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Adding regulation without forbidding payday loans sounds to me like the worst thing you can do. In emergency situations, it can be perfectly rational to take ou

Adding regulation without forbidding payday loans sounds to me like the worst thing you can do. In emergency situations, it can be perfectly rational to take out such a loan, despite high interests and fees. On the other hand, if you take a payday loan for an unneeded expenditure, you will have even less money in the long term. So either you get rid of the regulation, in order to lower the fees. Or you forbid payday loans outright, to prevent people from hurting themselves (while ignoring the needs of those who are in an emergency situation). I don't think there is any real middle ground. Everybody loses when you do something that increases fees without actually helping those who are affected by this.

mikeash 8y ago
Why would removing regulation reduce fees, and why would adding regulation increase them?
- tjansen 8y ago
  Because compliance with regulation requires additional work and thus costs money. As every payday lender has to do this, they will raise their fees.
  - mikeash 8y ago
    Obvious counterpoint: regulations which cap fees below the current level.
    - tjansen 8y ago
      That's not the kind regulation the article is mentioning. But generally, the effect of limiting the fees in a working market (and there is no indication here that the market isn't working in this particular segment) would be that it either has no effect, if the fees are already lower, or it de-facto outlaws payday loans.
- leetcrew 8y ago
  complying with regulations costs money. obviously if you are exploiting people in a way that becomes illegal, you have to stop doing that profitable thing. this is probably not bad. however, even if your business is already compliant with the new regulations, you still still have to pay someone to understand the new rules and confirm that you are not breaking them. as regulations grow in number and complexity, you have to spend more money just to know whether you are complying with them. removing regulations may not reduce fees, but adding new ones will almost certainly increase them, since they necessarily increase the overhead for the business.
  - mikeash 8y ago
    I understand how regulations increase costs. But increased costs can be recovered from in increased prices, decreased profits, or increased volume. I don’t see why it necessarily must be the first one, especially when these regulations often put a cap on fees.
u10 8y ago
73 dollars in interest/fees for a 30 day, 300 dollar loan doesn't sound like much, but it works out to approx. a 296% APR. This isn't about fees, it's about usurious behaviour.

mikeash 8y ago

Why would removing regulation reduce fees, and why would adding regulation increase them?

tjansen 8y ago
Because compliance with regulation requires additional work and thus costs money. As every payday lender has to do this, they will raise their fees.
- mikeash 8y ago
  Obvious counterpoint: regulations which cap fees below the current level.
  - tjansen 8y ago
    That's not the kind regulation the article is mentioning. But generally, the effect of limiting the fees in a working market (and there is no indication here that the market isn't working in this particular segment) would be that it either has no effect, if the fees are already lower, or it de-facto outlaws payday loans.
leetcrew 8y ago
complying with regulations costs money. obviously if you are exploiting people in a way that becomes illegal, you have to stop doing that profitable thing. this is probably not bad. however, even if your business is already compliant with the new regulations, you still still have to pay someone to understand the new rules and confirm that you are not breaking them. as regulations grow in number and complexity, you have to spend more money just to know whether you are complying with them. removing regulations may not reduce fees, but adding new ones will almost certainly increase them, since they necessarily increase the overhead for the business.
- mikeash 8y ago
  I understand how regulations increase costs. But increased costs can be recovered from in increased prices, decreased profits, or increased volume. I don’t see why it necessarily must be the first one, especially when these regulations often put a cap on fees.

u10 8y ago

73 dollars in interest/fees for a 30 day, 300 dollar loan doesn't sound like much, but it works out to approx. a 296% APR. This isn't about fees, it's about usurious behaviour.