Consumer Protection Bureau Aims to Roll Back Rules for Payday Lending • Hacker News Board

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

#201

Post by andrewla » Wed, Feb 06, 2019, 11:54 PM UTC

numbsafari wrote: post #32

andrewla wrote: post #22

Earlier quoted context omitted.

I saw a tweet [1] that followed a thread on the concept that paydays are not really a requirement any more -- it is totally possible with our existing banking infrastructure to pay salaries on a more continuous basis, but we've built up a huge amount of institutional momentum around the idea that running payroll is a complex and laborious process that we want to infrequently. By parallel in software engineering, bran…

Because the folks that use payday loans are most likely [a] not on a salary and [b] have very inconsistent wages due to inconsistent scheduling and [c] likely don't even have a bank account.

For point c this is completely untrue; you in fact can’t get a payday loan without a bank account, and many of the most sleazy practices of payday lenders (and all of the practices banned by the rule) are related to charging fees against bank accounts.

A and b are both true but don’t seem especially relevant; payments can still be made on a daily or hourly basis based on the work they are doing rather than bundled up at the end of a pay cycle.

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

#202

Post by SilasX » Wed, Feb 06, 2019, 11:55 PM UTC

rosser wrote: post #197

SilasX wrote: post #182

Earlier quoted context omitted.

>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 o…

Do I read you correctly as saying that the anecdotal evidence of the kinds of abuse you're concerned about (in the form of chain emails, &c ) outweighs the actual, you know, "research" that has been done on these programs, their use, and their outcomes, and that there is instead some kind of systemic abuse by "pockets of underclass that grows up not knowing anything different"? Because, yeah. We're just going to talk…

Where did I say I was grounding any of this in a chain email? I started out objecting to someone's over-the-top skepticism that anyone has every bought a luxury food on foodstamps.

Are you saying there aren't pockets of near-permanent poverty in America that depend on social spending? Nice, didn't know that was patched up.

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

#203

Post by nopriorarrests » Wed, Feb 06, 2019, 11:55 PM UTC

stevesimmons wrote: post #198

nopriorarrests wrote: post #158

Earlier quoted context omitted.

>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 compen…

Plus, in order to get those 20% loss rates, you have to decline 80% of people, and half the 20% accepted will decide the rates are too expensive. So only 10% of applicants end up taking a loan. Then a $10 per application marketing/processing cost and $5 per application decisioning cost translates to $150 cost per loan booked. Using the numbers above, it would cost $350 to lend $1000. That's 35%. If the loan term is 2…

>This is the fundamental economics of high-cost, short-term credit.

Exactly. People see 300% APR and think about it like it's applied to their premium credit card, the financial product they are familiar most, and get into rage without trying to run the numbers first.

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

#204

Post by dannypgh » Wed, Feb 06, 2019, 11:56 PM UTC

m463 wrote: post #194

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…

It would be more ethical on all sides if there were hard limits on the "usury rate". I think it was acceptable in the past when credit cards had a hard limit on the interest percentages (I recall maybe 12%?). I was kind of appalled when the percentages were relaxed years back and when 24% and 36% became possible, they were immediately the norm. Availability of capital is great, but not at the expense of perpetual ind…

In these products, the stated interest rate is often low, but when you factor in fees the effective interest rate is astronomical.

Fees are also why payday loans can be attractive over real banks - a payday loan is likely cheaper than a checking account overdraft.

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

#205

Post by breatheoften » Wed, Feb 06, 2019, 11:57 PM UTC

seandhi wrote: post #9

maratd wrote: post #6

Earlier quoted context omitted.

> Which consumers is the CPB protecting? Those very same consumers. Large, established players do not want to even touch that customer base because it represents a high risk and a low payoff. These are the only financial services these people have access to. Cutting that off is not a solution. Encouraging competition and increasing the number of players will reduce the "obscene fees". People aren't stupid, they'll al…

There are a few startups, like Earnin, Even, and SoLo Funds trying to tackle this problem in different ways. Lending options for those markets are vitally important, for sure, but we can find a better way of doing it without abusing the ones who need it most.

I'd be curious to know -- if you issued loans via prepaid credit cards that explicitly could not be used for gambling/drug dealer payments - what happens to the default rate of your (remaining) customers ... - can you filter out enough high-risk scammers to serve a legitimate market segment (with more fairness) with this kind of tactic?

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

#206

Post by jakelazaroff » Wed, Feb 06, 2019, 11:57 PM UTC

towelr34dy wrote: post #58

firasd wrote: post #31

Anytime I see people defend this kind of practice, the John Ruskin quote comes to mind: “The dullest of all excuses for usury is that some kind of good is done by the usurer.”

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…

> So then they decide to: Ban the bad thing people do for relief when they are desperate. All while not ameliorating the suffering that cause the desperate bad relief efforts.

There's another option, of course: create regulations to limit only the harmful effects of the thing.

It's not like there's some law of economics that says we can't find a way to make loans accessible to people who need money without also enabling predatory lending.

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

#207

Post by dlp211 » Wed, Feb 06, 2019, 11:57 PM UTC

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…

Social Programs are abused, but not nearly at the levels that people assume. In 2016, SNAP abuse accounted for just 0.9% of SNAP benefits paid. This also coincided with a drastic reduction in overall utilization from the 4 prior years.

https://www.forbes.com/sites/simonconstable/2018/04/04/the-f...

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

#208

Post by rosser » Wed, Feb 06, 2019, 11:57 PM UTC

SilasX wrote: post #202

rosser wrote: post #197

Earlier quoted context omitted.

Do I read you correctly as saying that the anecdotal evidence of the kinds of abuse you're concerned about (in the form of chain emails, &c ) outweighs the actual, you know, "research" that has been done on these programs, their use, and their outcomes, and that there is instead some kind of systemic abuse by "pockets of underclass that grows up not knowing anything different"? Because, yeah. We're just going to talk…

Where did I say I was grounding any of this in a chain email? I started out objecting to someone's over-the-top skepticism that anyone has every bought a luxury food on foodstamps. Are you saying there aren't pockets of near-permanent poverty in America that depend on social spending? Nice, didn't know that was patched up.

I guess I don't find referencing research in response to cultural tropes to be "over-the-top skepticism".

Have a good day.

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

#209

Post by dsfyu404ed » Wed, Feb 06, 2019, 11:58 PM UTC

kortilla wrote: post #181

arthur_pryor wrote: post #157

Earlier quoted context omitted.

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 th…

>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.

It used to be that kids were treated like little adults and were considered fully capable of decision making. Now it seems like a lot of people want adults to be treated like kids and protected (if you can call it that) from opportunities to make bad decisions.

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

#210

Post by comicjk » Wed, Feb 06, 2019, 11:59 PM UTC

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.

In the context of limited time and information when making decisions - i.e. real life - removing an option that's (on average) a mistake can make the average chooser better off. That's obvious; it's why we have guardrails on the sides of highways. The question is utilitarian, not absolute. It depends on the specifics of the regulation. Furthermore you don't have to think that the regulators are elite - anyone can make a better decision in the abstract than they can in the heat of the moment.