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What a deal!

analystdude wrote:

el_macca17 wrote:

I have no issue from a contractual point of view but in practice it is a predatory business targeting people who are already in dire straits.

predatory if they were forcing people to take loans they didnt need maybe. but willing buyer willing seller, high risk loans come with high interest rates, and these are the riskiest of the risky. i dont see why this is so controversial

like I said, if you sign a contract you are bound to it - no issue here. 

The issue I see is how they advertise/misrepresent the contracts, rates, terms, they’re about to enter to people who don’t know any better and will sign anything so they can meet their bills. If a big bank like Wells Fargo can get away with misrepresentation and shady stuff for so long can you imagine the kind of stuff a payday loan company could get away with just to get a signature?

^I don’t think that anybody who signs that ever sees “”740% APR” on any of the documents.  Well, maybe they do, but they just don’t care.  It doesn’t mean anything to them.  

All that 740% APR means is that if you borrow $1000 today, you will pay back $1080 in two weeks.  And for some people, that’s all they need.  They need to pay a medical bill, or their water heater went out, or something similar, and they don’t have any savings.  

Whether they should have savings is another story.  But they don’t, and payday loans give them the best chance of being able to buy the aforementioned necessities.  

Granted, some people get roped into it, and they visit the payday loan place every two weeks.  For them, they are paying 740% per year.  But that’s their choice.  

And to Ohai’s point, some people are just bound and determined to make bad decisions.  If you give them an extra $80, they’ll just drink/smoke/snort it away.  If I’m a payday loan operator, and they’re going to throw away $80, they might as well throw it my way.  Otherwise, it will go to Marlboro/Budweiser/corner dealer.  

82 > 87
Simple math.

el_macca17 wrote:

analystdude wrote:

el_macca17 wrote:

I have no issue from a contractual point of view but in practice it is a predatory business targeting people who are already in dire straits.

predatory if they were forcing people to take loans they didnt need maybe. but willing buyer willing seller, high risk loans come with high interest rates, and these are the riskiest of the risky. i dont see why this is so controversial

like I said, if you sign a contract you are bound to it - no issue here. 

The issue I see is how they advertise/misrepresent the contracts, rates, terms, they’re about to enter to people who don’t know any better and will sign anything so they can meet their bills. If a big bank like Wells Fargo can get away with misrepresentation and shady stuff for so long can you imagine the kind of stuff a payday loan company could get away with just to get a signature?

Point taken. Our system affords much protection to the consumer though. 

Someone should start an ethical payday loan company, charge Prime + 3 and see how long they stay in business

http://freakonomics.com/podcast/payday-loans/

pretty interesting. These guys did some investigative stuff. Some important snippets

So, the payday business model is not like a pawn shop, where you surrender your valuable possessions to raise cash. To get a payday loan, you need to have a job and a bank account. According to Pew survey data, some 12 million Americans — roughly 1 in 20 adults — take out a payday loan in a given year. They tend to be relatively young and earn less than $40,000; they tend to not have a four-year college degree; and while the most common borrower is a white female, the rate of borrowing is highest among minorities.

Fulmer says that payday-loan interest rates aren’t nearly as predatory as they seem, for two reasons. First: when you hear “400 percent on an annualized basis,” you might think that people are borrowing the money for a year. But these loans are designed to be held for just a few weeks, unless, of course, they get rolled over a bunch of times. And, reason number two: because payday loans are so small — the average loan is about $375— the fees need to be relatively high to make it worthwhile for the lender. For every $100 borrowed, Fulmer says, the lender gets about $15 in fees. So, capping the rate at an annualized 36 percent just wouldn’t work.

Fulmer’s firm, Advance America, runs about 2,400 payday loan shops, across 29 states. All in, there are roughly 20,000 payday shops in the U.S., with total loan volume estimated at around $40 billion a year. If you were to go back to the early 1990s, there were fewer than 500 payday-loan stores. But the industry grew as many states relaxed their usury laws — many states, but not all. Payday lending is forbidden in 14 states, including much of the northeast and in Washington, D.C. Another nine states allow payday loans but only with more borrower-friendly terms. And that leaves 27 states where payday lenders can charge in the neighborhood of 400 percent interest — states ranging from California to Texas to Wisconsin to Alabama, which is what drew President Obama there.

Later on, the payday lenders gave Mann the data that showed how long it actually took those exact customers to pay off their loans. About 60 percent of them paid off the loan within 14 days of the date they’d predicted.

DEYOUNG: If we take an objective look at the folks who use payday lending, what we find is that most users of the product are very satisfied with the product. Survey results show that almost 90 percent of users of the product say that they’re either somewhat satisfied or very satisfied with the product afterwards.

even though it was pretty interesting I got bored so if someone wants to finish it and report by all mean plz do.

also rofl 

DUBNER: Hey Christopher. So, as I understand it, much of what you’ve learned about CCRF’s involvement in the payday research comes from a watchdog group called the Campaign for Accountability, or CFA? So, first off, tell us a little bit more about them, and what their incentives might be.

I love my cheese. I got to have my cheddar.

Step aside cat fanciers

So you guys are saying it was a bad idea for me to finance my house through payday lenders?  I’ve been rotating from one lender to another every 2 weeks, paying off each loan with the new one.  I don’t pay any interest that way, right?

This space available.

82 > 87
Simple math.