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> 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 th

> 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...

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...