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Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

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Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#71

Post by CydeWeys »

andrewla wrote: post #12
SpikeDad wrote: post #2

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…

> 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.

I'm not sure many such people exist. Surely the vast majority of payday loan companies' customers are not these kinds of people, but rather, people who are being taken advantage of.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#72

Post by darkpuma »

seibelj wrote: post #56

There is still no law against spending your entire paycheck on lotto tickets, nor taking out a loan and spending it entirely on lotto tickets. The government seems to pick and choose what mistakes they allow their citizens to make.

With modern advances in law enforcement techniques for dealing with organized crime, the legality of state run lotteries should be revisited. The continued operation of numbers games in immigrant communities probably has more to do with inadequate policing in those communities than it has to do with lack of awareness for state lotteries.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#73

Post by CydeWeys »

i_am_proteus wrote: post #54
braythwayt wrote: post #28

Earlier quoted context omitted.

If you read the article, there's a little more nuänce than that. One thing listed right up front is a limit on how many times a lender can try to withdraw funds from your account. If they have, say, a $200 NSF charge, and your payment bounces, they can try every business day, racking up $1,000 a week in NSF fees. Companies that do this kind of thing aren't trying to collect their original payments in good faith, they…

Nonetheless, payday lenders are not exactly making money hand over fist. Predatory practices to recover as much money as possible are, in aggregate, a reflection on the risk profile (i.e. staggering default rate) of these borrowers. Prohibiting these practices with no replacement measures just raises the rate or reduces loan availability. Realistically, people who can't get even a (legal) payday loan often turn to pl…

> Nonetheless, payday lenders are not exactly making money hand over fist.

Even assuming this is true, which I doubt, am I supposed to care that predatory lenders are suffering? It'd be good if they shut down. I'm all for making them unprofitable.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#74

Post by foobiekr »

dawhizkid wrote: post #29

Is getting paid daily vs biweekly actually the antidote to payday lending? There's a few Silicon Valley cos that enable this and they seem to have become really popular. Could it really be that simple?

Could you share which companies you are referring to?

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#75

Post by calvinmorrison »

CydeWeys wrote: post #67
rayiner wrote: post #59

The rules were misconceived to begin with, by people who mistook the symptoms for the problem. There is a ton of competition in payday lending—there is zero reason to believe that payday lending rates are higher than the efficient amount. There is no hint of market failure, systemic risk, or any of the other criteria that typically justify regulating financial institutions. That means this rule wasn’t really a consum…

Payday lenders are predatory. They want to get people locked into a cycle of debt, so that they can charge many times the original amount in interest per year . I'm surprised to see anyone defending them.

Honestly, they're providing a service and there are customers. Walter block who is a noted austrian-school economist did a fun set of books called "Defending the Undefendable" where he runs through thought experiments about Slumlords, Payday Lenders, Pimps, etc. I'm not asking you to agree with him, or start defending pimps but reading through some of those is a fun way to get a different take on things. Book is available in print but also below for free from Mises:

https://mises-media.s3.amazonaws.com/Defending_the_Undefenda...

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#76

Post by CydeWeys »

jdavis703 wrote: post #43
dawhizkid wrote: post #29

Is getting paid daily vs biweekly actually the antidote to payday lending? There's a few Silicon Valley cos that enable this and they seem to have become really popular. Could it really be that simple?

No. I have family who have/had payday loans. From my personal experience they're taken up because an emergency happens, not because the money ran out 2 days before payday. A daily payday drip might make sense for some consumers, but what's really needed are accounts that start to build up an automatic emergency fund, and perhaps also look at past banking history to quickly give an emergency loan that is automatically…

There's been some success with lottery savings accounts in other countries. The idea is that it's very hard to get people interested in saving if they'll only see a handful of bucks per year in interest on the kinds of amounts they'd be saving, but if that saving instead enrolls in a lottery they could see a huge return.

Basically, turn small predictable gains into smaller predictable gains plus much larger unpredictable gains, so that people start redirecting money spent on the lottery (which is a big net negative for them) into money in savings accounts (a net positive for them). And then, as a bonus, they also have money saved up for an emergency.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#77

Post by larrywright »

dlp211 wrote: post #64
larrywright wrote: post #52

Earlier quoted context omitted.

How exactly does that work? Person A had an unexpected expense and needs a little help, so we just take it out of the pocket of Person B, who happens to be the nearest wealthy person?

If that was what payday loans were actually used for then their existence would be a little bit easier to justify. That isn't what payday loans are used for. They are usury of the worst kind taking advantaged of the worst off in our society. I'm not going to sit here and pretend I have a definitive solution, but perhaps bringing actual banking to these neighborhoods would be a good start.

It's not about having bank branches nearby, it's about people that can't get traditional loans or credit cards. These are loans of last resort for people that don't have enough (or good enough) credit. The default rate on these is around 20%.

I don't have a solution either, but this is a more nuanced issue than just not having a bank nearby.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#78

Post by Someone1234 »

i_am_proteus wrote: post #54
braythwayt wrote: post #28

Earlier quoted context omitted.

If you read the article, there's a little more nuänce than that. One thing listed right up front is a limit on how many times a lender can try to withdraw funds from your account. If they have, say, a $200 NSF charge, and your payment bounces, they can try every business day, racking up $1,000 a week in NSF fees. Companies that do this kind of thing aren't trying to collect their original payments in good faith, they…

Nonetheless, payday lenders are not exactly making money hand over fist. Predatory practices to recover as much money as possible are, in aggregate, a reflection on the risk profile (i.e. staggering default rate) of these borrowers. Prohibiting these practices with no replacement measures just raises the rate or reduces loan availability. Realistically, people who can't get even a (legal) payday loan often turn to pl…

> Nonetheless, payday lenders are not exactly making money hand over fist.

Before these regulations were originally enacted they were making $9.2B, that dropped to $6B. The regulations are now being removed. So they were in fact making money hand over fist, and will be again.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#79

Post by mrhappyunhappy »

rayiner wrote: post #59

The rules were misconceived to begin with, by people who mistook the symptoms for the problem. There is a ton of competition in payday lending—there is zero reason to believe that payday lending rates are higher than the efficient amount. There is no hint of market failure, systemic risk, or any of the other criteria that typically justify regulating financial institutions. That means this rule wasn’t really a consum…

Nobody is denying people credit. Payday loans are predatory and perpetuate poverty instead of helping to solve it. It would be great if they were transparent and didn’t try to rob you in the process, but that’s just not how they work.

Re: Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending

#80

Post by SilasX »

minikites wrote: post #37
kevin_thibedeau wrote: post #33

Earlier quoted context omitted.

How many struggling people are spending $200+ monthly for overpriced cell and cable service?

Very few, the "welfare queen" idea is largely unsupported by actual evidence, despite chain emails claiming to document someone buying [luxury food] on food stamps.

Food stamps can be used to purchase lobster. I don't know why you think that's impossible.

Edit: I've even seen fast food places accept EBT.

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