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Dang doesn't represent YC's accelerator/investments arm (i.e., he's an employee engaged to run HN, not a YC partner who makes investment decisions or official Y

Dang doesn't represent YC's accelerator/investments arm (i.e., he's an employee engaged to run HN, not a YC partner who makes investment decisions or official YC announcements). But here's an article from 2016 about what LendUp was trying to do back then: https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn:pYGg https://techcrunch.com/2016/01/22/the-loan-dolphin/#.4sfbucn... I don't know much about LendUp at all, but I do remember the surprise - and feeling it myself - when it was announced that YC was funding a payday lending company. Then I remember the thinking behind it being explained (perhaps on HN, perhaps elsewhere) and seeing that the founders seemed to be making a sincere effort to offer something that was at least just less-terrible than the existing payday lending options around (many of which involve dealing with crime gangs), which made me think "OK, I guess it's worth a try". I presume YC thought the same thing when they invested almost ten years ago. If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before, I still don't think it's reprehensible that YC thought it was worth backing founders that seemed to be making a sincere effort to try.

emodendroket 5y ago
I don't think it's true that the only alternative is loan sharks. It's mostly "traditional" payday lenders, many of which are owned by the big banks (through a couple layers of obfuscation to cover up the stench).
- tomhoward 5y ago
  I edited my comment to tone down the implication that it's only loan sharks. That said, the "traditional" payday lenders all turn out to be quite predatory, don't they? (I understand that's what the original founding premise of LendUp was intended to address, even if they couldn't make it work.) But aside from that, will the traditional payday lenders lend to everyone and anyone, no matter their circumstances? If not, what are the options for people who they won't deal with?
  - emodendroket 5y ago
    Sure, I would agree with that characterization. But apparently LendUp was even more predatory, to the point that regulators shut it down. So in retrospect, I think we need to take the claim that they wanted to create a kinder, gentler kind of lending with a grain of salt.
    - tomhoward 5y ago
      The claim we’re addressing in this subthread is that in 2012 YC knowingly invested in a company that intended to be predatory towards military personnel, such that it would end up being shut down by regulators, implying that YC was both deeply unethical and deeply stupid. Are we really to believe that YC was being as unethical and stupid as this claim requires us to?
      - emodendroket 5y ago
        "Knowing," "intended [at the time]", "would end up being shut down by regulators" are all your embellishments. The claim is "YC funded a payday lender that targeted active duty military service members." As far as I can tell, that is true, regardless of how pure anyone's intentions were at the time. The defense on offer is that the founders left the company between funding and now, but it is not very compelling given the timelines.
        tomhoward 5y ago
        The last part of that comment is quite obtuse. Can you state simply and clearly, what, if anything, YC did that was unethical?
        emodendroket 5y ago
        "Unethical" again another embellishment. Perhaps this was simply a case of poor judgment, which isn't unethical to have.
coderintherye 5y ago
>If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before This is a disingenuous response because this space is highly competitive and most of the big names in it have not gone out of business due to flagrantly breaking the law. Just because LendUp broke the law and went out of business does not mean there are no sustainable, legal entities operating in it.
- tomhoward 5y ago
  You could have added your perspective without describing my response as "disingenuous", i.e., dishonest. I said very clearly I have no specific knowledge on LendUp. I also know little about the space (apart from that it's a nightmare). The only specific insight I have here is on YC's history and ethical track record. That said, can you educate me and other readers by linking to examples of companies that are doing well in this space (specifically, offering a better lending option than payday loans in the U.S.)?
  - coderintherye 5y ago
    Ok, we first have to start with acknowledging there are two different things under discussion: * Sustainable, legal lending businesses operating in the payday loan space * Better lending options than payday loans I am not an expert in either of these [though I have worked with numerous people who are experts in these] so will not make blanket statements (which is why your statement was disingenuous, rather than saying look I don't know anything about this you instead chose to make an authoritative statement indicating sustainable business was not possible in this industry which is untrue) about them, rather only indicate some of the information available: In the first group you have companies like: * Enova [CashNet USA] - Had CFPB enforcement * Avant - Also from a YC founder, had FTC enforcement action * OneMain - Caps interest at 36%, actually has a carve-out in California lending law These companies have been operating sustainably for years and looks like business is booming for them. Note how despite receiving enforcement action they were not shut down nor called "cheaters" by the CFPB like LendUp was? This is indicative that one can commit predatory actions in this industry and still be sustainable. Now for the second group of better lending options than PayDay loans, that's a very wide field but let's assume we want to specifically discuss people who would otherwise be going for a PayDay loan. I'm going to link here to NerdWallet which actually has great overview of options: https://www.nerdwallet.com/article/loans/personal-loans/alternatives-to-payday-loans-in-crisis https://www.nerdwallet.com/article/loans/personal-loans/alte... Specifically, I would call out local credit unions as being a "good" option that is often overlooked despite providing a ton of loan capital in the U.S. There are also a number of non-profits working to try to help people fall into the Pay Day loan space, in which I would specifically call out SaverLife https://about.saverlife.org/ https://about.saverlife.org/ Arguing whether or not PayDay loans are good (ethical) or not is subjective, as others have noted a high-interest loan can often be better than no loan, but what I would personally argue is that continued and improved government support for credit union payday lending (e.g. https://www.ncua.gov/support-services/access/advancing-communities-through-credit https://www.ncua.gov/support-services/access/advancing-commu... ) as well as more available physical lending options (e.g. Go to the Post Office for a loan) are very much worth exploring and supporting.

emodendroket 5y ago

I don't think it's true that the only alternative is loan sharks. It's mostly "traditional" payday lenders, many of which are owned by the big banks (through a couple layers of obfuscation to cover up the stench).

tomhoward 5y ago
I edited my comment to tone down the implication that it's only loan sharks. That said, the "traditional" payday lenders all turn out to be quite predatory, don't they? (I understand that's what the original founding premise of LendUp was intended to address, even if they couldn't make it work.) But aside from that, will the traditional payday lenders lend to everyone and anyone, no matter their circumstances? If not, what are the options for people who they won't deal with?
- emodendroket 5y ago
  Sure, I would agree with that characterization. But apparently LendUp was even more predatory, to the point that regulators shut it down. So in retrospect, I think we need to take the claim that they wanted to create a kinder, gentler kind of lending with a grain of salt.
  - tomhoward 5y ago
    The claim we’re addressing in this subthread is that in 2012 YC knowingly invested in a company that intended to be predatory towards military personnel, such that it would end up being shut down by regulators, implying that YC was both deeply unethical and deeply stupid. Are we really to believe that YC was being as unethical and stupid as this claim requires us to?
    - emodendroket 5y ago
      "Knowing," "intended [at the time]", "would end up being shut down by regulators" are all your embellishments. The claim is "YC funded a payday lender that targeted active duty military service members." As far as I can tell, that is true, regardless of how pure anyone's intentions were at the time. The defense on offer is that the founders left the company between funding and now, but it is not very compelling given the timelines.
      - tomhoward 5y ago
        The last part of that comment is quite obtuse. Can you state simply and clearly, what, if anything, YC did that was unethical?
        emodendroket 5y ago
        "Unethical" again another embellishment. Perhaps this was simply a case of poor judgment, which isn't unethical to have.

coderintherye 5y ago

>If it turns out that there's no possible way of making a sustainable business in this space that's less-terrible than that was there before This is a disingenuous response because this space is highly competitive and most of the big names in it have not gone out of business due to flagrantly breaking the law. Just because LendUp broke the law and went out of business does not mean there are no sustainable, legal entities operating in it.

tomhoward 5y ago
You could have added your perspective without describing my response as "disingenuous", i.e., dishonest. I said very clearly I have no specific knowledge on LendUp. I also know little about the space (apart from that it's a nightmare). The only specific insight I have here is on YC's history and ethical track record. That said, can you educate me and other readers by linking to examples of companies that are doing well in this space (specifically, offering a better lending option than payday loans in the U.S.)?
- coderintherye 5y ago
  Ok, we first have to start with acknowledging there are two different things under discussion: * Sustainable, legal lending businesses operating in the payday loan space * Better lending options than payday loans I am not an expert in either of these [though I have worked with numerous people who are experts in these] so will not make blanket statements (which is why your statement was disingenuous, rather than saying look I don't know anything about this you instead chose to make an authoritative statement indicating sustainable business was not possible in this industry which is untrue) about them, rather only indicate some of the information available: In the first group you have companies like: * Enova [CashNet USA] - Had CFPB enforcement * Avant - Also from a YC founder, had FTC enforcement action * OneMain - Caps interest at 36%, actually has a carve-out in California lending law These companies have been operating sustainably for years and looks like business is booming for them. Note how despite receiving enforcement action they were not shut down nor called "cheaters" by the CFPB like LendUp was? This is indicative that one can commit predatory actions in this industry and still be sustainable. Now for the second group of better lending options than PayDay loans, that's a very wide field but let's assume we want to specifically discuss people who would otherwise be going for a PayDay loan. I'm going to link here to NerdWallet which actually has great overview of options: https://www.nerdwallet.com/article/loans/personal-loans/alternatives-to-payday-loans-in-crisis https://www.nerdwallet.com/article/loans/personal-loans/alte... Specifically, I would call out local credit unions as being a "good" option that is often overlooked despite providing a ton of loan capital in the U.S. There are also a number of non-profits working to try to help people fall into the Pay Day loan space, in which I would specifically call out SaverLife https://about.saverlife.org/ https://about.saverlife.org/ Arguing whether or not PayDay loans are good (ethical) or not is subjective, as others have noted a high-interest loan can often be better than no loan, but what I would personally argue is that continued and improved government support for credit union payday lending (e.g. https://www.ncua.gov/support-services/access/advancing-communities-through-credit https://www.ncua.gov/support-services/access/advancing-commu... ) as well as more available physical lending options (e.g. Go to the Post Office for a loan) are very much worth exploring and supporting.