I’m not a fan of the payday loan vendors, but if you do away with them them they’ll be replaced by the loan sharks of old who were vastly, vastly worse.
That said, this thread reminds me that one of the reasons so many people seem drawn to libertarianism is that they’re outraged at the idea that “smart” people be limited in their ability to exploit “dumb” people.
Desperation? Lack of other options? Ignorance?
Or, stupidity, taken advantage of by predators.
According to the article, somewhere around 25-30% of servicemen and women take advantage of such loans, and yet the vast majority don’t have the problems she did. Maybe we should up the intelligence test for being admitted into the military.
She may be an outlier, sure. With no snark intended, what’s your point?
That she’s an outlier. We shouldn’t make public policy solely on the experience of outliers, as Fear Itself is suggesting. Besides, he only (attempted) to answer my first question. I don’t think the experience of this one person is “the problem”.
These are all important questions.
The problems is that your next paragraph…
…assumes that the only question we need to answer is whether or not these stores are engaged in anti-competitive behavior. If that is, in your opinion, the only “problem we are trying to solve” in this debate, that’s completely fine, but you can’t expect that other people will necessarily accept your assumption about what the problem/s might be.
It seems pretty clear, from the way this debate has proceeded, that many of the people involved believe that one of the problems to be solved is the fact that poor people—for a variety of reasons—end up borrowing beyond their means and spiraling further into debt and poverty. And some of the solutions proposed include regulating the people who offer such credit schemes.
You might believe that the borrowers should be allowed to make those decisions without government intervention, and should have to live with the consequences. Again, that’s a tenable position. But to ask nothing more than, “Is this an anti-competitive business practice under current law?” seems to me a rather oblique way to address the issue.
It seems that, in posing your four questions at the beginning, and then going straight to the issue of competition and market forces, you are only willing to address your questions as long as everyone else agrees with you about what the answer to Question 1 is. But they don’t, and the fact that they don’t is central to this discussion.
I probably was not clear in how I got from those 4 questions to the next paragraph. My point is that I am not willing to interfere in the market until and unless someone answers those 4 questions. We have all sorts of laws to protect against consumer exploitation, so tell me why those laws are not adequate in this particular business realm. People want shit, and other people are willing to supply them with the shit for a market price. Walk me through the 4 questions, and tell me why the government needs to step in. Because my position is that government should only interfere in the market when there is a clear public need to do so. And the fact that one servicewoman ending up owing $15k on a $500 loan does not demonstrate a clear public need.
How many do you require?
42, of course.
Insane weekend, and I lack time or energy to respond to some very decent points raised by mhendo and John Mace, as well as a really dumb point raised by Bricker (Stalin, not motivated by principle? Really, Bricker?)
If I had time I’d probably adjust my position a bit in the direction of caring about principles; if I have time later I’ll respond more. Just want to say that I’m reading what folks say and thinking about it.
Arguments that rent-to-own places aren’t actually harmful are the most persuasive.
It might be better that these type of loans don’t exist.
Do we have information as to how often such loans actually help people get things they wouldn’t have had otherwise?
This whole bit about “they had no other choices” is complete bullshit.
Choice #1: Don’t buy a new couch!!
Choice #2: Quit smoking and use the money you save to buy a new couch.
Choice #3: If Cullman doesn’t have shit, go somewhere that does. Birminghan is about an hour’s drive from Cullman. Pick a day to go garage sale shopping and used furniture store shopping. Buy a used couch for a few hundred bucks, put it n the back of your truck, and drive home.
Those are all things that can be done with a 9th grade education.
Any chance of getting you to post this in the GOP vote supressing voter ID thread?
I think that thread might destroy the internet by using up all the bandwidth available!
I was reading this thread with the TV on and I saw a commercial from a local credit union for personal loans to finance engagement rings and honeymoons.
The truth is that the middle class has the same issues, just with cheaper forms of financing. Paying for clothes, cars, furniture, jewelry, college, or vacations is as simple as signing on the dotted line. We want what we want, and we want it right now. It’s as simple as that.
This reminds me of when restrictions on interest and other items were limited by Dodd Frank. Just because the supply of this credit was reduced, the demand doesn’t change. As a result, consumers turned to other means of credit, pay day lenders, and rent to own places.
Here’s a longer article that discusses high rate products in general:
Information regarding payday loans(not the subject at hand, but also considered high interest credit):
All of these were written by Todd Zywicki who has written extensively on the subject at Volokh and other locations.
This is the heart of the problem. I’m surprised there haven’t been more comments on one of the first sentences in the OP’s story: namely, the one mentioning that the woman in question has “no access to credit” and “no bank account” in addition to not having much cash.
I’ve been in debt temporarily to the tune of a few thousand bucks a couple times in my life, but I’ve always had things to make it possible to go on with my life fairly normally while getting out of debt: the credit card, the bank account, (usually) the income, the roof over my head, and so forth. I have never been on such a financial knife-edge that I’ve had to avoid absolutely EVERY non-essential purchase for months or years at a time just in order to keep my head above water, with no reliable prospect of being better off at the end even if I DO go balls-to-the-wall austerity.
It was easy for me to be financially responsible because I had lots of options and a pretty easy choice: Option A was “live a slightly more frugal but still quite comfortable life for a limited time and get back in the black on a clearly demarcated schedule”, while Option B was “don’t make any sacrifices and sink deeper into the red with increasingly burdensome debt”.
If my options had been “buy a few normal amenities of life like furniture and phones and pile up debt” versus “deprive myself of even ordinary amenities for a long time with no assurance that I’ll end up better off than when I started”, I don’t know that I could have made the wiser choice and stuck to it.
It’s not enough just to say “it’s stupid for people to make bad financial choices”. We also need to ask “How much benefit are people going to get from good financial choices?” Somebody whose work and income prospects are very insecure and fluctuating is not necessarily being irrational if they decide that the extravagance bird in the hand is better than the two financial-security birds in the bush. If they have no realistic prospect of getting the financial-security birds anyway, why should they pass up the extravagance bird while they’ve got the chance?
The benefits of frugality and thrift need to be realistic if we want poor people to seek them out. It’s no use just lecturing poor people to use financial instruments like credit and bank accounts (that they don’t have access to) in order to put aside a certain percentage of income (that may not exist next week or next month) and avoid purchasing things they can’t pay for (even if those things include basic amenities that you and I have never had to do without).
Yes, many people are just stupid and thoughtless and dumb with money. But given that that’s inevitably going to be the case, we need to figure out systems that make the effects of widespread financial stupidity and thoughtlessness less catastrophic.
If some of you think there is money to be made by creating “micro-financing” outlets so that poor people can buy luxury items, knock yourselves out. Maybe that’s a business model that you can make work.
Luckily, we do not live in a libertarian society. So we have other options.
One thing we have agreed on as a society is that we are better off when people are not destitute. Destitute people don’t contribute much, and they tend to cause problems-- problems that can even persist across generations.
We don’t want to trip over the homeless on our way to work, we don’t want beggars tapping on our car windows at red lights, we don’t want to be robbed constantly and we don’t want kids with no future hanging around.
Luckily preventing destitution doesn’t usually mean supporting someone. Typically, it’s just about creating a little resilience. I have a savings account, and a credit card, and at the very end bankruptcy to smooth over the unexpected bills and bad decisions. I can go pretty low without getting to a place I can’t get out of.
When you are poor, the line between “doing ok” and “destitute” becomes precariously thin. These rent to own places provide a little resilience, but at an outrageous cost that takes away from other forms of resilience (savings, items that can be resold if necessary, etc.)
We can do better than this. And it’s in our best interests to do better than this.
OK, so walk us through the answers to the 4 questions I asked upthread (post #177).