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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

#151

Post by tantalor »

nopriorarrests wrote: post #147

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…

> Levels of fraud are epidemic... you factor it into your interest rate

What does that have to do with fraud? Who is the fraud?

> Ironically enough... "social score credit"

This is the very problem social credit score is intended to solve. How is it ironic?

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

#152

Post by cletus »

There's an episode of the Netflix documentary series "Dirty Money" specifically about payday lending. Lots has been written about it too. I believe John Oliver has a bit about it too.

This isn't about "freedom" and letting people make their own mistakes. It's basically a disgusting predatory practice designed to deceive and take advantage of the desperate and uninformed. When you look into it, what becomes clear is that people are intentionally deceived into thinking that that after X payments come out of their account the loan is repaid (when those are just "fees"). The agreement language is almost indecipherable.

Some states have tried to regulate this, which has typically just meant renaming things to get around legislation (if it ever gets that far).

You could probably mostly solve these problems by classifying fees that scale with the size of the loan as "interest". Perhaps people don't understand that if you borrow $100 the fee is $15 (per pay period) while at $300, the fee might be $40-50. It's not fixed. How exactly is this not interest?

You see ads on TV for this kind of product. What's funny is one of them is that one says "not available in New York for legal reasons" or somesuch. It's kind of sad that only the state of New York seems to have usury laws to prevent this.

What's also interesting is how payday lenders increasingly try and shield themselves from legal action using the sovereign immunity of native tribes (patent trolls also increasingly are trying this). The Netflix documentary has more on this.

Payday lenders are big donors to state politicians. In one example, a Texas assemblywoman who criticized the industry quit and was a lobbyist for that industry within weeks of that criticism. I forget her name.

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

#153

Post by FPGAhacker »

mikeash wrote: post #146
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…

At least with traditional loan sharking, broken legs and death are pretty easy consequences to understand.

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

#154

Post by towelr34dy »

jdietrich wrote: post #143
dajohnson89 wrote: post #93

Earlier quoted context omitted.

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 recei…

When you deal with people who want to ban those who suffer, you have to remember that 65% of people in the Milgram experiment will pull the lever until the end.

Some people just don't listen to those who suffer: they only have an ear for authority.

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

#155

Post by googlryas »

reallydude wrote: post #144
oh_sigh wrote: post #94

Earlier quoted context omitted.

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.

I agree - you would need to look at the default rates for interest rates on their loan to mean anything.

I see a bunch of independent payday lenders with similar rates. Are they a cartel and fixing their rates? Or are they in competition and all offer reasonable low rates considering the default rate of their clientele?

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

#156

Post by bilbo0s »

towelr34dy wrote: post #129
dajohnson89 wrote: post #93

Earlier quoted context omitted.

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…

If you really ever needed money, you'd have gotten it. I grew up poor in the 3rd world. Loan sharks, prostitutes, druggies... that's part of life there. Honestly, your judging something from a certain position that's pretty obviously removed from ever really being needing money (in poor areas there are a options to get money, restricting those would be blessing to the illegal loan sharks that already operate in most…

>Loan sharks, prostitutes, druggies... that's part of life there...

Just saying as someone who grew up poor here in the (???) "first world" (I guess?), those things are part of life here. And our police are generally very aggressive in reminding us that all of them are illegal.

Payday loans are like the drug dealers. There really is no difference. They happily give you access to their product as long as you pay them, and then when you can't pay them, you're left in a worse situation than you were at the start. And worse, a lot of people start committing their own crimes to be able to afford those things again. Because they are hooked.

(Actually, nowadays I guess with the drug of choice being opioids a lot of the people just overdose eventually and die so they never get to that point of committing other crimes to get the drugs. So maybe the loan sharking is not quite as bad as the drugs? But it's still pretty bad.)

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

#157

Post by arthur_pryor »

pitaj wrote: post #133
sangnoir wrote: post #101

Earlier quoted context omitted.

> 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 o…

the point is, by removing the "least bad" option of an 8 year old working a coal mine, we were forced to improve our labor practices overall.

if kids don't have a better option than working in a coal mine at 8, society needs to come up with that better option, rather than giving the kid/family the current "best".

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

#158

Post by nopriorarrests »

tantalor wrote: post #151
nopriorarrests wrote: post #147

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…

> Levels of fraud are epidemic... you factor it into your interest rate What does that have to do with fraud? Who is the fraud? > Ironically enough... "social score credit" This is the very problem social credit score is intended to solve. How is it ironic?

>What does that have to do with fraud? Who is the fraud?

What does interest rate have with fraud? Well, for each 1000$ loaned out, say, $100 will be defaulted by some honest dude who had no money to pay back in time, and $100 will be loaned to someone who had no intention to pay it back. Numbers are random of course, but they give the idea.

To keep your business operating, you have to charge enough interest to compensate both for $100 honest default and $100 loaned to fraudster.

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

#159

Post by thaumaturgy »

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…

Likewise, I find any and all laws criminalizing common scams to be gross and onerous. I would rather live in a free society, where I'm sure everyone would educate themselves and never fall for these scams, and if they did fall for one, then clearly the scam was good for them and they got something they wanted in exchange. Who are we to try to prevent that?

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

#160

Post by towelr34dy »

fzeroracer wrote: post #148
towelr34dy wrote: post #141

Earlier quoted context omitted.

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…

Err, we do have payday lending regulations. The new ones would basically destroy the industry. It would remove the vast majority of lenders of last resort. It wasn't just capping fees. It was 'making sure the lender could pay'

Let's see, who else does that... banks.

How? a credit score. Which has nothing to do with being able to pay truly pay long term or be sustainable. Some poor people have good credit. Some rich people have bad. It's... messy.

But please don't let the details of what you support actually alter what you support in name.

BTW, if the rules were only targeting continuation fees (i.e. multiple debit restriction part), I'd 100% support them. Remember, your talking to someone who has been there, done that.

I'm not against all legislation. I'm against privileged people sitting on a high horse, looking down on 'the commoners' and telling them what they need.

I personally would not have qualified under the new regulations when I took the loans.

I feel like I'm talking to someone who has good health wanting to ban sneezing instead of helping the sick. And you are talking to someone who has been sick.

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