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"stop payday lending" Have you asked any poor people about that? Because getting rid of payday lending just leaves people with worse options or no options at a

"stop payday lending" Have you asked any poor people about that? Because getting rid of payday lending just leaves people with worse options or no options at all.

octonion 8y ago
Do you actually know what payday lending is and what the lending rates are like? They're designed to trap people in an endless cycle of high-interest debtorship.
- peterhadlaw 8y ago
  Yeah if you look at APRs, except what the anointed don't want you to know is that these loans are very short term, not lasting years. This is a choice you're advocating to remove from people experiencing hardships you will never understand. The reason the interest is so high is that these are high risk and high necessity markets.
  - nsp 8y ago
    But the loans are designed and in 80% of cases rolled over into a sequence of short term loans, meaning that looking at the APR is not as unreasonable as it might sound for a 2 week loan. Source: CFPB study: https://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf https://files.consumerfinance.gov/f/201403_cfpb_report_payda... Personal experience: I've taken out payday loans they definitely tried to steer me into rolling them over
  - axaxs 8y ago
    If the interest were so high just to counterbalance the 'high risk', then lenders wouldn't be profiting the billions of dollars they are off of them. Why not just cap the APR at something less exploitative?
  - blackflame7000 8y ago
    The thing is that most people who take a payday loan do so because of an emergency need such as a doctor bill, car repair, or rent shortfall. Then they are stuck because suddenly next months pay is already being spent today and its more expensive. About 85% of the traffic is repeat customers from what I observed when I built the online systems that would process these applications
  - JackFr 8y ago
    The two week loan typically gets rolled multiple times, and on average end up as as in the 60 to 90 day range. Payday lenders -- because of their nearly limitless willingness to roll loans -- face default rates of around 6 percent, similar to those of credit cards. You have no idea what hardships I've faced, what my personal experience with the payday loans is or what my professional level of understanding about the industry is, so I'd prefer you not lecture me about what I will and won't understand. You can make usurious loans if you like, but don't use our courts to collect. We don't want to be part of it.
- intuitionist 8y ago
  Do you actually know what default rates are like for people without access to better sources of credit? The interest rates are so high because that's the only way payday lenders can make money. In states with usury laws that prohibit such high interest rates, you don't see lenders lowering their rates; you see credit for poor people dry up completely. Liz Warren does have a good solution to this, namely postal banking. (The US government can swing the losses incurred from lending small sums to high credit risks at low rates.) But just killing the payday lenders without setting up an alternative is not a good idea.
JackFr 8y ago
I'm not naive. I understand the difficulties of unsecured consumer loans to the poorest borrowers. As a society though, there are contracts which are unconscionable and these should not be enforceable by law. A lender who typically faces default rates of less than 10% while charging APR's greater than 400%, in my view should not get to use the full force of law to enforce their collections.
- Matticus_Rex 8y ago
  I'm a member of society (with a law degree) and think these are absolutely conscionable and in many circumstances (some of which I've been in), are absolutely beneficial. Looking at the APR on a very short-term loan for a very small amount is missing the forest and the trees for the crack in your glasses. If you think these loans can be provided at a significantly lower rate, then you've obviously got a huge market opportunity in front of you, and should pursue it. Otherwise, you're advocating for removing what is often the best option in unfortunate circumstances.
  - ABCLAW 8y ago
    I think it's patently obvious that these services rely on unconscionable contracts - they are literally premised upon financial coercion. However, litigation on the basis of unconscionability is unlikely to be successful due to market realities in the legal field. Payday loans offer financially distressed individuals a method of accessing financing, despite their risk profile. This is laudable. However, most studies on the matter produce voluminous reams of data regarding the debt-trap the industry creates. Ultimately, the public ends up shouldering a lot of externalities created by this loop. Can we achieve the beneficial results while attenuating the magnitude of the wealth transfer from the poor and from taxpayers to the creditors in this instance? It seems we can - there are other models used in the development world for delivering micro-loans which work better. But could they outcompete the margins generated by debt traps? Unlikely. Another avenue is to regulate the industry - which we already do. The Truth in Lending Act arose partially as a result of people being lied to about the contents of their credit agreements. We could create a schedule of fees for advanced amounts, allow for applications for non-scheduled fees on the basis of exceptional Opex or Capex requirements to serve a given community, etc with supporting margin calculations. This isn't hard - we already do far more complicated work in setting acceptable profit margins in construction, utilities, telecom, etc. Are these solutions perfect? No. But are they better than the status quo? It would appear so. That's why we've migrated off the payday loan model for producing beneficial results in areas where the profit motive isn't the driver of service growth.
wnevets 8y ago
perhaps we should have a larger safety net instead?
- Matticus_Rex 8y ago
  Then go after payday lending by getting a bigger safety net, which undermines their customer base. "We need a bigger safety net, therefore we should ban one of the things that helps people in its absence" is not a coherent position.

"stop payday lending" Have you asked any poor people about that? Because getting rid of payday lending just leaves people with worse options or no options at all.

octonion 8y ago

Do you actually know what payday lending is and what the lending rates are like? They're designed to trap people in an endless cycle of high-interest debtorship.

peterhadlaw 8y ago
Yeah if you look at APRs, except what the anointed don't want you to know is that these loans are very short term, not lasting years. This is a choice you're advocating to remove from people experiencing hardships you will never understand. The reason the interest is so high is that these are high risk and high necessity markets.
- nsp 8y ago
  But the loans are designed and in 80% of cases rolled over into a sequence of short term loans, meaning that looking at the APR is not as unreasonable as it might sound for a 2 week loan. Source: CFPB study: https://files.consumerfinance.gov/f/201403_cfpb_report_payday-lending.pdf https://files.consumerfinance.gov/f/201403_cfpb_report_payda... Personal experience: I've taken out payday loans they definitely tried to steer me into rolling them over
- axaxs 8y ago
  If the interest were so high just to counterbalance the 'high risk', then lenders wouldn't be profiting the billions of dollars they are off of them. Why not just cap the APR at something less exploitative?
- blackflame7000 8y ago
  The thing is that most people who take a payday loan do so because of an emergency need such as a doctor bill, car repair, or rent shortfall. Then they are stuck because suddenly next months pay is already being spent today and its more expensive. About 85% of the traffic is repeat customers from what I observed when I built the online systems that would process these applications
- JackFr 8y ago
  The two week loan typically gets rolled multiple times, and on average end up as as in the 60 to 90 day range. Payday lenders -- because of their nearly limitless willingness to roll loans -- face default rates of around 6 percent, similar to those of credit cards. You have no idea what hardships I've faced, what my personal experience with the payday loans is or what my professional level of understanding about the industry is, so I'd prefer you not lecture me about what I will and won't understand. You can make usurious loans if you like, but don't use our courts to collect. We don't want to be part of it.
intuitionist 8y ago
Do you actually know what default rates are like for people without access to better sources of credit? The interest rates are so high because that's the only way payday lenders can make money. In states with usury laws that prohibit such high interest rates, you don't see lenders lowering their rates; you see credit for poor people dry up completely. Liz Warren does have a good solution to this, namely postal banking. (The US government can swing the losses incurred from lending small sums to high credit risks at low rates.) But just killing the payday lenders without setting up an alternative is not a good idea.

JackFr 8y ago

I'm not naive. I understand the difficulties of unsecured consumer loans to the poorest borrowers. As a society though, there are contracts which are unconscionable and these should not be enforceable by law. A lender who typically faces default rates of less than 10% while charging APR's greater than 400%, in my view should not get to use the full force of law to enforce their collections.

Matticus_Rex 8y ago
I'm a member of society (with a law degree) and think these are absolutely conscionable and in many circumstances (some of which I've been in), are absolutely beneficial. Looking at the APR on a very short-term loan for a very small amount is missing the forest and the trees for the crack in your glasses. If you think these loans can be provided at a significantly lower rate, then you've obviously got a huge market opportunity in front of you, and should pursue it. Otherwise, you're advocating for removing what is often the best option in unfortunate circumstances.
- ABCLAW 8y ago
  I think it's patently obvious that these services rely on unconscionable contracts - they are literally premised upon financial coercion. However, litigation on the basis of unconscionability is unlikely to be successful due to market realities in the legal field. Payday loans offer financially distressed individuals a method of accessing financing, despite their risk profile. This is laudable. However, most studies on the matter produce voluminous reams of data regarding the debt-trap the industry creates. Ultimately, the public ends up shouldering a lot of externalities created by this loop. Can we achieve the beneficial results while attenuating the magnitude of the wealth transfer from the poor and from taxpayers to the creditors in this instance? It seems we can - there are other models used in the development world for delivering micro-loans which work better. But could they outcompete the margins generated by debt traps? Unlikely. Another avenue is to regulate the industry - which we already do. The Truth in Lending Act arose partially as a result of people being lied to about the contents of their credit agreements. We could create a schedule of fees for advanced amounts, allow for applications for non-scheduled fees on the basis of exceptional Opex or Capex requirements to serve a given community, etc with supporting margin calculations. This isn't hard - we already do far more complicated work in setting acceptable profit margins in construction, utilities, telecom, etc. Are these solutions perfect? No. But are they better than the status quo? It would appear so. That's why we've migrated off the payday loan model for producing beneficial results in areas where the profit motive isn't the driver of service growth.

wnevets 8y ago

perhaps we should have a larger safety net instead?

Matticus_Rex 8y ago
Then go after payday lending by getting a bigger safety net, which undermines their customer base. "We need a bigger safety net, therefore we should ban one of the things that helps people in its absence" is not a coherent position.