard time in life with that attitude.
    - towelr34dy 8y ago
      Let me see if I understand: so when we ban pay day loans and all the loan sharks come out, this is the message you have for poor people: Don't take the loan shark desperate option, accept homelessness/bankruptcy instead of trying to stay afloat. Then you can try and work up from there because it is easier. I honestly can't believe you want to make the lender of last resort worse for poor people in an effort to get them to hit rock bottom so they can then climb. I might have had a hard time in life (I've actually taken out short term loans to stay afloat) and I might have an attitude from it, but I can tell you have little compassion for those who were in my situation; so you'll have to excuse the fact that this is personal. A 19 year old me would have been homeless with people like you. I actually am happy I wasn't. I'm happy there are 'exploitative capitalists' and not just 'warm hearted well wishers' up on high horses.
jakelazaroff 8y ago
> So then they decide to: Ban the bad thing people do for relief when they are desperate. All while not ameliorating the suffering that cause the desperate bad relief efforts. There's another option, of course: create regulations to limit only the harmful effects of the thing. It's not like there's some law of economics that says we can't find a way to make loans accessible to people who need money without also enabling predatory lending.
- towelr34dy 8y ago
  Except... we have regulations. It's state by state. Meaning, the laws adapt to the needs of the people of each state. The new laws would have removed 90% of the industry, including my ability to have participated. I fully supported the limitation of debiting end user accounts, which was part of the legislation. I'm completely against the need to 'verify someone can pay'... which I read as basically requiring credit scores. Which again, don't really protect people as they have little to do with your ability to pay (just your previous history of payment) I'm seeing this as filled with details that need to be considered and making decisions to support or oppose based on that. But please, don't let details or getting to know what you are talking about get in the way of your decision to support something or not.
  - jakelazaroff 8y ago
    I wonder why payday loans are widely regarded as predatory if existing regulations are sufficient.
    - towelr34dy 8y ago
      Because they are. But that doesn't stop making them a service. Listen, if you could figure out how to charge even 40% yearly interest on a $100 one week loan (i.e. you'll make $0.7 gross) then you should do it and offer a better service. Restricting people from accessing the service because you read some outrage entertainment (the news) is not good. To be clear, that is what this law did. It's like lottery. It's basically a tax on the poor. I hate it. But if it was overly regulated, we'd see the numbers racket come up again. And personally, I prefer regulated markets over black markets. And to be clear; I think lottery should be further regulated by limiting advertising, and even creating an opt out system for problem gamblers. But if a legislation was passed that had those elements WITH elements that would drive the industry underground, I'd 100% be against it.
ghufran_syed 8y ago
Same, I think I wrote about this before on HN, but I once had my bank freeze the funds in my account, while driving across the country with my kids. We would have ended up sleeping in a park if we couldn't use a 24-hour pawn shop (yay Las Vegas!) with a super-high interest rate to get some cash overnight to pay for the hotel. We paid it back the next day, and we're still super grateful it was available. When you ban these things, you're imposing your value judgement on others, because you think you know better than "them poor folk". I am fine with some regulation to make it clear what the cost is, something like: "you are borrowing $100, if you pay it back in 1 month, you will have to pay back $130. If you pay it back in 2 months, touch will pay back a total of $170 etc. ..."
- thaumaturgy 8y ago
  It is unbelievably arrogant of so many people to keep ascribing motivations to other folks they haven't even talked to. Hey, it's great that a pawn shop helped you out in your case, where you didn't have a credit card or apparently any other option. That doesn't even a little bit offset the predatory nature of payday loan outfits, and they are predatory. I have no problem with people who want to loan money to other people who have trouble getting loans. I do have a problem with turning it into a business practice that brazenly targets poorer communities and levies fees and interest rates that ensure that poor people stay poor. But, if it helps make this a more black-and-white issue in your mind, sure, keep believing that people like me are in favor of payday loan regulation just because of our moral superiority complex.
  - towelr34dy 8y ago
    Actually you are being viewed as arrogant not because you support the legislation. I support one part of the legislation (limiting debits to user accounts). I don't support another part of the legislation that would basically create a regulatory burden that would make payday lending more akin to credit cards. As a thinking person, I research what I support and don't. I look into whether what I support will actually help. This should apply doubly if I'm supporting congress to limit someone else's freedom to associate and engage in 'in state commerce'. I'm supporting something based on my own personal experience. Details matter. Let's not keep it at the level some people seem to not be able to get past: "pay day loan bad, people suffer, make illegal, people not suffer". This requires two assumptions: 1- all/the vast majority of pay day users are suffering because of they are stupid and NEED your smart help and 2: no one will offer pay day loans illegally and collect with a bat.

amvalo 8y ago

Not clear to me what that quote is saying. Doesn't that just encompass any possible excuse?

firasd 8y ago
He means that dressing it up as a virtue is worse than just admitting that you want to make a profit.
- kortilla 8y ago
  Same thing could be said about people wanting to make a living as a professional doctor. It’s a pretty dumb quote.

pitaj 8y ago

Many people make use of payday loans. If you remove that option, those people aren't any better off. Restricting or prohibiting payday loans is politicians saying they can make better choices than the people they're claiming to help. Does it come from good intentions? Of course. But it's also fundamentally elitist.

sangnoir 8y ago
> Many people make use of payday loans. If you remove that option, those people aren't any better off. This is a false dichotomy - the options are wider than "unregulated lenders" and "non-existant lenders". Imagine saying in 1850: "Many 8 year olds work in coal mines. If you remove that option, those kids aren't any better off."
- candiodari 8y ago
  They did not remove that option. They provided schools, as an option, without forcing people, then made them free (mostly because the church was out competing them, but ... it's not like that still matters). Kids were widely expected to work on the fields during school holidays as recently as the 70s. For that matter, ever notice how if you wanted your kid to work the fields, that school holidays sure have mighty convenient dates ? That's not a coincidence ... So they very much did not remove the option of having kids work in the coal mines and on the fields. Not for a LOOOONG time after the 1850s. https://en.wikipedia.org/wiki/Child_labor_laws_in_the_United_States https://en.wikipedia.org/wiki/Child_labor_laws_in_the_United... You could apply that here: the government could get into the payday lending business and enforce a maximum interest rate that way.
  - dsfyu404ed 8y ago
    >mostly because the church was out competing them, but ... it's not like that still matters I disagree that it does not still matter. For the past few centuries or so (depending on what country you're looking at) the church had the monopoly on morals and the state had the monopoly on violence. It seems to have in the last 100yr (in the US at least) the government, and to a lesser extent corporations, have replaced the church as the source of morals for a great deal of the population in Europe and North America. Public education is a great net good but we need to be careful with it because the line between education and indoctrination is a fine one. I think that the replacement of church provided education with public education poses a slow long term risk to secular societies. You do not want the entity that has a monopoly on violence also controlling education and with it morality. That's how you get the crusades, the USSR, etc. I'm not sure what the solution is. I don't think increased religion is it. FWIW I am not religious.

bko 8y ago

From another article: > A typical two-week payday loan comes with a $15 fee for every $100 borrowed and has an annual interest rate of nearly 400%, according to the CFPB. Over It's technically 400% APR, but its because the amount borrowed is very low. What should the rate be? 10% or ~$0.40 for the two week loan? There is a certain amount of overhead in processing a loan. Especially considering that the clientele often prefers a brick and mortar location and personalized service.

hobs 8y ago
Then they could offer a flat fee instead of an ever compounding one that is predatory to their clients (but they dont.)
- pochamago 8y ago
  That sounds very preferable for me as a consumer, you should start a company and see if it keeps you in business
- bko 8y ago
  It is a flat fee... $15 per two weeks
clairity 8y ago
> “amount borrowed is very low.... There is a certain amount of overhead in processing a loan.” this is the crux of the business challenge here, and it’s common for long-tail businesses like payday lending. fixed and marginal costs are high relative to marginal revenue and to loan amounts. but the social and ethical issue is rooted in bias and discrimination mediated through the credit bureaus who have a poor track record with low-information and/or highly-dynamic credit landscapes. they apply a static model that works fine for the affluent while shutting out the poor. payday lenders transfer default risk to borrowers through high fees rather than relying on imperfect creditworthiness models applied to borrowers that often have little credit history or bad credit from difficult life circumstances. in that situation, is it possible to create credit models that better predict default risk based on information available in our interconnected age? some startups tried using social media data for this, but none seem to have emerged victorious.

golergka 8y ago

Freedom is nothing without freedom to make mistakes.

analog31 8y ago
Oddly enough, people who are more successful, tend to have more of a safety net that protects them from the worst mistakes. They do have more freedom, usually provided by their parents. De-criminalizing financial mistakes is one of the great breakthroughs of modern society.

bedhead 8y ago

If it is so awful, why do so many people use it? Most critics don't understand the depressing reality that payday lenders are often better than the alternative. I would also point out that the companies vary in profitability, and they're not particularly good businesses. Default rates are so high that the lenders often generate returns on equity below many regular banks, or just on par.

deleted 8y ago
[deleted]

Spooky23 8y ago

Well get ready. A platoon of John Galts are on the way with lots of dull excuses.

pps43 8y ago

There is a good reason why payday loan rate is so high: the loss rate is also high. Otherwise competition would drive the rates down, just like with mortgages or credit cards. This has nothing to do with morals, it's just economics.