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I know someone who worked for McKinsey for a few years, and some of the projects he described were straight up slimy. The one I recall right now was helping a b

I know someone who worked for McKinsey for a few years, and some of the projects he described were straight up slimy. The one I recall right now was helping a big payday lender (read: large scale loan shark) figure out how to get their money back from people who were behind on their payments. The problem was that they can only attempt to withdraw so many times from someone's bank before they're banned, so the agreed solution was to estimate the best time of the month when the client had received their paycheck, but before they had used it to pay rent and other expenses. This person is no longer working there, and I'm not surprised.

colinmhayes 6y ago
Same with the people I know at Mckinsey. I makes sense though, companies contract out the work that would cause them bad publicity. Then when someone writes a news story they can say "hey, that wasn't us, it was the consultants."
ipv6ipv4 6y ago
As a very early P2P lending participant in the early days of Prosper Lending, I've seen the other side of this. Many borrowers adopt a mindset that they have earned the money they borrowed and don't feel that they need to pay it back. I came in to Prosper with a distaste for the apparent predatory lender tactics and came out with an appreciation that not everything that seems predatory really is. While there are plenty of legitimately shady lending practices, reasonably high APRs and the collection tactic you described are not some of them.
- cmmeur01 6y ago
  Asserting your debt as more important than someone's housing does seem like a pretty shitbag thing to me.
  - t-writescode 6y ago
    You say that but every debt company will say that very thing. Miss enough credit card bills, and they come for you; and, in states that don't protect the house, that's fair game.
  - wittyreference 6y ago
    People say that like the "debt" doesn't ultimately matter - as if adopting a policy of "you only get property ownership rights if you can prove you're sorrier than the person who claimed your stuff" won't lead to calamity over the medium-long term.
  - golemiprague 6y ago
    How do you think the people who lend the money and their employees pay their housing costs? Not saying that there shouldn't be some humanity involved if possible but it certainly not shitbag, they gave someone money and he should give it back.
  - arcticbull 6y ago
    The reality is that this is a very difficult situation all around. 1) Lenders probably shouldn't be lending money to people they know cannot repay the debts. This is also why APRs are so high - most people simply don't. 2) People who know they can't repay the debts shouldn't be borrowing in the first place. This is also why lenders have to go to such extremes to collect their debts. This is a function of being poor in a country like America with zero social safety net. If you're desperate and on the ropes and have nothing to fall back on you'll do whatever it takes to get by including take out loans that you can't afford, from lenders who know you can't repay them. The problem isn't predatory lending, or deadbeat borrowers, it's a deeply unequal society which doesn't look after its own, with rampant wealth and income inequality and a total lack of social safety net. In an ideal world, folks would be able to rely on unemployment or UBI to get by tough stretches, and this system would disappear instantly. Half the country is busy breathlessly screaming socialism over what the rest of the world considers a "functioning government" and the other half has other things on their mind like walking back stupid bathroom laws, and in the end, nothing fundamentally changes.
    - malandrew 6y ago
      How do you design an unemployment/UBI system that provides an incentive not to use it unless necessary and not to stay on it any longer than is necessary?
      - lostcolony 6y ago
        You don't have to. How many people have you met who were happy doing nothing, living with nothing, AND who made good employees doing anything at all? I've met exactly zero. The ambitious won't want to stay there; the unambitious may "unfairly" get their basic needs met, but they're hardly living the high life, and the lost -useful- labor to society is negligible. Almost certainly more than offset by the ambitious who can now take risks they otherwise couldn't, knowing that if they fail they at least aren't going to end up hungry and homeless.
        deleted 6y ago
        [deleted]
  - majani 6y ago
    Not paying back debts as agreed is tantamount to stealing, which is even shittier IMO
    - arcticbull 6y ago
      For the most part, America abolished debtors prisons in 1833, and they were found unconstitutional in 1983 (Bearden v. Georgia). I say for the most part because that offer doesn't apply to things like fines and court fees [1]. Assuming you're truthful in your application for the loan, it's not theft. It may be a poor decision on the part of the lender, but of course, that's why interest rates exist and scale with your likelihood of nonrepayment. [1] https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-court-declares-new-orleans-debtors-prison-unconstitutional/?sh=195af94a221f https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-...
    - underwater 6y ago
      In the first scenario the borrower can't pay their rent, is evicted and possibly becomes homeless. In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress. How is that worse.
      - deleted 6y ago
        [deleted]
      - dataexporter 6y ago
        While I agree with the comments about predatory lending, I kind of feel that it has more to do with being more financially aware before agreeing to such loans. Payday lending is closer to the predatory lending practices, but I see the same kind of attitude among borrowers at lower interest rate products as well. Borrowing when you know that you will not be able to repay the loan (or with the intention of not repaying) is also wrong. > In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress. In this case, the employees of the so called lender are rendered jobless and they don't meet their financial obligations and might become homeless themselves.
  - bumby 6y ago
    I understand the compassion behind your point, but to play devils advocate: doesn’t every bank that holds mortgages and every landlord assume this very thing? Fall behind far enough and your debt takes priority over staying in your home. Hell, even the government will kick you out if you fall behind far enough on property taxes
  - throwawayboise 6y ago
    It ultimately comes down to what type of housing people have a "right" to. If I can't afford the house I bought, I'll need to sell it and downsize or rent a smaller/cheaper place. That's not because the bank is being a shitbag about my debt.
  - ipv6ipv4 6y ago
    You’ve drawn yourself a caricature of a hard scrabble borrower who’s just trying to make ends meet and has the best of intentions with regards to their debts. In my Prosper experience that was the rare exception. The typical defaulting borrower bought themselves a shiny new toy and literally felt entitled to the money. As if their success in securing the loan was sufficient justification to have earned the money outright. The drama on the Prosper lending forums, where lenders and borrowers could directly communicate with each other, was epic and educational.
    - jessaustin 6y ago
      Why does Prosper encourage loans for the purchase of shiny toys? Does this service benefit their customers?
  - neya 6y ago
    Then don't borrow what you can't afford to pay back? When you borrow money from someone, you explicitly enter a contract with a legal understanding that you will pay it off back in a stipulated time. When you go back on your word, it's not only unprofessional, it is also a breach of that contract. So, the other party should be free to get back their money in whatever means legally possible within the boundaries of the law. Getting back their money from your account when it's most likely to exist isn't a bad idea after all. Not everyone who borrows money is a "victim" and not everyone who asks for their money back is a "predator". It's not so black and white. I've lost money to worthless people who lied while borrowing only to find out they blew it all on prostitutes instead of that family emergency they claimed they had.
- bumby 6y ago
  >reasonably high APRs I think the disagreement may be on the definition of “reasonable”. Similar to utilities, I don’t think most people begrudge a company for making a “reasonable” profit. The problem sometimes comes when it starts to become unreasonable level of profit, predicated on lack of transparency and shady tactics
  - Matticus_Rex 6y ago
    How do people have such a strong opinion on what level of profit is reasonable if they don't know the default rate? The average person thinks companies make over 5x the profit they actually make, and they think the amount of profit correlates negatively with how responsible and good for the world the company is (when in fact there's very little discernable correlation, and it may be positive). What profit people begrudge is likely not particularly relevant, given how uneducated those opinions generally are.
    - bumby 6y ago
      I’m pretty agnostic in my opinion on this personally because I don’t know their profit margin, default rate etc. I also think these lenders fulfill a worthwhile service in some cases. Note that I didn’t actually define what reasonable should be. People do get a say in the policies of their society in a democracy, whether educated or not. People also think NASAs budget is 50x what it is, but it doesn’t mean we should strip away their right to vote, it means they need to be educated (or their representatives, by proxy). Otherwise it’s just advocating for a technocracy
      - nitrogen 6y ago
        Otherwise it’s just advocating for a technocracy A technocratic republic, maybe where we got to pick who ends up on legislative subcommittees ourselves[0], might actually be a good thing. [0] Obviously we can imagine many other forms for a technocratic republic to take; this is just the most similar to the current system, and thus maybe least unreasonable in a path-dependency sense.
    - akira2501 6y ago
- csomar 6y ago
  I'm not opposed to collection (it's your right after all) but what would you describe as a reasonably high APR?
- lg 6y ago
  yeah a lender trying to get back principal seems pretty ordinary, i thought the bad behavior is making it hard to pay down to drag out the interest payments.
trhway 6y ago
>so the agreed solution was to estimate the best time of the month when the client had received their paycheck, but before they had used it to pay rent and other expenses. The Purdue OxyContin's 12 hours higher dose and thus higher addictiveness "solution" instead of the 8 hour based lower dose cycle similarly bears all the hallmarks of being produced by MBA consultants.
- strbean 6y ago
  Along with the whole different release times thing. People obviously have different metabolisms, so the duration of effect was different for different people. When these people told their doctors that their dose didn't last a full 8 hours, and they were experiencing pain after, say, 6 hours... their doctors were advised by Purdue to simply up their dosage, rather than give them a different dosing schedule. Pretty direct approach to creating addicts.
  - fuzzfactor 6y ago
    Time-release to begin with was the strategy to re-patent a prescribable habit-forming API (Active Pharmaceutical Ingredient) whose underlying patent itself had already expired. Turned out to be even more of a gold mine since the FDA approved formulations where each tablet simply contained way more of the API than it had on the label. Full detailed data from the clinical trials supported the labeling for each tablet to show the amount from that tablet that would be released into the bloodstream when taken as directed, not the actual full amount of API in each tablet. For the "taken as directed" dosing to be reliable enough for doctors to correctly gauge how much habit-forming toxic API their patients were absorbing compared to established & generic non-time-release formulations, the target is for the time release pills to have quite a bit of API remaining at the baseline upon excretion. But this is an API that opiate addicts crave and it didn't take long for them to figure out they could simply crush the pills to ingest the full amount of API a tablet contained. On the black market this escalated each pill to the top shelf category. For addicts and chronic pain patients building a progressive tolerance they can't get enough, and this is the regular kind of opiate API that has always fomented eventual overdose when the increases are not curtailed and the toxic effects become much more prominent or fatal. For any patient on generics who wanted _more drugs_, if they got switched to Oxycontin at the same dose they were a happy camper. Until they wanted even more. But multiple time-release pills were not in the prescribing guidelines so Purdue escalated by stepping up to the plate and developing stronger-dose product in the same time-release formulation. This was a sign that so many people were building up a tolerance where it took more API to give them the same perceived effect. The non-addicted occasional consumer of these powerful pain pills could sell their surplus for more each year. The financial incentive to refill prescriptions is greatest for those who don't actually take any of the pills. The Sacklers got richer at the same rate as the drug dealers too, since they raised the pharmaceutical price in step with the increases in street price. The growing financial economy paralled the spread of the tolerance-building consumption habit, so realistically the demand was stronger than that from all of the ultimate consumers' habits by a large margin. Opium wars had been fought over this kind of thing. Doctors, nurses, patients, addicts, narcotics agencies were raking in the bucks like there was no tomorrow, and even those who were not benefitting by one dime were not going to stop. Sacklers simply declared opium wars and the casualties are still mounting.
say_it_as_it_is 6y ago
Considering the sacrifice and hard work that people make to get into a top management consultancy, no one leaves due to ethical concerns. If they do, the entire world comes to know about it through self-promotion (hire me! buy my book! hear my TED talk). People rationalize morally questionable behavior in all walks of life. Management consultants aren't even the decision makers who have to pull the trigger, and it's far easier to sleep at night as an advisor than it is an operator.
refurb 6y ago
It's slimy to try and collect on payments that a consumer agreed to make? Is that what you're saying?
gher-shyu3i 6y ago
We know that interest is a parasitic, immoral, and destructive practice. The banks are in bed with the government, so they are allowed to lend with interest, however, how are payday lenders allowed to operate? Who are they bribing?

colinmhayes 6y ago

Same with the people I know at Mckinsey. I makes sense though, companies contract out the work that would cause them bad publicity. Then when someone writes a news story they can say "hey, that wasn't us, it was the consultants."

ipv6ipv4 6y ago

As a very early P2P lending participant in the early days of Prosper Lending, I've seen the other side of this. Many borrowers adopt a mindset that they have earned the money they borrowed and don't feel that they need to pay it back. I came in to Prosper with a distaste for the apparent predatory lender tactics and came out with an appreciation that not everything that seems predatory really is. While there are plenty of legitimately shady lending practices, reasonably high APRs and the collection tactic you described are not some of them.

cmmeur01 6y ago
Asserting your debt as more important than someone's housing does seem like a pretty shitbag thing to me.
- t-writescode 6y ago
  You say that but every debt company will say that very thing. Miss enough credit card bills, and they come for you; and, in states that don't protect the house, that's fair game.
- wittyreference 6y ago
  People say that like the "debt" doesn't ultimately matter - as if adopting a policy of "you only get property ownership rights if you can prove you're sorrier than the person who claimed your stuff" won't lead to calamity over the medium-long term.
- golemiprague 6y ago
  How do you think the people who lend the money and their employees pay their housing costs? Not saying that there shouldn't be some humanity involved if possible but it certainly not shitbag, they gave someone money and he should give it back.
- arcticbull 6y ago
  The reality is that this is a very difficult situation all around. 1) Lenders probably shouldn't be lending money to people they know cannot repay the debts. This is also why APRs are so high - most people simply don't. 2) People who know they can't repay the debts shouldn't be borrowing in the first place. This is also why lenders have to go to such extremes to collect their debts. This is a function of being poor in a country like America with zero social safety net. If you're desperate and on the ropes and have nothing to fall back on you'll do whatever it takes to get by including take out loans that you can't afford, from lenders who know you can't repay them. The problem isn't predatory lending, or deadbeat borrowers, it's a deeply unequal society which doesn't look after its own, with rampant wealth and income inequality and a total lack of social safety net. In an ideal world, folks would be able to rely on unemployment or UBI to get by tough stretches, and this system would disappear instantly. Half the country is busy breathlessly screaming socialism over what the rest of the world considers a "functioning government" and the other half has other things on their mind like walking back stupid bathroom laws, and in the end, nothing fundamentally changes.
  - malandrew 6y ago
    How do you design an unemployment/UBI system that provides an incentive not to use it unless necessary and not to stay on it any longer than is necessary?
    - lostcolony 6y ago
      You don't have to. How many people have you met who were happy doing nothing, living with nothing, AND who made good employees doing anything at all? I've met exactly zero. The ambitious won't want to stay there; the unambitious may "unfairly" get their basic needs met, but they're hardly living the high life, and the lost -useful- labor to society is negligible. Almost certainly more than offset by the ambitious who can now take risks they otherwise couldn't, knowing that if they fail they at least aren't going to end up hungry and homeless.
      - deleted 6y ago
        [deleted]
- majani 6y ago
  Not paying back debts as agreed is tantamount to stealing, which is even shittier IMO
  - arcticbull 6y ago
    For the most part, America abolished debtors prisons in 1833, and they were found unconstitutional in 1983 (Bearden v. Georgia). I say for the most part because that offer doesn't apply to things like fines and court fees [1]. Assuming you're truthful in your application for the loan, it's not theft. It may be a poor decision on the part of the lender, but of course, that's why interest rates exist and scale with your likelihood of nonrepayment. [1] https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-court-declares-new-orleans-debtors-prison-unconstitutional/?sh=195af94a221f https://www.forbes.com/sites/nicksibilla/2019/08/30/federal-...
  - underwater 6y ago
    In the first scenario the borrower can't pay their rent, is evicted and possibly becomes homeless. In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress. How is that worse.
    - deleted 6y ago
      [deleted]
    - dataexporter 6y ago
      While I agree with the comments about predatory lending, I kind of feel that it has more to do with being more financially aware before agreeing to such loans. Payday lending is closer to the predatory lending practices, but I see the same kind of attitude among borrowers at lower interest rate products as well. Borrowing when you know that you will not be able to repay the loan (or with the intention of not repaying) is also wrong. > In the second scenario the worst case is that the payday lender becomes insolvent, the company collapses, and the workers go and find other jobs because they're not the ones suffering financial stress. In this case, the employees of the so called lender are rendered jobless and they don't meet their financial obligations and might become homeless themselves.
- bumby 6y ago
  I understand the compassion behind your point, but to play devils advocate: doesn’t every bank that holds mortgages and every landlord assume this very thing? Fall behind far enough and your debt takes priority over staying in your home. Hell, even the government will kick you out if you fall behind far enough on property taxes
- throwawayboise 6y ago
  It ultimately comes down to what type of housing people have a "right" to. If I can't afford the house I bought, I'll need to sell it and downsize or rent a smaller/cheaper place. That's not because the bank is being a shitbag about my debt.
- ipv6ipv4 6y ago
  You’ve drawn yourself a caricature of a hard scrabble borrower who’s just trying to make ends meet and has the best of intentions with regards to their debts. In my Prosper experience that was the rare exception. The typical defaulting borrower bought themselves a shiny new toy and literally felt entitled to the money. As if their success in securing the loan was sufficient justification to have earned the money outright. The drama on the Prosper lending forums, where lenders and borrowers could directly communicate with each other, was epic and educational.
  - jessaustin 6y ago
    Why does Prosper encourage loans for the purchase of shiny toys? Does this service benefit their customers?
- neya 6y ago
  Then don't borrow what you can't afford to pay back? When you borrow money from someone, you explicitly enter a contract with a legal understanding that you will pay it off back in a stipulated time. When you go back on your word, it's not only unprofessional, it is also a breach of that contract. So, the other party should be free to get back their money in whatever means legally possible within the boundaries of the law. Getting back their money from your account when it's most likely to exist isn't a bad idea after all. Not everyone who borrows money is a "victim" and not everyone who asks for their money back is a "predator". It's not so black and white. I've lost money to worthless people who lied while borrowing only to find out they blew it all on prostitutes instead of that family emergency they claimed they had.
bumby 6y ago
>reasonably high APRs I think the disagreement may be on the definition of “reasonable”. Similar to utilities, I don’t think most people begrudge a company for making a “reasonable” profit. The problem sometimes comes when it starts to become unreasonable level of profit, predicated on lack of transparency and shady tactics
- Matticus_Rex 6y ago
  How do people have such a strong opinion on what level of profit is reasonable if they don't know the default rate? The average person thinks companies make over 5x the profit they actually make, and they think the amount of profit correlates negatively with how responsible and good for the world the company is (when in fact there's very little discernable correlation, and it may be positive). What profit people begrudge is likely not particularly relevant, given how uneducated those opinions generally are.
  - bumby 6y ago
    I’m pretty agnostic in my opinion on this personally because I don’t know their profit margin, default rate etc. I also think these lenders fulfill a worthwhile service in some cases. Note that I didn’t actually define what reasonable should be. People do get a say in the policies of their society in a democracy, whether educated or not. People also think NASAs budget is 50x what it is, but it doesn’t mean we should strip away their right to vote, it means they need to be educated (or their representatives, by proxy). Otherwise it’s just advocating for a technocracy
    - nitrogen 6y ago
      Otherwise it’s just advocating for a technocracy A technocratic republic, maybe where we got to pick who ends up on legislative subcommittees ourselves[0], might actually be a good thing. [0] Obviously we can imagine many other forms for a technocratic republic to take; this is just the most similar to the current system, and thus maybe least unreasonable in a path-dependency sense.
  - akira2501 6y ago
csomar 6y ago
I'm not opposed to collection (it's your right after all) but what would you describe as a reasonably high APR?
lg 6y ago
yeah a lender trying to get back principal seems pretty ordinary, i thought the bad behavior is making it hard to pay down to drag out the interest payments.

trhway 6y ago

>so the agreed solution was to estimate the best time of the month when the client had received their paycheck, but before they had used it to pay rent and other expenses. The Purdue OxyContin's 12 hours higher dose and thus higher addictiveness "solution" instead of the 8 hour based lower dose cycle similarly bears all the hallmarks of being produced by MBA consultants.

strbean 6y ago
Along with the whole different release times thing. People obviously have different metabolisms, so the duration of effect was different for different people. When these people told their doctors that their dose didn't last a full 8 hours, and they were experiencing pain after, say, 6 hours... their doctors were advised by Purdue to simply up their dosage, rather than give them a different dosing schedule. Pretty direct approach to creating addicts.
- fuzzfactor 6y ago
  Time-release to begin with was the strategy to re-patent a prescribable habit-forming API (Active Pharmaceutical Ingredient) whose underlying patent itself had already expired. Turned out to be even more of a gold mine since the FDA approved formulations where each tablet simply contained way more of the API than it had on the label. Full detailed data from the clinical trials supported the labeling for each tablet to show the amount from that tablet that would be released into the bloodstream when taken as directed, not the actual full amount of API in each tablet. For the "taken as directed" dosing to be reliable enough for doctors to correctly gauge how much habit-forming toxic API their patients were absorbing compared to established & generic non-time-release formulations, the target is for the time release pills to have quite a bit of API remaining at the baseline upon excretion. But this is an API that opiate addicts crave and it didn't take long for them to figure out they could simply crush the pills to ingest the full amount of API a tablet contained. On the black market this escalated each pill to the top shelf category. For addicts and chronic pain patients building a progressive tolerance they can't get enough, and this is the regular kind of opiate API that has always fomented eventual overdose when the increases are not curtailed and the toxic effects become much more prominent or fatal. For any patient on generics who wanted _more drugs_, if they got switched to Oxycontin at the same dose they were a happy camper. Until they wanted even more. But multiple time-release pills were not in the prescribing guidelines so Purdue escalated by stepping up to the plate and developing stronger-dose product in the same time-release formulation. This was a sign that so many people were building up a tolerance where it took more API to give them the same perceived effect. The non-addicted occasional consumer of these powerful pain pills could sell their surplus for more each year. The financial incentive to refill prescriptions is greatest for those who don't actually take any of the pills. The Sacklers got richer at the same rate as the drug dealers too, since they raised the pharmaceutical price in step with the increases in street price. The growing financial economy paralled the spread of the tolerance-building consumption habit, so realistically the demand was stronger than that from all of the ultimate consumers' habits by a large margin. Opium wars had been fought over this kind of thing. Doctors, nurses, patients, addicts, narcotics agencies were raking in the bucks like there was no tomorrow, and even those who were not benefitting by one dime were not going to stop. Sacklers simply declared opium wars and the casualties are still mounting.

say_it_as_it_is 6y ago

Considering the sacrifice and hard work that people make to get into a top management consultancy, no one leaves due to ethical concerns. If they do, the entire world comes to know about it through self-promotion (hire me! buy my book! hear my TED talk). People rationalize morally questionable behavior in all walks of life. Management consultants aren't even the decision makers who have to pull the trigger, and it's far easier to sleep at night as an advisor than it is an operator.

refurb 6y ago

It's slimy to try and collect on payments that a consumer agreed to make? Is that what you're saying?

gher-shyu3i 6y ago

We know that interest is a parasitic, immoral, and destructive practice. The banks are in bed with the government, so they are allowed to lend with interest, however, how are payday lenders allowed to operate? Who are they bribing?