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It's easy to call this kind of lending predatory, but when you leave the problem of poverty to private businesses to solve you end up with high-interest loans a

It's easy to call this kind of lending predatory, but when you leave the problem of poverty to private businesses to solve you end up with high-interest loans and payday loans. If the government banned this kind of lending and didn't provide an alternative, poor people would have no lending options. Regulating this kind of lending (e.g. by tightening the already regulated limits on interest rates) can only go so far before the products become unprofitable and will be discontinued. There is not a market solution for this.

faissaloo 7y ago
In a world without interest the poor seldom need loans.
- xhkkffbf 7y ago
  That's not really so. If you have a bunch of bad luck in one month, you sometimes need a line of credit to get to the next. Did you have a flat tire? Did the baby need three trips to the doctor because of croup? Banks exist to make our life better when we need extra spending cash. If we ban lending to the poor than it will be one more thing that only the rich will have. I agree that the lending rates are insanely high, but that's largely because of defaults. The rates for secured goods (car, house) are insanely low, even when the defaults are taken into account. Car loans from credit unions are below 2% because they're secured. The real problem is that the easiest way to cure defaults is to start saying "No" more often. But no one likes to be told "no" and that's unpopular too.
  - boring_twenties 7y ago
    Uh, car loans are below 2% only for people like you and me with excellent credit scores. "The other half" can only get financing directly from shady used car lots, where good luck even getting them to tell you the interest rate (or the purchase price) -- they focus instead on the monthly payment (and try to downplay the fact that it's for 72 months).
    - xhkkffbf 7y ago
      Yes, they are a higher for people with bad credit, but they are still reasonable compared to unsecured loans. And that was my point, not this social justice diversion. And, yes, the rates do go up for people with a bad credit history. You can call them "the other half" but the simplest way for you to demonstrate your devotion to helping them is to quit writing comments and go lend your retirement savings to them. You seem to imply the banks are just overcharging out of some evil motive. Now is your chance to prove how wrong they are by cashing out your trust fund (you sound like a trustafarian) and loaning it out at "fair" rates. Just remember that every default by "the other half" destroys hard earned capital of retirees. The low rates really hurt the older savers. They're part of the "other half" too.
  - faissaloo 7y ago
    >you sometimes need a line of credit to get to the next Not in a society that looks after it's people. >Did you have a flat tire? Did the baby need three trips to the doctor because of croup? You shouldn't be paying for healthcare, guaranteed minimum income and social connections should suffice for the other stuff. >If we ban lending to the poor than it will be one more thing that only the rich will have. We shouldn't ban lending to the poor, we should ban lending with interest period.
    - tuesdayrain 7y ago
      > We shouldn't ban lending to the poor, we should ban lending with interest period. This is the worst opinion I have ever read on HN.
      - faissaloo 7y ago
        I actually think it's one of my better opinions.
      - vinniejames 7y ago
        This is a common belief of the Muslim religion. Interest is haram https://www.coindesk.com/sharia-goldbugs-how-isis-created-a-currency-for-world-domination https://www.coindesk.com/sharia-goldbugs-how-isis-created-a-...
    - foogazi 7y ago
      We already banned interest, it’s even criticized in the Bible We brought it back because it’s useful for finding business enterprises - then they looked at private individuals and businesses wondered why they couldn’t expand into those markets too - and here we are
      - faissaloo 7y ago
        No we brought it back because people are greedy and forgot what it did.
WalterBright 7y ago
> poor people would have no lending options Then they borrow from criminals, which historically provide services the government bans.
- ngngngng 7y ago
  > which historically provide services the government bans. Yes... That's why they're called.. criminals?
  - WalterBright 7y ago
    The point being the government didn't prevent them from borrowing money, it just made things worse as they then are forced to deal with criminals.
- korethr 7y ago
  And borrowing from loan sharks or other criminals is not the best idea. A predatory pay day loan company can set you up to fail in civil procedings about the money you owe them, and then garnish your wages, take your savings, resposess your car, etc. But there's still a limit to what they can do, and there's still that final-resort escape hatch of bankruptcy procedings. Conversely, criminals, by definition not being bound by any such structures, can come take not just your wages or savings, but also you kidneys, your wife or daughter, etc. This is not to say that all criminal lenders are or would immediately become as bad as the worst stereotypes about the mafia, but whom do you think it would be a better to owe money to, when considering your long term ability to get out of debt, or even the long-term survival of yourself or family & friends? Predatory Payday Providers, or Big Tony?
xenocyon 7y ago
> If the government banned this kind of lending and didn't provide an alternative, poor people would have no lending options. IIRC poor women's self-run savings groups enable microcredit for poor people, and these loans generally have high repayment rates and relatively low interest. It has been a while since I read about this so it is possible that my info is now out of date.

faissaloo 7y ago

In a world without interest the poor seldom need loans.

xhkkffbf 7y ago
That's not really so. If you have a bunch of bad luck in one month, you sometimes need a line of credit to get to the next. Did you have a flat tire? Did the baby need three trips to the doctor because of croup? Banks exist to make our life better when we need extra spending cash. If we ban lending to the poor than it will be one more thing that only the rich will have. I agree that the lending rates are insanely high, but that's largely because of defaults. The rates for secured goods (car, house) are insanely low, even when the defaults are taken into account. Car loans from credit unions are below 2% because they're secured. The real problem is that the easiest way to cure defaults is to start saying "No" more often. But no one likes to be told "no" and that's unpopular too.
- boring_twenties 7y ago
  Uh, car loans are below 2% only for people like you and me with excellent credit scores. "The other half" can only get financing directly from shady used car lots, where good luck even getting them to tell you the interest rate (or the purchase price) -- they focus instead on the monthly payment (and try to downplay the fact that it's for 72 months).
  - xhkkffbf 7y ago
    Yes, they are a higher for people with bad credit, but they are still reasonable compared to unsecured loans. And that was my point, not this social justice diversion. And, yes, the rates do go up for people with a bad credit history. You can call them "the other half" but the simplest way for you to demonstrate your devotion to helping them is to quit writing comments and go lend your retirement savings to them. You seem to imply the banks are just overcharging out of some evil motive. Now is your chance to prove how wrong they are by cashing out your trust fund (you sound like a trustafarian) and loaning it out at "fair" rates. Just remember that every default by "the other half" destroys hard earned capital of retirees. The low rates really hurt the older savers. They're part of the "other half" too.
- faissaloo 7y ago
  >you sometimes need a line of credit to get to the next Not in a society that looks after it's people. >Did you have a flat tire? Did the baby need three trips to the doctor because of croup? You shouldn't be paying for healthcare, guaranteed minimum income and social connections should suffice for the other stuff. >If we ban lending to the poor than it will be one more thing that only the rich will have. We shouldn't ban lending to the poor, we should ban lending with interest period.
  - tuesdayrain 7y ago
    > We shouldn't ban lending to the poor, we should ban lending with interest period. This is the worst opinion I have ever read on HN.
    - faissaloo 7y ago
      I actually think it's one of my better opinions.
    - vinniejames 7y ago
      This is a common belief of the Muslim religion. Interest is haram https://www.coindesk.com/sharia-goldbugs-how-isis-created-a-currency-for-world-domination https://www.coindesk.com/sharia-goldbugs-how-isis-created-a-...
  - foogazi 7y ago
    We already banned interest, it’s even criticized in the Bible We brought it back because it’s useful for finding business enterprises - then they looked at private individuals and businesses wondered why they couldn’t expand into those markets too - and here we are
    - faissaloo 7y ago
      No we brought it back because people are greedy and forgot what it did.

WalterBright 7y ago

> poor people would have no lending options Then they borrow from criminals, which historically provide services the government bans.

ngngngng 7y ago
> which historically provide services the government bans. Yes... That's why they're called.. criminals?
- WalterBright 7y ago
  The point being the government didn't prevent them from borrowing money, it just made things worse as they then are forced to deal with criminals.
korethr 7y ago
And borrowing from loan sharks or other criminals is not the best idea. A predatory pay day loan company can set you up to fail in civil procedings about the money you owe them, and then garnish your wages, take your savings, resposess your car, etc. But there's still a limit to what they can do, and there's still that final-resort escape hatch of bankruptcy procedings. Conversely, criminals, by definition not being bound by any such structures, can come take not just your wages or savings, but also you kidneys, your wife or daughter, etc. This is not to say that all criminal lenders are or would immediately become as bad as the worst stereotypes about the mafia, but whom do you think it would be a better to owe money to, when considering your long term ability to get out of debt, or even the long-term survival of yourself or family & friends? Predatory Payday Providers, or Big Tony?

xenocyon 7y ago

> If the government banned this kind of lending and didn't provide an alternative, poor people would have no lending options. IIRC poor women's self-run savings groups enable microcredit for poor people, and these loans generally have high repayment rates and relatively low interest. It has been a while since I read about this so it is possible that my info is now out of date.