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

#251

Post by towelr34dy » Thu, Feb 07, 2019, 1:43 AM UTC

kelnos wrote: post #195

kortilla wrote: post #134

Earlier quoted context omitted.

>the assumption that all players are rational actors. A.k.a the assumption that people should have agency

Not at all. Just because you have agency, it doesn't mean you'll wield it rationally, or even responsibly. And so you get the central question: in what cases should you protect people from themselves? It's a hard question to answer. Given that financial education in the US is nearly nonexistent, I would personally err on the side of protections in the financial sphere. Does that mean that some legitimate cases get de…

So by protection, you mean the bill as it was, that would 'remove pay day lending'. Maybe we'll copy what we did with drugs.

Hmm... what guarantees mob option will stop existing? That's what's happened with drugs. Drugs are easily available.

Or are you suggesting creating another lender of last resort?

I'm sorry, I'm not sure your offering a solution. It seems what is offered is a blind restriction to satiate your own feelings of 'protecting others'. Like we've done with drugs. It doesn't work because it doesn't address the problem, just the symptom. It's arrogant and short sighted.

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

#252

Post by dragonwriter » Thu, Feb 07, 2019, 1:43 AM UTC

rayiner wrote: post #247

stouset wrote: post #188

Earlier quoted context omitted.

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…

Information asymmetry results in market failures, and can justify regulation. But the Obama payday regulations aren’t directed to information asymmetry. They do not, for example, require certain transparency measures. Instead, what they do is place limits on who lenders and lend to.

You seem to assume that there are transparency measures that would adequately resolve an information assymetry (which doesn't just exist in possession of information but practical capacity to apply it), and further in making a claim about what the regs are directed at that the regulators agree with you in that belief.

Neither point is obvious.

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

#253

Post by towelr34dy » Thu, Feb 07, 2019, 1:46 AM UTC

noodlenotes wrote: post #161

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…

This brings up an interesting ethical question. Let's say for every entrepreneur who stays afloat because of a payday loan, there are two people who don't manage money well and the payday loan sends them spiraling into debt. Do you prevent all three from taking the payday loan option because it has negative consequences for two of them? What if the ratio of people that benefit from payday loans is more like one in te…

How about this. Even IF it was 9/10 that get hurt and 1/10 that get helped.

Even IF that is true.

What do you get by regulating out of existence?

It stops?

Or it goes underground.

Think marijuana. What happened when legal? What happened when illegal?

I'm not saying don't regulate. I'm saying don't regulate it to death where only 3-4 big companies can operate in the space and then play oligopoly games.

Paying $200 in fees and stuff over 12 months on a $50 loan IS 400%. Just like an overdraft fee of $50 on a $10 charge could be touted in the papers as 500% interest.

Is there stuff to be cleaned up? Absolutely. Did this bill do it? No. It was restrictive.

I actually think this is something better suited for states to decide. And that is what is happening now.

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

#254

Post by tptacek » Thu, Feb 07, 2019, 1:55 AM UTC

rayiner wrote: post #81

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.

And Facebook and Google want to get you locked in a cycle of mindless browsing and ad consumption. The difference is that Facebook and Google operate in markets with high barriers to entry resulting in fat profit margins. Payday lenders, by contrast, operate in a market with immense amounts of competition. There’s one on every block in most places. Payday lenders don’t lock people in cycles of debt. What looks people…

I think you're getting tangled up in the wrong facet of the argument. You're litigating whether payday loan firms are distortive. The payday lenders can be perfectly fair dealers in the market, but that doesn't dispose of the policy debate about whether what they're selling should be allowed in the first place.

What you're arguing here could seemingly be repurposed to argue, for instance, that companies should be able to sell stock to the public without SEC-mandated disclosures and legal process, couldn't it?

I can concede that payday lenders aren't "bad people" and still believe that payday lending should be sharply curtailed, and yet still not be a moralizer, I think.

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

#255

Post by patio11 » Thu, Feb 07, 2019, 2:12 AM UTC

carbocation wrote: post #27

i_am_proteus wrote: post #23

I'm of the mind that many of these lenders are indeed predatory, but prohibiting loans to high-risk borrowers at realistic rates (based on the risk) just leaves them unbanked rather than poorly-banked.

Payday loans are some of the things that the unbanked turn to . Using a payday loan shark does not make one banked.

Payday loans structurally require you to be banked.

The offering is "I will advance you $400 in cash today for a $415 check dated in a week. You can come back and buy your check back for $415. If you do not, I will deposit it." The security here _is the check drawn on your checking account_; without that the payday loan has markedly higher collection costs and markedly lower probability of collection.

Also, they use the fact of writing a check to (in some jurisdictions) gain legal leverage that they would not otherwise have access to, because making someone a promise to pay and failing to follow through with it is generally under the notice of criminal law, but (in some jurisdictions) writing a check which one knows to be unbacked by funds is a criminal offense.

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

#256

Post by skh » Thu, Feb 07, 2019, 2:17 AM UTC

matt4077 wrote: post #171

skh wrote: post #42

If we amended the Constitution of the United States to state that only corporations count as people then our politicians would no longer be lying when they say they support the people. We would finally be living in a country in which the peoples' will is done and be a country in which the peoples' voice was regularly heard.

Don’t go down this road of destructive cynicism. This issue is a good example: not “all politicians” are selling out citizen for company profit. There is one party that restricted predatory practices in lending, and the other party is now rolling this back. I know there is plenty of criticism for every party, in every country, ever. You will never find a politician you completely agree with unless you run for office…

I appreciate your sentiments and view. I went down cynical route a long time ago though. I lost all faith in 2009/2010 when it became clear that Obama and the Democrats took Wall Street money on the understanding that they would not prosecute the great frauds they engaged in.

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

#257

Post by jdietrich » Thu, Feb 07, 2019, 2:18 AM UTC

hoaw wrote: post #220

jdietrich wrote: post #143

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. 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 benefit…

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

Payday loans are often the least-worst option, but that doesn't prevent us from creating a better option. The best available option is not the same as the best possible option.

I'm not opposed to regulation if it is sensible and proportionate, but there is a huge knee-jerk reaction against payday lending that strikes me as paternalistic and mean-spirited. Assuming that poor people are being suckered by exploitative lenders is not a helpful starting point for what is a relatively complex social issue. I made my position clear in my original post - if you want to help poor people, then you should offer them more affordable credit rather than simply further restricting their ability to access what little credit is available to them.

If payday lenders really are ripping off the poor, then it shouldn't be difficult to outcompete them with a more affordable product; if it turns out that it's just expensive in percentage terms to lend small amounts of money for short periods of time to people who might not pay you back, then it may be necessary to provide subsidized loans.

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

#258

Post by kbenson » Thu, Feb 07, 2019, 2:30 AM UTC

breatheoften wrote: post #149

kbenson wrote: post #108

Earlier quoted context omitted.

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…

I'm not sure any specific rates. My exposure to that info (beyond what I might think to look up myself) was mostly through what changes they requested to the system which predictably were mostly about easing the application process, extending the ACH file generation to optimize submission of the transfers to send/receive money, and to provide accurate reporting of total system money in/out. Occassionally they would want to see state specific numbers in a custom report from some SQL query, but only very, very rarely would they want to see numbers on average/max time length of loans, and only ever when a regulator would spot check. If I recall correctly, the average length of the loans was over 3 months (with a 25% interest payment due every pay period or two weeks, if paid more frequently than that).

I remember looking up the data occassionally, but it was a decade ago, so I don't trust my memory enough to be definitive about specific numbers. They did start moving people into a separate collections department after a while, but I'm not sure what process they used to do that. It could be they were more on the ball about not allowing laons to go as long as I remember or knew about, but the amount of times they failed in this and needed help finding this info was notable, and yet better reporting of this info was never requested, so it could either be human error on a regular basis (fairly believable given the people they hired), or lack of importance to them, or some combination thereof.

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

#259

Post by dlp211 » Thu, Feb 07, 2019, 2:39 AM UTC

perl4ever wrote: post #242

iambateman wrote: post #239

Earlier quoted context omitted.

In that framework, is it possible to sell someone something (anything) they ought not purchase? Is there such a thing as a “poor choice”? The answer is yes! Fentanyl has a market. Student loans for a degree in Modern Studies have a market. Impossible health supplements have a market. Selling products can certainly take advantage of a person.

"Fentanyl has a market" Are you saying that a cancer patient ought not to use Fentanyl when Oxycontin no longer is enough and go directly to morphine? This is not obviously a "poor choice" from my perspective.

No. How would you even come to that conclusion? They are clearly talking about the black market for the drug.

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

#260

Post by Johnny555 » Thu, Feb 07, 2019, 2:58 AM UTC

maratd wrote: post #213

Johnny555 wrote: post #190

Earlier quoted context omitted.

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 exis…

The same could be said about allowing poor people to seek treatment from unlicensed medical practitioners "If we don't give them our substandard medical care, they'll get it from underground providers that will be even worse".

Or let them be served by an unregulated transportation providers "Well yeah, our buses aren't safe, some of our drivers have suspended licenses, but if they don't ride with us, they'll ride with someone worse".

Just because there are worse alternatives is no reason for the government to sanction exploitative businesses.