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Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
If people didn't want these loans, the companies would not exist. If the loans were capable of being serviced at a lower rate, then new companies would form to offer lower fees and charge less interest. The biggest blocker to the latter, ironically, is regulations that aim to prevent new payday loan companies from forming by requiring compliance with industry best practices.
This is a classic example of "regulation made the problem worse, let's add more regulation and see if that fixes it."
[1] https://files.consumerfinance.gov/f/documents/CFPB_Proposes_...
Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
> Which consumers is the CPB protecting? Those very same consumers. Large, established players do not want to even touch that customer base because it represents a high risk and a low payoff. These are the only financial services these people have access to. Cutting that off is not a solution. Encouraging competition and increasing the number of players will reduce the "obscene fees". People aren't stupid, they'll al…
The first thing that really struck me in the book is that there are more payday lenders and check cashers in the United States than McDonald's and Starbucks combined. Is that true?
How much more competition do you think there can be? And if "These are the only financial services these people have access to" and "fees are high because because it represents a high risk and a low payoff", why do you think the fees will be lower without regulation?
Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
(1) It's the CFPB (Consumer Financial Protection Bureau), the headline provided a description not a name (titlecase makes this ambiguous, though the body provides the correct name.)
(2) It's not protecting anyone; the administration is hostile the CFPB mission. It is being neutralized from within.
Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
Arguably, the consumers that the CPB is protecting is those who are aware of the fees and conditions but still require payday loans, who would be excluded from consideration by the new rules [1], which do not change the interest rate requirements but exclude some customers from eligibility. If people didn't want these loans, the companies would not exist. If the loans were capable of being serviced at a lower rate, t…
Here is the best argument in favor of the change: >> if the rule had kicked in, some two-thirds of borrowers wouldn't qualify for a payday loan If the above is true (and not fake news), I would like to understand how the industry was expected to survive with 2/3rd of its customer base taken away in an instant; and what alternative services these customers would have been routed to...
But there still exists a credit system for those borrowers. It's called paying late.
It might be mean to landlords to make them, essentially, the lenders of last resort. But just because you accounted for something more accurately, by forcing people to take payday loans to not get evicted, doesn't mean you have achieved a normatively positive thing.
Here is the best argument in favor of the change: >> if the rule had kicked in, some two-thirds of borrowers wouldn't qualify for a payday loan If the above is true (and not fake news), I would like to understand how the industry was expected to survive with 2/3rd of its customer base taken away in an instant; and what alternative services these customers would have been routed to...
Big benefit for payday lending companies who charge obscene fees mostly in poor and minority areas of the country. Which consumers is the CPB protecting?
Arguably, the consumers that the CPB is protecting is those who are aware of the fees and conditions but still require payday loans, who would be excluded from consideration by the new rules [1], which do not change the interest rate requirements but exclude some customers from eligibility. If people didn't want these loans, the companies would not exist. If the loans were capable of being serviced at a lower rate, t…
Careful, you can justify all sorts of scams this way. Just substitute any kind of illegal or misleading behavior. Eg., to take it to an extreme: If the people didn't want the Nigerian prince scam, they wouldn't keep it going!