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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

#131

Post by candiodari »

sangnoir wrote: post #101
pitaj wrote: post #63

Earlier quoted context omitted.

Many people make use of payday loans. If you remove that option, those people aren't any better off. Restricting or prohibiting payday loans is politicians saying they can make better choices than the people they're claiming to help. Does it come from good intentions? Of course. But it's also fundamentally elitist.

> Many people make use of payday loans. If you remove that option, those people aren't any better off. This is a false dichotomy - the options are wider than "unregulated lenders" and "non-existant lenders". Imagine saying in 1850: "Many 8 year olds work in coal mines. If you remove that option, those kids aren't any better off."

They did not remove that option. They provided schools, as an option, without forcing people, then made them free (mostly because the church was out competing them, but ... it's not like that still matters). Kids were widely expected to work on the fields during school holidays as recently as the 70s.

For that matter, ever notice how if you wanted your kid to work the fields, that school holidays sure have mighty convenient dates ? That's not a coincidence ...

So they very much did not remove the option of having kids work in the coal mines and on the fields. Not for a LOOOONG time after the 1850s.

https://en.wikipedia.org/wiki/Child_labor_laws_in_the_United...

You could apply that here: the government could get into the payday lending business and enforce a maximum interest rate that way.

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

#132

Post by thaumaturgy »

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.

> Payday lenders have low losses and high profits (34%+ return on investment)

> A payday lender would have to work hard to lose money, even though borrowers are generally low-income and have weak credit histories. Holding a "live" check as security gives a lender strong collateral and leverage over a borrower who, when faced with the threat of criminal prosecution and penalty fees, will keep paying renewal fees every two weeks when they cannot afford to repay the loan in full and walk away. With these renewals (or loan flips), they are never paying down the principal owed. In North Carolina in 2000, for example, only 6% of payday checks were returned for insufficient funds (NSF) and lenders recovered about 69% of the value on these. They also collected $2 million in NSF fees.

> In comparison, the credit card default rate, like the payday default rate, is also approximately 6% -- but the interest rate on a credit card rarely exceeds 29% (as opposed to payday loans that routinely charge 400% APR or more). Personal loans and car loans have default rates of around 2%, with APRs between 5 and 15%. Compared to other forms of credit, the exorbitantly high APR charged on payday loans is drastically out of proportion with the relatively normal risk involved in making those loans.

https://www.responsiblelending.org/research-publication/fact...

The whole page is worth reading.

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

#133

Post by pitaj »

sangnoir wrote: post #101
pitaj wrote: post #63

Earlier quoted context omitted.

Many people make use of payday loans. If you remove that option, those people aren't any better off. Restricting or prohibiting payday loans is politicians saying they can make better choices than the people they're claiming to help. Does it come from good intentions? Of course. But it's also fundamentally elitist.

> Many people make use of payday loans. If you remove that option, those people aren't any better off. This is a false dichotomy - the options are wider than "unregulated lenders" and "non-existant lenders". Imagine saying in 1850: "Many 8 year olds work in coal mines. If you remove that option, those kids aren't any better off."

Why are people using payday loans if they already have better alternatives? If it wasn't their best option, why would they pick it? Yes, you're making them worse off by removing their best option.

> Imagine saying in 1850: "Many 8 year olds work in coal mines. If you remove that option, those kids aren't any better off."

Why are kids working in mines if they already have better alternatives? If it wasn't their best option, why would they pick it? Yes, you're making them worse off by removing their best option.

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

#134

Post by kortilla »

Arbalest wrote: post #125
towelr34dy wrote: post #58

Earlier quoted context omitted.

I've had to take out loans for my business that were at usury rate. It saved me. If it wasn't there, if it was regulated out of existence; I'd have gone to a shark. I was not going to let cash flow cause me failing. Having said that, I'm very happy there was a lender of last resort that won't break my legs. Despite them screwing me in fees. Honestly, I've never understood people who suffer from legislitis: They see a…

I'm sorry to dismiss this more or less out of hand, but this is a case of anecdotal evidence. Using your case to generalise to greater choice is falling victim to the assumption that all players are rational actors.

>the assumption that all players are rational actors.

A.k.a the assumption that people should have agency

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

#135

Post by breatheoften »

candiodari wrote: post #120
pitaj wrote: post #63

Earlier quoted context omitted.

Many people make use of payday loans. If you remove that option, those people aren't any better off. Restricting or prohibiting payday loans is politicians saying they can make better choices than the people they're claiming to help. Does it come from good intentions? Of course. But it's also fundamentally elitist.

Ever notice how that's the entire premise of leftist thought ? "Let's just restructure society the way we see as better", and then the addendum "not by helping - of course, by force of punishment" once politicians come into it. I wish we went back to the left of the 90s. No more "you can't do X - bad for climate", "you can't do Y - bad for the poor", "you can't do Z - bad for the children". I want the left back of nu…

Who is this 'left' you choose to misidentify everyone as?

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

#136

Post by milesdyson_phd »

westurner wrote: post #103

From the article: > The way payday loans work is that payday lenders typically offer small loans to borrowers who promise to pay the loans back by their next paycheck. Interest on the loans can have an annual percentage rate of 390 percent or more, according to a 2013 report by the CFPB. Another bureau report from the following year found that most payday loans — as many as 80 percent — are rolled over into another l…

They are ultra short term loans, so the rate is going to be outrageous when expressed as an APR...

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

#137

Post by jessaustin »

threeseed wrote: post #102
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…

Pretty extraordinary to be defending the most insidious form of business around. Payday lenders do not remotely provide the same duty of care that more established lenders like banks do. And as such they need to be regulated to ensure that they aren't lending to people who are not in a financial position to repay the loans. Ignoring the impacts to consumers it is a systemic risk to the economy to allow this behaviour…

Wells Fargo might be an exception to that? Actually lots of credit cards are pretty terrible too. Not all payday borrowers are going to just say "ok I guess I'll let my life collapse" if payday loan firms disappear. There are less legal and less safe ways to get a loan. This seems like the wrong way to care about the poor.

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

#138

Post by Bud »

calvinmorrison wrote: post #75
CydeWeys wrote: post #67

Earlier quoted context omitted.

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 avai…

Ah, yes, Austrian "economists". Some of the most-noted quacks in world history.

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

#139

Post by chipotle_coyote »

rayiner wrote: post #89
Arbalest wrote: post #84

Earlier quoted context omitted.

GP starts with a fairly simple premise, the rate of default is high, so that much interest is required to make up the shortfall. Of course the rest of it is hinged solely on this premise, rather than acknowledging that the very act is taking advantage of people who can't or won't think far enough ahead to see why it is a very bad idea. It is of course the old argument that some economists use a little too regularly t…

The idea that selling products and services to poor people is “taking advantage of them” in the terms reality demands is bonkers.

So reality demands that we categorize charging desperate people an APR of 200%, 300% or more as "selling products and services to poor people," as if doing so is functionally indistinguishable from selling them a cheeseburger?

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

#140

Post by jessaustin »

echohack5 wrote: post #107
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…

Microloans exist, and offer credit at non predatory rates to low-income people, especially in third world countries. Your comment reeks of astroturfing bad-behavior.

Come on dude, 'rayiner is well known on HN. He has biases, like we all do, but you can't say he's astroturf.
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