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Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

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Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#21

Post by tjansen »

mikeash wrote: post #14
tjansen wrote: post #12

Adding regulation without forbidding payday loans sounds to me like the worst thing you can do. In emergency situations, it can be perfectly rational to take out such a loan, despite high interests and fees. On the other hand, if you take a payday loan for an unneeded expenditure, you will have even less money in the long term. So either you get rid of the regulation, in order to lower the fees. Or you forbid payday…

Why would removing regulation reduce fees, and why would adding regulation increase them?

Because compliance with regulation requires additional work and thus costs money. As every payday lender has to do this, they will raise their fees.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#22

Post by rootusrootus »

afpx wrote: post #3

I'm generally not a fan of regulation. But lately, I've been changing my opinion on that. I don't see how we can all play in the economy game without having a set of unambiguous rules and referees to enforce them. Regulations do add overhead, sure, but how else can we prevent companies from acting in ways that are detrimental to society? Capital finds the shortest path to profits, and without rules, it becomes a quic…

On top of that, payday loans don't have a 20% return on capital. That's about what a bad credit card charges. Try 20x that, payday loans typically annualize out at hundreds of percent.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#23

Post by leetcrew »

mikeash wrote: post #14
tjansen wrote: post #12

Adding regulation without forbidding payday loans sounds to me like the worst thing you can do. In emergency situations, it can be perfectly rational to take out such a loan, despite high interests and fees. On the other hand, if you take a payday loan for an unneeded expenditure, you will have even less money in the long term. So either you get rid of the regulation, in order to lower the fees. Or you forbid payday…

Why would removing regulation reduce fees, and why would adding regulation increase them?

complying with regulations costs money. obviously if you are exploiting people in a way that becomes illegal, you have to stop doing that profitable thing. this is probably not bad. however, even if your business is already compliant with the new regulations, you still still have to pay someone to understand the new rules and confirm that you are not breaking them. as regulations grow in number and complexity, you have to spend more money just to know whether you are complying with them.

removing regulations may not reduce fees, but adding new ones will almost certainly increase them, since they necessarily increase the overhead for the business.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#24

Post by rootusrootus »

calvinmorrison wrote: post #20
robert_foss wrote: post #16

Earlier quoted context omitted.

If the 'invisible hand of the market' was indeed working, why are such obscene rates common? In my mind it's profiteering on the backs of impoverished people.

What makes you think the rates are obscene?

Is there really any debate on whether or not 400% is obscene?

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#25

Post by robert_foss »

calvinmorrison wrote: post #20
robert_foss wrote: post #16

Earlier quoted context omitted.

If the 'invisible hand of the market' was indeed working, why are such obscene rates common? In my mind it's profiteering on the backs of impoverished people.

What makes you think the rates are obscene?

If my credit card had an APR of ~400% I would be ruined. Thankfully for me, I have enough financial assets that I will never have to take out a payday loan.

But for people who desperately need money now, and have no other choice, they're forced to accept these rates. It's profiteering on the backs of the very weakest people in society. That's obscene to me.

If this is indeed is a valuable service to society, cap the rates, and force them to be disclosed up front.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#26

Post by azinman2 »

calvinmorrison wrote: post #20
robert_foss wrote: post #16

Earlier quoted context omitted.

If the 'invisible hand of the market' was indeed working, why are such obscene rates common? In my mind it's profiteering on the backs of impoverished people.

What makes you think the rates are obscene?

The annual rates are around 390%, and often cause bankruptcy:

https://www.consumerfinance.gov/about-us/newsroom/consumer-f...

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#27

Post by dsfyu404ed »

murph-almighty wrote: post #7
afpx wrote: post #3

I'm generally not a fan of regulation. But lately, I've been changing my opinion on that. I don't see how we can all play in the economy game without having a set of unambiguous rules and referees to enforce them. Regulations do add overhead, sure, but how else can we prevent companies from acting in ways that are detrimental to society? Capital finds the shortest path to profits, and without rules, it becomes a quic…

Generally speaking, the golden rule of public policy is that policy begins where markets fail. The race to the bottom you're describing is a failure of the market to consider for their customers, and that's where regulation steps in.

>Generally speaking, the golden rule of public policy is that policy begins where markets fail.

Too bad the people writing policy don't follow that rule. It seems like they're eager to use policy to meddle in things that are working and won't use it to fix things that are broken.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#28

Post by rootusrootus »

SegFaultx64 wrote: post #19
scatters wrote: post #13

Earlier quoted context omitted.

> earned wage access Sounds like debt bondage.

The way it actually works is that people get payed before their paycheck if they need it at zero interest. When executed correctly there is no debt the money they took is just deducted from their paycheck. This is how payday advances worked for most people before the age of complex payroll systems. You used to be able to ask your boss to get payed early for the time you had already worked. Now that is really hard bec…

I wonder why we don't have pay-as-you go for income. There is no particular reason we couldn't pay people at the end of every day just as easily as every two weeks or once a month.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#29

Post by dragonwriter »

SegFaultx64 wrote: post #19
scatters wrote: post #13

Earlier quoted context omitted.

> earned wage access Sounds like debt bondage.

The way it actually works is that people get payed before their paycheck if they need it at zero interest. When executed correctly there is no debt the money they took is just deducted from their paycheck. This is how payday advances worked for most people before the age of complex payroll systems. You used to be able to ask your boss to get payed early for the time you had already worked. Now that is really hard bec…

> Now that is really hard because "the system isn't set up like that"

No, it's really hard because systems (technology secondarily, primarily policy and administrative controls) are set up to prevent the discretion that practice relied on because it was a giant and frequently exploited opportunity for embezzlement, favoritism, and unlawful discrimination (including quid pro quo sexual harassment) by line and middle managers.

It's not just an incidentally unsupported function.

Re: Move to Pull Consumer Protection Rule Heightens Debate over Payday Lending

#30

Post by [deleted] »

SegFaultx64 wrote: post #19
scatters wrote: post #13

Earlier quoted context omitted.

> earned wage access Sounds like debt bondage.

The way it actually works is that people get payed before their paycheck if they need it at zero interest. When executed correctly there is no debt the money they took is just deducted from their paycheck. This is how payday advances worked for most people before the age of complex payroll systems. You used to be able to ask your boss to get payed early for the time you had already worked. Now that is really hard bec…

[deleted]
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