Payday lenders leave Virginia

[Bricker]

The Commonwealth of Virginia has adopted strict limits on "payday loans." These are, for the uninitiated, very short term, high-interest/fee loans intended to be repaid by the loan recipient's next payday. As a result of these new restrictions, five payday lenders are closing their Virginia operations.

I think the payday loan is a terrible financial product, and you'd have to have holes in your head to use one.

But I wonder if the clients of those organizations think that Virginia lawmakers did them a favor, now that they can't get those loans anymore.

[DSYoungEsq]

Well, it probably will impact some people who had fallen into the habit of relying upon those loans. However, in the long run, it will do them good to stop relying upon them, since they will free up for use the ridiculous interest/fees they had to pay on the loans. So I am thinking in the long run, they will be perfectly happy. :)

[Bearflag70]

I think the payday loan is a terrible financial product, and you'd have to have holes in your head to use one.

But what if you run out of smokes before payday? Then what, smart guy?

;)

[MOIDALIZE]

I'm sure neighborhood loan sharks will pick up the slack.

[Cisco]

But I wonder if the clients of those organizations think that Virginia lawmakers did them a favor, now that they can't get those loans anymore.

Do those places have a lot of repeat customers?

[Skald the Rhymer]

But I wonder if the clients of those organizations think that Virginia lawmakers did them a favor, now that they can't get those loans anymore.

Here's my cynical answer: the clients won't, because they are stupid.

I know a guy who lost his (admittedly cheap) house because of payday loans. He got behind on his house note one month and so took out a loan to compensate, then kept rolling it over because he enjoyed the little "extra' bit of money he perceived himself as having, until he got to the point where he could no longer service his debt. And this was in '02--long ere the current crisis. He did it to himself, and though I felt pity for his wife and kids, I had little for him.

[Tom Tildrum]

Do those places have a lot of repeat customers?

No cite handy, but I recall reading that most of their business is with regular or semi-regular customers.

[Gfactor]

Do those places have a lot of repeat customers?

Yes.

Yet according to industry sources, the typical customer takes out 11 or 12 payday loans a year, and nearly 40% of borrowers extend their loans past the initial two-week term. One payday loan firm reported that it counts on repeat customers for more than 89% of its business. http://www.alarise.org/paydayweb.pdf

http://minnesota.publicradio.org/display/web/2009/03/13/payday_loans/

[Lamar Mundane]

Good for Virginia. I see this as similar to the banning of indoor smoking across the country - Yes, it is a huge inconvenience to a lot of people, and it certainly pissed a lot of people off, but it was done for the right reasons, and in the long run it makes things better for the vast majority of us.

Good governing isn't just giving the people what they want.

[Boyo Jim]

The Commonwealth of Virginia has adopted strict limits on "payday loans." These are, for the uninitiated, very short term, high-interest/fee loans intended to be repaid by the loan recipient's next payday. As a result of these new restrictions, five payday lenders are closing their Virginia operations.

I think the payday loan is a terrible financial product, and you'd have to have holes in your head to use one.

But I wonder if the clients of those organizations think that Virginia lawmakers did them a favor, now that they can't get those loans anymore.

Nothing you've posted necessarily means people can't get these loans any more. 5 lenders have quit -- out of how many? How many still in the business will expand into areas no longer served by the 5?

There may be some other laws to prevent this, but it may be that some "legitimate" banks might offer some new services to fill that need.

[Ludovic]

I'm sure neighborhood loan sharks will pick up the slack.Ehhh, it's about the same interest rate. I wish that was a joke.

[Lamar Mundane]

Nothing you've posted necessarily means people can't get these loans any more. 5 lenders have quit -- out of how many? How many still in the business will expand into areas no longer served by the 5?

There may be some other laws to prevent this, but it may be that some "legitimate" banks might offer some new services to fill that need.

I've seen some neighborhoods where there are five on one block.

[MOIDALIZE]

Yeah, but the payday lenders won't break your thumbs or take your car if you don't pay them.

[Gfactor]

There may be some other laws to prevent this, but it may be that some "legitimate" banks might offer some new services to fill that need.

The timing is probably pretty poor for that because "Higher default rates for payday loan portfolios indicate that loan loss reserves and capital levels that may be adequate for some other forms of subprime lending may not properly cover the greater risks associated with payday loans." http://www.fdic.gov/bank/analytical/fyi/2003/012903fyi.html

But see, http://www.responsiblelending.org/issues/payday/briefs/page.jsp?itemID=29557872 (default rate is comparable to car loans and personal loans, but APR is much higher)

[tumbleddown]

I wonder how much this has to do with the number of military families stationed in Virginia and the growing use of payday lenders by military families that cannot make ends meet otherwise. This could either be brilliant political maneuvering, or disastrous for a lot of folks.

[Boyo Jim]

The timing is probably pretty poor for that because "Higher default rates for payday loan portfolios indicate that loan loss reserves and capital levels that may be adequate for some other forms of subprime lending may not properly cover the greater risks associated with payday loans." http://www.fdic.gov/bank/analytical/fyi/2003/012903fyi.html

But see, http://www.responsiblelending.org/issues/payday/briefs/page.jsp?itemID=29557872 (default rate is comparable to car loans and personal loans, but APR is much higher)


It might also be that lowering APR from -- what I've heard is something like 400 or 500 percent in some cases -- insane to merely predatory might improve the default rate. But I have no expertise in banking to back up such an idea.

[LawMonkey]

We passed a law regulating these guys in Ohio. I heard an (NPR?) story recently that explained that they'd just restructured their interest charges into "fees" and were taking something like the same interest rate. Anecdotally, I noticed exactly zero payday lenders going out of business after November. I'm curious if the Virginia law is more tightly drafted...

[Simplicio]

I wonder how much this has to do with the number of military families stationed in Virginia and the growing use of payday lenders by military families that cannot make ends meet otherwise. This could either be brilliant political maneuvering, or disastrous for a lot of folks.

They passed a federal law a year or so back limiting the interest pay-day lenders could charge to military personnel.

[Bricker]

Yeah, but the payday lenders won't break your thumbs or take your car if you don't pay them.

Oddly enough, the businesses that are staying are taking advantage of what is either an inadvertant loophole left by the new law, or a devilishly clever way to still screw consumers. They are doing "car title loans," where the loan is secured by a car title.

So to answer Boyo Jim's question, the majority of these lenders are shutting their doors, but some will remain. And to answer MODALIZE's speculation: actually, yes: they DO take your car.

[MOIDALIZE]

If you agree to put your car up as collateral for a loan, then you really can't be surprised when it gets repo'd. I was talking about the neighborhood goon deciding on his own that you're going to lose your car (or jewelry, or whatever) until you pay him back.

[Gfactor]

It might also be that lowering APR from -- what I've heard is something like 400 or 500 percent in some cases -- insane to merely predatory might improve the default rate. But I have no expertise in banking to back up such an idea.

It's possible, although, payday lenders generally justify their high interest rates by pointing to the high default rates, so they'd have to make a leap of faith . . . Your broader point is well taken, though. It might be that some entity takes up the slack.

[Chronos]

In the long term, this is certainly a good thing. In the short term, though, there are going to be some folks crashing and burning. Now, those are the same folks who would have crashed and burned a year from now instead, when their loans caught up to them, but it's going to look pretty bleak for them to all crash at once right now.

While I applaud the outcome, I can't help but wonder if there might have been some gentler way to put it in place, with fewer short-term consequences. For instance, one might set up an organization which provides a similar service, but sets aside some of the interest money in an account in the customer's name, and when that account has accumulated enough, the next "loan" the customer takes out just closes out the account and he doesn't have to pay it back, and, if he's learned a bit more about money management meanwhile, might not have to start the cycle again. Given the high default rates, such an enterprise would probably have to be backed by the government, but it might be a good enough societal benefit to justify it.

[Ace309]

I don't know what the tax structure is for lenders. Holding the amount loaned constant, what would be the tax implications of moving all business currently served by (legal) payday lenders to neighborhood loan sharks?

[IdahoMauleMan]

Good for Virginia. I see this as similar to the banning of indoor smoking across the country - Yes, it is a huge inconvenience to a lot of people, and it certainly pissed a lot of people off, but it was done for the right reasons, and in the long run it makes things better for the vast majority of us.

Good governing isn't just giving the people what they want.

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

I'm sure all The Little People will be so glad that your enlightened governors are there to make decisions for them. And for you too, I might add.

What's next on your list of freedoms that you would like to willingly give away to a government official, to 'make things better for the majority of us?'

[DSYoungEsq]

Oddly enough, the businesses that are staying are taking advantage of what is either an inadvertant loophole left by the new law, or a devilishly clever way to still screw consumers. They are doing "car title loans," where the loan is secured by a car title.

So to answer Boyo Jim's question, the majority of these lenders are shutting their doors, but some will remain. And to answer MODALIZE's speculation: actually, yes: they DO take your car.

They do that here in South Carolina. I don't know if the payday loan business has restrictions that make it unprofitable. But the car title loan businesses are all over the place.

[DSYoungEsq]

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

I'm sure all The Little People will be so glad that your enlightened governors are there to make decisions for them. And for you too, I might add.

What's next on your list of freedoms that you would like to willingly give away to a government official, to 'make things better for the majority of us?'

Oh, please. ALL action by government takes away "freedom" from the people (or some subset of them) in order to provide some perceived benefit to the "whole." To assert that this is a bad thing for government to do is to assert that we should not have government. :smack:

Which is not to say that this is a good idea. The whole point to politics is to decide which freedoms to give away for what benefits. ;)

[Gfactor]

They do that here in South Carolina. I don't know if the payday loan business has restrictions that make it unprofitable. But the car title loan businesses are all over the place.

Here is some information on how car title loans work, at least in South Carolina: http://www.scjustice.org/pdfs/TitleLoans.pdf

[Gfactor]

We passed a law regulating these guys in Ohio. I heard an (NPR?) story recently that explained that they'd just restructured their interest charges into "fees" and were taking something like the same interest rate. Anecdotally, I noticed exactly zero payday lenders going out of business after November. I'm curious if the Virginia law is more tightly drafted...

Here's the story on the Ohio deal: http://www.nytimes.com/2009/04/16/us/16ohio.html

[villa]

This reminds me of a discussion in contract law class after studying Williams v. Walker-Thomas Furniture Co.. (http://academic.udayton.edu/caseslawecon/Contracts/williams%20v%20walker%20thomas.pdf)

The dissent is interesting in the case. It is certainly true, I think, that clamping down on those who lend to the poor doesn't mean they are going to be replaced by people offering loans at low interest rates. The likely outcome is either the loans change form (fees, car title), or are replaced by those less obedient of lawful authority. Doesn't mean it shouldn't be done, but it doesn't necessarily have the desired effect.

If it pushes people into car title loans, the side effects could be very negative, especially in areas of Virginia where public transportation is non-existant and people rely on their cars to get to work. If it reduces the availability of high risk credit, then I imagine you will see more people getting their power shut off.

The problem isn't only that pay day loan places charged extortionate interest. The deeper part of the problem is that often full time work doesn't pay a living wage. And that isn't changed by driving the blood sucking parasites out of business. I bet the pawn shop owners, on the other hand, are celebrating this law. I just don't know if they are much more "noble."

[Dripping]

The problem isn't only that pay day loan places charged extortionate interest. The deeper part of the problem is that often full time work doesn't pay a living wage.I don't know anyone who has this problem that 1) doesn't have more kids than they can support, and/or 2) doesn't buy shiat they can't afford.

[Chronos]

While certainly the root problem is that some folks just don't make enough money, places like payday loan shops don't make that root problem better; they make it worse. If someone is in a situation where they're going to suffer Dire Economic Consequences unless they can get a payday loan, then that just means that they're going to suffer Even More Dire Economic Consequences, just a year or so further down the road.

[Boyo Jim]

While certainly the root problem is that some folks just don't make enough money, places like payday loan shops don't make that root problem better; they make it worse. If someone is in a situation where they're going to suffer Dire Economic Consequences unless they can get a payday loan, then that just means that they're going to suffer Even More Dire Economic Consequences, just a year or so further down the road.

Ahh, I see a glimmer of an answer here. We need to find a way to change "next year" to "after the next election" to satisfy the politicians.

[Bryan Ekers]

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

This is just going to have to be one of those situations where the stupid are prevented (or at least discouraged) from hurting themselves.

Heck, if it weren't for the stupid, we'd all have more freedom.

[MOIDALIZE]

If poor people in Virginia have bills to pay, and not enough money to pay them, and if they're underserved by traditional banking services, I don't see how eliminating a source of lending benefits them.

[Bryan Ekers]

If poor people in Virginia have bills to pay, and not enough money to pay them, and if they're underserved by traditional banking services, I don't see how eliminating a source of lending benefits them.

Do we have any figures on how many people use these services responsibly versus how many end up aggravating their situations?

[Frank]

I read the article, but I did not do the math.

Credit unions muscle into payday loan services (http://www.stltoday.com/stltoday/business/stories.nsf/developmenteconomy/story/1634A2FFC81D4C57862575A3000A4EB6?OpenDocument)

[MOIDALIZE]

Do we have any figures on how many people use these services responsibly versus how many end up aggravating their situations?

I don't have any figures, though I'm sure plenty of them screw up and take out a loan to pay off another loan. But it shouldn't matter what the people are doing with their loans. The only thing that should matter is whether the lenders are providing all the necessary information the law requires them to provide and whether they're engaging in abusive collection practices. If all the Virginia legislature and payday loan opponents focus on is the high APRs, then they're missing the point.

If it's about protecting people from themselves, then why doesn't Virginia get rid of its lottery?

[fruitbat]

I just don't understand this mentality. We seem hell bent on ensuring that consumers can't make decisions on their own. One of the most basic freedoms is the freedom to do things that hurt no one but yourself. It would seem to me that the proper role of regulation is to ensure disclosure of fees and interest rates, preferably in huge unmistakable bold letters, to the clients of these businesses.

The problem is that we can start to take away many minor freedoms in pursuit of better public policy. Eventually we get to a freedom you or I care about and by then it is too late. So let us imagine payday lenders were forced to disclose their APR in 72 point type on all contracts and in two foot letters in every store window. Would you still be in favor of shutting them down? Comparing this to a smoking ban seems misguided at best. Prohibiting smoking in public places is done not to protect the smoker from himself, but to protect other's from the smoker's by products. There is no such effect (unless you stretch the analogy to the breaking point) with payday lending.

[waterj2]

I just don't understand this mentality. We seem hell bent on ensuring that consumers can't make decisions on their own. One of the most basic freedoms is the freedom to do things that hurt no one but yourself. It would seem to me that the proper role of regulation is to ensure disclosure of fees and interest rates, preferably in huge unmistakable bold letters, to the clients of these businesses.

The problem is that we can start to take away many minor freedoms in pursuit of better public policy. Eventually we get to a freedom you or I care about and by then it is too late. So let us imagine payday lenders were forced to disclose their APR in 72 point type on all contracts and in two foot letters in every store window. Would you still be in favor of shutting them down? Comparing this to a smoking ban seems misguided at best. Prohibiting smoking in public places is done not to protect the smoker from himself, but to protect other's from the smoker's by products. There is no such effect (unless you stretch the analogy to the breaking point) with payday lending.You act like prohibiting payday lending is some sort of brand new idea, trampling over a previously long-standing right. In fact, payday lending only came about relatively recently, and prohibitions against usury have been the rule, not the exception since at least biblical times.

For a look at the laws, state by state, here's a clickable map: http://www.paydayloaninfo.org/states.cfm

Here in Massachusetts, for example, the small loan rate is capped at 23%, and I've never seen a payday lending office that I can recall.

[Claire Beauchamp]

We have all sorts of consumer protection laws, and as already stated, usury laws go back centuries and centuries. The fact that some states are clamping down on what has been essentially unregulated, predatory lending is in line with these precedents.

My state allows both payday loans, "check cashing" for exorbitant fees, and car title loans. In poorer neighborhoods (like mine -- I live in a cheap but edgy, immigrant-heavy area) there are more of these, plus pawn shops, than any other type of business. It's true that low-cost lending programs are sadly needed, and traditional banks do a piss-poor job of serving the lower class. Letting these usurious business flourish, however, isn't the answer.

A related legal scam are the tax filing business that "give" you your refund immediately. They are, of course, high-interest, short-term loans, but you can't convince the target market that they're a rip-off. I've seen interviews on TV where people using these services would much rather get less money NOW than wait a couple of weeks and get their full return. It's short-term thinking at its worst, but it's really hard to convince them that waiting would be more beneficial in the long run.

There are those who say that the government should not worry about protecting people from their own stupidity, or at best, ignorance, caveat emptor and all of that. In that case, let's repeal ALL consumer protection and fair trade laws, and let the market self regulate. That works really well.

[Lamar Mundane]

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

I'm sure all The Little People will be so glad that your enlightened governors are there to make decisions for them. And for you too, I might add.

What's next on your list of freedoms that you would like to willingly give away to a government official, to 'make things better for the majority of us?'

The legislature enacted this, it wasn't by the Governor's fiat. Do you have a problem with representative democracy? This was the decision of the people, via their elected representatives.

[MOIDALIZE]

We have all sorts of consumer protection laws, and as already stated, usury laws go back centuries and centuries. The fact that some states are clamping down on what has been essentially unregulated, predatory lending is in line with these precedents.

My state allows both payday loans, "check cashing" for exorbitant fees, and car title loans. In poorer neighborhoods (like mine -- I live in a cheap but edgy, immigrant-heavy area) there are more of these, plus pawn shops, than any other type of business. It's true that low-cost lending programs are sadly needed, and traditional banks do a piss-poor job of serving the lower class. Letting these usurious business flourish, however, isn't the answer.

A related legal scam are the tax filing business that "give" you your refund immediately. They are, of course, high-interest, short-term loans, but you can't convince the target market that they're a rip-off. I've seen interviews on TV where people using these services would much rather get less money NOW than wait a couple of weeks and get their full return. It's short-term thinking at its worst, but it's really hard to convince them that waiting would be more beneficial in the long run.

There are those who say that the government should not worry about protecting people from their own stupidity, or at best, ignorance, caveat emptor and all of that. In that case, let's repeal ALL consumer protection and fair trade laws, and let the market self regulate. That works really well.

Payday lending isn't automatically predatory. Of course the APR on a payday loan is astronomical, it's a short term loan to people that generally have poor credit. But the borrowers don't care about the APR, they only care about the total fee they have to pay. A payday loan at a "non-usurious" rate wouldn't be worth making unless you could acheive some serious volume business, but most payday lenders I've seen have basically been neighborhood concerns.

As for the tax filing businesses, yeah, it would be great if people didn't live check-to-check and had a basic grasp of the time value of money, but if you need money RIGHT NOW then you might be willing to pay for that service. There's nothing wrong with having that option.

Your last point presents a false dichotomy. Payday lenders can be regulated to prevent certain abuses and still provide a valuable service to the type of borrowers your average bank won't deal with. It's not an all or nothing proposition. You recognize that banks don't serve these folks, yet you're against payday lenders. Can you think of a good alternative?

[MOIDALIZE]

The legislature enacted this, it wasn't by the Governor's fiat. Do you have a problem with representative democracy? This was the decision of the people, via their elected representatives.

What's more likely, that Virginia's legislature collectively developed a conscience and decided to play the benevolent nanny, or that banking interests lobbied for legislation that hamstrings a competitor to their industry?

[Frank]

... but most payday lenders I've seen have basically been neighborhood concerns.
Nonsense. Payday lenders are big business.

[IdahoMauleMan]

The legislature enacted this, it wasn't by the Governor's fiat. Do you have a problem with representative democracy? This was the decision of the people, via their elected representatives.

Of course I do, when the government invokes threat of force to prevent voluntary transactions from occurring between consenting adults. Are you suggesting that as long as 50+% of the voting populace 'wants something', they can have it? I thought that is what our Constitution was designed to protect against.

50+% of California voters repudiated gay marriage via Prop 8. OK by you?

[MOIDALIZE]

Nonsense. Payday lenders are big business.

A big payday lender is quitting Virginia because of the tough economy and new restrictions on high-cost instant loans, but others are finding new -- and potentially controversial -- ways to keep open their money stores.

Recession and additional regulation have shrunk the ranks of cash parlors in Virginia more than 19 percent since December. There now are 630 payday-lending outlets -- down from 786, according to the State Corporation Commission.

Leading the exodus is Check 'n Go of Mason, Ohio, which is closing its 68 Virginia outlets. It is among five instant lenders surrendering their payday licenses to Virginia regulators.

"We're fighting to survive," said W. Allen Jones, founder and chairman of another major lender, Check Into Cash of Cleveland, Tenn., the nation's largest privately owned payday lender.

"People will not overspend; they're not confident in their jobs."

But rather than leave the state, Check Into Cash is closing 19 of 64 stores -- idling about 60 workers -- and shifting to pricier, lightly regulated open-ended loans. This could buttress annual profits that, when the company was offering only payday loans, had fallen to about $10,000 per store from $15,000 in 2004.

LINK (http://www.timesdispatch.com/rtd/news/state_regional/state_regional_govtpolitics/article/PDAY23_20090422-221816/263015/)

I wouldn't call $10,000 annual profits per location big business. I bet a fast food restaurant could make more than that.

[Frank]

I wouldn't call $10,000 annual profits per location big business. I bet a fast food restaurant could make more than that.
A privately owned business announces their earnings to the media? In such a manner as to make it seem that, "Well, gee, we don't really make any money." I'm sorry, my skepticism meter just broke.

[Lamar Mundane]

Of course I do, when the government invokes threat of force to prevent voluntary transactions from occurring between consenting adults. Are you suggesting that as long as 50+% of the voting populace 'wants something', they can have it? I thought that is what our Constitution was designed to protect against.

50+% of California voters repudiated gay marriage via Prop 8. OK by you?

If it's unconstitutional, take it to the courts. That's the way it works.

Prop 8 was decided by a vote of the state. I don't agree with it, but I don't have a problem with it being lawful. That's what the people wanted.

There are all kinds of voluntary transactions between consenting adults that are outlalawed.

[MOIDALIZE]

A privately owned business announces their earnings to the media? In such a manner as to make it seem that, "Well, gee, we don't really make any money." I'm sorry, my skepticism meter just broke.

I think the fact that they're closing up shop is as clear an indicator as any of what little money they're making. If they're secretly raking in all this money, why leave? And how much do you think they charge on these loans? They might be able to charge $40 on a $500 loan.

[Rand Rover]

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

I'm sure all The Little People will be so glad that your enlightened governors are there to make decisions for them. And for you too, I might add.

What's next on your list of freedoms that you would like to willingly give away to a government official, to 'make things better for the majority of us?'

As always, I agree with you 100%.

Once the current crisis is over and banks start lending again, you will (yes, that's a guaran-damn-tee, folks) hear somoene (prediction: Al Sharpton) crowing about the lack of "access to financing" available to poor people in Virginia.

[IdahoMauleMan]

There are all kinds of voluntary transactions between consenting adults that are outlalawed.

Of course there are. It's a travesty. Why would you support more of them? Why would you elect officials who legislate more of them?

[Frank]

I think the fact that they're closing up shop is as clear an indicator as any of what little money they're making. If they're secretly raking in all this money, why leave? And how much do you think they charge on these loans? They might be able to charge $40 on a $500 loan.
They are only closing 19 of their 64 shops. Please recalibrate your skepticism meter.

Where do you get $40 from?

[The Tao's Revenge]

Of course I do, when the government invokes threat of force to prevent voluntary transactions from occurring between consenting adults. Are you suggesting that as long as 50+% of the voting populace 'wants something', they can have it? I thought that is what our Constitution was designed to protect against.

50+% of California voters repudiated gay marriage via Prop 8. OK by you?

The new cigarette taxes finally convinced my mom to quit smoking. Could add years to her life. I'd been trying to convince her for years.

We never got involved with check cashing loan sharks. I've always been able to figure out ways to deal with financial problems without them. Sold blood plasma to buy food or lived on potatoes and pot noodles for stretches before but we did okay.

I'll tell you what though when I have kids it isn't gonna be till I'm rich enough to never give them problems like that. See I was lucky though. For whatever reason I happened to be smart enough to know pay day advance scams are bad.

With the predatory interest they charge it's easy to get in a cycle depending on them. Like smokes kind of. Each hit means you'll need another pay day advance boost to make it through the next month. Just like cigarette addiction means every cigarette you smoke keeps you addicted so you'll need the next one, which makes sure you need the next one etc.

Now why would someone enter a cycle like that? Is it a smart choice? Fuck no. That's the problem, payday advance places exploit people's vulnerability and ignorance.

So to return to your argument about gay marriage.

Do you believe equal treatment under the law is the same level of importance as buying defective and dangerous products? Which these scams pretty much amount to.

[MOIDALIZE]

They are only closing 19 of their 64 shops. Please recalibrate your skepticism meter.

Where do you get $40 from?

I mixed up the companies in the article.

$40 I just pulled out of my ass because it's going to depend on the state. For a more concrete example, looking at Check 'n Go's (https://www.checkngo.com/about-us/products/default.aspx) website, they charge $55 on a $500 loan in Florida, while in Texas they charge $125 (:eek:).

[IdahoMauleMan]

Do you believe equal treatment under the law is the same level of importance as buying defective and dangerous products? Which these scams pretty much amount to.

Are you arguing that payday lending is fraudulent? That they are somehow enticing someone into entering into a contract via nefarious means, by misrepresenting the terms and conditions of the deal? That's the definition of a scam, isn't it? You seem to know all about this. I'd like to hear more.

Consumer satisfaction with payday lenders is usually quite high relative to other high-interest loans like credit cards. One reason for this is that the 'deal' is usually exceedingly clear: Borrow $100, pay back $115 in two weeks. Or something like that. It's very easy to understand. This contrasts with credit cards, which often have loads of fine print, or confusing fee structures, or payment allocation methods that put the consumer in the worst possible place.

Customers need to get into their car, or walk down the street, and walk into a payday lending store to conduct business. That's a pretty conscious decision, don't you think? Or is that also somehow a 'scam'?

In fact, this is also one of the reasons consumer satisfaction is so high. Many of these underbanked consumers are intimidated by traditional banks, but like the face-to-face transaction capability of a local bricks and mortar lender.

So no, I don't buy that they are being 'scammed'. Not in the least. They are making an extremely conscious, voluntary decision to borrow money with terms and conditions that are quite clear.

You, on the other hand, seem eager to deny them this choice, as well as deny employment to payday lending employees, because you apparently Know What Is Best.

What else is on your list of Knowing What Is Best for the Little People, who apparently can't make decisions for themselves? Prohibition of alcohol? R-Rated movies with foul language? Staying up late on a school night? Driving too fast and passing on the right?

Why don't you run down some of your personal habits for the rest of us, and we'll see if we can find something objectionable. After all, I can also claim We Know What is Best. It'll be fun. It'll be a contest to see who can outlaw the most voluntary transactions that occur between consenting adults.

[The Tao's Revenge]

Are you arguing that payday lending is fraudulent? That they are somehow enticing someone into entering into a contract via nefarious means, by misrepresenting the terms and conditions of the deal? That's the definition of a scam, isn't it? You seem to know all about this. I'd like to hear more.

Consumer satisfaction with payday lenders is usually quite high relative to other high-interest loans like credit cards. One reason for this is that the 'deal' is usually exceedingly clear: Borrow $100, pay back $115 in two weeks. Or something like that. It's very easy to understand. This contrasts with credit cards, which often have loads of fine print, or confusing fee structures, or payment allocation methods that put the consumer in the worst possible place.

Customers need to get into their car, or walk down the street, and walk into a payday lending store to conduct business. That's a pretty conscious decision, don't you think? Or is that also somehow a 'scam'?

In fact, this is also one of the reasons consumer satisfaction is so high. Many of these underbanked consumers are intimidated by traditional banks, but like the face-to-face transaction capability of a local bricks and mortar lender.

So no, I don't buy that they are being 'scammed'. Not in the least. They are making an extremely conscious, voluntary decision to borrow money with terms and conditions that are quite clear.

You, on the other hand, seem eager to deny them this choice, as well as deny employment to payday lending employees, because you apparently Know What Is Best.

What else is on your list of Knowing What Is Best for the Little People, who apparently can't make decisions for themselves? Prohibition of alcohol? R-Rated movies with foul language? Staying up late on a school night? Driving too fast and passing on the right?

Why don't you run down some of your personal habits for the rest of us, and we'll see if we can find something objectionable. After all, I can also claim We Know What is Best. It'll be fun. It'll be a contest to see who can outlaw the most voluntary transactions that occur between consenting adults.

I assume you could find a cite saying many smokers are happy with there smokes too, and that's true to some extent, and I bet I could a nice bunch of cites about gearheads who want do away with mandatory pollution control systems on cars. The point being we live in a society, we have a duty to each other because we don't live in glass bubbles.

I'm not for arbitrarily banning things. I believe weed should be legal as long as beer and tobacco is. It's not as dangerous as either of those.

The thing I don't get is why the fuck are so many people in a position to even need these services? Doesn't it strike you as a break down of the system? The working poor aren't lazy. Most of them just weren't trained how to approach life right. I spent my early 20s unlearning bad habbits from my poor family. Still unlearning them. Those habbits are why they're poor. They could all be expressed as the "smoke it while you got it" school of money management.

See when you're poor simple things like a pop, new clothes, washing machine/trip to laundromat, food that resembles food, etc. are luxuries. Think about that for a minute. It puts you in a different mindset. Sure you should buy gas with that $20, but your stomach is growling and you've been eating mac and "cheese" dinners for the last 3 weeks because it's all you could afford. The thought of another plate of it makes you queasy. You just want one good meal. The future is an abstract thing but your growling stomach is very real.

Different mindset. You can't get ahead in that mindset. You won't think logical. It pushes you to live for today while it's good, because that's rare.

People need to get the word out about how to get ahead. We need to restructure society so people can, and they're educated how to.

I sympathize with your position. I really do. I hate being told what I can and can't do, but there is a duty to protect people from themselves. Many of them were just raised that way and don't know any better.


I ask you this simple question. Why would someone willingly be in a position to have to rely on these services?

[Chronos]

Your last point presents a false dichotomy. Payday lenders can be regulated to prevent certain abuses and still provide a valuable service to the type of borrowers your average bank won't deal with. It's not an all or nothing proposition. You recognize that banks don't serve these folks, yet you're against payday lenders. Can you think of a good alternative?Sure, banks aren't serving this demographic, but the payday loan places aren't serving them, either. At least, in other than the "To Serve Man" sense. Getting rid of the payday loan shops isn't giving the poor a hand up, but it at least means not kicking them while they're down.

[atomicbadgerrace]

The thing I don't get is why the fuck are so many people in a position to even need these services? Doesn't it strike you as a break down of the system? The working poor aren't lazy. Most of them just weren't trained how to approach life right. I spent my early 20s unlearning bad habbits from my poor family. Still unlearning them. Those habbits are why they're poor. They could all be expressed as the "smoke it while you got it" school of money management.

Doesn't really matter why they need them, or why they want them. The way the system works was described pretty well by IdahoMauleMan. There's nothing fraudulent going on; no scam involved. Payday loan places are extremely clear about what's owed and when. No fine print, no loopholes. You borrow $100, you owe $115 in two weeks.

I sympathize with your position. I really do. I hate being told what I can and can't do, but there is a duty to protect people from themselves. Many of them were just raised that way and don't know any better.

A duty to protect people from themselves? I disagree. That's a pretty broad, subjective spectrum, and I'm not interested in my lawmakers putting themselves in a position to decide what's best for, and what's not good for, the individual. I'm against mandatory seat belt laws, I'm against a flat out ban on indoor smoking, and I'm against legislating where consumers can and can not borrow money and at what rate.

If John Smith wants to drive without a seat belt and risk injuring himself, that should be his choice. If a restaurant wants to allow indoor smoking, I see no reason why they can't make that decision on their own. If John wants to borrow $100 today and repay me $500 next week, that's his prerogative. "Protecting people from themselves" should not be a part of the lawmaking process.

I ask you this simple question. Why would someone willingly be in a position to have to rely on these services?

That doesn't matter to me at all with regard to whether or not these services should be legal. It's not my job to judge why someone needs something, or to judge whether they're too stupid to know better. This type of service is nothing more than two parties engaging in a consensual transaction.

[IdahoMauleMan]

The thing I don't get is why the fuck are so many people in a position to even need these services?

People need to get the word out about how to get ahead. We need to restructure society so people can, and they're educated how to.


Well, then...we better ban it. After all, if you don't understand something, it should be banned. Shouldn't it? Isn't that that bar for restricting voluntary transactions? If The Tao's Revenge doesn't understand why two consenting adults would engage in a voluntary transaction, it should be banned?

I don't understand why anybody stays up after midnight and spends time drinking and smoking cigarettes in a bar. It seems to be extremely unhealthy behavior, doesn't it? Let's ban it.

I don't understand why anybody would bear children out of wedlock when they can't support them financially. Let's ban that, too.

How about bottled water? Now THAT's a scam. Most of it is no different than what comes out of your tap, for free. Let's ban it.

How about betting on roulette in Vegas or Atlantic City, where it is a mathematical certainty that you are in a losing position, relative to the House? That seems silly to me, too. Let's ban it.

You know what? I think you're onto something here. This philosophy is growing on me. If I, IdahoMauleMan, cannot personally understand why somebody would do something, I am going to insist that it be banned.

[Sandwich]

If John wants to borrow $100 today and repay me $500 next week, that's his prerogative. "

I understand your position much better now.

I think society should protect people like John from people like you.

[LonesomePolecat]

No cite handy, but I recall reading that most of their business is with regular or semi-regular customers.
A lot of them will even give you your first loan free just to get you hooked. All usury is despicable, but this is a particularly despicable form.

[IdahoMauleMan]

A lot of them will even give you your first loan free just to get you hooked. All usury is despicable, but this is a particularly despicable form.

What's your bar for your definition of 'usury'? Could you throw out a dividing line on interest rates, or fees, that you think is the Go/NoGo boundary for usury?

Thanks in advance.

[villa]

Of course I do, when the government invokes threat of force to prevent voluntary transactions from occurring between consenting adults.

And so we pave the way for the return of the truck system and the tommy store.

[IdahoMauleMan]

And so we pave the way for the return of the truck system and the tommy store.

You'll have to educate me on that one. I've never heard the terms 'truck system' and 'tommy store' before.

[Vinyl Turnip]

This is just going to have to be one of those situations where the stupid are prevented (or at least discouraged) from hurting themselves.

Heck, if it weren't for the stupid, we'd all have more freedom.

Tell me about it. Because of a few careless idiots, I'll never be able to introduce my three-year-old nephew to the wonderful world of Lawn Darts!

[villa]

Paying people in company script that can only be used at the inflated price company store. Common place in England, for a while, until it was banned as part of labour reform.

Of course, no one forced the "employees" to take the jobs, so everything was hunky dorey.

[Bryan Ekers]

You'll have to educate me on that one. I've never heard the terms 'truck system' and 'tommy store' before.

I think they involve digging 16 tons or something.

[LonesomePolecat]

What's your bar for your definition of 'usury'? Could you throw out a dividing line on interest rates, or fees, that you think is the Go/NoGo boundary for usury?

Thanks in advance.What's your bar for the definition of sexual harassment? Where's the dividing line between sexual harassment and agressive courtship? Follow this line of reasoning far enough, and you reach a point where you refuse to make a distinction between a gully and a canyon because there is no universally agreed upon dividing line between the two. The boundary for usury will always be at least somewhat arbitrary. That doesn't make the concept meaningless.

I don't like it when lefties try to derail a thread by drawing others into endless, nitpicking debates about definitions, and I don't like it any better when conservatives and libertarians do it either.

[shiftless]

I always assumed these paycheck cashing places serviced a semi-underground market - those people who need to do basic banking but don't have a normal bank account for some reason. Read illegal workers. That would be my guess for the real reason Virginia wants to shut them down. Not to say they are doing anything illegal, just that there are some people who can't even cash a paycheck because they don't have an account anywhere. These places will do that for a fee. They take the risk that a tradictional bank won't - that the check is bad - and they charge accordingly.

Those places are predatory in their rates but no more so than your average credit card.

[Vinyl Turnip]

My credit card lender, evil as they may be (and they are), at least refrains from broadcasting endlessly repeated no-budget commercials featuring ecstatic "people of color" (literally) dancing around with fists full of cash. Somewhere P.T. Barnum is saying "hey now... let's not take things too far!"

[Kimstu]

How does eliminating voluntary transactions between consenting parties 'make things better for the vast majority of us?'

Well, it depends partly on what the voluntary transactions are. If you recall, over the past several years there was a huge wave of voluntary transactions between financial institutions and other companies selling each other various kinds of collateralized debt obligations, bundled subprime mortgages, and the like, in a completely non-transparent and poorly regulated manner.

Very nice for them, while they were raking in lots of money from their voluntary transactions. Not so great for the vast majority of us in the long run.

Libertarian outrage about mean old nanny government interfering with the brave patriots of untrammelled commercial freedom isn't selling so well as it used to.


Once the current crisis is over and banks start lending again, you will (yes, that's a guaran-damn-tee, folks) hear somoene (prediction: Al Sharpton) crowing about the lack of "access to financing" available to poor people in Virginia.

I think you intended to say that someone would be "complaining" or "lamenting" rather than "crowing". "Crowing" implies gleeful rejoicing, which I don't think is what you mean here.

[Lamar Mundane]

Nigerian scams are voluntary transactions between consenting adults. Bernie Madoff didn't hold anyone up at gunpoint, they all voluntarily gave over there money. What's the problem?

[Gangster Octopus]

What are the strict limits exactly? I mean they haven't directly outlawed the loans have they?

[MOIDALIZE]

Nigerian scams are voluntary transactions between consenting adults. Bernie Madoff didn't hold anyone up at gunpoint, they all voluntarily gave over there money. What's the problem?

Fraud is never voluntary. Where does fraud come into play for a payday loan?

[filling_pages]

I use a check loan service a couple of times a year. I'm a state worker, I live paycheck to paycheck. If my car breaks down or some other emergency comes up, I can wait two weeks for my next paycheck and hope there's enough to get repairs - spending money that whole time on the (terrible) bus system or even missing work because I can't get there - or I can get a small loan and pay it back over the course of a month. The fees are doable for me - if I borrow $400, I might wind up paying back $450 - $470. That's worth it to keep me on the road.

I am not stupid, I do not have holes in my head, I am not buying smokes (in fact, I do not smoke). I am not partying it up, I do not have kids, I understand that it is not "free money". In fact, most of the people who use the service, if those I see when I go there are any example, are like me. Underpaid and in some small emergency (health, cars, buying school books, etc).

I would be mighty angry if my state government took this option from me.

[Chronos]

If you're rich enough to be able to afford these services, then you're rich enough that you don't need them. You say that paying back the extra $50 - $70 interest is doable for you... If that's the case, then why not put that $50-$70 in a bank account every month and let it accumulate? Then, six months from now when your car breaks down, you have $300-$420 that you can spend on it without having to pay any interest, or even have to pay off the principle.

[Bricker]

Nigerian scams are voluntary transactions between consenting adults. Bernie Madoff didn't hold anyone up at gunpoint, they all voluntarily gave over there money. What's the problem?

Are you serious?

I mean, I could point out that fraud vitiates consent, as MOIDALIZE did, but I'm sure you knew that already. So I'm not sure I understand what the point of your post is.

[Lamar Mundane]

Are you serious?

I mean, I could point out that fraud vitiates consent, as MOIDALIZE did, but I'm sure you knew that already. So I'm not sure I understand what the point of your post is.

I didn't say there wasn't fraud. I just said they were voluntary transactions. Just like drug dealing. They are preying on the weakness of one party - be it ignorance, greed, or addiction.

Spare me your Libertarian fantasies.

[filling_pages]

If you're rich enough to be able to afford these services, then you're rich enough that you don't need them. You say that paying back the extra $50 - $70 interest is doable for you... If that's the case, then why not put that $50-$70 in a bank account every month and let it accumulate? Then, six months from now when your car breaks down, you have $300-$420 that you can spend on it without having to pay any interest, or even have to pay off the principle.

Because I don't have it every month. I can, by lowering my standard of living, selling a few things, taking odd jobs on the weekend, or some other hook and crook method, come up with about $50 - 70 extra a few times a year. I'm in that position right now, and I've eaten red beans and rice for dinner the past 5 nights in a row, for example. (Made it in a crock pot that I got for Xmas last year. Sure would like some veggies. Or meat.) As an isolated incident, it's not that bad. As a way to live my life? Not worth it.

Let's say I did have a year in which I had no emergency costs, and I willing gave myself, say, three tight months - no going out at all, gas only for home to work and back, no rental movies, only the most basic of food - and was able to put that money away. That's maybe $200 - $300 a year. And odds are good that's not going to cover the kind of expenses I'm talking about. Or I could drop the one nonessential bill I pay regularly, cell phone/internet, which is about $100 a month, and put that into savings. You know what? That's not worth it to me, either.

I have one credit card, a department store card I got when my sister got married and I needed a new pair of pants. It's paid off and I don't use it. I bet I pay less in interest and credit fees than 90% of the people on this board. But because I choose to take the option that hits me with a small lump sum rather than spread it away between a half dozen credit cards and so on, I've got holes in my head? Different ways for different folks.

[Bricker]

I didn't say there wasn't fraud. I just said they were voluntary transactions. Just like drug dealing. They are preying on the weakness of one party - be it ignorance, greed, or addiction.

Spare me your Libertarian fantasies.

No, they're not. It's not a matter of "libertarian fantasy," but a matter of law that fraud vitiates consent. In other words, your example of the Nigerian scams and the Bernie Madoffs of the world is distinguishable, legally, from the example of payday lenders.

And you knew that. Yet you posted the question anyway. Why?

[mswas]

Well, it probably will impact some people who had fallen into the habit of relying upon those loans. However, in the long run, it will do them good to stop relying upon them, since they will free up for use the ridiculous interest/fees they had to pay on the loans. So I am thinking in the long run, they will be perfectly happy. :)

But now you can't go to the track and double your money before you pack it back!

[atomicbadgerrace]

I understand your position much better now.

I think society should protect people like John from people like you.

Oh, spare me. I wasn't suggesting that the scenario I made up was at all indicative of my personal nature.

We'll have to agree to disagree. Lawmakers should not cater to the lowest common denominators in society. There are grey areas, I'll admit, but I don't see how payday loans factor into them. It's John's money, and John is told very clearly, up front, before anything is signed, how much he has to pay back and when he has to pay it back. At that point, John has every right to turn around and leave. If he doesn't, it's on him, and I have zero sympathy for someone who turns around 2 weeks later and whines about the big bad loan company coming after them for repayment according to the terms of a signed contract.

Fraud does prey upon the less fortunate, but fraud should be limited to contractual violations. The 419 scams and Bernie Madoff's gig can then certainly be considered fraud, but Payday loan places? I can't see that.

[LonesomePolecat]

Or I could drop the one nonessential bill I pay regularly, cell phone/internet, which is about $100 a month, and put that into savings. You know what? That's not worth it to me, either.
you can get a pre-paid cell very cheap, and a dial-up internet service for about $5 a month. If you live by yourself, you need to get a roommate or move in with a relative or something. I find it hard to believe you can't find a way to save $50 a month, but somehow you can find a way to pay $450 in one lump sum without wrecking your budget.

[Spiff]

If John Smith wants to drive without a seat belt and risk injuring himself, that should be his choice.And if John Smith crashes and suffers catastrophic injuries that would have been prevented by a seat belt, then the cost of his medical care is assumed by the state. This takes money out of my pocketbook and that of every other taxpayer.

That is the justification for mandatory seat belt laws. John has the right to be stupid if it only hurts himself. He does not have the right to be stupid if his stupidity has a very real potential to affect me and everyone else in society.

Usury laws protect stupid people from high-interest loans that trap them in to a debt cycle that is extremely hard to break. This damages society because it pushes a percentage of these people into such a state of poverty that they need state welfare services that they otherwise might not have needed.

This takes money out of my pocketbook and that of every other taxpayer, and yep, you guessed it, is the justification for anti-usury laws. Plus, there is the negative effect of increasing the number of financially desperate people in society, which certainly doesn't help the crime rate go down.If a restaurant wants to allow indoor smoking, I see no reason why they can't make that decision on their own.And the employees and customers and delivery people and health inspectors (and so on) who are subjected to the second-hand smoke?

Some of those people might conceivably be doing so on their own volition, but not all of them. Do those people not have rights? Plus there's the cost to society of indigent people dying slow and expensive deaths from emphysema, which, yep, you guessed it, takes money out of my pocketbook and that of every other taxpayer. And that is the justification for smoking bans in public spaces.

Any other examples you'd like to put forth?

[atomicbadgerrace]

And if John Smith crashes and suffers catastrophic injuries that would have been prevented by a seat belt, then the cost of his medical care is assumed by the state. This takes money out of my pocketbook and that of every other taxpayer.

That is the justification for mandatory seat belt laws. John has the right to be stupid if it only hurts himself. He does not have the right to be stupid if his stupidity has a very real potential to affect me and everyone else in society.

As a corollary to my post, I don't think the state or anyone but John and his insurance should assume the cost of any medical care.

The rest of your post details other ways in which society picks up the pieces for those who made bad choices. I thought it implied, but suppose I didn't outright say, that I don't think society should be in this business, either. If John crashes, let him and his insurance company sort out the cost. His insurance company should be able to mandate seat belt use; if it's found that he was negligent in that regard, they should have the right to refuse payment.

Some of those people might conceivably be doing so on their own volition, but not all of them. Do those people not have rights? Plus there's the cost to society of indigent people dying slow and expensive deaths from emphysema, which, yep, you guessed it, takes money out of my pocketbook and that of every other taxpayer. And that is the justification for smoking bans in public spaces.

Any other examples you'd like to put forth?

The employee doesn't have the "right" to a smoke-free environment, no. The employer's policy on smoking should be (and usually is) very clear, and this kind of employment is by and large at-will. This type of reasoning leads to absurd statements like "well, we should ban fast food, because it can lead to all kinds of medical problems which, yep, you guessed it, takes money out of my pocketbook and that of every other taxpayer."

[Chronos]

Because I don't have it every month. I can, by lowering my standard of living, selling a few things, taking odd jobs on the weekend, or some other hook and crook method, come up with about $50 - 70 extra a few times a year. I'm in that position right now, and I've eaten red beans and rice for dinner the past 5 nights in a row, for example. (Made it in a crock pot that I got for Xmas last year. Sure would like some veggies. Or meat.) As an isolated incident, it's not that bad. As a way to live my life? Not worth it.Don't forget about the principle, too. What you're saying is that, a few times a year, you can scrounge up enough money to pay for a car repair or other surprise contingency, plus interest on that cost. When such a contingency comes up, costing, say, 400 dollars, you take out a loan, and then a few weeks later scrounge enough to pay $450 that you hadn't budgeted.

OK, so you're doing well enough that about twice a year, you can pony up $450 more than you normally expect to. Suppose that, just once, you scrounged that way without needing to. Not as a way of life, just one single month. Instead of putting the $450 you scraped together towards an emergency + interest, you put it into a bank account (or heck, even just hid it in a shoebox under your bed). Then, when the next emergency comes along, instead of taking out a loan for $400 at the time and paying back $450 a couple of weeks later, you can withdraw $400 from your account (or shoebox) now and put $400 back into your account a couple of weeks later. By tightening your belt just one single time, you've managed to save yourself $50 every single time in the future that you're ever in that situation. If you want, you can spend that $50 you saved on something you want, or of course you could put some or all of it into your rainy day fund, so you're now able to withstand even greater emergencies.

[Spiff]

His insurance company should be able to mandate seat belt use; if it's found that he was negligent in that regard, they should have the right to refuse payment.And when John can't pay the hundreds of thousands of dollars in medical bills, then John becomes a ward of the state. Then, yet again, it's my pocketbook and your pocketbook taking the hit.

Sure, if a millionaire wants to violate the terms of his or her insurance policy, or not carry injury protection on a car insurance policy, that's fine by me. But for the other 99% of the population, who will become destitute when faced with astronomical medical bills, what then?

[filling_pages]

you can get a pre-paid cell very cheap, and a dial-up internet service for about $5 a month. If you live by yourself, you need to get a roommate or move in with a relative or something. I find it hard to believe you can't find a way to save $50 a month, but somehow you can find a way to pay $450 in one lump sum without wrecking your budget.

Actually, I can't get dial-up - the phone lines don't work in the apartment I live in. I could get them fixed, but why? I would then have to get home phone service. And why would I move in with a relative or get a roommate (I live in a 220 sq foot one bedroom that I love and is quite cheap) to save myself, what, $150 a year in fees? This is my life. I am in my 30s. I do not have amassed debt. I pay my bills. I save up and buy used cars up front when I need a new one. I do not require government assistance. I am not complaining.

What I am saying is that I could save up $450 over the course of a very tight month and a half to two months if I had to, by cutting out all entertainment/nonessential costs (rent, utilities, phone/internet, one tank of gas, beans and rice/staples for food, that's it) and by working on the weekends at odd jobs, friends' flea market booths, that sort of thing. That's not enjoyable, nor is it a way I intend to live my life on a regular basis. It works just fine when there is an emergency. Payday loans allow me to get that cash up front, pay it off over the month/two months, does not cost me all that much, and means I can deal with said emergency right then instead of after the money is saved.

It works for me. Like I said, most of you are paying much more than I do yearly in fees and interest rates on car loans, credit cards, house payments, and the like. In fact, banning payday loans would not prevent me from getting a half dozen credit cards, maxing them out, and REALLY putting myself into dire straits, which I have seen friends do over and over. I don't need protecting. I understand what I am paying and choose to pay it. I am not alone in this.

[atomicbadgerrace]

But for the other 99% of the population, who will become destitute when faced with astronomical medical bills, what then?

What then, indeed? It really shouldn't be my problem, or anyone else's. If Joe was following the terms of his insurance contract, let them pay. If he wasn't, collect from him. I don't see why I, or anyone else, should be burdened with picking up his bill. I'm fine with paying into hospitals to provide rudimentary emergency care to the uninsured, but beyond that, individuals alone should be faced with the consequences of their actions.

I don't need protecting. I understand what I am paying and choose to pay it. I am not alone in this.

I don't know where you live, but drinks are on me.

[filling_pages]

Chronos: Honestly, tell me - do you pay everything in cash, up front? Or do you currently have loans and debt?

[Kimstu]

What I am saying is that I could save up $450 over the course of a very tight month and a half to two months if I had to, by cutting out all entertainment/nonessential costs (rent, utilities, phone/internet, one tank of gas, beans and rice/staples for food, that's it) and by working on the weekends at odd jobs, friends' flea market booths, that sort of thing. That's not enjoyable, nor is it a way I intend to live my life on a regular basis. It works just fine when there is an emergency. [...]

It works for me. [...] I don't need protecting. I understand what I am paying and choose to pay it.

Sure. But as Chronos pointed out, you could handle these emergencies even more cheaply by just once scrimping to save up that $450 BEFORE you need it. Then whenever the next emergency comes along, you spend whatever you need from your savings, and scrimp and save again for a month or so to replace what you spent.

In short, you'd be your own payday lender, except you'd be earning interest instead of paying interest on your payday loan money.

If you personally would rather pay interest to a payday lender, that's fine with me. But it doesn't strike me as a compelling argument for why predatory payday lending needs to be kept legal. If some people are being victimized by it, and if the non-victims who use it (like you) have cheaper and better alternatives available, then what purpose is it really serving?

[atomicbadgerrace]

If you personally would rather pay interest to a payday lender, that's fine with me. But it doesn't strike me as a compelling argument for why predatory payday lending needs to be kept legal.

His choice is fine with you, but you'd still prefer to regulate what types of voluntary transactions he can and cannot enter into, simply because they don't sit well with you?

If some people are being victimized by it, and if the non-victims who use it (like you) have cheaper and better alternatives available, then what purpose is it really serving?

The only people being victimized by payday lending are those who, voluntarily and with full consent, agree to be victimized.

[filling_pages]

Sure. But as Chronos pointed out, you could handle these emergencies even more cheaply by just once scrimping to save up that $450 BEFORE you need it. Then whenever the next emergency comes along, you spend whatever you need from your savings, and scrimp and save again for a month or so to replace what you spent.


By that method, I'd have to do the scrimp thing one extra time, to save up the $400 or whatever to start with. I'd still have to scrimp after paying it, to replenish. The fee is the smallest part of the money that I'd be trying to get my hands on, right? The extra $50 is not what makes it take up to two months to save up. Yes, it would save me money. No, it would not save me time. Yes, I could spend that $150 a year on something else. I know that. But I would rather have the time than the money, frankly, in this case.

Not to say that some people don't get into nasty cycles with payday loans. I've seen people getting them that, frankly, can barely read. But the majority of the people I have encountered in payday loan situations are just doing what it takes to get out of an emergency situation. As I said before, you can get in much bigger trouble by stacking credit cards, and no one's banning those.

[Renob]

I understand your position much better now.

I think society should protect people like John from people like you.

That makes as much sense as saying society should protect people like John from people who want to charge him $500 for a couch. You fail to realize that the value of money is not necessarily the same as the numbers printed on those dollar bills being borrowed. Value is subjective. For some people, $100 today may be worth $500 in two weeks (actually, it's more like $115 in two weeks -- that's the rate payday lenders were charging in Ohio). Sometimes you need cash in a hurry and its value to you is far in excess of the actual amount of money being borrowed.

Let me try and illustrate by using an example of value from my own life. I work from home and I rely on my Internet connection for my work. I have to turn in something every morning by 8:00 a.m. for me to get a paycheck. It's vital that I turn this stuff in every morning or I'll lose my job. I pay $30 a month for my Internet connection. One morning I had to drop my mom off at the airport at 7:00 a.m. So in order to do that as well as get my job done, I used the airport's wi-fi to complete my work at the airport. I paid $9.99 for a couple hour's worth of wi-fi usage. If I did that for all 20 working days in a month, that would be around $200, far more than I pay for Internet service. But for me to keep my paychecks rolling, the value of that wi-fi at that time was worth well in excess of $9.99. I was willing to pay a much higher price for that service than I normally pay because of its value to me at that time.

The same reason I paid $9.99 for two hours of wi-fi is the same reason people take out payday loans. If you can't understand the basic concept of value then you shouldn't be part of this debate.

[DSYoungEsq]

Of course there are. It's a travesty. Why would you support more of them? Why would you elect officials who legislate more of them?

I notice you totally sidestepped my comments upon your theory of government.

Unless you desire that government cease to exist, all acts of government interfere with the right of some group of people to exercise what I suspect you consider "freedom" to be. So, to take your theory to its logical conclusion, no act of government should ever be allowed to happen, since such an act is the will of the majority imposing itself upon the freedom of the minority.

You will, I hope, agree that's a stupid concept.

Now, we can debate quite thoroughly the question of whether this particular governmental act should be allowed to occur. We can weigh the benefits to society versus the infringement upon the freedoms of some group of individuals. We can try to apply some theory of political science that allows us to determine which governmental acts are ok, and which are excessive uses of power. And that's the nature of politics.

But your argument does none of these things. It is based solely upon an attack at the very root nature of government. Accepted as true, it would mean that there should be no government. This, I think, we all reject.

[IdahoMauleMan]

What's your bar for the definition of sexual harassment? Where's the dividing line between sexual harassment and agressive courtship? Follow this line of reasoning far enough, and you reach a point where you refuse to make a distinction between a gully and a canyon because there is no universally agreed upon dividing line between the two. The boundary for usury will always be at least somewhat arbitrary. That doesn't make the concept meaningless.

I don't like it when lefties try to derail a thread by drawing others into endless, nitpicking debates about definitions, and I don't like it any better when conservatives and libertarians do it either.

Derail? It's the whole point of the discussion. It's the kernel. The core.

Let me ask it another way. Suppose there was an offering of credit to you. A certain APR, certain fees, certain terms and conditions. Pick whatever numbers you want for purposes of discussion. 40% APR, $100 fee. 1% APR, no fee. It doesn't matter to me. Pick a strawman at your leisure.

Do you feel you are competent enough to decide whether to accept that offer, or decline it?

[IdahoMauleMan]

Very nice for them, while they were raking in lots of money from their voluntary transactions. Not so great for the vast majority of us in the long run.




And why was that? Why did the banking system collapse affect all of us? I'd like you to walk through that in a little detail, if you don't mind.

For example, if depositors give a bank $100, and the bank lends out $100, and it goes bad, and they can maybe only recover $30 of the $100, the depositors only get back $30, right? And then it's over. The bank made a bad decision, and the depositors (and perhaps the banks' shareholders) lost money, just like any other business. It's confined to them.

Right? Isn't that the way it works? Oh, wait. It doesn't work that way. Banks seemingly can be exposed for far, far more than their depositors funds.

How can that be? And even if they lose money on bad loans, the depositors are insured. How can that be, as well? I'm confused.

Hmmmmm. It seems that banking is dramatically different than nearly all other industries in the US that go bankrupt when they make bad decisions.

How can this be? Who would create such a system that operates on fiat money and allows fractional-reserve banking, which in the technical sense could be argued allows banks to operate as bankrupt at all times? Did that just spring out of the ether? Was it the free market that did that? Did banks agree to go off the gold standard of their own volition (which would provide a natural check on much of their recent activity)?

Who created that system? Who controls the fiat money supply, which is the blood coursing through it's veins? Who outlaws the use of a commodity-backed currency? Who regulates such entities?

It must the free market. The free market did that. Right?

[Spiff]

What then, indeed? It really shouldn't be my problem, or anyone else's. If Joe was following the terms of his insurance contract, let them pay. If he wasn't, collect from him. I don't see why I, or anyone else, should be burdened with picking up his bill. I'm fine with paying into hospitals to provide rudimentary emergency care to the uninsured, but beyond that, individuals alone should be faced with the consequences of their actions.In Calcutta, destitute people die in the streets. I'd rather not have that here.

[Renob]

In Calcutta, destitute people die in the streets. I'd rather not have that here.
Since India's economy is far more socialist than ours, I assume you are saying you'd like India to reduce the heavy burden of government on its citizens so businessmen can create jobs and people can find work. I agree with you wholeheartedly.

[filling_pages]

I just wanted to add this, as the only person here who has so far admitted to using payday loans: I'm not saying it's a great idea or should be used all the time. It does cost money. I'm just saying that sometimes it's handy and worth it to me, and I like having it as an option.

[Bricker]

I notice you totally sidestepped my comments upon your theory of government.

Unless you desire that government cease to exist, all acts of government interfere with the right of some group of people to exercise what I suspect you consider "freedom" to be. So, to take your theory to its logical conclusion, no act of government should ever be allowed to happen, since such an act is the will of the majority imposing itself upon the freedom of the minority.

You will, I hope, agree that's a stupid concept.

Now, we can debate quite thoroughly the question of whether this particular governmental act should be allowed to occur. We can weigh the benefits to society versus the infringement upon the freedoms of some group of individuals. We can try to apply some theory of political science that allows us to determine which governmental acts are ok, and which are excessive uses of power. And that's the nature of politics.

But your argument does none of these things. It is based solely upon an attack at the very root nature of government. Accepted as true, it would mean that there should be no government. This, I think, we all reject.

Yes.

But perhaps I can refine (or finesse) his argument a bit.

Perhaps he means to suggest not that we eliminate all acts of government that restrict freedom -- but rather that we begin our negotiating posture from that position. By way of analogy, a wise shopper does not begin bargaining for his car from the MSRP and ngotiate downwards -- although a wise car dealer certainly does just that. A wise shopper begins with the true dealer cost and reluctantly accepts increases.

So, too, might his argument go, should we as a society begin from a position that regards all government acts with skeptical concern, and allow ourselves only reluctantly to be convicned of the necessity of any of them. He's not enunciating a bright-line rule, then, but merely a rebuttable presumption.

[Kimstu]

His choice is fine with you, but you'd still prefer to regulate what types of voluntary transactions he can and cannot enter into, simply because they don't sit well with you?

No, not "simply because they don't sit well with me". It's a typical libertarian rhetorical ploy to pretend to believe that people who support regulation of any practice are doing so merely because they personally don't like that practice, but that doesn't make it a valid argument.

Who created that system? Who controls the fiat money supply, which is the blood coursing through it's veins? Who outlaws the use of a commodity-backed currency? Who regulates such entities?

It must the free market. The free market did that. Right?

:rolleyes: More libertarian boilerplate: if the government didn't regulate something adequately and a bad result ensued, it must be because regulation itself is just bad and unworkable. As I said, that line of talk isn't fooling so many people these days as it used to.


By that method, I'd have to do the scrimp thing one extra time, to save up the $400 or whatever to start with. I'd still have to scrimp after paying it, to replenish.

Sure. On the other hand, you'd be saving the $50 interest every time an emergency occurs, plus you'd be earning interest on your emergency money in between emergencies. How long would it really take you to recoup that up-front investment of $400?

[IdahoMauleMan]

I notice you totally sidestepped my comments upon your theory of government.

Unless you desire that government cease to exist, all acts of government interfere with the right of some group of people to exercise what I suspect you consider "freedom" to be. So, to take your theory to its logical conclusion, no act of government should ever be allowed to happen, since such an act is the will of the majority imposing itself upon the freedom of the minority.

You will, I hope, agree that's a stupid concept.

Now, we can debate quite thoroughly the question of whether this particular governmental act should be allowed to occur. We can weigh the benefits to society versus the infringement upon the freedoms of some group of individuals. We can try to apply some theory of political science that allows us to determine which governmental acts are ok, and which are excessive uses of power. And that's the nature of politics.

But your argument does none of these things. It is based solely upon an attack at the very root nature of government. Accepted as true, it would mean that there should be no government. This, I think, we all reject.

My argument is based on no such thing. I've gone into long, rambling polemics in other posts about the appropriate reach of government. I assumed you didn't want that here, yet again.

[IdahoMauleMan]

I just wanted to add this, as the only person here who has so far admitted to using payday loans: I'm not saying it's a great idea or should be used all the time. It does cost money. I'm just saying that sometimes it's handy and worth it to me, and I like having it as an option.

An option? That you can choose to accept, or decline, at your own discretion?

That's crazy talk. Stop it now, please.

The government knows whats best for you. The sooner you realize that the better.

[IdahoMauleMan]

:rolleyes: More libertarian boilerplate: if the government didn't regulate something adequately and a bad result ensued, it must be because regulation itself is just bad and unworkable. As I said, that line of talk isn't fooling so many people these days as it used to.



Are you arguing my point now? What point are you arguing? It's difficult to tell. As soon as I press you on an issue you roll your eyes (in an avatar sense) and hand-wave it away with an ad hominem attack.

I thought you were arguing that 'voluntary transactions' between other individuals in a free market have somehow caused you harm, and therefore they must be banned.

Is that right?

[IdahoMauleMan]

And if John Smith crashes and suffers catastrophic injuries that would have been prevented by a seat belt, then the cost of his medical care is assumed by the state. This takes money out of my pocketbook and that of every other taxpayer.

That is the justification for mandatory seat belt laws. John has the right to be stupid if it only hurts himself. He does not have the right to be stupid if his stupidity has a very real potential to affect me and everyone else in society.

Usury laws protect stupid people from high-interest loans that trap them in to a debt cycle that is extremely hard to break. This damages society because it pushes a percentage of these people into such a state of poverty that they need state welfare services that they otherwise might not have needed.

Any other examples you'd like to put forth?

Can you try some that don't speed us further down the Road to Serfdom?

Have you read Hayek? Do you know what the Road to Serfdom is? Because all of your arguments above have a 'Wide Load' sticker on the rear, and take up all the available lanes.

To summarize: Because the government is already involved, and takes my tax dollars to get involved, it must get even more involved.

That justifies it's further intervention in just about anything. And, as Hayek (and HL Mencken) predicted. the people will actually clamor for more government involvement as a result. The politicians won't even need to expend energy asking for more....it will be given to them. The people will willingly dispossess themselves of rights that they now hold, and give them to government officials.

[filling_pages]

Sure. On the other hand, you'd be saving the $50 interest every time an emergency occurs, plus you'd be earning interest on your emergency money in between emergencies. How long would it really take you to recoup that up-front investment of $400?

Let's see. If I have 2 or 3 emergencies/large unusual costs in a year and I'm not paying fees, it would be about two and a half to three years before I saved enough in fees to make back that first $400. And if you think the money wouldn't go for a nonemergency before that, you've never lived paycheck to paycheck for any length of time. And in the meantime, that's still an extra two months of unpleasant belt-tightening that I don't need to go through.

At the end of the year, I would be no less broke than I am at the end of the year now. I might have a new winter jacket or my car might get an extra oil change, but I wouldn't have that $50 in hand. And, as I have said several times now, putting in the time ain't worth the cash.

[DSYoungEsq]

My argument is based on no such thing. I've gone into long, rambling polemics in other posts about the appropriate reach of government. I assumed you didn't want that here, yet again.

On the contrary (not that I want the polemics :p) but your argument HERE is indeed boiled down to that concept.

Now, mayhap your intention is something more in line with what Bricker postulated. But so far, your argument here has boiled down to this: it restricts freely entered into contracts, so it is wrong.

If you intende a more subtle argument than that, you need to make it. :)

[DSYoungEsq]

Yes.

But perhaps I can refine (or finesse) his argument a bit.

Perhaps he means to suggest not that we eliminate all acts of government that restrict freedom -- but rather that we begin our negotiating posture from that position. By way of analogy, a wise shopper does not begin bargaining for his car from the MSRP and ngotiate downwards -- although a wise car dealer certainly does just that. A wise shopper begins with the true dealer cost and reluctantly accepts increases.

So, too, might his argument go, should we as a society begin from a position that regards all government acts with skeptical concern, and allow ourselves only reluctantly to be convicned of the necessity of any of them. He's not enunciating a bright-line rule, then, but merely a rebuttable presumption.

Well, that's a better argument, surely. And one I won't necessarily disagree with. AND one that allows for a lot of political discourse and disagreement.

But it does have one particular flaw: it advocates nothing, sets no boundaries for what government should be doing. It is easy to sit on the sidelines and say skeptically: oh, yeah? Why? It's much more helpful to be in the middle of the dance saying, "This is what we should do; these things that you are doing are not in that list, so stop doing them."

For example: Our champion of the free market system would likely be aghast if, when someone defaulted upon a contract, he didn't have a remedy through the law. Yet, one could always argue that enforcing a private contract is something government has no business doing; let the contracting parties beware! After all, legal contract remedies do nothing but ensure that those who seek to enter into contracts will not do sufficient homework to avoid unacceptable risk of default (so the argument would go). So obviously, our champion is willing to have SOME governmental interference in the affairs of private individuals. It is, I think, incumbent upon him to articulate the outlines of such willingness, then state why the action discussed HERE is not within those boundaries (as opposed to just saying, "government shouldn't interfere between private contracting parties!").

[filmore]

The problem isn't only that pay day loan places charged extortionate interest. The deeper part of the problem is that often full time work doesn't pay a living wage. And that isn't changed by driving the blood sucking parasites out of business.

True, but if their full time pay is not sufficient, then payday loans just make the problem worse. A payday loan for a one-time emergency is one thing. Using it for day-to-day expenses is just asking for trouble. If their pay is not enough to live on, they're not going to be able to pay back all the interest either. Not having the loan places around will make it that much harder to get the loan on impulse. Unfortunately, that doesn't help the person who has that one-time emergency and needs the loan.

[Chronos]

Chronos: Honestly, tell me - do you pay everything in cash, up front? Or do you currently have loans and debt? I pay everything up front, and I do not have any debt. It's not nearly as difficult as most Americans seem to think.

[IdahoMauleMan]

But it does have one particular flaw: it advocates nothing, sets no boundaries for what government should be doing. It is easy to sit on the sidelines and say skeptically: oh, yeah? Why? It's much more helpful to be in the middle of the dance saying, "This is what we should do; these things that you are doing are not in that list, so stop doing them."

For example: Our champion of the free market system would likely be aghast if, when someone defaulted upon a contract, he didn't have a remedy through the law.

Hardly. I'll be happy to send $100 to a Paypal account of your choice if you can find a post of mine anywhere that advocates abolition of laws that enforce contracts.

If you're that interested in what I specifically advocate in terms of government's role, I suggest you search for long, rambling post about 2 months ago where I tried to lay it out. I can't say it's the most articulate post in the world, but you seem to be extremely interested...so I say, give it a read. I tried to use the Forum search engine but it keeps crashing on me as soon as I hit the submit button, and then it says I have to wait 300 seconds before another search.

Honestly, the ridiculous strawmen posted on this Board against libertarian arguments never ceases to amaze me. You seem more intelligent and articulate than most. Usually they boil down to the Der Trihs/Voyager variety of

- Libertarians want to sell their children into slavery
- Libertarians want to roast their grandmothers alive
- Libertarians advocate enforceable contracts of slavery, indentured servitude, <fill in social ill here>
- Libertarians will run out at the first opportunity and start companies that make defective products, to kill their customers

etc.

[atomicbadgerrace]

No, not "simply because they don't sit well with me". It's a typical libertarian rhetorical ploy to pretend to believe that people who support regulation of any practice are doing so merely because they personally don't like that practice, but that doesn't make it a valid argument.

I'm not a Libertarian, and I'm not engaging in any rhetorical ploy. Perhaps I should have instead said "simply because you feel comfortable making sweeping decisions about what is and is not good for others."

[LonesomePolecat]

Derail? It's the whole point of the discussion. It's the kernel. The core.

Let me ask it another way. Suppose there was an offering of credit to you. A certain APR, certain fees, certain terms and conditions. Pick whatever numbers you want for purposes of discussion. 40% APR, $100 fee. 1% APR, no fee. It doesn't matter to me. Pick a strawman at your leisure.

Do you feel you are competent enough to decide whether to accept that offer, or decline it?
No, I'm not going to play this silly game with you. There's always some degree of arbitrariness in every law. The arbitrariness of laws against usury doesn't make those laws bad ones. The laws against drunk driving, child molestation and murder are all arbitrary, but I suspect you won't find this sufficient grounds for doing away with them.

It is immoral and unwise to allow unscrupulous moneylenders to ruin lives. Why do you have a problem with that?

[atomicbadgerrace]

No, I'm not going to play this silly game with you. There's always some degree of arbitrariness in every law. The arbitrariness of laws against usury doesn't make those laws bad ones. The laws against drunk driving, child molestation and murder are all arbitrary, but I suspect you won't find this sufficient grounds for doing away with them.

It is immoral and unwise to allow unscrupulous moneylenders to ruin lives. Why do you have a problem with that?

The difference between some of your examples and the unscrupulous moneylenders ruining lives is that in the latter, both parties are acting voluntarily and with full disclosure and consent. No one consents to being the victim of drunk driving, child molestation, or murder.

[LonesomePolecat]

- Libertarians want to sell their children into slavery
I have come across several libertarians who advocated allowing slavery, so long as it is a "contract freely entered into."
- Libertarians want to roast their grandmothers alive
I've heard at least one libertarian advocate consensual cannibalism on a radio talk show about that that sicko in Germany.
- Libertarians advocate enforceable contracts of slavery, indentured servitude, <fill in social ill here>
See above.
- Libertarians will run out at the first opportunity and start companies that make defective products, to kill their customers
There are plenty of companies which, in the absence of effective regulation, have made defective products that injured and killed people. Had any peanut butter crackers lately? Got any securities backed by subprime mortgages in your portfolio?

Except for that third one, I don't think I've ever heard any one actually make these accusations. Careful with those strawmen, Idaho. They could be a fire hazard.

[LonesomePolecat]

The difference between some of your examples and the unscrupulous moneylenders ruining lives is that in the latter, both parties are acting voluntarily and with full disclosure and consent. No one consents to being the victim of drunk driving, child molestation, or murder.Nonsense. When you use the public roads, you voluntarily accept whatever risk may be involved in using them. Most incidents of drunk driving don't end in accidents, so it's obviously unfair to restrict my freedom to fly down the interstate at 100 mph with a head full of mescaline. If you want to offer an 8-year-old a bag of candy in return for some sex play, that's a contract into which the child has entered freely, and who are you tell someone they can't enter into a contract just because society arbitrarily decides they're too young? Likewise, if a couple of drunks get into a fight in a bar, they must understand that they've decided on a course of action which is likely to end in serious injury or death; they knew what they were getting into. Therefore, no one should interfere, and no one should be punished if someone gets killed.

Like the rhetoric of rights and equality, the rhetoric of personal liberty can be used to justify anything.

[atomicbadgerrace]

Well, this is rapidly deteriorating into a set of absurd extensions and stretched assumptions. We could continue to play "What If?" forever, but suffice it to say, all of your hyperbolic examples involve either situations where the consequences of ones actions cannot be absolutely determined, or one party involved is impaired in some way and unable to see such consequences.

If we want to write laws around worst case scenarios, we could certainly say "you have an x% chance of being killed by a drunk driver; it's your fault if you are, because you could stay home instead." Payday loans are much more cut and dry. The consequences for both parties are laid out, hammered in stone, from step 1. At least one poster in this thread has acknowledged that he has used them to his benefit on more than one occasion, with complete foreknowledge of the consequences of doing so.

How much further do you want to go to protect people from themselves? Outlaw alcohol, tobacco, anything deemed potentially dangerous if abused? A lot of folks are injured in NASCAR racing -- maybe they just don't have the presence of mind to understand that driving a car at such speed in such proximity to other cars can end up very bad for them. We should save them from themselves and a potentially bad choice and outlaw it altogether, eh?

[Renob]

It is immoral and unwise to allow unscrupulous moneylenders to ruin lives. Why do you have a problem with that?
So everything you (or our elected officials) see as immoral and unwise should be against the law?

I guess laws against homosexuality are OK, then, since many think it is immoral and it's clearly unwise to engage in risky sex that exposes you to HIV, right?

There needs to be a better basis for laws than what politicians think is immoral and unwise.

Of course, even if we accept your terms, you'd need to prove that these moneylenders are unscrupulous and that they ruin the lives of their borrowers. Having studied the payday lending issue in some depth, the evidence of either of those things is pretty much nonexistent.

[LonesomePolecat]

How much further do you want to go to protect people from themselves?
How much further do you want to go in refusing to protect people at all?

[LonesomePolecat]

There needs to be a better basis for laws than what politicians think is immoral and unwise.
. The main reason we have laws in the first place is because we consider many things immoral and unwise. The law can't be separated from morality.

[LonesomePolecat]

If we want to write laws around worst case scenarios, we could certainly say "you have an x% chance of being killed by a drunk driver; it's your fault if you are, because you could stay home instead." Payday loans are much more cut and dry. No, they're not. The payday loan industry makes its bread and butter from the folks who get stuck on the debt treadmill, and they deliberately designed their policies to suck people into that trap.

A question for the legal eagles out there. Writing a check when you know you don't have sufficient funds to cover it is illegal. Yet pay day lenders require their customers to write bad checks. Doesn't that make pay day lenders accessories before the fact or something?

[Renob]

No, they're not. The payday loan industry makes its bread and butter from the folks who get stuck on the debt treadmill, and they deliberately designed their policies to suck people into that trap.
They do, huh? Let's see a cite for those two claims. And I know you'll probably turn to the Center for Responsible Lending for backup, which is fine, I guess. However, when you do I'll gladly point you to scholarly analysis that points out the methodological flaws of their "studies."

The fact is that payday lenders make their money like any other business -- selling products that people want. No one is forced to take loans from them and, quite often (around a quarter of the time), people don't repay these loans. These lenders take a huge risk making unsecured loans to people with shaky finances. The borrowers, however, feel they have the need for that money. If people want to take these loans and others want to provide them with money, both are engaging in a transaction that holds risks for them. Just because you don't understand that transaction or don't approve of it is no reason for that transaction to be banned.

A question for the legal eagles out there. Writing a check when you know you don't have sufficient funds to cover it is illegal. Yet pay day lenders require their customers to write bad checks. Doesn't that make pay day lenders accessories before the fact or something?
Your questions shows you don't really know how the process works. The lenders, in fact, don't know this. Since many times (most, perhaps, depending on the state) lenders require proof of a job (hence the term "payday lenders") it's pretty clear that the people should have enough money to pay the lenders back. Of course, some people lie and deceive lenders. That's immoral so I assume you'd support strict punishment of these predatory borrowers.

[LonesomePolecat]

They do, huh? Let's see a cite for those two claims. And I know you'll probably turn to the Center for Responsible Lending for backup, which is fine, I guess. However, when you do I'll gladly point you to scholarly analysis that points out the methodological flaws of their "studies." And that analysis will itself be perfectly unbiased and without flaw. Yeah, right.

Just because you don't understand that transaction or don't approve of it is no reason for that transaction to be banned. The army considers payday loans enough of a hazard that they warn their personnel away from them. Journalists have reported plenty of people getting caught on that debt treadmill with payday lenders. There are plenty of people besides myself who see a serious problem here.

Your questions shows you don't really know how the process works. The lenders, in fact, don't know this. Since many times (most, perhaps, depending on the state) lenders require proof of a job (hence the term "payday lenders") it's pretty clear that the people should have enough money to pay the lenders back. Of course, some people lie and deceive lenders. That's immoral so I assume you'd support strict punishment of these predatory borrowers. Oh, yeah, right. The lenders have absolutely no idea that any of those checks could be bad. If you believe that one, how would you like to trade your car for some magic beans?

[Renob]

And that analysis will itself be perfectly unbiased and without flaw. Yeah, right.
Well, unlike the CFR studies, it will be academically sound.

The army considers payday loans enough of a hazard that they warn their personnel away from them. Journalists have reported plenty of people getting caught on that debt treadmill with payday lenders.
The plural of "anecdote" isn't "data."

There are plenty of people besides myself who see a serious problem here.
And those people, on the whole, aren't well-informed about the facts on payday lending. They, like most people, see a high APR and think there's something wrong. They don't understand short-term loans, the business model of payday lending, or why people choose payday lending. They simply jump to a knee-jerk conclusion based on a few anecdotes.

Oh, yeah, right. The lenders have absolutely no idea that any of those checks could be bad. If you believe that one, how would you like to trade your car for some magic beans?
So these lenders are purposefully lending to people who have no way of repaying, huh? Sounds like a pretty bad business model. If you lend money to people who can't repay, you go out of business. If your assertions were true, then the average payday lender would be out of business in about two weeks.

[Spiff]

Can you try some that don't speed us further down the Road to Serfdom?

Have you read Hayek? Do you know what the Road to Serfdom is? Because all of your arguments above have a 'Wide Load' sticker on the rear, and take up all the available lanes.

To summarize: Because the government is already involved, and takes my tax dollars to get involved, it must get even more involved.

That justifies it's further intervention in just about anything. And, as Hayek (and HL Mencken) predicted. the people will actually clamor for more government involvement as a result. The politicians won't even need to expend energy asking for more....it will be given to them. The people will willingly dispossess themselves of rights that they now hold, and give them to government officials.Reality has disproven your thesis. The dire things predicted by Hayek have not happened since the publication of his book more than 60 years ago.

Feel free to postulate that "It's taking longer than we thought" (Where have I heard that before?), but then also please explain why that's the case.

[filling_pages]

A question for the legal eagles out there. Writing a check when you know you don't have sufficient funds to cover it is illegal. Yet pay day lenders require their customers to write bad checks. Doesn't that make pay day lenders accessories before the fact or something?

That's not how it works. I go in, I prove I have a checking account, a home address, a phone, a job, and I bring proof of how much I get paid. They crunch the numbers, decide how much I can be loaned at once (less than I get paid per paycheck, but still more than I have ever needed to borrow at once), and I tell them how much up to that number I want to borrow. I then give them a check, dated for my next payday, for that amount plus the fees. I can either come in and pay it off on payday or they will put the check through my bank and get their money that way (sometimes this can cost an extra fee for not repaying on time).

The payday lenders want me to have that money to give them. That's how they make their cash. If I do not have that money, they do not make their money. They have to track me down and hassle me just like any other business that gets a bad check. At no point do they ask me or want me to write a bad check. What would that gain them?

[DSYoungEsq]

It is a "bad" check because it is written at a time when the funds to cover it are not in the account. And since you cannot predict the future (fired, killed, laid off, injured and can't work, etc.), there is no way to be certain the account will ever HAVE such funds, even if you insist the borrower have something like direct deposit of his paycheck.

[filling_pages]

It is a "bad" check because it is written at a time when the funds to cover it are not in the account. And since you cannot predict the future (fired, killed, laid off, injured and can't work, etc.), there is no way to be certain the account will ever HAVE such funds, even if you insist the borrower have something like direct deposit of his paycheck.

A postdated check is not a "bad check". From all cites I have seen, writing a postdated check is legal. I'd like to see a cite that it is not.

Yes, you may lose your job in the future. But a payday loan is collected, generally speaking, on your very next payday. The one that pays you for the work you have done or are doing now, as shown in paperwork you provide. It's a regular check. If you write it and receive funds for it, you are promising that this check will be good. If you go around bouncing checks, you will have legal troubles. This is true whether you bounce them on a payday loan business or your local grocery store. Their business is modeled on the idea that people pay back the loans. They gain nothing by having to track you down, turn your check over to the authorities, etc.

[Bricker]

It is a "bad" check because it is written at a time when the funds to cover it are not in the account. And since you cannot predict the future (fired, killed, laid off, injured and can't work, etc.), there is no way to be certain the account will ever HAVE such funds, even if you insist the borrower have something like direct deposit of his paycheck.

Well, the law in Virginia defines a bad check as one uttered "with intent to defraud...knowing, at the time of such [uttering] that the maker or drawer has not sufficient funds..."

So I think these check fail the criminal test because an unforeseen future event causing the funds to be available is not "knowing" or "intent to defraud" conduct.

Now, it's true also that Virginia law says that the mere fact a check is dishonored is prima facie evidence of intent to defraud, so the burden would be on the issuer to show that some unforeseen event occurred.

But the key element is: not per se bad checks, at least under Virginia law, even though they're issued at a time when no funds exist.

[LonesomePolecat]

Well, unlike the CFR studies, it will be academically sound. Because you say so? Because it told you what you wanted to hear? The plural of "anecdote" isn't "data." Cliches are not insights. And those people, on the whole, aren't well-informed about the facts on payday lending. Because personally observing what it does to actual individuals isn't academically sound?
So these lenders are purposefully lending to people who have no way of repaying, huh? Sounds like a pretty bad business model. If you lend money to people who can't repay, you go out of business. If your assertions were true, then the average payday lender would be out of business in about two weeks. When you've squeezed enough fees and interest out of them, when a loan keeps getting rolled over so that a customer has paid $300 or $400 on a $100 dollar, you're going to make money on that loan even if it eventually goes bad.

[LonesomePolecat]

Their business is modeled on the idea that people pay back the loans. They gain nothing by having to track you down, turn your check over to the authorities, etc. Their business is modelled on the assumption that a significant number of their customers will have to keep rolling over their loans until they've paid back several times the amount of the original loan in a relatively short time. Guess what? That's usury.

[filling_pages]

Their business is modelled on the assumption that a significant number of their customers will have to keep rolling over their loans until they've paid back several times the amount of the original loan in a relatively short time. Guess what? That's usury.

I agree that is their hope. That you will have to turn around and reborrow some or all of the same amount the next day. But that has nothing to do with writing bad checks. In fact, someone who is in the habit of writing bad checks won't bother to go to a payday loaner in the first place - he or she will simply write bad checks for what they want. The person a payday loan business prefers to deal with does NOT want to write bad checks, and is willing to pay a fee to the loaners to get the money to cover the expenses they already have.

The system absolutely has problems, especially for serial reborrowers. Being persuaded to write bad checks is not one of those problems.

[Dangerosa]

Their business is modelled on the assumption that a significant number of their customers will have to keep rolling over their loans until they've paid back several times the amount of the original loan in a relatively short time. Guess what? That's usury.

Not according to their financial statements....the public companies I just peeked at have HUGE allowances for doubtful accounts.

[Gfactor]

Now, it's true also that Virginia law says that the mere fact a check is dishonored is prima facie evidence of intent to defraud, so the burden would be on the issuer to show that some unforeseen event occurred.


I've seen payday lenders threaten prosecution. It seldom works.

Some state laws just come out and say the deferred presentment lender cannot threaten or initiate prosecution based on a bad check: http://www.nclc.org/issues/payday_loans/content/NCLC_SUMMARY.pdf

http://www.aocg.com/resources/CA1-CASH%20ADVANCE%20CONTRACT.pdf

http://kyjustice.org/displaynodepublic?nid=1262&tid=431&synname=Pay%20Day%20Loans&termnum=1060200

http://www.in.gov/dfi/FAQ_-_Check_fraud_.pdf

In the rest, the facts of the transaction itself serve as a rebuttal. (I assume you know this Bricker, and I see that you aren't arguing otherwise.) It's a postdated check, made as repayment of a loan. It's obvious that the drawer of the check didn't have the funds to cover it when the check was written--that's why he needed the loan. He entered into a transaction and explained how he would get the money to repay the loan (paycheck). The payee took the check with full knowledge it wasn't good when it was written, having requested the check as security for the loan. Nobody was misled. Of course, some consumers might do the deal with the intention that they would take the money and run. I think the prosecution would have to affirmatively prove that, just like any other promissory fraud case.

http://ago.mo.gov/ConsumerCorner/blog/10127/Payday_loan_checks_are_not_bad_checks/

http://www.iowa.gov/government/ag/protecting_consumers/ICCC_Opinions/87a.pdf

[gurujulp]

Yes.

http://www.alarise.org/paydayweb.pdf

http://minnesota.publicradio.org/display/web/2009/03/13/payday_loans/

Yes, when I have been forced to use them for childcare due to lack of hours at work, I have nearly always had to take a second partial loan in order to clear it out. The issue is with those who see it as just an advance on a paycheck, and somehow don't see the 675% interest rate...

Not in virginia, tho

[DSYoungEsq]

Well, the law in Virginia defines a bad check as one uttered "with intent to defraud...knowing, at the time of such [uttering] that the maker or drawer has not sufficient funds..."

So I think these check fail the criminal test because an unforeseen future event causing the funds to be available is not "knowing" or "intent to defraud" conduct.

Now, it's true also that Virginia law says that the mere fact a check is dishonored is prima facie evidence of intent to defraud, so the burden would be on the issuer to show that some unforeseen event occurred.

But the key element is: not per se bad checks, at least under Virginia law, even though they're issued at a time when no funds exist.

Yes, my apologies, I didn't mean to make a legal argument in precision, just an assertion that the check is what most of us would consider "bad" because it cannot be cashed at that moment with funds to cover.

[Claire Beauchamp]

Their business is modelled on the assumption that a significant number of their customers will have to keep rolling over their loans until they've paid back several times the amount of the original loan in a relatively short time. Guess what? That's usury.

Not according to their financial statements....the public companies I just peeked at have HUGE allowances for doubtful accounts.

Their financial statements may have huge allowances, but they still depend on rollovers. Here's a tidbit that popped up in my local weekly

http://blogs.nashvillescene.com/pitw/2009/04/harpers_magazine_looks_into_th.php

After reading Daniel Brook's in-depth look at Tennessee's payday lending industry in the April issue of Harper's Magazine, I'm surprised there hasn't been any real buzz on local blogs.

...

In the early 1990s, there were fewer than 200 payday lending stores in America, but after industry deregulation, the industry exploded. "Today," Brook writes, "there are over 22,000, serving ten million households each year--a $40 billion industry with more US locations, in fact, than McDonald's." (Tennessee made payday lending explicitly legal in 1997, following $29,000 in contributions from Allan Jones and his family to state legislators.)

Despite it's absurdly high interest rates, which amount to several hundred percent annually, payday lending seems straightforward on its surface. You write a a bad check for, say, $230, they give you $200 in cash, and when you get your paycheck you cash it, pay them the $230 and get your check back.

But, as Brook explains, seldom does it work out that way:

When the next payday arrives, most borrowers can't afford to repay, so they extend the loan until the following payday by paying another finance charge. (In Tennessee and many other states, a borrower technically cannot "extend"' the transaction, but lenders make it a trivial process to pay back the loan and immediately take out a new one, adding another finance charge on top.) Like a sharecropping contract, a payday loan essentially becomes a lien against your life, entitling the creditor to a share of your future earnings indefinitely. Even the industry-sponsored research cited on the Check Into Cash website shows that only 25.1 percent of customers use their loans as intended, paying each one off at the end of their next pay period for an entire year. Government studies show even lower rates of customer payoff. North Carolina regulators found that 87 percent of borrowers roll over their loans; Indiana found that approximately 77 percent of its payday loans were rollovers. This is hardly surprising, of course: if your finances are so busted that a doctor visit or car repair puts you in the red, chances are slim that you'll be able to pay back an entire loan plus interest a few days after taking it out. "On average", Jeremy Tobacman, a Wharton professor who studies the industry, drily put it, "payday borrowers seem to be over-optimistic about the future".

[Vinyl Turnip]

"On average", Jeremy Tobacman, a Wharton professor who studies the industry, drily put it, "payday borrowers seem to be over-optimistic about the future".

And who wouldn't be? Every scratch-off ticket is another step closer to Easy Street!