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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

#211

Post by seandhi »

breatheoften wrote: post #205
seandhi wrote: post #9

Earlier quoted context omitted.

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?

I’m not sure what you mean. I recently interviewed with Earnin and SoLo Funds, and they have their own risk and reputation algorithms based on many factors. All loans are no interest - borrowers pay a gratuity of their choosing. They are running at a much lower margin than traditional loans, and especially cash advance/payday loans, from what I understand.

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

#212

Post by dwaltrip »

kortilla wrote: post #170
fzeroracer wrote: post #148

Earlier quoted context omitted.

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…

What are these rational regulations? Does the ban on buying cold beer from a gas station in Indiana have a strong backing showing that the cold beer barrier is reducing alcoholism? I’ll save to some time, there is no link. It’s protectionist crap hidden behind the guise of moralizing. States have wildly different liquor laws they all claim are “rational”, which may be true but they certainly aren’t rational to protec…

You don't consider laws against drunk driving to be rational regulation?

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

#213

Post by maratd »

Johnny555 wrote: post #190
maratd wrote: post #130

Earlier quoted context omitted.

> 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 th…

> 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.

If that's the percentage being charged and that's the best a person can do, that means that person has a very high chance of defaulting on the loan.

Which would explain why nobody else wants to lend to that person. With your regulations, that financial institution would not exist. You can't regulate people into losing money. They'll just shut down.

You've now deprived the person of a legal financial option of borrowing money. You think they won't borrow anyway? They will. From a loan shark. They'll go into the black market.

They'll end up paying more for that loan since the shark now needs to cover the legal risk involved and if they don't pay it back, they may end up with broken legs.

How is that better?

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

#214

Post by dsfyu404ed »

candiodari wrote: post #131
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."

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 con…

>mostly because the church was out competing them, but ... it's not like that still matters

I disagree that it does not still matter.

For the past few centuries or so (depending on what country you're looking at) the church had the monopoly on morals and the state had the monopoly on violence. It seems to have in the last 100yr (in the US at least) the government, and to a lesser extent corporations, have replaced the church as the source of morals for a great deal of the population in Europe and North America.

Public education is a great net good but we need to be careful with it because the line between education and indoctrination is a fine one. I think that the replacement of church provided education with public education poses a slow long term risk to secular societies.

You do not want the entity that has a monopoly on violence also controlling education and with it morality. That's how you get the crusades, the USSR, etc. I'm not sure what the solution is. I don't think increased religion is it.

FWIW I am not religious.

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

#215

Post by [deleted] »

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…

[deleted]

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

#217

Post by Spooky23 »

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.”

Well get ready. A platoon of John Galts are on the way with lots of dull excuses.

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

#218

Post by CydeWeys »

kortilla wrote: post #186
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.

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.

Nobody here is drawing that line. Almost anyone who's in favor of going after predatory payday lenders will also be in favor of going after the predatory practices of big banks, like transaction ordering to maximize overdraft fees. The CFPB can and should fix all of this.

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

#220

Post by hoaw »

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…

> If you have no access to better credit, payday loans are often the least-worst option.

Just isn't a very relevant argument. The reason you regulate things are because they provide, often strong, value to one or multiple parties but overall negative effects. Either eventually to the parties themselves or society at large. It is essentially a way to control externalities. So you would have to argue that these benefits are greater than the negatives.

> The only credible solution is to improve access to credit for the poor [...]

If payday loans are legitimate there is unlikely to be a need for such a solution.

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