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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

#181

Post by kortilla »

arthur_pryor wrote: post #157
pitaj wrote: post #133

Earlier quoted context omitted.

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".

Well banning them certainly would have led to many families being worse off in the short term (lost income) and coal prices increasing (reduced labor pool). The analysis needs to be compared against alternative policies that would have discouraged it through market pressure (e.g. free school for children with a free meal) rather than an outright ban.

Don’t ban the undesirable thing, figure out why people are doing the undesirable thing in the first place and address that.

Btw the children example is bad because there is an entirely separate argument about the child not being old enough to make decisions that completely muddies the point.

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

#182

Post by SilasX »

rosser wrote: post #169
SilasX wrote: post #126

Earlier quoted context omitted.

>But if someone is willing to go hungry for a few days in order to indulge in a modest luxury, then why not let them? The whole point of these "free market" welfare programs is that people know best how to spend their money. I completely agree, but the typical case isn't "hey, I rewarded myself for showing restraint in spending my benefits while I work myself out of poverty" (which I completely support) but "stars ab…

> It's not fine to act like no luxury good has ever been bought on food stamps, and every recipient is a meticulous steward of taxpayer's largesse, ceaselessly working toward the day when they don't need public assistance. Can you please point out where anyone has ever legitimately argued that? I think we're all aware social programs are abused. I also think we're better off with them, even being abused, than without…

>Can you please point out where anyone has ever legitimately argued that?

How about where I entered the thread?

https://news.ycombinator.com/item?id=19100636

>chain emails claiming to document someone buying [luxury food] on food stamps.

--

>I think we're all aware social programs are abused. I also think we're better off with them, even being abused, than without.

And I think it's unrealistic to model the abuse as one-off, contained events instead of "pockets of underclass that grows up not knowing anything different".

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

#183

Post by thaumaturgy »

rayiner wrote: post #165
thaumaturgy wrote: post #132

Earlier quoted context omitted.

> 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…

That page has no citation for the 34% figure.

The number appears to come from a report titled "Survey of non-bank financial institutions: Final report prepared for U.S. Department of the Treasury", authored by an outfit called Dove Consulting, back around 2000 or thereabouts. See also p. 10 of http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.195... [pdf]

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

#184

Post by dd36 »

pitaj wrote: post #142
threeseed wrote: post #111

Earlier quoted context omitted.

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

The people that can’t afford it?

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

#185

Post by lostdog »

FPGAhacker wrote: post #150
threeseed wrote: post #102

Earlier quoted context omitted.

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?

Payday lending companies get shut down a lot (because they often break the law until try can no longer get away with it). The owners will shut them down, and quicky reopen them as a new company, shedding their legal problems in the process. Wells Fargo doesn't want to shut down and reopen every few years, so they won't give payday loans directly.

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

#186

Post by kortilla »

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.

So are banks, credit card companies, etc. Their dream is always the customer making minimum payments and maybe some late payments for fees.

Look at the dump that is Wells Fargo and the their precious behavior with deposit/withdrawal ordering in daily reconciliation to screw people into overdraft fees.

Drawing the line at payday lenders seems super arbitrary.

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

#187

Post by mkbgw »

SilasX wrote: post #126
mywittyname wrote: post #113

Earlier quoted context omitted.

People who seriously object to SNAP, or find it to be too generous should seriously spend a month on it. It's legitimately difficult to shop and budget around because it so restrictive and you don't get much. Yeah, you may technically be able buy some lobster with your SNAP, but it would cost several days worth of benefits to do so. But if someone is willing to go hungry for a few days in order to indulge in a modest…

>But if someone is willing to go hungry for a few days in order to indulge in a modest luxury, then why not let them? The whole point of these "free market" welfare programs is that people know best how to spend their money. I completely agree, but the typical case isn't "hey, I rewarded myself for showing restraint in spending my benefits while I work myself out of poverty" (which I completely support) but "stars ab…

> the typical case isn't "hey, I rewarded myself for showing restraint in spending my benefits while I work myself out of poverty" (which I completely support) but "stars above, it wasn't enough, again, woe is me, I need more indefinitely and why change if they'll cut my benefits ones I have gainful employment?".

Source?

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

#188

Post by stouset »

rayiner wrote: post #164
Arbalest wrote: post #109

Earlier quoted context omitted.

Stating that still assumes rational actors. It is based off the premise of "freedom" above all else. The problem with freedom is that the way it is defined really depends on what you want to achieve. Infinite choice is the simplest form of freedom, but in this case, you are enabling market forces to remove the ability for people with poor judgement to lose any capacity for future financial freedom, a form of freedom…

Yes, I’m assuming poor people aren’t irrational. Silly me.

We’re all irrational. We all lack access to complete information about any market we’re acting in.

Entire business models have been created to take advantage of and even maximize this type of information asymmetry. Legislation exists to curb the most egregious offenders.

You can argue whether or not this specific case is egregious enough to warrant regulation. But implying we’re all fully rational actors who can make perfect (or even good) decisions in times of great distress and who don’t ever need sort of safety rail to protect us from our own ignorance, urgency, or rashness is just arguing in bad faith.

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

#189

Post by dlp211 »

pitaj wrote: post #162
Bud wrote: post #128

Earlier quoted context omitted.

You don't actually know, pitaj, that those people are not better off. You just made that up. I think the odds are much better that those protected from usury are, in fact, better off.

This is exactly what I was referring to by "elitism". If people were better off to not have the loans, why would they ever use them? You think you know better than these people, but you are not in their situation. Perhaps instead of restricting options, you should offer free poverty counseling or something. Expand people's options, don't restrict them.

Because people are not purely rational actors no matter how much you want them to be.

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

#190

Post by Johnny555 »

maratd wrote: post #130
Johnny555 wrote: post #13

Earlier quoted context omitted.

From that article: 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 t…

> How much more competition do you think there can be? Quite a bit more, apparently. See the other comments here. There are startups trying to tackle the problem. Regulation is not the answer. Competition is. If you feel you can provide better service at a lower cost, the field is wide open.

Regulation levels the playing field.

It'd be easy to undercut the airlines by starting a company that eschews safety regulations.

It'd be easy to undercut the banks by starting a company that eschews financial regulations.

It'd be easy to undercut a doctor by offering services by unlicensed medical staff that don't follow medical guidelines.

There are lots of businesses that would be more affordable to the poor if they didn't have any regulation at all.

Reasonable regulation is not a bad thing, it ensures that consumers are getting what they paid for and that they aren't being exploited. Like, giving the customer a $500 loan at 300% interest that they may never be able to pay back so they end up in an endless cycle of debt.

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