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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

#141

Post by towelr34dy »

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.

How dare consenting adults do things I find offensive.

I don't drink. Drunk people act stupid. Let's ban alcohol. It'll be great. Prove to me it won't!

Oh, you enjoy alcohol responsibly? That's just anecdotal. Not like MY anecdotal evidence, I see drunks everywhere... everyone knows that. And they are all alcoholics who are depraved by predatory beer companies.

My anecdotal evidence is good and corroborated by my tribe. And you must prove me wrong, despite the fact that I'm the one making statements like we need to regulate something.

Oh, and of course, once we ban it, no mafia guy is going to start offering it in a sketchy way... there's NO WAY that will happen in a low class neighborhood because we really take care of our poor. I have this all planned out. Going with my gut to make emotive detached decisions instead of dealing with the grit of reality is so nice. /s

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

#142

Post by pitaj »

threeseed wrote: post #111
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.

Nobody is necessarily saying get rid of payday loans. Only that they are heavily regulated to ensure that (a) consumers are fully informed, (b) no lending occurs to people who can't afford them and (c) interest rates are capped to reasonably levels.

Doing that still means restricting the options people have

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

#143

Post by jdietrich »

dajohnson89 wrote: post #93
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…

The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation. When I had my first real job out of college, I didn't manage my money well and ran out of cash well before my next payday. I went to a check-cashing type of place to try and get a payday loan, but the state had outlawed them a couple of years prior. Had I been gra…

>The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation.

If you have no access to better credit, payday loans are often the least-worst option. If your car breaks down and you have no other means of getting to work, borrowing a few hundred bucks at usurious rates is probably better than losing your job. If you've received a parking ticket and don't have the cash, paying $18 to borrow $80 for two weeks might be better than going to court and paying a $160 fine plus costs.

The situation is analogous to drug prohibition - banning payday loans just pushes people towards criminal lenders, who charge even higher interest rates and enforce payment with baseball bats. The only credible solution is to improve access to credit for the poor, whether that's through the expansion and promotion of credit unions or some kind of state-subsidised emergency lending facility.

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

#144

Post by reallydude »

oh_sigh wrote: post #94
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.

Payday lenders want to lend money and get repaid. If fewer of their customers defaulted, they would probably start charging a lower interest rate.

> they would probably start charging a lower interest rate.

I would love to see some data, because it all looks to go one way. The rates never fall, only rise.

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

#145

Post by pochamago »

hobs wrote: post #122
bko wrote: post #82

Earlier quoted context omitted.

From another article: > A typical two-week payday loan comes with a $15 fee for every $100 borrowed and has an annual interest rate of nearly 400%, according to the CFPB. Over It's technically 400% APR, but its because the amount borrowed is very low. What should the rate be? 10% or ~$0.40 for the two week loan? There is a certain amount of overhead in processing a loan. Especially considering that the clientele ofte…

Then they could offer a flat fee instead of an ever compounding one that is predatory to their clients (but they dont.)

That sounds very preferable for me as a consumer, you should start a company and see if it keeps you in business

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

#146

Post by mikeash »

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…

Do payday lenders actually compete on rates?

The problem with these services is that people don’t understand the long-term implications of them. Tons of people use them and get stuck in an endless cycle of debt, even though roughly zero of them would have thought that was an acceptable outcome at the start.

If the customers mostly don’t understand the product then the businesses aren’t competing on price, but rather competing on their ability to fool the customer. And regulation on these businesses are essentially anti-fraud measures.

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

#147

Post by nopriorarrests »

I have some insights into payday loans industry. Mostly in Europe, though, but I think these are industry-wide observations.

1. Levels of fraud are epidemic. Absolute majority of clientele have no credit score or have rather shitty one, so it's hard to score people properly, like banks do. You end up with rejecting almost everyone or lending a lot to people who have no intention to pay it back. Naturally, you factor it into your interest rate, what are your other options?

Ironically enough, the possible solution to this is "social score credit" system being adopted in China. Some authority which can quickly guarantee that you are poor, but law-abiding citizen.

2. As I've mentioned in this thread already, some payday lenders issue bonds, and these bonds are _high yield_. Markets do not see this business as a money making machines. Any macroeconomic shock can raise defaults 2-3x times (because, unlike clients of traditional banks, these folks are 1 step from complete insolvency), so when you are buying payday lender bonds, you are betting on, essentially, no recession for next 3-5 years.

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

#148

Post by fzeroracer »

towelr34dy wrote: post #141
Arbalest wrote: post #125

Earlier quoted context omitted.

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.

How dare consenting adults do things I find offensive. I don't drink. Drunk people act stupid. Let's ban alcohol. It'll be great. Prove to me it won't! Oh, you enjoy alcohol responsibly? That's just anecdotal. Not like MY anecdotal evidence, I see drunks everywhere... everyone knows that. And they are all alcoholics who are depraved by predatory beer companies. My anecdotal evidence is good and corroborated by my tri…

I mean despite your terrible sarcasm, we do have rational regulations on things like alcohol or gambling because we recognize that it helps protect people overall, sometimes indeed from themselves.

Your argument is essentially 'I don't drive drunk, therefore we don't need any laws against drunk driving' since the expectation is that people will behave rationally. Or that we don't need regulations against things like cigarettes because people know the harm already.

Obviously there's room to debate on how socially dangerous something is and whether it warrents regulation; hence the ongoing debate on marijuana legalization; but in general he's right: relying on anecdotal evidence and extrapolating that is bad form. It provides context and reason for your arguments, but is not an argument in itself.

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

#149

Post by breatheoften »

kbenson wrote: post #108
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…

As someone that provided development and system administration support for multiple payday lenders for a few years, I will say that their adherence to the rules each state enforces for payday lending companies I dealt with was often "spotty". It was a regular occurrence that they would have a state regulator visit to look at their operation, and they would all of a sudden be scrambling to make one or two accounts tha…

How likely was it for people who showed a steady history of repaying the loans to suddenly start defaulting at or near the average rates?

The only moral way to conduct this business is for the funnel to move people into lower risk tiers in proportion to their demonstrated/historical levels of risk - funneling every customer forever backward into the highest risk pools is systemically bad (inefficient) as well as evil.

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

#150

Post by FPGAhacker »

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…

Does Wells Fargo offer payday loans? If not, why not?
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