What if we got rid of payday loans?

wallyj84

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Payday loans have always seemed like huge scam to me. They have insane interest rates, as high as 400% a year, and they prey on the desperate and financially illiterate.

So, what if we just banned them outright? What would happen to the greater economy? Would the country as a whole be better off? Would the poor be negatively affected? What do you think would happen?
 

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Payday loans have always seemed like huge scam to me. They have insane interest rates, as high as 400% a year, and they prey on the desperate and financially illiterate.

So, what if we just banned them outright? What would happen to the greater economy? Would the country as a whole be better off? Would the poor be negatively affected? What do you think would happen?
Old school loan sharks would quickly fill the void, returning to the tactics of busting someone up who doesn't pay. That's the only difference between payday loans and loan sharks...

Maybe we should go back to teaching basic home economy in school, how to balance a household budget and how feed nutritious meals to your family. Basic skills probably lacking from 70% of American households.
 

wallyj84

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Old school loan sharks would quickly fill the void, returning to the tactics of busting someone up who doesn't pay. That's the only difference between payday loans and loan sharks...

Maybe we should go back to teaching basic home economy in school, how to balance a household budget and how feed nutritious meals to your family. Basic skills probably lacking from 70% of American households.

We're home economics ever really taught in schools?

I personally think a certain percentage of the population is just bad with money. They can't do basic math or lack the ability to make rational decisions about their finances. They are beyond helping and really the rest of us need to be shielded from their bad decisions.
 

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I had to take home ec in school. But I got more out of a sociology course. They taught us how to register to vote, balance a checkbook and how to manage bills. People put down on Texas schools, but I was sure prepared for real life.

As for payday loans I learned a few years ago that many of the workers for some of my subcontractors were heavily in debt to payday lenders. It was a sad situation and not one easily remedied. The management team didn't want to pay their debts because we hadn't incurred them, but we couldn't see leaving them in a never ending cycle of desperation.

The contractors created an agreement with their workers that a portion of their salary would be withheld to pay off the lenders. And the payday folks were told to take it or leave or I don't know what, and they told me I didn't want to know the details.

But most of the debts were finally paid within a year. Still there were some who got themselves right back into the same situation.
 
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Every second advertisement these days is for some loan company, or some online gambling company.

I've never heard much about the term "Payday Loans" ...But I'm guessing it's pretty much along the lines for those who have found themselves in a position of living day to day. And not all of the time is it those on low incomes. The problem is growing rapidly and a pretty good indication of how many governments today are operating, not just individuals in society. Borrowing from Peter to pay Paul.

Although the problem has always been around, I think it has multiplied because of direct deposit and debit. When you received your cash in a pay packet you knew how much to spend, you could visibly see and physically touch your earnings, when you spent it, when you were running out.

It also depends on your personality, if you are attracted and easily succumb to advertising and shit you don't need. Then you are fair game for the predators waiting to pounce on you. Someone can be there saying No, No...don't do it....but makes no difference.


I was taught, or I taught myself to only buy what I need..which I still adhere to to this day.
 
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Payday loans have always seemed like huge scam to me. They have insane interest rates, as high as 400% a year, and they prey on the desperate and financially illiterate.

So, what if we just banned them outright? What would happen to the greater economy? Would the country as a whole be better off? Would the poor be negatively affected? What do you think would happen?

I don't support banning them, but regulating them much more heavily than they currently are would be good.
 

wallyj84

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I had to take home ec in school. But I got more out of a sociology course. They taught us how to register to vote, balance a checkbook and how to manage bills. People put down on Texas schools, but I was sure prepared for real life.

As for payday loans I learned a few years ago that many of the workers for some of my subcontractors were heavily in debt to payday lenders. It was a sad situation and not one easily remedied. The management team didn't want to pay their debts because we hadn't incurred them, but we couldn't see leaving them in a never ending cycle of desperation.

The contractors created an agreement with their workers that a portion of their salary would be withheld to pay off the lenders. And the payday folks were told to take it or leave or I don't know what, and they told me I didn't want to know the details.

But most of the debts were finally paid within a year. Still there were some who got themselves right back into the same situation.

I assume that you guys knew about their loan status at all because the lenders were calling you and asking about the money, right?

The liberal in me wants to bemoan the poor plight of these workers and how low their wages must be, but I know the truth is that your employees were just living beyond their means. Most people don't have the ability to handle money and I don't think the American culture or psyche really helps.
 

wallyj84

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I don't support banning them, but regulating them much more heavily than they currently are would be good.

The thing is if you regulate them they are no longer profitable.

Their whole business model relies on keeping people in a cycle of debt. if people were getting these loans and then paying then off quickly, like you're supposed to, then payday lenders would go out of business. They need people to make bad financial decisions and dig themselves into deeper holes of debt. I just don't see why any company should have a business model built on human misery.
 

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I assume that you guys knew about their loan status at all because the lenders were calling you and asking about the money, right?

The liberal in me wants to bemoan the poor plight of these workers and how low their wages must be, but I know the truth is that your employees were just living beyond their means. Most people don't have the ability to handle money and I don't think the American culture or psyche really helps.

Actually, one of the men asked for an advance because a loan payment was due. That's when someone became aware and started snooping a little.

These people are contract workers that go from job to job. We have regulars that we know and use all the time. But the work is not always available for them, and some weeks are leaner than others. This happened during the housing bubble burst when I thought about becoming a librarian. That's how slow it was.
 
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The thing is if you regulate them they are no longer profitable.

Their whole business model relies on keeping people in a cycle of debt. if people were getting these loans and then paying then off quickly, like you're supposed to, then payday lenders would go out of business. They need people to make bad financial decisions and dig themselves into deeper holes of debt. I just don't see why any company should have a business model built on human misery.

I didn't say force them to use low interest rates. I said regulate. They can still operate with interest rates that are high enough to cover the default rate without also engaging in really squirrelly compounding interest / fake repayment schemes.
 
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MickeyLee

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Maybe that fact that yearly incomes are stagnant while the cost of living continues to climb to new heights make housing, food and basic life requirements a matter of living beyond one's means. :mad:

The classism and lack of empathy in this thread are appalling. Wally, you suck. Trolling is one thing, showing your whole ass is another.

Most people don't go to payday loans to finance a trip overseas. Most are desperate to make ends meet after a, what is to them, huge unexpected expense. Car repair, medical bills and seasonal highs on utilities can break a lower income to working-class families budget to hell.

Fuck a payday loan. Pay a livable wage.

Some people will still get to desperation, but fewer would be on the hook to predatory loans.
 
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liquiss

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Maybe that fact that yearly incomes are stagnant while the cost of living continues to climb to new heights make housing, food and basic life requirements a matter of living beyond one's means. :mad:

The classism and lack of empathy in this thread are appalling.

Most people don't go to payday loans to finance a trip overseas. Most are desperate to make ends meet after a, what is to them, huge unexpected expense. Car repair, medical bills and seasonal highs on utilities can break a lower income to working-class families budget to hell.

Fuck a payday loan. Pay a livable wage.

Some people will still get to desperation, but fewer would be on the hook to high-interest loans.

Agreed, the big problem though is the payday loan system preys upon those people, because they have no other option, and the extremely (almost criminal) interest rates that they charge only further's the problem. I'm with @TexanStar and his suggestion that they need to be better regulated.

For reference, I'm a financial planner. When it comes to money people more often that not are their own worst enemies. We always make efforts to pay our bills as a priority, but we leave ourselves at the end of that list. People need to get better about putting themselves (eg savings/emergency fund) at the same priority level as the hydro bill and the water bill. Obviously that doesn't address the working poor, that's a whole issue into itself. I just mean the general populous. We've learned to live so far outside our means anymore.

The other major problem that I see, at least in Canada, is that we have a ridiculous lack of financial literacy and education for youths. There is no where in the curriculum that we teach anything at all about financial vehicles and systems available to support us. So then people are reliant on planning professionals to help them, but are riddled with stigmas around feels and the qualifications of those individuals. (Rightfully so I might add, but we're not all bad).

Anyways, I digress. Payday loans are a necessity for a lot of people, but they're run like it's the wild west.
 
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We're home economics ever really taught in schools?

I personally think a certain percentage of the population is just bad with money. They can't do basic math or lack the ability to make rational decisions about their finances. They are beyond helping and really the rest of us need to be shielded from their bad decisions.

People are bad with money because they have usually never been taught to handle it or understand how to manage it. I think you underestimate how bad so many people actually are. A lot of people victimized by these loans are servicemen and women - and Trump s making it easier for the lenders to collect their money and fees.

We need to do a better job with this, especially in schools. As to Home Ec, I really don't know how much is taught anymore - I think what we used to call "shop" has gone be the wayside as well. I took a Home EC class in high school in the 70's designed for guys and it was great. I learned how to cook and budget beyond the examples I saw growing up. I was lucky - I had some good examples growing up, but a lot of kids did not and don't. The failure of public education is the root of most of our social problems in the U.S. It is the reason why Trump is president, it is a reason why people are victimized by these sharks. Yes, I would love to see payday loans banned. It won't solve the problem, but it would be a good step in the right direction.
 
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keenobserver

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The thing is if you regulate them they are no longer profitable.

Their whole business model relies on keeping people in a cycle of debt. if people were getting these loans and then paying then off quickly, like you're supposed to, then payday lenders would go out of business. They need people to make bad financial decisions and dig themselves into deeper holes of debt. I just don't see why any company should have a business model built on human misery.

They won't be as profitable, but they will profit, they and vultures like them always do. You're right, a business built on human misery is not something that deserves protection.
 

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A large portion of working Americans (even in two-income families) are a missed paycheck or two from financial ruin. Or a medical emergency that can be catastrophic both physically and monetarily.

I don't think that most people are unable to handle money; I think a more accurate statement would be that a lot of folks have no clue how to handle money. How to budget. Because so many "life skills" are no longer taught in school. Or by their parents. Through instruction and/or setting the example.

As an AP student, I took Bookkeeping as an elective in High School. That course taught me so many basic facts about money, and where it goes. Like how to write a check. That you don't write a check if there's no money in the account.

Take my niece as an example. She was shopping with her mother. She wanted a new coat. Her mother said she couldn't afford it; there was no money in the checking account. My niece said she didn't understand why that was a problem since she still had blank checks she could write. WTF???

And this industry sorely needs to be regulated. While I understand the credit risk associated with lending to these type of folks, it boggles my brain that the least able to pay are charged the most interest.

And don't say well, they should get better jobs; that's just an unrealistic response. Cuz there are millions of Americans just like my sister--she's working retail because that's all she's been able to find. And then there are the sins of youth that always come back to haunt.

Here's a short article from USA Today earlier this year that I found interesting:

Personal debt: Are Americans responsible with their paychecks?
 

wallyj84

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I didn't say force them to use low interest rates. I said regulate. They can still operate with interest rates that are high enough to cover the default rate without also engaging in really squirrelly compounding interest / fake repayment schemes.

The thing is, I don't think they can. I would bet that they engage in all of this stuff, insane interest and compounding and at times harassment, because that is the only way to make a profit.

We can't really discuss this without looking at the books of a payday lender, but I've heard that as many as 4 out of 5 borrowers who go to payday lenders end up borrorowing again in their next payment cycle. That says everything to me in regards to their business model and the type of customer they want to attract.
 

wallyj84

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Maybe that fact that yearly incomes are stagnant while the cost of living continues to climb to new heights make housing, food and basic life requirements a matter of living beyond one's means. :mad:

The classism and lack of empathy in this thread are appalling. Wally, you suck. Trolling is one thing, showing your whole ass is another.

Most people don't go to payday loans to finance a trip overseas. Most are desperate to make ends meet after a, what is to them, huge unexpected expense. Car repair, medical bills and seasonal highs on utilities can break a lower income to working-class families budget to hell.

Fuck a payday loan. Pay a livable wage.

Some people will still get to desperation, but fewer would be on the hook to predatory loans.

I don't really disagree with you, even though you seem to think that I do.
 

wallyj84

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People are bad with money because they have usually never been taught to handle it or understand how to manage it. I think you underestimate how bad so many people actually are. A lot of people victimized by these loans are servicemen and women - and Trump s making it easier for the lenders to collect their money and fees.

We need to do a better job with this, especially in schools. As to Home Ec, I really don't know how much is taught anymore - I think what we used to call "shop" has gone be the wayside as well. I took a Home EC class in high school in the 70's designed for guys and it was great. I learned how to cook and budget beyond the examples I saw growing up. I was lucky - I had some good examples growing up, but a lot of kids did not and don't. The failure of public education is the root of most of our social problems in the U.S. It is the reason why Trump is president, it is a reason why people are victimized by these sharks. Yes, I would love to see payday loans banned. It won't solve the problem, but it would be a good step in the right direction.

I've known a lot of people personally who should have known better, people quite literally trained in how to handle money, who still made stupid mistakes with their finances.

Money is just a difficult thing for a lot of people to handle, whether they are trained or not. When you add to that the fact that some people are just dumb, then it should come as no surprise that payday lenders are as profitable as they are.
 

wallyj84

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A large portion of working Americans (even in two-income families) are a missed paycheck or two from financial ruin. Or a medical emergency that can be catastrophic both physically and monetarily.

I don't think that most people are unable to handle money; I think a more accurate statement would be that a lot of folks have no clue how to handle money. How to budget. Because so many "life skills" are no longer taught in school. Or by their parents. Through instruction and/or setting the example.

As an AP student, I took Bookkeeping as an elective in High School. That course taught me so many basic facts about money, and where it goes. Like how to write a check. That you don't write a check if there's no money in the account.

Take my niece as an example. She was shopping with her mother. She wanted a new coat. Her mother said she couldn't afford it; there was no money in the checking account. My niece said she didn't understand why that was a problem since she still had blank checks she could write. WTF???

And this industry sorely needs to be regulated. While I understand the credit risk associated with lending to these type of folks, it boggles my brain that the least able to pay are charged the most interest.

And don't say well, they should get better jobs; that's just an unrealistic response. Cuz there are millions of Americans just like my sister--she's working retail because that's all she's been able to find. And then there are the sins of youth that always come back to haunt.

Here's a short article from USA Today earlier this year that I found interesting:

Personal debt: Are Americans responsible with their paychecks?

I already wrote this before, but Money is just difficult for people to handle. I never took a class on how to write a check, but I understand that you don't write a bad check. I bet your niece gets that as well, honestly. But, when you add the desire of wanting something, thinking that you can get away with it and the adverse affects being abstract or in the future, you will find a lot of people more than willing to go against their own better judgement.