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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
Since you used this example, and are tying it to the offensive figure of 400%, take the 400% APR out of it for a minute.

You borrow $500 for 2 weeks. You pay a $75 fee to borrow that money. What should the appropriate fee be for borrowing someone else's money because you desperately need it and don't have it?

Oh, and my wife just had a great idea. Maybe they could not necessarily do away with the business, but limit how often people can write a payday loan, say borrowers are limited to 4 times a year or something....
 
I believe that usury laws when they existed, or were enforced were somewhere around 29.9% APR....And I seem to recall that investments that pay around 16% will result in tripling the initial investment...So, why the rush to absolutely crush those who get involved with this kind of borrowing? I don't get it...I am a conservative, but this business bothers me a great deal.

Okay, but again, what is a reasonable fee to borrow someone else's $500?
 
Oh, and my wife just had a great idea. Maybe they could not necessarily do away with the business, but limit how often people can write a payday loan, say borrowers are limited to 4 times a year or something....

That's okay, I guess, but I'm not someone who thinks the government should put forth laws to protect people from their own stupidity. And that would be impossible to regulate unless you put all payday lenders on a national shared network, and that won't happen.
 
They're the ones who have cut off all of their other options by being irresponsible. So now you want even this option removed? What will you replace it with? The need isn't going to go away, just because *YOU* don't like it.

There isn't a need for predatory interest rates designed at creating a perpetual debt cycle that they know desperate people must enter into and will probably never get out.
 
Okay, but again, what is a reasonable fee to borrow someone else's $500?

I don't know, I'm not in the business...Clearly 400% APR is not.

That's okay, I guess, but I'm not someone who thinks the government should put forth laws to protect people from their own stupidity. And that would be impossible to regulate unless you put all payday lenders on a national shared network, and that won't happen.

Why not. They are on a shared network within a state....You can't for instance go to Advance America and write for $500, then go down the street and walk into Check into Cash and write another $500....What the real problem is, are the online ones that don't have to have a brick and mortar store front...They skirt the system in even worse ways.

In any case, these places are loan sharking with the appearance of legitimacy. As I said before, I don't like the government inserting themselves in business, but in this case you can hardly call these people legitimate business people.
 
There isn't a need for predatory interest rates designed at creating a perpetual debt cycle that they know desperate people must enter into and will probably never get out.

You know, having been down, and I mean really down at points in my life, I've often daydreamed about what I would do if I were to ever win something like the recent powerball, over 300 million after taxes....One thing, would be philanthropic in nature in setting up a trust that brings in younger couples that have real budget issues, and bail them out with a small interest loan, and as a pre condition to the loan have an accountant teach them how to budget.
 
I don't know, I'm not in the business...Clearly 400% APR is not.



Why not. They are on a shared network within a state....You can't for instance go to Advance America and write for $500, then go down the street and walk into Check into Cash and write another $500....What the real problem is, are the online ones that don't have to have a brick and mortar store front...They skirt the system in even worse ways.

In any case, these places are loan sharking with the appearance of legitimacy. As I said before, I don't like the government inserting themselves in business, but in this case you can hardly call these people legitimate business people.

You don't have to be "in the business". You said that the $75 cost for a $500 2 week loan is too high. You have to say what you think is a fair cost for the loan? You keep using "400%" as an argument about why $75 is too high, and that isn't an argument. Cephus is 100% correct when he says you're all getting so wrapped up in that 400% number that you aren't getting what that number actually is. So forget the APR and tell me - what is a reasonable fee for a lender to provide $500 to a credit risk with no security? It's a simple question.

These places have the appearance of legitimacy because they are legitimate. There are people who need $500 for an emergency but they don't get paid for 2 weeks. Those people who can't get loans from a bank or credit union will gladly pay $75 to avoid their electricity getting shut off, avoid their car getting towed to a garage because 4 lugnuts fell off and they need a new wheel but can't afford it, avoid wracking up $150 in return check charges because they didn't balance their checkbooks, avoid getting $50 late fees, and so on. Those are the people who rely on payday lenders. They're the ones who are responsible enough to know that in 2 weeks they'll have $575 to pay the lender back. There is absolutely nothing illegitimate about that, and if those people are willing to pay $75 to borrow someone else's $500 for 2 weeks, who are you or me or Elizabeth Warren to say that's a bad thing?
 
There isn't a need for predatory interest rates designed at creating a perpetual debt cycle that they know desperate people must enter into and will probably never get out.

Nor is there such a thing. These people have created their own perpetual debt cycle, they can easily break it, they just have to stop spending more money than they bring in. When the desperation is self-inflicted, color me unimpressed.
 
You don't have to be "in the business". You said that the $75 cost for a $500 2 week loan is too high. You have to say what you think is a fair cost for the loan? You keep using "400%" as an argument about why $75 is too high, and that isn't an argument. Cephus is 100% correct when he says you're all getting so wrapped up in that 400% number that you aren't getting what that number actually is. So forget the APR and tell me - what is a reasonable fee for a lender to provide $500 to a credit risk with no security? It's a simple question.

It's not the $75 on $500 that bothers me so much for the two week period. It's the way that these places herd their customers toward revolving accounts that never touch the principle, and employ a model that seeks to keep from their customers the option of splitting the amount into three payments to pay it off. When someone goes in there for the first time they need to take a paystub, electric bill, and drivers licence. Using that the clerk will use a calculation of how much they are allowed to write, along with establishing their payback date. No where in that process is any thought that these people can't afford the payback. IOW, if you were lending me $500. for two weeks, and you wanted $575 back. Now I am desperate to get the money, and will agree to anything, but you look at my paystub and I make $300 per week take home....Are you going to lend me the $500? Would you think that would be an ethical thing to do?

continued
 
These places have the appearance of legitimacy because they are legitimate.


"The pitfalls of borrowing from storefront payday lenders -- companies that offer short-term loans with high interest rates -- are already well-documented. Regulators and consumer groups have long warned such loans can trap people in vicious cycles of debt. Less is known about online payday lenders, which offer the same service with the added allure of the transaction happening completely on the Web.


Consumer groups say these types of lenders may be even riskier for struggling borrowers than brick-and-mortar lenders, leading consumers into even more hopeless financial quagmires.


“They loan to people not even caring whether they can pay the whole thing off,” said Jay Speer, the executive director of the Virginia Poverty Law Center. “They just want a certain amount every couple weeks -- as much as they can beat out of you until you default.”


Payday Lenders Are Using The Internet To Evade State Law


"Earlier this month, Manhattan District Attorney Cyrus R. Vance, Jr. brought charges against a Tennessee-based businessman and the 12 companies he allegedly created to offer payday loans to New Yorkers at illegally high rates.
With one website, MyCashNow.com, based in the West Indies and others incorporated in various states, Carey Vaughn Brown is accused of trying to escape legal regulations and usury laws. New York usury laws cap loan interest rates at 25 percent, but prosecutors say Brown’s companies extended loans with rates that ranged from 350 to 650 percent.
Brown is also accused of disguising the fact that that his companies would oversee an entire loan process. For example, a borrower would apply for a loan on one website Brown owned, their information would be transferred to another company that extended the loan and a third company would collect payments. By managing all of the companies involved in the loan lifecycle, prosecutors say that Brown could profit off of expensive loans in states that banned them. Chief operating officer Ronald Beaver and legal counsel Joanna Temple have also both been indicted."


https://blog.creditkarma.com/news-t...ay-companies-for-breaking-interest-rate-laws/


"Aggressive collection practices[edit]
In US law, a payday lender can use only the same industry standard collection practices used to collect other debts, specifically standards listed under the Fair Debt Collection Practices Act. The FDCPA prohibits debt collectors from using abusive, unfair, and deceptive practices to collect from debtors. Such practices include calling before 8 o'clock in the morning or after 9 o'clock at night, or calling debtors at work.[27]


In many cases, borrowers write a post-dated check (check with a future date) to the lender; if the borrowers don't have enough money in their account, their check will bounce.


Payday lenders will attempt to collect on the consumer's obligation first by simply requesting payment. If internal collection fails, some payday lenders may outsource the debt collection, or sell the debt to a third party.


A small percentage of payday lenders have, in the past, threatened delinquent borrowers with criminal prosecution for check fraud.[28] This practice is illegal in many jurisdictions and has been denounced by the CFSA, the industry's trade association.


Pricing structure of payday loans[edit]
The payday lending industry argues that conventional interest rates for lower dollar amounts and shorter terms would not be profitable. For example, a $100 one-week loan, at a 20% APR (compounded weekly) would generate only 38 cents of interest, which would fail to match loan processing costs. Research shows that on average, payday loan prices moved upward, and that such moves were "consistent with implicit collusion facilitated by price focal points".[29]


Consumer advocates and other experts argue, however, that payday loans appear to exist in a classic market failure. In a perfect market of competing sellers and buyers seeking to trade in a rational manner, pricing fluctuates based on the capacity of the market. Payday lenders have no incentive to price their loans competitively since loans are not capable of being patented. Thus, if a lender chooses to innovate and reduce cost to borrowers in order to secure a larger share of the market the competing lenders will instantly do the same, negating the effect. For this reason, among others, all lenders in the payday marketplace charge at or very near the maximum fees and rates allowed by local law.[24]"


Payday loan - Wikipedia, the free encyclopedia


Anyone in business with these types of practices, I don't consider legitimate.

continued
 
There are people who need $500 for an emergency but they don't get paid for 2 weeks. Those people who can't get loans from a bank or credit union will gladly pay $75 to avoid their electricity getting shut off, avoid their car getting towed to a garage because 4 lugnuts fell off and they need a new wheel but can't afford it, avoid wracking up $150 in return check charges because they didn't balance their checkbooks, avoid getting $50 late fees, and so on. Those are the people who rely on payday lenders. They're the ones who are responsible enough to know that in 2 weeks they'll have $575 to pay the lender back. There is absolutely nothing illegitimate about that, and if those people are willing to pay $75 to borrow someone else's $500 for 2 weeks, who are you or me or Elizabeth Warren to say that's a bad thing?


Come on Tres....You know me better than that...I am staunch conservative, ask anyone....But this group of criminals are a blight on the nation, and if they are out of business I wouldn't shed a tear....They are scum.
 
It's not the $75 on $500 that bothers me so much for the two week period. It's the way that these places herd their customers toward revolving accounts that never touch the principle, and employ a model that seeks to keep from their customers the option of splitting the amount into three payments to pay it off. When someone goes in there for the first time they need to take a paystub, electric bill, and drivers licence. Using that the clerk will use a calculation of how much they are allowed to write, along with establishing their payback date. No where in that process is any thought that these people can't afford the payback. IOW, if you were lending me $500. for two weeks, and you wanted $575 back. Now I am desperate to get the money, and will agree to anything, but you look at my paystub and I make $300 per week take home....Are you going to lend me the $500? Would you think that would be an ethical thing to do?

continued

What is a reasonable fee? It's a very simple question.
 
Come on Tres....You know me better than that...I am staunch conservative, ask anyone....But this group of criminals are a blight on the nation, and if they are out of business I wouldn't shed a tear....They are scum.

What is a reasonable fee for them to charge, j-mac? You say $75 for a $500 loan is too high. I'm not trying to be a jerk or doubt that you're a conservative, but the argument you are making is that the fee is too high. What should it be?
 
What is a reasonable fee for them to charge, j-mac? You say $75 for a $500 loan is too high. I'm not trying to be a jerk or doubt that you're a conservative, but the argument you are making is that the fee is too high. What should it be?
I know Tres...but that's the thing, it's not that the fee is necessarily too high, but rather the amount of times you can roll over the original $500.

Like I said, maybe the answer is limiting the times you can take a loan to 4 per year.
 
I know Tres...but that's the thing, it's not that the fee is necessarily too high, but rather the amount of times you can roll over the original $500.

Like I said, maybe the answer is limiting the times you can take a loan to 4 per year.

Which doesn't change a thing really. These people need that money. You can put all the controls on the lenders that you want, it doesn't change the fact that these people need that money. If a legal means vanishes, they'll just turn to an illegal means. You can't make these people stop needing the money by wishing really hard. So what is your workable solution?
 
Which doesn't change a thing really. These people need that money. You can put all the controls on the lenders that you want, it doesn't change the fact that these people need that money. If a legal means vanishes, they'll just turn to an illegal means. You can't make these people stop needing the money by wishing really hard. So what is your workable solution?
Why do I personally have to have all the answers? Isn't that what we elect people for? This incessant tactic around here to say that if I don't know how to fix every facet of a particular problem means that I can't hold an opinion on the problem, or speak to the problem is just plain dumb if you ask me.

If your fine with people being taken advantage of in the name of business then fine, that's on you.
 
Why do I personally have to have all the answers? Isn't that what we elect people for? This incessant tactic around here to say that if I don't know how to fix every facet of a particular problem means that I can't hold an opinion on the problem, or speak to the problem is just plain dumb if you ask me.

If your fine with people being taken advantage of in the name of business then fine, that's on you.

Okay, so then your problem isn't the fees or the cost, or that responsible people actually need the money and follow the rules, and payday lenders are a net positive for those people. The problem you seem to have with payday lenders is that people are too stupid to know they shouldn't borrow $500 if they can't pay it back on time and as agreed, and therefore it's the fault of the payday lenders that these people are too stupid to take care of themselves.

That's exactly what the left said about the "predatory lenders" over the last few years. People are too stupid to take care of themselves, so we need Uncle Sam to come in and make those mean, nasty, predatory banks suffer because people have to be protected from their own stupidity.
 
Okay, so then your problem isn't the fees or the cost, or that responsible people actually need the money and follow the rules, and payday lenders are a net positive for those people. The problem you seem to have with payday lenders is that people are too stupid to know they shouldn't borrow $500 if they can't pay it back on time and as agreed, and therefore it's the fault of the payday lenders that these people are too stupid to take care of themselves.

That's exactly what the left said about the "predatory lenders" over the last few years. People are too stupid to take care of themselves, so we need Uncle Sam to come in and make those mean, nasty, predatory banks suffer because people have to be protected from their own stupidity.
Morning Tres. You say that "responsible people need the money and follow the rules" would you catagorize taking a revolving payday loan as "responsible"?

If people are going to use these places as a credit card, then apply those rules to them. Cap the APR at 30%
 
Morning Tres. You say that "responsible people need the money and follow the rules" would you catagorize taking a revolving payday loan as "responsible"?

If people are going to use these places as a credit card, then apply those rules to them. Cap the APR at 30%

Happy Thursday J,

What isn't responsible about it? If you need $500 for an emergency, and don't have it, but know you'll have $575 in 2 weeks, what business is it of ours to say that isn't responsible to borrow the money? What if not borrowing meant $35 in overdraft charge from your bank, $25 in a return check charge from the vendor you pay, and cutting off your electricity and having to pay another $35 fee to hook it back up, not to mention losing your power?

And if the APR was 30%, what would the fee be? You still haven't said what you think a reasonable fee should be.
 
Happy Thursday J,

What isn't responsible about it? If you need $500 for an emergency, and don't have it, but know you'll have $575 in 2 weeks, what business is it of ours to say that isn't responsible to borrow the money? What if not borrowing meant $35 in overdraft charge from your bank, $25 in a return check charge from the vendor you pay, and cutting off your electricity and having to pay another $35 fee to hook it back up, not to mention losing your power?

And if the APR was 30%, what would the fee be? You still haven't said what you think a reasonable fee should be.
What isn't responsible is that they don't have the $575 if they go back the next day and take back another $500 do they?
 
My opinion -Pay day loans prey upon the poor- but where else can they turn - banks- forget it.
http://dealbook.nytimes.com/2015/02...agency-seeks-limits-on-payday-lenders/?ref=us

In the world of consumer finance, they are chameleons: payday lenders that alter their practices and shift their products ever so slightly to work around state laws aimed at stamping out short-term loans that can come with interest rates exceeding 300 percent.

Such maneuvers by the roughly $46 billion payday loan industry, state regulators say, have frustrated their efforts to protect consumers.

Sorry like but think you are lucky. 300%!?

5500% in the UK!
 
Happy Thursday J,

What isn't responsible about it? If you need $500 for an emergency, and don't have it, but know you'll have $575 in 2 weeks, what business is it of ours to say that isn't responsible to borrow the money? What if not borrowing meant $35 in overdraft charge from your bank, $25 in a return check charge from the vendor you pay, and cutting off your electricity and having to pay another $35 fee to hook it back up, not to mention losing your power?

And if the APR was 30%, what would the fee be? You still haven't said what you think a reasonable fee should be.

Sounds really good when you put it like that but its like using a shotgun to blow off a leg that has an infection. Because 500 turns into 575 then turns into 1000 then turns into 2000 and so on.
 
Why do I personally have to have all the answers? Isn't that what we elect people for? This incessant tactic around here to say that if I don't know how to fix every facet of a particular problem means that I can't hold an opinion on the problem, or speak to the problem is just plain dumb if you ask me.

If your fine with people being taken advantage of in the name of business then fine, that's on you.

Because you're the one proposing that we change the system, you just have no idea how to actually change it. The system works, the people involved in these transactions aren't being harmed, they are doing it willingly, understanding the consequences. It's only the people on the outside who are trying to save these people from themselves. The system ain't broke. Stop trying to fix it unless you have a better solution.
 
Because you're the one proposing that we change the system, you just have no idea how to actually change it. The system works, the people involved in these transactions aren't being harmed, they are doing it willingly, understanding the consequences. It's only the people on the outside who are trying to save these people from themselves. The system ain't broke. Stop trying to fix it unless you have a better solution.
It is broke, next to no regulation, these people have no where else to turn.
Why should they not be regulated, other lending institutions are?
 
What isn't responsible is that they don't have the $575 if they go back the next day and take back another $500 do they?

So? That isn't the lender's problem. And that certainly isn't the problem of the people who can borrow and pay it back as agreed. It doesn't mean it isn't responsible for the people who actually are responsible. I know in America we seem to like to reduce everything down to the lowest common denominator, but we shouldn't always have to. The people who have to borrow from payday lenders are doing so because they screwed up somewhere along the line, and can't get credit as you & I can. This is the only way they can get emergency cash. Should those people be punished again because there are idiots out there who borrow $500 on February 20, promise to pay back $575 on March 6, and then piss away the $575 before then....or worse yet, knew up front that they wouldn't have $575 on March 6?
 
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