September 9, 2002
6:29 PM Subscribe
Disclaimer: I'm biased because a good friend of mine runs several short-term loan businesses.
I don't see how this is appreciably different than offering credit cards at 20 percent or higher and charging $20 for a bounced check, which are a mainstream banking practices, or selling lottery tickets, which is a mainstream government practice. If people live so paycheck-to-paycheck that they want a short-term payday loan, why should the government prevent them from doing it?
Back when I would've used a payday loan service, I sometimes had to write checks at four or more supermarkets just so I could deposit the money and keep the account balanced until payday. It would've been much easier to get one of these loans and pay their surcharge.
posted by rcade at 7:56 PM on September 9, 2002
I don't see how this is appreciably different than offering credit cards at 20 percent or higher and charging $20 for a bounced check, which are a mainstream banking practices, or selling lottery tickets, which is a mainstream government practice. If people live so paycheck-to-paycheck that they want a short-term payday loan, why should the government prevent them from doing it?
Back when I would've used a payday loan service, I sometimes had to write checks at four or more supermarkets just so I could deposit the money and keep the account balanced until payday. It would've been much easier to get one of these loans and pay their surcharge.
posted by rcade at 7:56 PM on September 9, 2002
There is no reason I can think of why this should be illegal. The company doesn't misrepresent what they do, what they offer, or what they charge. No one forces anyone to take out one of his loans. If people are being taken advantage of here, it's completely their own stupidity doing it.
Besides, it's probably a decent service for people with terrible credit, and it sounds like it's almost impossible for someone to get into terrible debt that way, as often happens with credit cards.
posted by Mitrovarr at 8:03 PM on September 9, 2002
Besides, it's probably a decent service for people with terrible credit, and it sounds like it's almost impossible for someone to get into terrible debt that way, as often happens with credit cards.
posted by Mitrovarr at 8:03 PM on September 9, 2002
Usury sucks, but in this case it doesn't appear to be illegal. A friend of mine coined the phrase poverty surcharge for things like this, I think that's an excellent description.
posted by RylandDotNet at 8:22 PM on September 9, 2002
posted by RylandDotNet at 8:22 PM on September 9, 2002
As the article states, payday loan customers aren't all poor. My friend has one office in a nice coastal San Diego area, and it was frequented by a bunch of people who aren't anywhere close to the poverty line, including a few doctors.
posted by rcade at 8:53 PM on September 9, 2002
posted by rcade at 8:53 PM on September 9, 2002
I suppose what worries me here is that the loan sharks (and that's what they are - 'payday loans' is such flannel) get the high street shops and the marketing budgets, while the organisations offering a solution that doesn't involve your pound of flesh, such as credit unions, often go unnoticed because they're run out of public libraries and community centres, with little publicity. Anyway, the whole 'debtor nation' thing is looking increasingly maxed out.
posted by riviera at 9:15 PM on September 9, 2002
posted by riviera at 9:15 PM on September 9, 2002
I know if I were in a bind I wouldn't care what the interest was... wait that's not true, I'd care. But I'd be some darn happy I could get the money it would pretty much cancel it out. Especially if I was in a situation where I:
A) Wasn't able to buy food for my family
B) Was going to miss a mortgage/rent payment (or needed a downpayment/deposit)
C) Had a sudden bill that needed to be paid before payday.
I bet payday advance companies have saved the arse of many a family out there, rich and poor, who know exactly what the interest rates are and are perfectly happy with it.
posted by filecrave at 9:21 PM on September 9, 2002
A) Wasn't able to buy food for my family
B) Was going to miss a mortgage/rent payment (or needed a downpayment/deposit)
C) Had a sudden bill that needed to be paid before payday.
I bet payday advance companies have saved the arse of many a family out there, rich and poor, who know exactly what the interest rates are and are perfectly happy with it.
posted by filecrave at 9:21 PM on September 9, 2002
riviera: these aren't loan sharks. Why? Because loan sharks break your knees if you don't pay.
If you drive out the honest businessmen who make high interest loans, what you will get is dishonest businessmen who make high interest loans, i.e., loan sharks. This does not make the poor who use these services better off. When there's an economic niche, someone will fill it. Government can criminalize the filling of that niche, but it can't eliminate it. See: War on Drugs.
I know, it's painful to see the poor being charged high interest. But it's their choice. It's a voluntary transaction on both sides.
For a libertarian view of Finance on the Fringe, see this article from Reason.
posted by Slithy_Tove at 10:07 PM on September 9, 2002
If you drive out the honest businessmen who make high interest loans, what you will get is dishonest businessmen who make high interest loans, i.e., loan sharks. This does not make the poor who use these services better off. When there's an economic niche, someone will fill it. Government can criminalize the filling of that niche, but it can't eliminate it. See: War on Drugs.
I know, it's painful to see the poor being charged high interest. But it's their choice. It's a voluntary transaction on both sides.
For a libertarian view of Finance on the Fringe, see this article from Reason.
posted by Slithy_Tove at 10:07 PM on September 9, 2002
I know, it's painful to see the poor being charged high interest. But it's their choice. It's a voluntary transaction on both sides.
No it's not. When the choice is between immiseration on the one hand, and outrageous usury on the other, "voluntary" becomes, at best, a relative term. If there were more alternatives offering interest rates comparable to those offered upper-class borrowers, I would grant your point, but they simply don't exist.
Oh boy! I get to use my favorite term!
This is nothing more or less than class warfare.
rcade: Sure there are other reprehensibly usurious financial practices out there. They're bad, too.
posted by Nicolae Carpathia at 11:02 PM on September 9, 2002
No it's not. When the choice is between immiseration on the one hand, and outrageous usury on the other, "voluntary" becomes, at best, a relative term. If there were more alternatives offering interest rates comparable to those offered upper-class borrowers, I would grant your point, but they simply don't exist.
Oh boy! I get to use my favorite term!
This is nothing more or less than class warfare.
rcade: Sure there are other reprehensibly usurious financial practices out there. They're bad, too.
posted by Nicolae Carpathia at 11:02 PM on September 9, 2002
When the choice is between immiseration on the one hand, and outrageous usury on the other, "voluntary" becomes, at best, a relative term.
You are saying that choices have consequences. No shit. Every choice has a price.
If one chooses to use the paycheck loan guy, one has to pay the man. If not, one has to live on the money one has until the next paycheck. Either way, it's voluntary.
Oh boy! I get to use my favorite term!
Murder your darlings.
posted by Slithy_Tove at 12:13 AM on September 10, 2002
You are saying that choices have consequences. No shit. Every choice has a price.
If one chooses to use the paycheck loan guy, one has to pay the man. If not, one has to live on the money one has until the next paycheck. Either way, it's voluntary.
Oh boy! I get to use my favorite term!
Murder your darlings.
posted by Slithy_Tove at 12:13 AM on September 10, 2002
Actually, riviera, the reason credit unions aren't more "popular" is that in the US, by law, they're chartered to specific membership groups, such as employees of a specific institution, members of a professional organization, and less frequently, members of specific geographic communities. These rules have been slightly relaxed, but Congress has balked at further deregulation; the bank lobby, to be sure, is opposed as well, but Congress remembers all too well what happened when they deregulated savings and loans, to the point where that subset has now effectively disappeared.
posted by dhartung at 12:58 AM on September 10, 2002
posted by dhartung at 12:58 AM on September 10, 2002
I know, it's painful to see the poor being charged high interest. But it's their choice.
And there should be more choices.
For a libertarian view of Finance on the Fringe, see this article from Reason.
Ah. It's not as if I needed to refuel my distaste of libertarians, but that piece is one lofty sneer at the poor and their 'liberty' to pay a premium. There are enough 'poverty surcharges' already to cement class distinctions, without the glorification of smiley-face usury and crackhouse finance. But I always guessed there was a healthy streak of veiled disgust in that excuse for an ideology: 'isn't it nice that the little people have their own way of getting by, and aren't we smart by pretending that they beat the system?' Pardon me while I wash my eyes.
posted by riviera at 5:47 AM on September 10, 2002
And there should be more choices.
For a libertarian view of Finance on the Fringe, see this article from Reason.
Ah. It's not as if I needed to refuel my distaste of libertarians, but that piece is one lofty sneer at the poor and their 'liberty' to pay a premium. There are enough 'poverty surcharges' already to cement class distinctions, without the glorification of smiley-face usury and crackhouse finance. But I always guessed there was a healthy streak of veiled disgust in that excuse for an ideology: 'isn't it nice that the little people have their own way of getting by, and aren't we smart by pretending that they beat the system?' Pardon me while I wash my eyes.
posted by riviera at 5:47 AM on September 10, 2002
riviera, when you get done washing your eyes, you might try reading the article again.
The poor have lots of choices. Banks, offering the same services used by the middle class, compete in the same neighborhoods as check-cashing services and paycheck loan businesses. The poor sometimes choose not to use them.
We may disagree with their choices. We may believe they are the wrong choices. We may use sneering epithets like 'crackhouse finance'. But they are not our choices, and the people who make them are adults, not children, and a free society should allow them to decide for themselves.
The value of articles like the one in Reason is that it questions the conventional wisdom that fills the media. Even if you don't buy all of it, it provides ideas you are unlikely to get elsewhere, and shakes up your worldview a little.
If you let it, and don't simply retreat into a stream of insults.
posted by Slithy_Tove at 6:23 AM on September 10, 2002
The poor have lots of choices. Banks, offering the same services used by the middle class, compete in the same neighborhoods as check-cashing services and paycheck loan businesses. The poor sometimes choose not to use them.
We may disagree with their choices. We may believe they are the wrong choices. We may use sneering epithets like 'crackhouse finance'. But they are not our choices, and the people who make them are adults, not children, and a free society should allow them to decide for themselves.
The value of articles like the one in Reason is that it questions the conventional wisdom that fills the media. Even if you don't buy all of it, it provides ideas you are unlikely to get elsewhere, and shakes up your worldview a little.
If you let it, and don't simply retreat into a stream of insults.
posted by Slithy_Tove at 6:23 AM on September 10, 2002
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posted by todd at 6:32 PM on September 9, 2002