39 ms·

I think being really broke greatly hinders your ability to think rationally. I never committed any violent crimes, but I know throughout most of 2016 I was rea

I think being really broke greatly hinders your ability to think rationally. I never committed any violent crimes, but I know throughout most of 2016 I was really really broke (about $15,000 credit card debt, 3 months of unpaid rent, a lawsuit from my landlord for the back rent). In the process I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams. My desperate brain was overriding my logical brain. I can only assume I'm not unique in this fact; if it comes down to mugging someone or not eating for a week, I'm not 100% sure which option I would choose. I would like to think that I would never hurt someone, but since 2017 or so, I've had a pretty privileged life.

wutbrodo 6y ago
> In the process I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams. Because they're not, the idea that they are is paternalistic bullshit from the kind of people who get their news from John Oliver. Debt can be dangerous, and payday loans are commensurately more so due to their high rates. But debt is a _tool_, and just like middle- and upper-income folks can use it to prevent disaster or rationally extend themselves, lower-income people can too. Not having access to credit isn't a _good_ thing per se. Whenever people have actually bothered to look into the use of payday loans instead of pearl-clutching about how the poor don't know what's good for them, they've found that much of the clientele is making rational decisions. As bad as a high-interest loan sounds to privileged sensibilities, the alternative is often worse. It's just more diffuse and thus easier to ignore.
- Judgmentality 6y ago
  Your arguments are entirely theoretical while ignoring the fact that payday loan businesses are regularly shut down for fraud. Just because debt as a concept isn't flawed doesn't mean the people selling debt are moral. https://en.wikipedia.org/wiki/Scott_Tucker_(businessman) https://en.wikipedia.org/wiki/Scott_Tucker_(businessman) Likewise, just because I post one extreme example of payday loan businesses being a fraud doesn't invalidate the entire industry. As a whole though, I feel the industry is quite scummy and often scammy.
  - wutbrodo 6y ago
    > Your arguments are entirely theoretical while ignoring the fact that payday loan businesses are regularly shut down for fraud I alluded to empirical evidence of their usefulness. Here's a study from the FDIC[1]. It's dated, but there are structural conclusions about the way payday loans work and why their rates are so high. I don't see the relevance of specific payday lenders being shut down for fraud. Individual cases of fraud should be cracked down upon, and its widespread prevalence in an industry suggests that regulation is potentially a good idea. But neither of these automatically negate the usefulness of a service, just as the bad behavior of the banking industry doesn't make a bank account useless. > Likewise, just because I post one extreme example of payday loan businesses being a fraud doesn't invalidate the entire industry. Yes, this is my point. The comment I responded to and that I quoted from said: > I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams The point of my comment is that they can be useful, and the GP's shame at considering an option he "knew" was a scam is unwarranted and down to midwit elites who are quick to fuck the poor over in the name of paternalistic, performative virtue, but never bother to understand them as agents making decisions that are sometimes unintuitively rational. [1] https://www.fdic.gov/bank/analytical/cfr/2005/wp2005/2005-09.pdf https://www.fdic.gov/bank/analytical/cfr/2005/wp2005/2005-09...
- NikolaNovak 6y ago
  Having access / option for credit may be a good thing. Using a loan rationally may be a good thing. Not sure where you get your news/experience from ;), but I don't see how any of those arguments apply to payday loan places - in every country, city, society I've lived in, they a) were shut down for fraud and exploitation anytime anybody bothered to look & investigate b) are universally demonstrated and proven to prey upon those who can least afford it. These are not benevolent capitalists trying to help those who nobody else would help - the owners are shameless sharks exploiting and manipulating people into a vicious cycle. (FWIW I'm not going to downvote, I actually upvoted - your perspective is interesting and must as I may disagree I'd like to hear more and maybe be educated, rather than shut the debate down; but I'd like to see some "counter-John-Oliver" studies and stats to go against the ones I think most of us have seen) Edit: I mean heck, like with smoking, government here will try their best to talk you out of it; you can still do it, as an adult human being... but it's just a bad, bad idea https://www.canada.ca/en/financial-consumer-agency/services/loans/payday-loans/_jcr_content/par/mwsadaptiveimage_630700645/image.img.jpg/1588959121537.jpg https://www.canada.ca/en/financial-consumer-agency/services/...
- tombert 6y ago
  I guess I am one of those kind of people who get their news from John Oliver. Maybe I was being a bit hyperbolic when I said "scam" since they usually do what they advertise. Let me rephrase: they have ridiculously high interest rates that can lead to difficult-to-escape debt, and they are predatory towards desperate people, hence why you usually see them in poorer neighborhoods. Debt is absolutely a tool and I wasn't claiming otherwise, so when I said "scam", what I really meant was "the worst possible way to leverage debt".
  - wutbrodo 6y ago
    > I guess I am one of those kind of people who get their news from John Oliver. From your clarifications in this comment, it doesn't sound like you're the type of person I'm talking about. I don't disagree at all that loans can take advantage of people's innumeracy and desperation-driven irrationality. And I consider this a serious concern with excessively high rates. But it needs to be balanced against the bedrock principle that taking a choice away from someone usually immiserates them further, and if you believe otherwise you need a damn high level of rigor to show it. Tarring the payday loan industry writ large as a scam doesn't stand up to that level of rigor, and there are a thousand qualitative and quantitative pieces of evidence pointing to the fact that the industry does provide value to a portion of the underbanked population. This doesn't preclude things like capping rates, but this is an explicit recognition that, at the given rate, the cost of the innumerate being taken advantage of is higher than the cost of cutting off an emergency lifeline for people who can use it rationally. I don't think you and I are especially in disagreement here, given your clarification of what you meant by "scam".
- smiley1437 6y ago
  I'm sorry but in Ontario, prior to January 1, 2017, the charge was $21 per $100 advanced, an effective interest rate of 14,299% (not a typo) That's not using debt as a 'tool', that is weaponizing it against those can't fend for themselves.
  - wutbrodo 6y ago
    Note up top that my comment was in response to someone saying that payday loans per se are a scam, a widely-held view in my social circles which I disagree with strongly. > That's not using debt as a 'tool', that is weaponizing it against those can't fend for themselves. Are you familiar with the concept of a poverty trap? We're not talking about people whose financial decisions consist of figuring out how to distribute their securities tax-efficiently across their accounts. There are lots of people for whom there are _very_ few degrees of financial freedom, where not being able to pay for car repairs can mean losing your job which can mean getting evicted, and where a precarious but livable existence can become a financial nightmare trap with a single stroke of bad luck and bad timing. What's the discount rate on a loan for someone in that position? Why are you so confident that, a million miles away from your situation, you can make that decision better for them than they can for themselves? If someone is underbanked (like 22% of Americans), why are you so sure that a time-sensitive $300 emergency expense isn't worth $360, if they're confident they can pay it back (eg, when they get their paycheck)? If you're actually interested in the well-being of those who feel the need to avail themselves of tools like this, the New Yorker wrote an article about it half a decade ago[1]. There are a million other resources and even studies describing the demand side of the story, but it's a lot easier to just pat oneself on the back about how these poor illiterate people are being saved from themselves and then ignore the people whose weakened access to credit further immiserates them. > I'm sorry but in Ontario, prior to January 1, 2017, the charge was $21 per $100 advanced, an effective interest rate of 14,299% (not a typo) There are an impressive amount of things wrong with this short sentence and its implications. 1) This is the maximum allowable rate. It's completely consistent for someone to believe that the worst-possible payday lenders are on-net exploitative without claiming the entire industry is a scam. 2) The parent comment I disagreed with did not say "I was going to a pre-Jan-1-2017 Ontario payday lender, which I know is a scam". He said it of payday loans in general, a belief that's widely held in my social circles for the John-Oliver-related reasons I mentioned before. 3) Nothing in my comment said I was opposed to regulation, up to and including capping rates. Most people (poor or not) are pretty terrible at math, and desperation absolutely can push people further towards irrational decisions. Legally capping rates is a decision that, at a given rate, more people are falling prey to their innumeracy than are availing themselves of a costly but necessary emergency life-raft. There's nothing wrong with this legislative judgment call, but starting and ending your analysis at "look how high this number is!!!!" is just cosplaying compassion. 4) Again, the assumption that just waving your hands in the air and saying a number has any connection to the reality of poverty traps and the incredibly steep discount rates they impose upon people. Removing options from people isn't saving them from their misery, it's just displacing their misery into a million diffuse other problems that you don't have to think about. [1] https://www.newyorker.com/business/currency/what-good-are-payday-loans https://www.newyorker.com/business/currency/what-good-are-pa...
- tw04 6y ago
  Spoken like someone who has never lived paycheck to paycheck and been caught in a debt spiral. You are correct, not having access to credit is a bad thing. But having access to predatory credit is a WORSE thing. There's a reason we outlawed indentured slavery and "company scrip", and payday loans are a half a step up from that situation.
  - gambiting 6y ago
    The reason why payday loans are allowed is that just like with drugs - outlawing them doesn't mean people don't seek them out. It's better to have access to a legal and well regulated payday lender business, rather than letting people borrow money from the "pay us back or else" kind. And they absolutely will, desperate people will seek out desperate solutions.
  - wutbrodo 6y ago
    > Spoken like someone who has never lived paycheck to paycheck and been caught in a debt spiral. Respectfully, go fuck yourself, you know nothing about me. You don't even seem to know what _you're_ talking about: poverty spirals don't disappear when you remove access to credit. I'm all for regulating payday lenders: the industry can be riven with fraud and rate regulation on the margins can smooth out the tradeoff between expanded credit access and debt traps. But my comment was in response to a comment claiming that they're always scams; spend five minutes educating yourself and you'll find plenty of examples of people who've actually bothered to look at the lives of people on the demand side of payday loans, like this New Yorker journalists[1]. It takes a lot of privilege and callous disregard for the poor to arrive at the idiocy of claiming that it's always a _good_ thing to remove a bad option from someone with only bad options. [1] https://www.newyorker.com/business/currency/what-good-are-payday-loans/amp https://www.newyorker.com/business/currency/what-good-are-pa...
    - dang 6y ago
      Please don't break the site guidelines like this, regardless of how badly you were provoked or feel you were. It just sends the threads into a hellish spiral. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- GhostVII 6y ago
  I agree that there are cases where a payday loan is a good option, and that if people behaved rationally it would be objectively better to have that option than to not have it. The problem is that people don't behave rationally. And behaving irrationally isn't isolated to poor people (lots of people get 96 month loans on expensive cars they can't afford), but it hurts them the most. Reminds me of an anecdote from poor African countries. Farmers would buy fertilizer months before they needed it, even though it is logically better for them to save that money and only buy the fertilizer when they needed it (assuming the price of the fertilizer was constant). But they knew if they had the money the would be tempted to spend it in the meantime, so they bought it early to avoid the temptation. Payday loans can encourage people to take out a loan and spend money even in cases where it would be better for them to find an alternative.
  - tombert 6y ago
    Sure, but it almost seems like you are justifying predatory behavior. When people are really desperate they'll do anything to survive, and providing a 14000% loan to people feels like you're just exploiting people's survivalist instincts. Also, a lot of these payday loans are just flat-out illegal. If you look up usury laws in the US, they typically cap interest at somewhere around ~25% per year[1], and the highest I could find was on the order of 400% per year [2]. I didn't check every state so it's possible there are some that don't have any caps, but my point is that very often these payday loans are literally breaking the law by charging absurd interest rates. [1] https://paydayloaninfo.org/state-information/40 https://paydayloaninfo.org/state-information/40 [2] https://paydayloaninfo.org/state-information/17 https://paydayloaninfo.org/state-information/17
  - wutbrodo 6y ago
    100% agreed, and to some extent people _do_ need to be protected from themselves where irrational decisions are likely. But the comment I responded to referred to payday loans in general as a scam, and anyone who's bothered to study this, qualitatively or quantitatively, firmly disagrees. Note that this doesn't preclude regulated rate caps, which are motivated by the idea that, at a given rate, the innumerate/irrational being harmed outweigh the harm done by removing an emergency liferaft from those for whom it makes sense. You don't even have to be that smart or read high-quality sources to find this perspective! "Payday loans never provide value" is too dumb for even Vox[1]! The reason I'm so passionate about this topic is not just garden-variety frustration at how stupid people are. "Helping" people by controlling what they can spend their food stamps on, whom they can have sex with, or how they survive and support themselves should come with a heavy, heavy burden of rigor. History is full of elites destroying the lives of others through their malicious "compassion" and refusal to actually consider that other people live different lives with different problems. The problem with things like payday loans is that the kind of IFLScience midwits that places like HN are thick with won't bother to do the most basic of research beyond clickbaity headlines, eye-popping context-free stats, amd comedy shows that pretend to be informative. It's repulsive. [1] https://www.vox.com/xpress/2014/8/11/5991137/john-oliver-payday-loan-postal-banking https://www.vox.com/xpress/2014/8/11/5991137/john-oliver-pay...
xcambar 6y ago
Thanks for the honest story, congrats on pulling yourself out of debt and into (quoting you) privileged life. I see the HN crowd as rather monotonic, and thanks to stories like yours, it shows me wrong, and that’s for the best.
- tombert 6y ago
  Thanks. It wasn't easy but to be honest having a high-paying engineering job certainly helps. I have no idea how I would have escaped that cycle if I had a lower-paying job.
  - theodric 6y ago
    +1 My escape was doubling my pay, then paying off my debt, then refusing to take on any further debt, ever. Currently closing on a house, paid with cash. Never again debt.
  - godfreyantonell 6y ago
    Good for you. I like seeing stories like this, especially in here.
- Ericson2314 6y ago
  "monotonous" I think you meant :). Though the identical etymology makes this a bit silly.
  - xcambar 6y ago
    Indeed!:p
Nasrudith 6y ago
Sounds like it hints at a nasty feedback loop. "Are they stuck in financial trouble because of poor impulse control or are they stuck with poor impulse control because of financial trouble?" Singular they that is. It is easier to think long term while feeling secure but not thinking long term can lead to becoming insecure. Not trying to make any moral or blame judgements here - just pondering origins of problems and solutions.
- tombert 6y ago
  I won't speak for anyone else, but I feel that I normally have reasonably good impulse control, even in 2016; I got into debt because a company I was working for ended up not paying me for multiple months and then shut down, and I didn't have much savings. I think my lack of impulse control came as a direct cause of me being broke. I had previously never seriously considered any kind of payday loan because I knew they were multi-thousand-percent levels of interest, but that part of my brain wasn't the one thinking. When faced with a really tough situation, I think it's common for your "survivalist" side to kick in. I never actually did get the payday loan because I was able to (begrudgingly) get a loan from my stepfather-in-law for the back rent, and I very luckily landed a decent-paying job shortly afterwards. I was absolutely one of the lucky ones. It's not hard at all for me to envision a universe where I was stuck in an endless cycle of debt, and honestly I still have nightmares about that time occasionally. Not fun.
- tguedes 6y ago
  This used to be a debate and it’s really not anymore. It was primarily the right that used to argue that the reason people committed crime was because of their attitudes and social norms. But with over the last few decades, large parts of white Midwest and Appalachia are facing the exact same circumstances that inner cities faced for decades. So even some conservatives have started to agree with the side of crime follows economics rather than economics follows crime.
- sjwright 6y ago
  There are many nasty feedback loops caused by severe poverty. Even the most basic things like being able to show up for a job interview in an arbitrary location at an arbitrary time wearing presentable clothing and a relaxed demeanour — try doing that when you can barely afford to use public transport and your daily schedule is rigidly monopolised by whatever terrible job/gig you currently rely upon to literally survive. For all the criticisms of UBI, I think it would be a net win simply because it eliminates the significant time wasted in maintaining welfare entitlement.
deleted 6y ago
[deleted]
hoophoop 6y ago
> I think being really broke greatly hinders your ability to think rationally. No: being really broke can cause a lot of anxiety that can lead to irrational behavior. But often a person has to choose between homelessness and crime and picks the latter as a rational choice, given the alternative. So please don't assume poor = "crazy" = criminal, it's a bit unkind.
- sjwright 6y ago
  When did tombert assume that poor = "crazy" = criminal? It's a bit unkind to take general thoughts about psychological pathways and unfairly reify them with the use of equality symbols.
  - hoophoop 6y ago
    > When did tombert assume that poor = "crazy" = criminal? It's implied here: "I think being really broke greatly hinders your ability to think rationally." ...by putting that sentence out alone without clarifying the context. > psychological pathways > unfairly reify Are you feeling ok?
    - tombert 6y ago
      I'm sorry it wasn't clear but this seems like a needlessly pedantic distinction. I never said "poor = 'crazy' = criminal". I don't think poor people are inherently crazy, though I suppose that being mentally ill could conceivably hinder your ability to make a decent income, if we're being pedantic. I feel like you're assuming I said something that I didn't; I really don't think I was being "unkind". In fact, I was trying to have a pretty sympathetic perspective on this. If that was not clear then that's a failing on my end and I apologize. Yes, you could make an argument is the "more rational" decision is to commit a crime, I read Les Miserables, but keep in mind that my comment was in direct response to someone asking why unemployment led to violent crime, and I specifically did not exclude myself from any category.
    - sjwright 6y ago
      Implied? No, not even with the most uncharitable interpretation did tombert even imply that being poor makes you "crazy" or that being crazy makes you a criminal. A hindered ability to think rationally might only make one more impulsive or less able to consider long term consequences. You are literally accusing the writer of implying things which rely upon a context of your own making, not theirs.
alfiedotwtf 6y ago
> I think being really broke greatly hinders your ability to think rationally A lot of comments here seem to think that it has something to do with morals, but from living in poor places, what I gather is that people have no other options when they’re backed into a corner. If you’re unemployed and you need money for rent and food, what the he’ll are you going to do? Survival mode kicks in, and you’ll do anything to make the next day/week. This could include steeling (to consume or sell) and mugging people (actual money, but probably less of a problem in the near future with everyone using digital payments). Now throw into the mix drugs to numb to pain of living an abysmal life... which are astronomically expensive, so most of the time your only option is to steel and mug more.
kbenson 6y ago
> I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams. They aren't scams, but they are only useful for a very narrow band of people in a very narrow band of circumstances. For the vast majority of people that want one of those loans, they are better off not getting it. It's entirely possible to get the loan and use it as intended, it's just the most the people that need it aren't in a position to do so, and the lenders go out of their way to make it real easy to just roll the loan over into a new ones that kicks the problem down the road to the next payday after this one.[1] 1: It's a dark pattern. "You borrowed $400 the other week and you owe use $500 today? How about we fund a new loan for $400 before your payment, roll that into your current payment, and all you have to do is pay the $100 difference this payday, and you can just pay it all next payday when it's more convenient?" Now, the lender has an installment plan for 700-1500% APR as long as they can get the client to keep doing that (but the client does have to choose to do it every time). At least, that's how it was a decade or so ago. I think it got even more regulated since then, and they can't charge 25% interest per payday anymore (you can likely thank the NY AG if so).
- killjoywashere 6y ago
  > you can likely thank the NY AG If I recall, the military had a heavy hand in that. When the payday loan industry has cut into military readiness to the point the generals are talking to Congress about it, it's gone a bit too far. edit (add ref): https://www.govinfo.gov/content/pkg/CHRG-109shrg50303/html/CHRG-109shrg50303.htm https://www.govinfo.gov/content/pkg/CHRG-109shrg50303/html/C...
- nullc 6y ago
  > use it as intended You mean that it's possible for some people to use it in a personally beneficial way. That is true without any need to get into intent. I think it's unambiguous that the predatory application is the actual intended usage-- since their business model doesn't make sense without it, they have a massive default rate that only gets paid for with the windfall customers that stay on the treadmill for a long time.
craftinator 6y ago
I've found that being poor actually sharpens the mind. It reminds you that if you don't eat, you'll die; clarifies that most laws are just rules crafted by the ultra rich to keep them in power; reminds you that many many people have way more than they need, and can afford to have some it go missing without longterm damage. It's very rational to choose crime over starvation or exposure, especially when our legal framework (US) is morally bankrupt. Why not turn to crime when crime really isn't such a bad thing compared to the other shit going on.
farrarstan 6y ago
Why on earth would you call that irrational?

wutbrodo 6y ago

> In the process I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams. Because they're not, the idea that they are is paternalistic bullshit from the kind of people who get their news from John Oliver. Debt can be dangerous, and payday loans are commensurately more so due to their high rates. But debt is a _tool_, and just like middle- and upper-income folks can use it to prevent disaster or rationally extend themselves, lower-income people can too. Not having access to credit isn't a _good_ thing per se. Whenever people have actually bothered to look into the use of payday loans instead of pearl-clutching about how the poor don't know what's good for them, they've found that much of the clientele is making rational decisions. As bad as a high-interest loan sounds to privileged sensibilities, the alternative is often worse. It's just more diffuse and thus easier to ignore.

Judgmentality 6y ago
Your arguments are entirely theoretical while ignoring the fact that payday loan businesses are regularly shut down for fraud. Just because debt as a concept isn't flawed doesn't mean the people selling debt are moral. https://en.wikipedia.org/wiki/Scott_Tucker_(businessman) https://en.wikipedia.org/wiki/Scott_Tucker_(businessman) Likewise, just because I post one extreme example of payday loan businesses being a fraud doesn't invalidate the entire industry. As a whole though, I feel the industry is quite scummy and often scammy.
- wutbrodo 6y ago
  > Your arguments are entirely theoretical while ignoring the fact that payday loan businesses are regularly shut down for fraud I alluded to empirical evidence of their usefulness. Here's a study from the FDIC[1]. It's dated, but there are structural conclusions about the way payday loans work and why their rates are so high. I don't see the relevance of specific payday lenders being shut down for fraud. Individual cases of fraud should be cracked down upon, and its widespread prevalence in an industry suggests that regulation is potentially a good idea. But neither of these automatically negate the usefulness of a service, just as the bad behavior of the banking industry doesn't make a bank account useless. > Likewise, just because I post one extreme example of payday loan businesses being a fraud doesn't invalidate the entire industry. Yes, this is my point. The comment I responded to and that I quoted from said: > I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams The point of my comment is that they can be useful, and the GP's shame at considering an option he "knew" was a scam is unwarranted and down to midwit elites who are quick to fuck the poor over in the name of paternalistic, performative virtue, but never bother to understand them as agents making decisions that are sometimes unintuitively rational. [1] https://www.fdic.gov/bank/analytical/cfr/2005/wp2005/2005-09.pdf https://www.fdic.gov/bank/analytical/cfr/2005/wp2005/2005-09...
NikolaNovak 6y ago
Having access / option for credit may be a good thing. Using a loan rationally may be a good thing. Not sure where you get your news/experience from ;), but I don't see how any of those arguments apply to payday loan places - in every country, city, society I've lived in, they a) were shut down for fraud and exploitation anytime anybody bothered to look & investigate b) are universally demonstrated and proven to prey upon those who can least afford it. These are not benevolent capitalists trying to help those who nobody else would help - the owners are shameless sharks exploiting and manipulating people into a vicious cycle. (FWIW I'm not going to downvote, I actually upvoted - your perspective is interesting and must as I may disagree I'd like to hear more and maybe be educated, rather than shut the debate down; but I'd like to see some "counter-John-Oliver" studies and stats to go against the ones I think most of us have seen) Edit: I mean heck, like with smoking, government here will try their best to talk you out of it; you can still do it, as an adult human being... but it's just a bad, bad idea https://www.canada.ca/en/financial-consumer-agency/services/loans/payday-loans/_jcr_content/par/mwsadaptiveimage_630700645/image.img.jpg/1588959121537.jpg https://www.canada.ca/en/financial-consumer-agency/services/...
tombert 6y ago
I guess I am one of those kind of people who get their news from John Oliver. Maybe I was being a bit hyperbolic when I said "scam" since they usually do what they advertise. Let me rephrase: they have ridiculously high interest rates that can lead to difficult-to-escape debt, and they are predatory towards desperate people, hence why you usually see them in poorer neighborhoods. Debt is absolutely a tool and I wasn't claiming otherwise, so when I said "scam", what I really meant was "the worst possible way to leverage debt".
- wutbrodo 6y ago
  > I guess I am one of those kind of people who get their news from John Oliver. From your clarifications in this comment, it doesn't sound like you're the type of person I'm talking about. I don't disagree at all that loans can take advantage of people's innumeracy and desperation-driven irrationality. And I consider this a serious concern with excessively high rates. But it needs to be balanced against the bedrock principle that taking a choice away from someone usually immiserates them further, and if you believe otherwise you need a damn high level of rigor to show it. Tarring the payday loan industry writ large as a scam doesn't stand up to that level of rigor, and there are a thousand qualitative and quantitative pieces of evidence pointing to the fact that the industry does provide value to a portion of the underbanked population. This doesn't preclude things like capping rates, but this is an explicit recognition that, at the given rate, the cost of the innumerate being taken advantage of is higher than the cost of cutting off an emergency lifeline for people who can use it rationally. I don't think you and I are especially in disagreement here, given your clarification of what you meant by "scam".
smiley1437 6y ago
I'm sorry but in Ontario, prior to January 1, 2017, the charge was $21 per $100 advanced, an effective interest rate of 14,299% (not a typo) That's not using debt as a 'tool', that is weaponizing it against those can't fend for themselves.
- wutbrodo 6y ago
  Note up top that my comment was in response to someone saying that payday loans per se are a scam, a widely-held view in my social circles which I disagree with strongly. > That's not using debt as a 'tool', that is weaponizing it against those can't fend for themselves. Are you familiar with the concept of a poverty trap? We're not talking about people whose financial decisions consist of figuring out how to distribute their securities tax-efficiently across their accounts. There are lots of people for whom there are _very_ few degrees of financial freedom, where not being able to pay for car repairs can mean losing your job which can mean getting evicted, and where a precarious but livable existence can become a financial nightmare trap with a single stroke of bad luck and bad timing. What's the discount rate on a loan for someone in that position? Why are you so confident that, a million miles away from your situation, you can make that decision better for them than they can for themselves? If someone is underbanked (like 22% of Americans), why are you so sure that a time-sensitive $300 emergency expense isn't worth $360, if they're confident they can pay it back (eg, when they get their paycheck)? If you're actually interested in the well-being of those who feel the need to avail themselves of tools like this, the New Yorker wrote an article about it half a decade ago[1]. There are a million other resources and even studies describing the demand side of the story, but it's a lot easier to just pat oneself on the back about how these poor illiterate people are being saved from themselves and then ignore the people whose weakened access to credit further immiserates them. > I'm sorry but in Ontario, prior to January 1, 2017, the charge was $21 per $100 advanced, an effective interest rate of 14,299% (not a typo) There are an impressive amount of things wrong with this short sentence and its implications. 1) This is the maximum allowable rate. It's completely consistent for someone to believe that the worst-possible payday lenders are on-net exploitative without claiming the entire industry is a scam. 2) The parent comment I disagreed with did not say "I was going to a pre-Jan-1-2017 Ontario payday lender, which I know is a scam". He said it of payday loans in general, a belief that's widely held in my social circles for the John-Oliver-related reasons I mentioned before. 3) Nothing in my comment said I was opposed to regulation, up to and including capping rates. Most people (poor or not) are pretty terrible at math, and desperation absolutely can push people further towards irrational decisions. Legally capping rates is a decision that, at a given rate, more people are falling prey to their innumeracy than are availing themselves of a costly but necessary emergency life-raft. There's nothing wrong with this legislative judgment call, but starting and ending your analysis at "look how high this number is!!!!" is just cosplaying compassion. 4) Again, the assumption that just waving your hands in the air and saying a number has any connection to the reality of poverty traps and the incredibly steep discount rates they impose upon people. Removing options from people isn't saving them from their misery, it's just displacing their misery into a million diffuse other problems that you don't have to think about. [1] https://www.newyorker.com/business/currency/what-good-are-payday-loans https://www.newyorker.com/business/currency/what-good-are-pa...
tw04 6y ago
Spoken like someone who has never lived paycheck to paycheck and been caught in a debt spiral. You are correct, not having access to credit is a bad thing. But having access to predatory credit is a WORSE thing. There's a reason we outlawed indentured slavery and "company scrip", and payday loans are a half a step up from that situation.
- gambiting 6y ago
  The reason why payday loans are allowed is that just like with drugs - outlawing them doesn't mean people don't seek them out. It's better to have access to a legal and well regulated payday lender business, rather than letting people borrow money from the "pay us back or else" kind. And they absolutely will, desperate people will seek out desperate solutions.
- wutbrodo 6y ago
  > Spoken like someone who has never lived paycheck to paycheck and been caught in a debt spiral. Respectfully, go fuck yourself, you know nothing about me. You don't even seem to know what _you're_ talking about: poverty spirals don't disappear when you remove access to credit. I'm all for regulating payday lenders: the industry can be riven with fraud and rate regulation on the margins can smooth out the tradeoff between expanded credit access and debt traps. But my comment was in response to a comment claiming that they're always scams; spend five minutes educating yourself and you'll find plenty of examples of people who've actually bothered to look at the lives of people on the demand side of payday loans, like this New Yorker journalists[1]. It takes a lot of privilege and callous disregard for the poor to arrive at the idiocy of claiming that it's always a _good_ thing to remove a bad option from someone with only bad options. [1] https://www.newyorker.com/business/currency/what-good-are-payday-loans/amp https://www.newyorker.com/business/currency/what-good-are-pa...
  - dang 6y ago
    Please don't break the site guidelines like this, regardless of how badly you were provoked or feel you were. It just sends the threads into a hellish spiral. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
GhostVII 6y ago
I agree that there are cases where a payday loan is a good option, and that if people behaved rationally it would be objectively better to have that option than to not have it. The problem is that people don't behave rationally. And behaving irrationally isn't isolated to poor people (lots of people get 96 month loans on expensive cars they can't afford), but it hurts them the most. Reminds me of an anecdote from poor African countries. Farmers would buy fertilizer months before they needed it, even though it is logically better for them to save that money and only buy the fertilizer when they needed it (assuming the price of the fertilizer was constant). But they knew if they had the money the would be tempted to spend it in the meantime, so they bought it early to avoid the temptation. Payday loans can encourage people to take out a loan and spend money even in cases where it would be better for them to find an alternative.
- tombert 6y ago
  Sure, but it almost seems like you are justifying predatory behavior. When people are really desperate they'll do anything to survive, and providing a 14000% loan to people feels like you're just exploiting people's survivalist instincts. Also, a lot of these payday loans are just flat-out illegal. If you look up usury laws in the US, they typically cap interest at somewhere around ~25% per year[1], and the highest I could find was on the order of 400% per year [2]. I didn't check every state so it's possible there are some that don't have any caps, but my point is that very often these payday loans are literally breaking the law by charging absurd interest rates. [1] https://paydayloaninfo.org/state-information/40 https://paydayloaninfo.org/state-information/40 [2] https://paydayloaninfo.org/state-information/17 https://paydayloaninfo.org/state-information/17
- wutbrodo 6y ago
  100% agreed, and to some extent people _do_ need to be protected from themselves where irrational decisions are likely. But the comment I responded to referred to payday loans in general as a scam, and anyone who's bothered to study this, qualitatively or quantitatively, firmly disagrees. Note that this doesn't preclude regulated rate caps, which are motivated by the idea that, at a given rate, the innumerate/irrational being harmed outweigh the harm done by removing an emergency liferaft from those for whom it makes sense. You don't even have to be that smart or read high-quality sources to find this perspective! "Payday loans never provide value" is too dumb for even Vox[1]! The reason I'm so passionate about this topic is not just garden-variety frustration at how stupid people are. "Helping" people by controlling what they can spend their food stamps on, whom they can have sex with, or how they survive and support themselves should come with a heavy, heavy burden of rigor. History is full of elites destroying the lives of others through their malicious "compassion" and refusal to actually consider that other people live different lives with different problems. The problem with things like payday loans is that the kind of IFLScience midwits that places like HN are thick with won't bother to do the most basic of research beyond clickbaity headlines, eye-popping context-free stats, amd comedy shows that pretend to be informative. It's repulsive. [1] https://www.vox.com/xpress/2014/8/11/5991137/john-oliver-payday-loan-postal-banking https://www.vox.com/xpress/2014/8/11/5991137/john-oliver-pay...

xcambar 6y ago

Thanks for the honest story, congrats on pulling yourself out of debt and into (quoting you) privileged life. I see the HN crowd as rather monotonic, and thanks to stories like yours, it shows me wrong, and that’s for the best.

tombert 6y ago
Thanks. It wasn't easy but to be honest having a high-paying engineering job certainly helps. I have no idea how I would have escaped that cycle if I had a lower-paying job.
- theodric 6y ago
  +1 My escape was doubling my pay, then paying off my debt, then refusing to take on any further debt, ever. Currently closing on a house, paid with cash. Never again debt.
- godfreyantonell 6y ago
  Good for you. I like seeing stories like this, especially in here.
Ericson2314 6y ago
"monotonous" I think you meant :). Though the identical etymology makes this a bit silly.
- xcambar 6y ago
  Indeed!:p

Nasrudith 6y ago

Sounds like it hints at a nasty feedback loop. "Are they stuck in financial trouble because of poor impulse control or are they stuck with poor impulse control because of financial trouble?" Singular they that is. It is easier to think long term while feeling secure but not thinking long term can lead to becoming insecure. Not trying to make any moral or blame judgements here - just pondering origins of problems and solutions.

tombert 6y ago
I won't speak for anyone else, but I feel that I normally have reasonably good impulse control, even in 2016; I got into debt because a company I was working for ended up not paying me for multiple months and then shut down, and I didn't have much savings. I think my lack of impulse control came as a direct cause of me being broke. I had previously never seriously considered any kind of payday loan because I knew they were multi-thousand-percent levels of interest, but that part of my brain wasn't the one thinking. When faced with a really tough situation, I think it's common for your "survivalist" side to kick in. I never actually did get the payday loan because I was able to (begrudgingly) get a loan from my stepfather-in-law for the back rent, and I very luckily landed a decent-paying job shortly afterwards. I was absolutely one of the lucky ones. It's not hard at all for me to envision a universe where I was stuck in an endless cycle of debt, and honestly I still have nightmares about that time occasionally. Not fun.
tguedes 6y ago
This used to be a debate and it’s really not anymore. It was primarily the right that used to argue that the reason people committed crime was because of their attitudes and social norms. But with over the last few decades, large parts of white Midwest and Appalachia are facing the exact same circumstances that inner cities faced for decades. So even some conservatives have started to agree with the side of crime follows economics rather than economics follows crime.
sjwright 6y ago
There are many nasty feedback loops caused by severe poverty. Even the most basic things like being able to show up for a job interview in an arbitrary location at an arbitrary time wearing presentable clothing and a relaxed demeanour — try doing that when you can barely afford to use public transport and your daily schedule is rigidly monopolised by whatever terrible job/gig you currently rely upon to literally survive. For all the criticisms of UBI, I think it would be a net win simply because it eliminates the significant time wasted in maintaining welfare entitlement.

deleted 6y ago

[deleted]

hoophoop 6y ago

> I think being really broke greatly hinders your ability to think rationally. No: being really broke can cause a lot of anxiety that can lead to irrational behavior. But often a person has to choose between homelessness and crime and picks the latter as a rational choice, given the alternative. So please don't assume poor = "crazy" = criminal, it's a bit unkind.

sjwright 6y ago
When did tombert assume that poor = "crazy" = criminal? It's a bit unkind to take general thoughts about psychological pathways and unfairly reify them with the use of equality symbols.
- hoophoop 6y ago
  > When did tombert assume that poor = "crazy" = criminal? It's implied here: "I think being really broke greatly hinders your ability to think rationally." ...by putting that sentence out alone without clarifying the context. > psychological pathways > unfairly reify Are you feeling ok?
  - tombert 6y ago
    I'm sorry it wasn't clear but this seems like a needlessly pedantic distinction. I never said "poor = 'crazy' = criminal". I don't think poor people are inherently crazy, though I suppose that being mentally ill could conceivably hinder your ability to make a decent income, if we're being pedantic. I feel like you're assuming I said something that I didn't; I really don't think I was being "unkind". In fact, I was trying to have a pretty sympathetic perspective on this. If that was not clear then that's a failing on my end and I apologize. Yes, you could make an argument is the "more rational" decision is to commit a crime, I read Les Miserables, but keep in mind that my comment was in direct response to someone asking why unemployment led to violent crime, and I specifically did not exclude myself from any category.
  - sjwright 6y ago
    Implied? No, not even with the most uncharitable interpretation did tombert even imply that being poor makes you "crazy" or that being crazy makes you a criminal. A hindered ability to think rationally might only make one more impulsive or less able to consider long term consequences. You are literally accusing the writer of implying things which rely upon a context of your own making, not theirs.

alfiedotwtf 6y ago

> I think being really broke greatly hinders your ability to think rationally A lot of comments here seem to think that it has something to do with morals, but from living in poor places, what I gather is that people have no other options when they’re backed into a corner. If you’re unemployed and you need money for rent and food, what the he’ll are you going to do? Survival mode kicks in, and you’ll do anything to make the next day/week. This could include steeling (to consume or sell) and mugging people (actual money, but probably less of a problem in the near future with everyone using digital payments). Now throw into the mix drugs to numb to pain of living an abysmal life... which are astronomically expensive, so most of the time your only option is to steel and mug more.

kbenson 6y ago

> I debated reaching out to one of those payday loan places, despite the fact that I knew they were scams. They aren't scams, but they are only useful for a very narrow band of people in a very narrow band of circumstances. For the vast majority of people that want one of those loans, they are better off not getting it. It's entirely possible to get the loan and use it as intended, it's just the most the people that need it aren't in a position to do so, and the lenders go out of their way to make it real easy to just roll the loan over into a new ones that kicks the problem down the road to the next payday after this one.[1] 1: It's a dark pattern. "You borrowed $400 the other week and you owe use $500 today? How about we fund a new loan for $400 before your payment, roll that into your current payment, and all you have to do is pay the $100 difference this payday, and you can just pay it all next payday when it's more convenient?" Now, the lender has an installment plan for 700-1500% APR as long as they can get the client to keep doing that (but the client does have to choose to do it every time). At least, that's how it was a decade or so ago. I think it got even more regulated since then, and they can't charge 25% interest per payday anymore (you can likely thank the NY AG if so).

killjoywashere 6y ago
> you can likely thank the NY AG If I recall, the military had a heavy hand in that. When the payday loan industry has cut into military readiness to the point the generals are talking to Congress about it, it's gone a bit too far. edit (add ref): https://www.govinfo.gov/content/pkg/CHRG-109shrg50303/html/CHRG-109shrg50303.htm https://www.govinfo.gov/content/pkg/CHRG-109shrg50303/html/C...
nullc 6y ago
> use it as intended You mean that it's possible for some people to use it in a personally beneficial way. That is true without any need to get into intent. I think it's unambiguous that the predatory application is the actual intended usage-- since their business model doesn't make sense without it, they have a massive default rate that only gets paid for with the windfall customers that stay on the treadmill for a long time.

craftinator 6y ago

I've found that being poor actually sharpens the mind. It reminds you that if you don't eat, you'll die; clarifies that most laws are just rules crafted by the ultra rich to keep them in power; reminds you that many many people have way more than they need, and can afford to have some it go missing without longterm damage. It's very rational to choose crime over starvation or exposure, especially when our legal framework (US) is morally bankrupt. Why not turn to crime when crime really isn't such a bad thing compared to the other shit going on.

farrarstan 6y ago

Why on earth would you call that irrational?