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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 b

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.

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.