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Consumer Protection Agency Seeks Limits on Payday Lenders

Pay day loans

  • Regulate - Yes

    Votes: 36 81.8%

  • Regulate - No

    Votes: 7 15.9%

  • No opinion

    Votes: 1 2.3%
  • Total voters
    44
SouthernDemocrat said:
I grew up poor thus I understand the trap of payday loans. If you cannot pay your bills with this paycheck, then how are you going to pay them with the next, plus pay back the principle on your loan, plus pay back the exorbitant interest on that principle? The vast majority of the time you can't and that is why some 80% of payday loans get rolled over. The service payday loans offer to a poor community is no different than the service a loan shark offers a poor community. They are a leach upon the communities they are in. They prey upon the working poor, people that are desperate and have no real concept of the cost of credit.

Let's say you are late on your rent. You can do one of the following:

1. You can go down to the local payday lender and hopefully borrow the money you don't have.

2. You can have an embarrassing talk with your landlord and hopefully work something out.

Of those two options which do you think is the better? I would say option 2. It is always a bad idea to borrow money to pay for a recurring expense that you cannot currently afford because it only pushes that problem down the road a little bit and exacerbates it. The problem is payday lenders are like making a deal with the devil in that they make it seem so painless to come in and take option 1 in such a scenario.

The fact is at least 9 out 10 people that walk into a payday lender are making a bad choice by doing so. There is almost always a better option than a payday lender if you need money. If you need money for food, then worst case scenario you can go to a food bank or church. If you are short on rent its always better to try to work something out with your landlord. If you are short on a car payment you can call the car lot and work something out (and if you are several payments late then the payday lender only delays the inevitable). The worst thing you can ever do is go down and borrow money for expenses you cannot afford now against future earnings that will be just as insufficient for paying your expenses as your current paycheck was.
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There are a lot of poor people who don't have bad credit. Payday loans are NOT designed for "poor people" - they are designed for people who can not get a loan elsewhere.

"Bad credit" doesn't come from not making a lot of money. It comes from not paying your obligations on time.
 
Declan said:
In my state, if I wanted to loan you money, there is a limit on the interest I can charge you because more than that would be unfair. If I were a "bank or registered lending institution", I could charge you 3 times that amount and the sate would be like, "Go for it!!"
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For what kind of loan, and in what state? And what is the maximum limit on interest that you can charge a friend for a loan?
 
Mr. Invisible said:
That may be true, but let's look at things more specifically.

Pew Research in 2012 reported that the majority of payday loan borrowers are 25- to 44-year-old white women, though “there are five groups that have higher odds of having used a payday loan: those without a four-year college degree; home renters; African Americans; those earning below $40,000 annually; and those who are separated or divorced.” (Who Borrows, Where They Borrow, and Why - Pew Center on the States)

So in many cases you already have people who are facing hard times economically and then have no where else to turn to to get money.
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My experience is that most of those who use the payday loan services do so on a recurring basis. They also tend to do so because they have failed to make the lifestyle changes necessary to negate the need for such loans. Gambling is one of those lifestyle issues.
 
Jack Fabulous said:
Bingo!

Just the sight of these places as I'm driving down the street is enough to make my skin crawl but you are absolutely correct. The people who use them are desperate, foolish, uneducated, addicted, et al. Closing these places down will give rise to alternatives that are even worse and regulating them to the point where it becomes unprofitable for them to operate within the risk pool that they are dealing with will do just that.
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Similar to the suggestion that pawn shops are a better alternative, where it encourages theft for the sake of a "loan". Too strict regulation will also lead to an increase in petty crime, from shop lifting to purse snatching to crash and dash....
 
MMC said:
They didn't say.....she might have just had liability. It don't think it was a new car tho.
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If she had a loan on her car, she would have to carry insurance on the car. If she didn't have a loan on her car, that meant she didn't have payments on it. And if she didn't have a loan and wasn't wise enough to carry insurance on it (protecting her interest in her property), she screwed up. That isn't the fault of the lender. Nor is her having credit so bad that she can't get a loan anywhere else.

Personal responsibility. Not blaming everyone else for what we did wrong.
 
Mr. Invisible said:
That may be true, but let's look at things more specifically.

Pew Research in 2012 reported that the majority of payday loan borrowers are 25- to 44-year-old white women, though “there are five groups that have higher odds of having used a payday loan: those without a four-year college degree; home renters; African Americans; those earning below $40,000 annually; and those who are separated or divorced.” (Who Borrows, Where They Borrow, and Why - Pew Center on the States)

So in many cases you already have people who are facing hard times economically and then have no where else to turn to to get money.
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Heya Mr I. :2wave: Yeah I was just thinking about those who get divorced to, especially seniors. Or widowed seniors.
 
Jack Fabulous said:
Bingo!

Just the sight of these places as I'm driving down the street is enough to make my skin crawl but you are absolutely correct. The people who use them are desperate, foolish, uneducated, addicted, et al. Closing these places down will give rise to alternatives that are even worse and regulating them to the point where it becomes unprofitable for them to operate within the risk pool that they are dealing with will do just that.
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Payday lenders don't break peoples' legs when they don't pay. Loan sharks do. Over regulating these payday lenders out of business will hurt the people that need them even further.
 
Declan said:
In my state, if I wanted to loan you money, there is a limit on the interest I can charge you because more than that would be unfair. If I were a "bank or registered lending institution", I could charge you 3 times that amount and the sate would be like, "Go for it!!"
Click to expand...

I suggest you investigate the law in your state. I believe most areas limit the charging of interest to licensed credit granting institutions. Businesses cannot charge interest, only late payment charges with strict guidelines on rates etc.

Anything you would charge as an individual would be liable for charges under usury laws or loansharking
 
Lutherf said:
My experience is that most of those who use the payday loan services do so on a recurring basis. They also tend to do so because they have failed to make the lifestyle changes necessary to negate the need for such loans. Gambling is one of those lifestyle issues.
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To be honest homeboy, from the research that I've done regarding payday loans, not much if anything came up about people gambling. It was just poor people needing money.
 
Mr. Invisible said:
That may be true, but let's look at things more specifically.

Pew Research in 2012 reported that the majority of payday loan borrowers are 25- to 44-year-old white women, though “there are five groups that have higher odds of having used a payday loan: those without a four-year college degree; home renters; African Americans; those earning below $40,000 annually; and those who are separated or divorced.” (Who Borrows, Where They Borrow, and Why - Pew Center on the States)

So in many cases you already have people who are facing hard times economically and then have no where else to turn to to get money.
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I am not sure of the point you are trying to make. The reason for a clamp down is because these outfits prey on people already in financial trouble, I doubt anyone not in financial trouble, i.e. eligible for a bank loan, employer advance would go there in the first place.

So your conclusion is the reason we are having this conversation in the first place
 
Fearandloathing said:
Similar to the suggestion that pawn shops are a better alternative, where it encourages theft for the sake of a "loan". Too strict regulation will also lead to an increase in petty crime, from shop lifting to purse snatching to crash and dash....
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Desperate people do desperate things.
 
Anyone else catch the John Oliver segment below, it's pretty good. I like the state representative who argues for them as the little guys, while also owning more than a couple of his own. :lol:


 
Fearandloathing said:
I suggest you investigate the law in your state. I believe most areas limit the charging of interest to licensed credit granting institutions. Businesses cannot charge interest, only late payment charges with strict guidelines on rates etc.

Anything you would charge as an individual would be liable for charges under usury laws or loansharking
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I know what the law is. HArd money lending has a cap on the interest rate. Interest is not prohibited.
 
Fearandloathing said:
I am not sure of the point you are trying to make. The reason for a clamp down is because these outfits prey on people already in financial trouble, I doubt anyone not in financial trouble, i.e. eligible for a bank loan, employer advance would go there in the first place.

So your conclusion is the reason we are having this conversation in the first place
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Luther is/was arguing that it's mainly people gambling that go to payday lenders, when the reality of the situation is different and actually has more to do with a lack of funds generally and is not related to gambling.
 
Mr. Invisible said:
Luther is/was arguing that it's mainly people gambling that go to payday lenders, when the reality of the situation is different and actually has more to do with a lack of funds generally and is not related to gambling.
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Sorry, that does not clear up the situation at all. Luther has been identifying various TYPES of hardships as, not the lack of them. The issue i that these people are already in trouble, the shops do not create it but aggravate it.

You directly implied the former. There are degrees of magnitude difference in that, if they were creating the hardship in the first place, like old pawnshop practices you shut them down all together.
 
One city's attempt to deal with the problem:

"Payday loan lenders often require repayment in two weeks at an interest rate that can add up to over 400 percent annually, according to the Center for Responsible Lending. Payday Plus SF offers an alternative. The loans range from $50 to $500, at a maximum annual percentage rate of 18 percent, and can be paid off in 12 months. The program was unveiled today at a press conference attended by District 9 Supervisor David Campos, Mayor Gavin Newsom, City Treasurer Jose Cisneros and Congresswoman Jackie Speier. “As mayor I want to get rid of them,” Newsom said, referring to the payday lenders, but acknowledging the need for quick cash to meet unexpected expenses, “they need to exist in the absence of an alternative.” While the city cannot shut down payday lenders, Cisnersos said this program is intended to provide just that alternative, to help families “get out of the debt cycle” and “provide access to healthy financial institutions Payday Plus SF will give loans at a “non-predatory rate” of 18 percent maximum interest – something that both Newsom and Campos, in a rare moment of agreement between the two, indicated that they would like to decrease further..." A New Hope? Payday Plus SF Offers Loan Alternative - Local: In The Mission

Website for the program: Payday Plus SF | A safe alternative to payday loans, sponsored by the SF Office of Financial Empowerment
 
Declan said:
I know what the law is. HArd money lending has a cap on the interest rate. Interest is not prohibited.
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What state are you talking about where a bank can charge interest that's many time higher than an individual can charge for a private loan?
 
I would make exactly 1 change to the current system. I would bar Payday Loan and Title Lenders access to the courts for collections of fee's. Period. Charge whatever stupid rates you want to charge. If your customers choose to not pay you back...thats on you. Therefore it would behoove you to make it workable.
 
gdgyva said:
40 300 14 days
13.33% 0.95% 342.86%


actually it exceeds 300% if my math is correct

$ 40 charge over 14 days equates to a daily rate of .95% x 360 days most banks use for a calculation = 342.86%

someone can check my math, but i believe i am right

these are predatory lending places....i hate them and the car title places

but....should they be regulated?

no....if you going there you have no other options.....and it is always buyer beware
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That's idiotic. The only way for the interest to be 300% is to charge $900 for a loan of $300. Try again.
 
Montecresto said:
I'm well aware of the various reasons why people sometimes end up with a 525 credit score. It's not ALL an issue of irresponsibility. Furthermore, some people have 90 IQ's and some have 140 IQ's, some people leave college with a 2.7 and a few leave with 4.0. Regulation is about protecting people, not about punishing or holding people back.
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Only a fool tries to protect people from their own irresponsibility or stupidity. You can protect them from being taken advantage of. Nobody is taking advantage of these people, they made their own bed, now they have to lie in it.
 
Erod said:
I do not deny that. But the more regulations on interest rates, the more selective they'll be about who to loan to.
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As it should be. You can't convince me that a rate of 342%A.P.R isn't usury.
 
j-mac said:
Rarely is it "short term"
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It's always short term. That's what a payday loan is. The people who borrow the short term loan even though they're not able to pay it back are the ones who start the process of rolling.
 
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