Is Payday Lending Worse Than Unprotected Sex?
Tyler Cowen asks the question:
The unprotected sex is riskier and less prudent than borrowing money at an annualized rate of two hundred percent. Why prohibit one and not the other? Many of the borrowers are being fooled, but others have legitimate reasons to seek the money, such as wanting to buy a birthday present for a visit to one’s child, living with a separated spouse.
Is it that sex is sacred but borrowing money is not? What if you’re borrowing money to catch a plane to go have sex? Isn’t sex a big reason why people might borrow money at high annualized rates? Aren’t “sex decisions” some of the least rational we make and the most prone to error?
When I use the ATM, often I am outside the network and thus I am paying annualized interest rates of over two hundred percent a year. Should someone (other than Natasha) stop me? Should they only stop me when I am younger and poorer than is the current Tyler? What about equality before the law?
Read the whole thing (and especially the link to The Case Against Elisabeth Warren.)
I point this out on the recent news Montanans will vote on I-164, known as the “payday loan initiative”, which will limit the interest rate on payday loans to 36% per annum. But as Tyler points out, the effective rate on a small ATM withdrawal can be much higher than that. Should the same restrictions be put on bank over-draft fees? How about late fees charged by landlords?
Of course, this law will most likely be passed with the support of those who really don’t have much experience with financial do-or-die moments in their lives – just as the no-smoking ban was passed by people who don’t rely on smokers for their livelihood.
For many folks, the alternative is pawning at your local hock shop, where Montana allows a 25% a month interest charge (= 300% annual rate).
One good reason to treat lending money different from unprotected sex is because of the enforcement problem. If you could buy unprotected sex at the neighborhood strip mall, demand for regulation probably would increase rapidly.
Hmmm? I wonder…
B & R Check Holders closes offices in state
Good ridence to bad rubbish. And before you start your holier than thou BS about how I have never had to use those services, don’t bother. I have and I wish to (diety of your choice) that I hadn’t. I have also had to bail a family member out of their loan from one of these loan shark outfits.
These people have been exploiting a loophole in the law and it is about time that someone closed that loophole making these “legal loansharks” disappear.
Exploiting a loophole in the law? What “loophole” would that be.
Of course, with the elimination of legal loan sharks we can look forward to the return of illegal loan sharks. You know, the kind that are really dangerous to do business with.
Seems to me kind of like the abortion argument that the left often makes – safe but rare.
This law, like the raise in minimum wage, is designed to make people feel good about themselves without having to understand the problem or the “solution.” The unions were behind increasing the minimum wage because it ends up reducing the number of workers and is also used for adjusting the union wages based on the rate set by law.
I am guessing that the pawn lobby is behind this one as well. If there weren’t so many people who need this service, there wouldn’t be as many pay day loan companies as there are.
But this is not just to be cynical. Former Congressman Pat Williams in his editorial, exhibited his ignorance of how to run a business. It’s quite possible that these do gooders are just stupid, not evil.
Oops, same thing when they have power.
I have a hard time taking this topic all that serious. To answer the question, I guess it depends on the need for and terms of the loan versus the smile factor of the sex.
Steve- I like how you equate doing good with evil. What a sick set of morals you must have.
WHAT, honey? You got another headache again tonight? Think I’ll go get me an unprotected loan. Sheesh. Only rightwingers could be that silly. Come on, guys. You can do better than this. Really, you can. In the world of fanciful analogies, this takes the cake. It’s Palinriffic!
I wholeheartedly approve of legal protection for those who know the essentials of contract law and compound interest to use that knowledge against those who do not. It’s only fair.
Ken, you are as dense as they come, and apparently deliberately so. And no, I am not going to look to someone like you for moral guidance.
I have standards.
I have never used the payday loan places – fortunately. I did get tied in with Household Finance Corp (HFC) back in the mid 70’s as a young married sailor with no credit history – the interest rate was around 30% as I recall.
So, just who uses these payday loans and for what reason? If you have a credit card, (not maxxed out) you wouldn’t need a payday loan most likely. If you have some savings, it’s doubtful you would need a payday loan. So, it would appear to me that the people that need these loans are people with no savings and no credit.
Why would you need a payday loan? Perhaps you got laid off and the electric bill is due. Maybe you do have a credit card and the payment is due and you have no money – the loan could be cheaper than the late fee. Perhaps your child needs to go to the emergency room or needs medicine.
These payday loans seem to me to be the last place a person would turn to when they need money. Just like HFC was for me 35+ years ago. I tried the banks, I tried the credit union, I didn’t have, or qualify for, a credit card.
So, just where will people get that “emergency cash” if these payday loan places are shut down? Perhaps they will remain in business with a cap of 36%. Perhaps not. If not, who is going to loan people that are a high credit risk the money they need?
Is this an example of a “free market”? Business supplying a product to people that need it? Or is it an example of pure, unadulterated greed with business taking advantage of people that can least afford it?
Dave – it seems that you are skeptical of the initiative process and are implying that people will vote on something without understanding what they are actually voting on nor the consequences, intended and unintended, of what their vote will accomplish.
Mike, you’re correct that I’m generally skeptical of the initiative process. My thinking has changed on that over the years. I once thought that ballot initiatives were a good way to keep the legislature in check. I think that’s still true for initiatives that put limits on government power or the construction of “negative rights.” But when it comes to public policy by initiative I have a deep problem with it since it often is nothing but majoritarian democracy that infringes on the liberties of the minority.
If you’re interested in a good analysis of why the conventional wisdom on voter participation and electoral outcomes often provide for bad government I highly recommend Bryan Caplan’s The Myth of the Rational Voter: Why Democracies Choose Bad Policies (New Edition)
It certainly bothers the hell out of me that more and more initiatives are on such specific policy-oriented questions which, at their core, are nothing but a governmental taking by majority rule. The game farms, the outfitters, and this initiative — all one in the same category of uncompensated seizure of property.
Travis, how does the outfitter initiative constitute “seizure of property?”
Craig, it’s a seizure, in my view, because people have invested lots of money based on a settled expectation that outfitter-sponsored game licenses will be available.
Landowners have leased their land to outfitters, who will go out of business and default on leases if their business diminishes, which undoubtedly will happen if this initiative passes. This has already happened in Idaho.
This is how a lot of small, rural communities survive — off the tourist hunting trade, especially now that their ability to drill or cut timber on public and private lands in the areas are hampered.
I was of a slightly different mind on this until I got out to the country and talked to the people most affected. Growing up in Great Falls, I can sympathize with those who complain that access is more restricted than in past generations. However, the whole notion that the initiative will somehow make land more publicly accessible is a complete red herring.
Travis, I disagree with your argument. A hunting license is not a right, it’s a privilege. No landowner is entitled to have guaranteed hunting licenses for payed outfitters. Landowners have no ownership rights to the public’s wild animals. You’re beginning to reason like Mark T.
correction: s/b paid not payed. Must have HUA today.
Craig — you are not actually addressing my argument, which is that a settled expectation exists on which people have founded numerous small businesses which, if this initiative passes, will surely go bust.
Merely saying that a hunting license is a privilege and not a right — I don’t disagree — is not in itself an argument for the initiative or against what I’m saying.
You appear to favor the initiative, and if that’s the case I’m curious to hear an actual affirmative argument for why you support gutting a policy that has encouraged small businesses, resuscitated some communities, restored game herds which end up being hunted not just by outfitters and their clients, and has lessened the burden of Fish & Game ops on the taxpayer. Rather apart from whether there is a “taking,” there are a large number of logical arguments in favor of maintaining the status quo which I have never heard rebutted.
Dave – Thanks for the book recommendation – looks like a perfect use for part of the Amazon gift card I have sitting here collecting dust.
Travis, those expectations are not property rights. They are mere hopeful dreams of a static condition that monopolizes a public resource for personal pecuniary benefit.
Actually, I am torn on the initiative. Locking up the best hunting and fishing to an exclusive few able to pay upwards of 10K for a publicly owned elk rubs me the wrong way. I feel for those trying to make a living by selling special access to quality game and fish owned by the public. If this keeps going say goodbye to hunting and fishing for everyone when there is no political base left to defend the experience. Why should there be a publicly funded fish and game dept at all if its all gone commercial? Might as well go the way of Texas and high fence with exotic animals. I don’t give a damn for the interests of out-of-state outfitters. In state ranchers that want to guide on their own property can advertise there services. Montana residents can secure those services any time they like. Out-of-staters receive their licenses beginning in April. Plenty of time to book a fall hunt if they wish. No need whatsoever to have guaranteed licenses that favor the out-of-state outfitters. The RMEF receives the majority of their funding from those money bag outfitters. That’s their reason to oppose the initiative.
Thanks Craig — that’s not at all a bad argument, and I actually know many people who are torn in just the way you describe.
Travis, tell ‘em to use duct tape, works for me.
I support this initiative.
The sooner these parasite businesses are gone, the better off Montana and its citizens will be. They feed into a vicious cycle of impoverishment, preying on the most poor, the most desperate, the most vulnerable elements of our society.
People under financial duress make bad decisions. These businesses exploit that duress.
Alan, what do you propose as an alternative for people under financial duress?
I eagerly await Alan’s answer too.
I wonder if an actuary has ever looked at this industry’s loss history to opine on an appropriate interest rate (premium) that would bring it in line with the loan profitability of other lending institutions making short-term loans where there is no asset to attach.
Dave, I fear it’s a ski mask and a Saturday night special. I was wondering today about the correlation of falling robbery statistics with the upsurge in payday loan outfits.
Craig …
Well said. Especially concerning outfitter’s special ‘rights’ to a national public resource.
~applause~
Wulfgar, thank you. I just don’t want to see the Texasification (kinda like Californication) of Montana’s wildlife experiences. The whole Cabela’s amenities properties lit my fuse a few years ago. This leasing to out-of-state outfitters is just another manifestation. Some of us had a lengthy discussion on this regarding several posts by Bill Schneider. Here is a link to one of them: http://www.newwest.net/topic/article/cabelas_desecrating_its_own_brand/C41/L41/
I don’t buy a damn thing from Cabela’s anymore.
Weathering the storm. Relying on family. Or obtaining charity, if available. Make the tough decisions.
The problem with the payday loan/title loan “service” is that the cure is often worse than the disease; the utilization of these services turn a short-term cash flow problem into a long term parasitic cash depletion. Most of the people who borrow this money would be better served by working through their immediate problem than becoming indentured servants to these rapacious companies who slip them into a cycle of dependency and increased poverty.
If you don’t get that, you have never had to use these places and you don’t have a lot of insight into – or compassion for – those who do.
Make no mistake; I firmly believe that the people who own these companies and who work at them are immoral and have no honor, and are the financial services equivalent of slumlords.
gregg, to answer your question with a couple of real life examples:
1. I believe that Ms X, an aging and very poor immigrant too proud to tell her adult children that she was behind on her bills and couldn’t afford Christmas presents for her grandhildren and so ended up spending over a thousand dollars in money borrowed to buy $150 or so of presents and $200 worth of bills, would have told her family of her problem and they would have helped her out, and she would have had more money each month for food and other necessities, and the stress wouldn’t have put her in the hospital where her children discovered her debt to these polite vampires and paid it off.
2.
2. Disabled Widower X would have had to borrow money from friends or eat leaner for a few days or pick up extra hours adn a meal or two from his kind boss at a local eatery, since he lived very low to the ground, but then would have started the next month with a fresh slate instead of starting the next month already behind and making payday loan after payday loan and getting further and further behind.
I htink sometimes that you people glibly forget that these are real people, desperate people. They don’t live on yur street. But they live here in Great Falls. And they suffer here. Some are victims of circumstance. Some are victims of crime or abuse or their own addictions. Many are victims of their own poor judgment and bad decisions. But none of these remove their essential humanity. And anyone who would take advantage of their duress is a monster. And that is exactly what these dirty companies do. Their so-called “service” in anything but. It harms those it is provided to in most cases.
And exactly what is the interest threshold for being labeled a “monster”? What an arrogant SOB to pass judgment so glibly. As long as the costs are fairly disclosed let people make thier own choices without nanny do gooders deciding for them. Most businesses sell consumers what they want not only what they need. When we start denying the poor cable TV, cell phones, alcohol, excess food ..ect I will buy Allen’s screed.
allen, here are the problems with your examples. They are built on assumptions, not reality.
– If people had the avenue to borrow from friends and family, that exists whether the payday loan is available or not. When people choose the loan over family, that is THEIR choice. Baffles me though when other options are available.
– When friends and family refuse to help for a variety of reasons, could be history with the individual, removing the loan option encourages darker recourse.
Instead of name calling why isn’t there more interest in peeling the onion. What is a fair interest rate to be charged by payday lenders to cover the risk factor from the pool of borrowers and make a reasonable profit for providing this service? I don’t know the answer to that but it seems to me to be a reasonable starting place to rationally discuss the issue. Also, write the terms of the service so that even a 5th grader could understand the obligations and costs.
Please remember that you are talking about several differnt issues and types of loans here. A delayed deposit check loan is usually for a term no longer than 31 days. A lender cannot use the proceeds of one delayed deposit to extend, renew or roll over an existing loan. For a term of 2 weeks, the lender will typically receive about $25 on a $200 loan.
Amazingly, most places actually make you PROVE you can pay that impressive fee and the loan itself, back in a short period of time. You must have things like a bank account and a source of income. A valid phone is mandatory. On a title loan it is harder. You must obviously have a vehicle, it must have valid insurance, and it must actually be worth something.
While I understand the compassion that causes the kneejerk reaction that these loans are evil, and cause a long term cycle of struggling to pay the sharks, I do not believe that our community will turn into utopia if these types of lenders are run out of town, which is what this bill will ultimately do. I believe that the members of our community with the means to obtain these types of loans also have the basic intelligence to make their own choices regarding their personal finances.
Personal choice and free interprise are cornerstones of our country.
I just do not accept that the people who choose to obtain one of these types of loans are so ignorant that they cannot understand the inherent risks, or choose for themselves if the cost is worth it.
Unprotected sex has a far higher pricetag, individually, and to our society as a whole, than payday loans will ever attain.
Oh, allen, could you identify the circumstances, including type and length of loan and lender, whereby poor ms. X got a $350 loan that ended up costing her thousands?
Craig, apparently you missed the part where I said that these were real life examples from here in Great Falls. They’re not based on assumptions. They’re based on the actual experiences of actual people I know. I think that if you peel this onion (and it certainly does stink!) you will find that these parasitic businesses can’t survive at a reasonable rate of interest.
Firefly, I am not going to reveal the identity of these people. Would you like me to reveal the name of the lender? I don’t mind doing that.
wolfpack, under your screed no consumer products or services would be prohibited or regulated.
By the way, I reached my opinion after study and analysis, and knowing not just the anecdotal evidence set forth above but also a friendship with a worker at one of these places. My opinions are niether glib nor kneejerk. And firefly and wolfpack I would gently suggest that it is a dangerous conceit to automatically assume opposing opinions haev been reached that way.
allen, the assumption is built into your examples as if they are representative of the usual situation.
I have done research too allen. I do not care about and did not ask for the identity of those individuals in your examples, I just question the size of the loan and the claimed amount of interest. If your examples are as you say, real people in this community, whom you know, then to cite specifics. Delayed deposit? Title loan? Terms of repayment? You an I both know what kinds of rules and regulations these business are held to by the State. So how was that specific loan structured is what I am asking.
OK, this is all just stupid. Both sides. Comparing a Payday loan to unprotected sex is moronic. Saying that not being able to get a payday loan will result in a life of crime is idiotic. Saying that getting a payday loan will cause life-long bankruptcy is imbecilic.
These things are like anything else. Smoking, drinking, gambling. Some people can do any or all of those things and never have a problem. Some people can’t. As long as the TERMS of the loan are disclosed up front, there’s NO GOOD REASON these loans should be illegal. Personally, I think some of these guys are really slimy individuals who take advantage of their clients, but some are not. The same thing could be said of pawn brokers, car salesmen, lawyers, and virtually any other profession. Defining a business by it’s lowest common denominator is ludicrous.
Oh, and by the way, I have unprotected sex as often as I can. With my wife. The only concern I have about it is adding to my growing brood, which I consider a very good thing.
Anonymous, all those hyperbolic straw men are sneaking up on you.
LAWYERS?!?
“I think that if you peel this onion (and it certainly does stink!) you will find that these parasitic businesses can’t survive at a reasonable rate of interest.”
If that is true, and we take your assumption about what is “reasonable,” then your solution for people who need a small, short term loan is…No.
I will gladly proffer an answer as to what would be better. The Mafia. I remember when the Mafia would loan money, the highest rate of interest they asked was twenty percent. Why? Because the Mafia had morals. These payday lenders do not. It’s a sad state of affairs in this country when the Mafia is a role model. But that’s where we’re at. The Mafia understood that usury was frowned upon by the general public. My how times have changed. And my how the Republicans have embraced usury. Greed is good, right? Especially when it trickles down.
Joe Blow, I think you have transcended to Joe Bullshit. As to the Mafia: http://answers.yahoo.com/question/index?qid=20071005103310AApAblQ
The collateral on a Mafia loan is one’s life. Bow Jobe, go sign up.
Are you not aware of DEMOCRAT Joe Biden’s cozy relationship with credit card companies?
Mr. Moore, as a kid I had the experience of actually knowing folks who borrowed from the Mafia. The interest rate fifty years ago WAS twenty-five percent. Take my word for it.
And the reason I point this out is to show WHAT has become respectable in Republican circles. That’s all. And to make the comparison that all bets are now if. Anything is acceptable and considered legitimate as long as it receives the Republicans seal of approval, even unblievable usury rates. You, sir, along with your chorts, have sold your souls. That’s all. I’ll answer the question before asking it. You have no deceny. Sorry to be so blunt.
Sorry for typos. I’m quite angry as you can tell.
And just one more thing. “The collateral on a Mafia loan is one’s life”. Oh really? Just WHAT is the difference between that and debt collectors? I see that from your quite comfortable perch, you have never had the pleasure of dealing with debt collectors. One’s “life” is equally as over I can assure you. I have the utmost outrage for those who steal from the impoverished. It is the most reprehensible kind of theft there is. And wholey sanctioned by our godly Republican Party!
“Just WHAT is the difference between that and debt collectors?”
Um, really? Well, in one case you get judgments against you, people try to seize your stuff for money you owe, and maybe you file bankruptcy and all your creditors get hosed.
In the other case, you’re dead.
Look on the bright side, Republicans have been elevated from Hitler to the Mafia! That’s got to be a step up, right?
Not true, Gregg. You, with all due respect, should know that bankruptcy, thanks to Republican sponsored legislation, is no longer as easy as that. And you should also recognize an uneven playing field, at least for honesty’s sake. It used to be that bankruptcy was as easy as you say, but no more. But my larger point is this. Stealing from the already impoverished is the lowest form of life there is. For example, a guy who steals a poor man’s car has eliminated his ability to get to work, thereby destroying the man’s life. When a person gets to the point that they must use these so-called payday loans, lets be honest and call their situation what it is, abject poverty. Now, what kind of person preys on victims? I think we know. We’ve seen it discussed above. I could not stoop that low, even if my own survival depended on it. But that’s just the way we poor folks are.
When CREW compiled the numbers the top 3 pigs at the feed trough provided by the payday loan industry were all DEMOCRATS: http://www.citizensforethics.org/files/CREW%20Payday%20Report.pdf
Blow Jobe, you are full of it.
MMr. More, that is very interesting, but does not change my views. I would still argue that this is a Republican agenda item. In other words, profit for the sake of profit and morality be damned. Now, let’s see where the state parties come down on their support for this initiative. Darn your good with your info checks though. I hate that.
It’s truly amazing how the secular-progressive-liberal Left adamantly knows they’re right even when the actual facts suggest otherwise.
In addition, it’s just plain goofy for JB to base his moral superiority on the premise that being murdered is equivalent to filing bankruptcy.
While the information that Craig Moore provided is technically correct, it’s misleading. What he’s showing is the payday loan industry’s response to calls for increased regulation by Democrats. Increased regulation that the Republican party is opposing.
.That is absolutely NOT what I said, Mr. Pack. I said that financially destroying a person is the same as murdering that person. And in fact, many times, the results are the same. Taking away a person’s means of survival is the equivalent of murdering that person. I mentioned nothing about bankruptcy being the same as murder. And my analogy is much closer to the mark than the silly unprotected sex one used above. Think about it.
Walter – Does that mean that Nehemiah was a secular-progressive-liberal in his extolling that God would have us ban all charging of interest to our fellow countrymen?
Yes, according to the Mitzvah (Commandment) Lev. 25:37, it is forbidden for Jews to charge interest from fellow Jews.
This Mitvah (Commandment), as are all the 613 Commandments, are only binding on those at Sinai, their descendents and those who voluntarily accept them through conversion.
Up above I mentioned Joe Biden, bigtime DEMOCRAT and VP. http://www.huffingtonpost.com/jackson-williams/joe-biden-true-friend-of_b_120776.html
As with payday loans BOTH parties are enablers. Blow Jobe, your attempt to “pin the tail on the R’s,” and take a holier than thou position, is pure bullshit. That pin skewers many powerful donkey D’s. While you demonstrate your lame attempt at politics, those donkeys play you for a chump. Hilarious! Remember it was those donkey D’s who made the deal with the drug companies to garner their support and dropped the public option in healthcare reform.
If its good enough for the Jews , shouldn’t it be good enough for the rest of us too?
Joseph Blow- I suspect this topic strikes a little too close to home for you to be rational. Do you see yourself as a victim? A victim who refuses to accept responsibility for his poor choices by blaming others.
Craig- trouble is sometimes some dems lose their moral compass and act like republicans, but the partisan breakdown of the recent banking reform act tells the story.
Ken, no it doesn’t. The reform bill built by the donkey D’s NEVER got to the heart of the bank problem. It is form over substance. See who the top 3 recipients are here: http://www.opensecrets.org/industries/indus.php?ind=F
Schumer, Charles E (D-NY) $4,114,389
Gillibrand, Kirsten (D-NY) $1,840,350
Reid, Harry (D-NV) $1,686,057
By the way some of your lost donkey D’s are having serious troubles: http://news.yahoo.com/s/ap/20100731/ap_on_go_co/us_waters_ethics
craig- Republicans and your corporate masters do everything in your power to stop and/ or water down all reform and then when milk toast compromise finally gets past as the best we can get , you yell the loader5 how the dems sold out, you bunch of hypocrits. This country is screwed , you win.
Ken, obviously you don’t read before embarrassing yourself. The political fingering point started here with Joe Blow at 44. Look at 61 where I said, “As with payday loans BOTH parties are enablers.” Actually Ken, YOU are the hypocrite for ignoring the facts and embracing emotional hyperbole over the truth. Obviously, you got nothing else.
Craig- you do a real good Mark T. impersonation there. One of his main points is that both parties are responsible for all the mess, so I wonder why you attack him so much?
Ken, apparently you have no grasp of the titled topic or any of the substantive commentary. As I said, you got noting else. Absolutely hilarious!!!
Gregg wrote:
“your solution for people who need a small, short term loan is…No.”
Absolutely, if “No” means “No, not from payday lenders and their ilk.”
Of course, you are looking at it from the wrong perspective. My solution for people who need housing when the only rentals they can afford are offered by absentee slumlords who offer the lowest rent in town because they ignore their obligations under the landlord tenant act and don’t maintain their property, leaving it dangerous and unsanitary, is “No, you don’t get to rent this rat-infested, moldy firetrap with exposed wiring within your children’s reach from this slumlord.”
Perhaps you and wolfpack and firefly honestly believe that if poor desperate people want to “freely” enter into contracts to live in unsanitary slum apartments, that’s their choice, and the legislature should get out of the way of the free enterprise system and revoke the landlord tenant act. Because it’s the same thing.
Listen, I am a strong adherent to the school-house rock cartoon expressed idea that the Constitution guarantees our freedom to have the chance to succeed, and sometimes, to fail (cue Wile E. Coyote falling off Mount Rushmore). But even Republicans have to recognize that some limited legislation aimed at protecting the powerless from exploitation is an appropriate part of the governmental scheme in a Republic which prefers as much of a free market system as is conscionable.
Alan, you didn’t address the issue, though. Look, if you proponents of the initiative could drop the emotional attacks and climb down off those white horses for a minute, we can at least discuss this.
You said that you don’t think that a business can provide these small short-term loans at a reasonable rate of interest and survive. In that case, you are essentially saying that the people who now receive them, not just those who had problems with them, but all people who now receive them cannot get these loans anymore.
You can say, “hey, that’s great. These bad guys are out of business, and we’ve rid the world of these evil doers who pray on the poor, unfortunate souls who need small short-term loans.” Fair enough.
Now, these poor, unfortunate souls who need small short-term loans just won’t get them. No one seems too concerned about what they’ll do instead. No doubt these poor souls will thank you and your “ilk” for the protection while they’re weathering the storm…relying on family.or obtaining charity, if available…or making the tough decisions.
So because a person is poor, society should make these decisions for them.
firefly, I am wondering why the ban advocates don’t press for greater regulation and keep the option. Allen talks about renting of substandard housing. Laws were put in place to address the problem, NOT ban rental housing.
M point exactly, Craig. That is why I used the Mafia example. Back in the fifties and sixties, the Mafia charged twenty-five percent interest on loans, and Americans believed that to be outrageously usurious. What has changed? I haven’t. I remember. The change that has occurred is that theft has become acceptable business practice, promoted almost wholely by Republicans.
Alan’s choice is a false one. It is not logically reasonable to compare safety of life regulations in housing with regulations that limit economic choices deemed unwise by Alan. As I said before, Alan, I’ll follow your logic when you get behind removing all bad choices from the poor not just picking and choosing based on your individual values. Sometimes short term loans are necessary when living check to check. When you are broke, have no family who will loan you money and need to get to work on time to keep a job; these loans are easily worth the cost.
Blow Jobe, are you not aware of history and how the Mafia was instrumental in getting JFK elected?
Yes. And assassinated too.
Joe Blow, your mafia example is factually incorrect. The mob, even to this day, usually charges 3% per week compounded weekly. The vigorish on an overnight loan for a bet is typically 3%. Juice loans, as they’re called, have an APR of roughly 350% – which is higher than a payday loan. Of course, if you default on a payday loan you get turned over to collection. If you default on a “vig” loan you get turned over in your hospital bed.
Informing us that the mob “has morals” is the most laughable thought in this thread so far. Obviously you’ve never lived in a large eastern city.
So, what we can expect, as the incentives to make high interest rate loans becomes limited, the black market on these loans will grow.
I don’t know anyone in the mafia. Can I google them if I need a loan? Will I need proof of income and a bank statement or do they just give you the money?
Firefly, google won’t do you any good. All you have to do is find a bookie because they’re “the guy who knows a guy.”
And no, you don’t need proof of income. You need a “reference” though – probably from someone you wouldn’t otherwise use as a reference on a job application – as in the aforementioned bookie.
But don’t worry. If the incentives are right you’ll be able to find one.
Gregg said:
“Alan, you didn’t address the issue, though . . . . Now, these poor, unfortunate souls who need small short-term loans just won’t get them. No one seems too concerned about what they’ll do instead.”
Actually the issue here is whether payday lenders and similar businesses are bad, not how to solve the greater problems temporary cash shortages due to unforeseen circumstances or bad money management by the poor and the desperate.
You arguments are the same, in import if not degree, as arguing, when Socrates is confronted with a cup of poison, that he must be allowed to drink it; otherwise how will he quench his thirst?
The loan services are harmful. If they can be regulated into reasonableness, I am not opposed to that, contrary to what Craig suggests. But we all have good reasons for believing otherwise, including the statements of the business owners themselves.
firefly said:
“So because a person is poor, society should make these decisions for them.”
Honestly, firefly, did you really think this through before posting? Society has a duty to protect, through government, those who are powerless in the market from being unduly taken advantage of. Do you oppose child labor laws? Do you oppose the concept of minimum wage? Do you oppose overtime laws? Do you oppose insurance fair claim handling requirements? Do you oppose contracts of adhesion being construed against the drafter? Do you oppose the concept of invalidating contracts which are unconscionable? These laws are all settled and intrinsic to our state of government and our American tradition. These laws are not an unreasonable restriction on the right of the poor to contract or govern their affairs. They are a reasonable restriction on the ability of the powerful to oppress the weak.
Maybe another option is that some of these folks will get help from one of the credit councilor programs that help repair and establish some modest credit for poor folk. We could be helping that system a bit.
Alan, that’s my point. You don’t seem too concerned about what really happens to these people. You just don’t like the lenders. In other words, as I said earlier, your solution for people who need a small, short term loan is…No.
Your impression of my lack of concern is based on a logical fallacy, gregorius maximus.
My opposition to people being taken advantage of is based on my concern for them, and my sincere belief that these loans leave people worse off than the original transitory crisis or need or desire which motivates them to borrow.
Your logical fallacy is in ascribing to me your belief that these loans represent a net gain, even if a small one, to people who need money right away, even if they have to pay an unfair price to get it.
I don’t believe that. I believe that the loans hurt people. That they cause a net loss to the people who borrow, even after factoring in any gain or good achieved by meeting the tempoary financial need. Stopping the ability of lenders to make such loans protects these people. The net suffering and loss of the potential borrowers from the initial crisis is be less than the ongoing costs and losses imposed on themm and their families.
Therefore, by getting rid of these monsters, there is one less adversity such people have to contend with. It does not logically follow that because I advocate helping people by removing one menace that I am apathetic to their other problems.
Perhaps I am not giving you enough credit. Perhaps you agree with me that payday lenders are scum and have a genuine concern to find alternate solutions to help the poor and the desperate find other ways to obtain assistance for temporary financial crises. If so, though it seems kind of odd for you to poke at me for not offering solutions while offering none of your own. Do you have some?
in any event, as a cosnervative, I do not believe it is actually incumbent upon me or the government to solve everyone’s personal problems. Perhaps you, like our fellow Americans in the Democratic party, believe there is a governmental solution to the problem of some people’s temporary cash shortages. For me, though I believe in freedom, and I believe that, once people are protected form being unduly taken advantage of, as is the case with these lenders, then they ought to have the freedom and responsibility to suffer from their own bad choices.
I think Ken has a good idea, and I would support governmental incentives in that direction, but for the fact that we have a serious an unaddressed fiscal problem with our national government. I do think high schools ought to have personal financial management education classes.
Dave, I think that my argument IS factually correct. The interest rates that you present are from today, are they not? I was talking about the rates from the fifties when I was a kid in a large western city. And although I never used the services of the Mafia, I knew folks who did. Twenty-five percent was it. Again, what has changed? Usury has become an acceptable business tactic and is conducted without shame. This I cannot believe.
Those who could not get a legal loan at 36% or 42% a year could secure a cash advance from a mobster at the going rate of 10% or 20% a week for small loans. Since the mob loans were not usually secured with legal instruments, debtors pledged their bodies as collateral.[8
Taken form wikepedia. Just google mafia loan rates from the fifties. You’ll find it. You see, the conservatives have greatly improved on the Mafia model of loan sharking. p.s. There’s also a great history of loan sharking and predatory lending. But you see, since conservatives are enamored of money anyway, money becomes the end all. Example. A friend who lives in the Paradise Valley tells me that MANY of the rich folks living there gained their welth through drug deals done elsewhere. They scored big drug deals, and retired to Montana to be respected citizens! True story.
Joe, I think your full of shit. I have a better idea. You provide the “proof.” But, beyond that, saying that the mob had morals – even in the 50s – is just so laughable you can’t be taken seriously. Then, to blame it on conservatism just shows that you were dipped in the stupid pond.
Alas, finally Joe’s argument collapses under the weight of his own financial ignorance.
After touting the Mafia’s “moral” 20% interest rate, we now learn it is a weekly interest rate. Joe, you’re a mathemagician, please annualize your 20% weekly rate for us.
Oh, and he knows a guy who says that “MANY” rich people were drug dealers…so they must be conservatives.
I’d call him an idiot, but…really? Do I really have to do that?
Alan (assuming you are the Anonymous, above), I simply think your point of view is incredibly paternalistic, and I think you fail to give people enough credit (no pun intended) to let them make their own decisions.
Paternalistic is an excellent word. I can understand your compassion, allen. I don’t agree with your stand that people who choose to get a short term loan are powerless victims being wronged by parasitic monsters.
No offence to the legal crowd here but I find it some what ironic that an attorney is accusing other businesses of being “parasitic monsters” when that is what most of the general public considers attorneys. I don’t think that assessment is generally fair just as I don’t think it’s a fair label for payday/title lenders.
People, regardless of intelligence, find themselves in sticky situations. Some people get caught in the downwardly spiraling ride that payday loans can become.
With that said my problem is with the initiative process. These are complex issues that people with limited knowledge are expected to vote on. We elect representatives that we feel are smart enough to weigh these problems for us.
Hmmm…much to ponder.