by hilzoy
From the NYT:
“Tracey Minda needed cash to buy clothes and school supplies for her 6-year-old son before the 2006 school year. A preschool teacher and single mother, she was broke after making her mortgage and car payments.
The quick and easy answer was a $400 loan from a payday lender. When payment was due two weeks later, she needed another loan to keep afloat. Nine months and 18 loans later, she was hundreds of dollars in debt and paying the lender about $120 in monthly fees from her $1,300 in wages.
“Once I was in the cycle for a few months, I couldn’t get out of it,” said Ms. Minda, who was on the brink of losing her car and her home in Washington Courthouse, Ohio, before turning to family members to pay off her debt.
Ohio lawmakers sought last spring to aid borrowers like Ms. Minda by capping annual interest rates for payday lenders at 28 percent, a sharp reduction from 391 percent. But lenders are fighting back in a novel way, collecting enough signatures, once certified, to force a vote in November on a ballot measure that could overturn legislation that established the rate cap.
“You can’t make a payday loan cheaper than the industry does,” said Steven Schlein, a spokesman for the Washington-based Community Financial Services Association of America, which represents lenders.”
Yet somehow, banks and credit cards remain in business. I wonder how?
According to this CBS report, there are more payday lending stores than Starbucks and MacDonalds combined. They try to get people to become repeat customers:
“A former regional manager, Jent says payday lenders train their workers to set hooks.
“Incentives that you offer to customers to get them to become repeat borrowers,” Jent said.
Like “take out five loans, get the sixth one free.” Or offering cash to managers of low-income buildings to refer desperate tenants.
And this document, obtained by CBS News reveals that among the targets for at least one payday lender are: “single-parent households with multiple children,” who are “financially stressed.””
A study (pdf) of North Carolina payday loans showed that 96% of them went to borrowers who took out more than five payday loans per year. These people are often caught in the same kind of trap as Tracey Minda: taking out loans to pay their interest, and ending up owing much more than they originally borrowed.
Personally, I think interest rates should be capped. I don’t know at what level. My instinct would be: high enough to allow lenders reasonable flexibility to address different circumstances in different ways. But to my mind, 391% a year — the average interest rate paid on payday loans in Ohio — is way, way too high to count as ‘reasonable’.
This, too, matters more than lipstick. Only one of the two candidates mentions predatory lending on his website. I might have missed something on McCain’s, though I did look; but capping interest rates on payday loans seems utterly out of keeping with McCain’s general economic philosophy.
Again: this matters to the 19 million households who take out payday loans (according to CBS.) It’s one of the things that (according to me) we ought to be thinking about as we try to decide who to vote for.
You’re so elitist, wanting us to think about issues before casting our votes. Did you see John Fund on Bill Maher tonight? He was constantly talking about how the Democrats need to focus on issues too, as though John McCain has been talking about nothing else for the last two months. Made me want to punch my tv.
Welcome to life in Japan.
I can’t really agree with you on this one. Payday lenders really do fill an important niche, and “Yet somehow, banks and credit cards remain in business. I wonder how?” is incredibly horrible logic. They stay in business by specifically not offering to the people who are using payday loans.
You don’t hear about people getting their legs broken by loansharks much anymore, and there is a reason.
“Again: this matters to the 19 million households who take out payday loans (according to CBS.) It’s one of the things that (according to me) we ought to be thinking about as we try to decide who to vote for.”
Ok, and what do you suspect will happen to the 19 million households who take out payday loans if half of them can’t get legal loans at all if you kill off the payday loaners? That is the side of the equation that liberals seem almost never to explicitly look at. Is that an important question to ask too?
So Sebastian, you think that it is wrong to cap the amount of interest? Here in Japan, they are going from 29% to a maximum of 20% in 2010. It really says something when the yakuza have can be more realistic than the payday loan outfits in the states.
i may be wrong about this, but i think nc got rid of these sort of lenders (after letting the 1997 bill which allowed such lenders to sunset in 2001)
I don’t make a moral judgment about capping or not capping the amount of interest. Framing it like that is the seed of awful policy.
I question the EFFECT of capping the amount of interest on those who will not be able to get loans at lower rates. I think that finding THE NUMBER of people who will not be able to get such loans at the lower rates is one of the most important parts of of judging the policy of capping interest.
Strict usury laws in the past led to illegal loansharks having an inappropriate level of power in people’s lives and being annoyingly common. Declaring bankruptcy didn’t protect you from them but it works wonders against legal loans.
Also I’m not certain that extrapolating the 2 week period into annual interest is really appropriate. The problem of making a short term loan small loan would I suspect have a higher percentage of overhead per dollar than larger and longer loans.
I wonder if this isn’t another case of anecdotes making for bad law. But in counter anecdotes–I took out two payday loans in my student years, and it kept the lights on.
In a related vein–have you seen local government ‘late fees’ recently? Yikes! They delivered stuff to the wrong address for a year, and you wouldn’t believe how much the price had gone up in that year. (Tripled)
So could you look at the proposals made by Obama and explain why they are problematic?
The problems with payday loans is also linked with the problem of loans to military personnel, something that hilzoy wrote about here and here.
I’m sorry, but I really fail to see how this can be cited as an instance of “predatory lending”, particularly given the extremely short time horizon involved. Was she expecting some windfall income in the two weeks between taking out the loan and it being due? If not, then why on earth did she think she would be in a position to pay it off? Did she, therefore, *anticipate* that she would have to get a second high-interest loan to pay off the first? If so, why is she apparently so surprised at having been drawn into a “cycle” of borrowing?
It’s especially baffling considering that the solution to her problem is contained within the article itself; instead of taking out a loan that she must have known she had no way of repaying, acquiring further loans to pay off the existing debt, almost going bankrupt, and then asking her family to help ameliorate what must at that point have been a substantial sum – why did she not ask their assistance for the $400 initial amount, and avail of a spectacularly low 0% interest rate? Come to that, why could she not have spoken to the school and arranged, for instance, to borrow some books until such time as she could afford her own? Or to stagger her purchases over a few weeks or a couple of months? Are these alternatives, while certainly less than ideal, not preferable to a massive and constantly-mounting debt? The loan may have been “quick and easy”, as the article puts it, but it was hardly her only or most sensible option.
I’m open to the idea that lending institutions need reform – clearly that is the case, considering the current economic climate and its provenance – but I cannot abide the lack of criticism applied to – indeed, the attitude that it is somehow *unseemly* to criticise – individuals who place themselves in this position. Payday loan interest rates ARE ridiculous, which is why they should be (1) an absolute last resort, for (2) people who are expecting a sufficient spike in short-term income to pay them off – and it’s really not hard to figure out what your cashflow is going to be in a fortnight. And why are the interest rates so high in the first place? Because people are *willing to take them on*. She made an extremely foolish financial decision which lead to utterly predictable consequences, and really has little ground for complaint – sympathy yes, but not complaint. Unless, of course, we are going to take what you have accurately characterised as the McCain campaign’s position over the past several months; that we should assume people to be idiots by default.
I do agree about the lipstick though. That’s got to be the stupidest meme yet, in a campaign that hasn’t lacked for stupidity.
Could somebody please educate the government about the unwiseness of taking loans to pay the interest on earlier loans that were taken to pay even earlier ones etc. ad infinitum (esp. when the loan shark is China)! 😉
Seriously, the problem described is literally thousands of years old and caused more than one violent revolution*. People tend to be both stupid and desperate and the moneylenders make a living out of it. I do not know a viable solution but (without a mitigation) this is one of the most explosive political issues possible, if history is any indicator.
*and every demagogue from Catilina to Hitler made “solving the debt problem (preferably by killing the loan sharks)” a central part of his propaganda.
I knew that moneylenders were a problem in the US (I’m from the Netherlands), but interest rates up to 391% are mind boggling.
Here in the Netherlands the government has put limits to the interest rates for these types of loans. At the moment they are at 23%. Actual rates are often much lower, between 7 and 20 per cent.
@ TTMYGH. Sure, I can understand that you think it is stupid for someone to take a loan if they have no clue how to pay it off. But many people lack your perspective, and haven’t been taught what else to do. They are probably the same people who waste food money on lottery tickets, hoping they will be lucky.
It seems important that the government not only sets reasonable limits to interest rates for lenders, but also helps to educate people how to deal with scarcity, that saving money before they need it is much much cheaper than first spending the money and repaying that amount + interest afterwards.
Just like sex education can help to prevent unwanted pregnancies, financial education may help to prevent bankruptcy. It seems to me that both preventive measures may significantly reduce unhappiness and despair.
“It’s especially baffling considering that the solution to her problem is contained within the article itself; instead of taking out a loan that she must have known she had no way of repaying, acquiring further loans to pay off the existing debt, almost going bankrupt, and then asking her family to help ameliorate what must at that point have been a substantial sum – why did she not ask their assistance for the $400 initial amount, and avail of a spectacularly low 0% interest rate?”
I find it staggering that there are people ignorant enough of the life of the poor to believe that everyone has a family either able or willing to loan $400. It’s damn well not an option I’ve had in the past couple of decades.
Gary:
“Once I was in the cycle for a few months, I couldn’t get out of it,” said Ms. Minda, who was on the brink of losing her car and her home in Washington Courthouse, Ohio, before turning to family members to pay off her debt.”
Yes, because accruing a much bigger debt and then asking her family to pay it was a far better approach for all concerned.
Any snide comments you’d like to contribute regarding the other alternatives I mentioned?
TTMYGH: but I cannot abide the lack of criticism applied to – indeed, the attitude that it is somehow *unseemly* to criticise – individuals who place themselves in this position.
Huh. Well, that’s a fairly unhelpful position to take about anyone who’s got themselves into major trouble due to unscrupulousness by other people and ignorance on their own part. You say you “can’t abide” any situation in which these people are not being criticised, yet – oddly – are not yourself apparently inclined to abide criticism in a pleasant spirit. Someone who advocates constant criticism of other people is someone who really ought to be able to take criticism themselves.
jesurgislac:
You say you “can’t abide” any situation in which these people are not being criticised
Well now, that’s an impressive display of logical gymnastics. I said that I “can’t abide” – perhaps too strong a term; “regard as inappropriate” would be better – the complete lack of criticism applied to people who have engaged in what is, objectively, extremely foolish behaviour. I noted (albeit obliquely, by reference to the necessity for reform in lending institutions in view of the foreclosure crisis, so apologies for any confusion) that this was different from other situations faced during the current economic downturn, and that cases such as this were noteworthy in large part because of the short time-period and consequent predictability involved. When someone has, to take a relevant example, signed a long-term mortgage with low initial rates which can rise to hazily-defined variable levels at a later stage – and then, some years down the line, find themselves paying far more than was originally billed as being plausible – then that is an instance wherein they can legitimately cry foul; their reasonable expectations have been violated.
That is emphatically NOT the case here. The period of the loan was only two weeks; she had complete knowledge of both the terms of the loan (I assume – if not, then her decision was even more foolish), and the amount of money she would have available when it was due. Anticipating what would happen was, literally, no more than a matter of observing that one number was significantly bigger than the other. And still she went ahead with it. It wasn’t “ignorance”, as you put it; it was recklessness. Are we to lay aside that fact altogether in our consideration of such situations?
Someone who advocates constant criticism of other people is someone who really ought to be able to take criticism themselves.
I’d be very interested to know by precisely what process – other than the logically-dubious rhetorical flourish noted above – you have extrapolated my desire for some acknowledgement of responsibility on the part of borrowers in cases such as this, into an observation that I “advocate constant criticism of others”.
yet – oddly – are not yourself apparently inclined to abide criticism in a pleasant spirit.
If you consider Gary’s criticism to have been intended or delivered in a pleasant spirit, then I can only say that we have very different definitions of “pleasant”. Your post was eminently more polite – although inaccurate in its surmising of my position – and I hope I have responded in kind.
I have to agree with Sebastian that “Yet somehow, banks and credit cards remain in business. I wonder how?” is terrible logic. Payday lenders make high-risk loans that banks and credit card companies would not (and, if they can help it, do not) make. The margins in the payday loan* industry are surprisingly thin.
Now, that does not mean that payday loans are a moral good; nor is it an argument against greater regulation. But Hilzoy’s bafflement is, well, baffling.
von
*Disclosure: A long time ago, I represented a payday lender in a trademark dispute.
I said that I “can’t abide” – perhaps too strong a term; “regard as inappropriate” would be better – the complete lack of criticism applied to people who have engaged in what is, objectively, extremely foolish behaviour.
That’s a classic blame-the-victim line. Yes, these people borrowed money without realising that the interest charges were such that they would be unable to pay off debt and interest completely and still have enough to live on.
Their cash flow problem was created because they were not wealthy enough to be able to get a low-interest loan from a bank: and because there exist unscrupulous people who regard these people as cash cows that can be bled indefinitely, or until they lose their homes, which ever goes first.
It’s not merely that these people weren’t the kind of people who carefully do the arithmetic to counteract the misleading sell before they sign the loan agreement – many people aren’t. It’s that these people were not rich enough to be able to benefit from loans from organisations that restrict themselves to repayable interest rates, not bleed-the-sucker-dry interest rates.
So these people deserve to be criticised because they aren’t natural arithmeticians: because they aren’t cynical enough to think the worst of anyone who wants to lend them money: and because they’re poor.
While apparently, to you, the crooks who took advantage of their need are exempt from blame – it’s only their victims who ought to be criticised for falling victim to the suckers.
If you consider Gary’s criticism to have been intended or delivered in a pleasant spirit
I didn’t. But what difference does that make? Were you saying at any point that the criticism you demand for other people ought to be intended and delivered only in a pleasant spirit? If not, you can’t expect yourself to be exempt. Who demands that others should be criticised, had bloody better be prepared to accept criticism himself and not whine about how people aren’t being nice.
The other point I originally intended to make is exactly as Sebastian and Von have outlined above; that payday loans exist, and tend to have greatly inflated interest rates, precisely because they service a high-risk niche that credit card companies and banks wouldn’t touch with a ten-foot pole. Hence my description of them as “an absolute last resort, for people who are expecting a sufficient spike in short-term income to pay them off.”
She sounds like a Service Nation employee.
Paid enough to keep her poor and job limited to a year.
precisely because they service a high-risk niche that credit card companies and banks wouldn’t touch with a ten-foot pole.
Because there exist people too poor to get loans from banks and credit card companies, and who have no alternative but to accept the massive interest rates that unscrupulous people will offer them.
This is why at least one microloan charity is extending operations to the US – with a government indifferent to the welfare of the very poorest, the poorest people in the US are effectively living in a Third World country, and need the same charitable help from other countries.
Of course, they might get help from their own country if not for the prevalence of superior SOBs who think that it’s better to criticise them for being victims that to criticise the sharks who take advantage of their need.
A small loan of $100 must be paid back with $115 in two weeks. So $400 must be paid back with $460. It is hard to imagine banks offering better rates on such small sums for such short periods, to poor people without collateral, even before you consider the number of deadbeats (people who leave town, or declare bankruptcy, or simply refuse to pay the sum back. (Try to get a lawyer for $60 or find assets to attach.)
While the math “works,” it is highly misleading to take this $15 fee (15%) and multiply it by 26.1 fortnights a year and call that a 391% interest rate. This sector, like pawnshops, just will not stay in business with annualized interest rates which seem “reasonable” to middle class people.
It is also unlikely that most of these customers would be better off relying on loan sharks, or instead defaulting on their bills (paying penalties or to have their utilities switched back on, for example). Poor people will be hurt (and criminals enriched) by the good intentions of the soft-brained soft-hearted.
I have seen it posited by at least two people that limiting payday loans will cause a surge in loansharking.
I’d like to see an ounce of empirical evidence for that claim. It seems ridiculous to me that, for example, the mom used in the NYT article would have turned to a loanshark to buy school supplies for her kid.
Count me in with Sebastian, Von and Pittelli: people take these loans because they can’t take regular loans. While I’m sure that there are some people who don’t appreciate the effective annual interest rate, I’m quite sure that no one taking such a loan fails to appreciate what Pittelli describes: all borrowers know they’re going to have to pay more than they got.
If you had a 30% cap, that would mean that the fee on a $500 loan would be, what, $6? With the risks of default and bankruptcy, no one would makes loans like that. Fine for me, I guess, since I don’t need one. But where are the millions and millions of people taking these loans supposed to get the credit they need? Microloans aren’t going to work, both because of the volume involved and, more importantly, the purposes to which the money is being put: people aren’t taking payday loans to invest in a new business of some kind, by and large. They’re financing life, most usually, ime, expenses already incurred.
UHC would be a big help, I’m sure, but even so there will always be a class of people for whom credit of last resort is desirable.
I tend to agree with much of what Sebastian says.
The interest calculation on short-term loans is deceptive, both because it’s an annualization of a very short-term rate and because it involves overhead costs.
Does it seem wildly unreasonable to charge a borrower $1 to borrow $100 for a week? That’s 52%. Yet I’d be surprised if that was a particularly profitable transaction for the lender. There are administrative costs associated with making any loan. Factor them into a 30-year mortgage and they don’t affect the rate very much. Factor them into a one week loan and they make it seem extortionate.
The credit risk is unclear, since default rates are stated a variety of ways.
None of that means that the borrowers aren’t paying the money, of course. The difficulty is getting them access to credit through some more efficient means. There seem to be some ways to accomplish this.
Besides that I’m surprised the military can’t come up with a way to provide relatively low-cost credit to its members. There can’t be much default risk there.
In short, I think some encouragement of alternatives would accomplish more than a cap.
“That’s a classic blame-the-victim line.”
I question whether somebody who borrows money knowing they have no way to pay it back can accurately be characterized as a “victim”. That’s like saying, “She should have looked both ways before crossing the street.”, or “Using a hair dryer while in the tub was a bad idea.” is blaming the victim.
While there are indeed occasions where people end up in dire straits through no fault of their own, far more common are cases where people make really stupid mistakes. I don’t exempt myself, most of the troubles in my life have been due to things I did, which I should have known, or worse DID know, were foolish.
Sympathy, yes, but being relentless about pointing out the underlying mistake is sympathy for the people who might make the same mistake themselves. There’s a fine line between being sympathetic and enabling.
About annualizing the rate: I did that because it’s standard. That said, I’m not sure how misleading it is, given that, as noted above, 96% of loans go to people who take out five or more a year — and 60% go to people with twelve or more loans a year. At those levels of borrowing, annualizing seems to me precisely appropriate: someone who’s borrowing 12 times a year is probably stringing loans together, using one to pay off the last one.
Also: fwiw, I said nothing about my attitudes towards the people who take out these loans and get into debt traps. (The people who take out these loans and pay them back and don’t get into debt traps, like Seb, are presumably fine.)
The reason is not that I think they’re above criticism. It’s because while I do think it’s important to think about the question, What should policy be here? And who is most likely to set it correctly?, I do not think it’s particularly important for me to arrive at a judgment of the character of people who take out these loans. Really, nothing turns on my opinion of them.
My opinion is that it’s probably dumb, in a lot of cases, for them to do what they did. That said, a lot of people do dumb things.
According to the CBS story cited in the post, “six states – Arkansas, Georgia, New Hampshire, North Carolina, Ohio and Oregon as well as the District of Columbia – have now effectively banned these loans”. The Center for Responsible Lending studied (pdf) people in NC after the ban (focussing on people who would have been likely customers, demographically.) Of people who had recently had a financial shortfall, most were unaware that payday lending had been banned, and of the rest, over 3x as many said that banning it had had a positive effect on their households. Among former payday loan customers, most were unaware, but (here the numbers are way too small to mean much, I offer them for illustrative purposes) 5 said the ban had had a positive impact on their households, compared to 2 for whom it was negative.
Brett: I question whether somebody who borrows money knowing they have no way to pay it back can accurately be characterized as a “victim”.
I question whether the people who take out payday loans and fail to pay them back do so knowing they cannot pay them back.
While there are indeed occasions where people end up in dire straits through no fault of their own, far more common are cases where people make really stupid mistakes.
I question your equation of “stupid mistake” with “fault”. I especially question it with the existence of unscrupulous people encouraging others to make stupid mistakes…
People who take payday loans are people who need money badly.
The example Hilzoy used was a woman who couldn’t afford to buy clothes and school supplies for her son.
I notice with interest that three out of the four people who have spoken up declaring that the important thing is not to ensure that a working single mother is financially supported so that she can afford to provide for her child, but to criticise her financial decisions – are Von, Brett, and Sebastian: all of whom have declared they believe in forced pregnancy. They didn’t believe this woman ought to have had the right, seven years earlier, to decide to have the baby: they have all claimed that they feel strongly about protecting “innocent unborn babies” – but not one of them appears to feel strongly that, once that “innocent unborn baby” gets to be six years old and going to school, he and his mother ought to have their support.
Interesting, that, isn’t it? The point at which pro-lifers quit supporting those cute little babies clearly occurs at some point between birth and six years old.
Count me in with Sebastian, Von and Pittelli: people take these loans because they can’t take regular loans.
So Obama also proposes the following (from hilzoy’s link in the post)
# Cap Outlandish Interest Rates on Payday Loans and Improve Disclosure: Obama supports extending a 36 percent interest cap to all Americans. Obama will require lenders to provide clear and simplified information about loan fees, payments and penalties, which is why he’ll require lenders to provide this information during the application process.
# Encourage Responsible Lending Institutions to Make Small Consumer Loans: Obama will encourage banks, credit unions and Community Development Financial Institutions to provide affordable short-term and small-dollar loans and to drive unscrupulous lenders out of business.
So it sounds like he realizes the objection that is raised and proposes steps to make sure that it is not a problem
The line ‘extend the 36% interest cap to all Americans’ refers to the interest cap enacted in the 6 states mentioned. This NPR story ends with a very interesting point about military payday loans, which is
Maj. Gen. Michael Lehnert, head of Marine Corps Installations West, said this is a priority for the military because high debt affects Marines’ ability to deploy.
“We need every Marine we can get. We want them to go forward with their heads in the game,” Lehnert said. “We don’t want them to have to worry about whether they can make their car payment when they’re in Fallujah.”
hilzoy,
Yes, annualizing is standard, but that doesn’t mean it can’t distort things. This is especially so when administrative costs make up a large part of the loan cost.
Gary: “I find it staggering that there are people ignorant enough of the life of the poor to believe that everyone has a family either able or willing to loan $400.”
I have five bills on my dresser at home right now: cable ($200), two credit cards ($600 and $300), the second mortgage ($400) and car ($400).
My wife does her part, using the money from her job to pay for groceries and everything and anything that our 9-year-old needs. She will come up with what she can — maybe $300 — to help out with the aforementioned bills.
I just tapped out my checking account the other day for prescriptions, my final $60.
So to pay off all of those bills, I will use my remaining credit card with available credit. And on it goes.
My family options are limited — Mom is on Social Security; my brother who lives with her is on SS Disability.
My paycheck yesterday was $58; the week before that: $68. The life of a commissioned salesman.
We just had our Saturday sales meeting: sell 10 cars this month or you’re done.
Sold 13 in July; 3 in August; 2 so far in September. So who knows? Give me a customer, and I know what to do; lack of customers have been the problem, but tell that to ownership, constantly in denial.
Sorry for all of the detail. But I’m supposed to be middle class.
There is no middle class.
jesurgislac:
Ah, I see we’re adopting the time-honored “ignore 85% of the preceding post’s reasoning” approach. I assume, at minimum, that you’re withdrawing your accusation that I demand constant criticism of everybody who’s not me, all the time? Anyway, this is a consolidated reply to your two posts.
So these people deserve to be criticised because they aren’t natural arithmeticians: because they aren’t cynical enough to think the worst of anyone who wants to lend them money: and because they’re poor.
… right. So as I understand your argument, people who don’t bother to do even the most fundamental, ten-minute appraisal of their financial situation before embarking upon an inherently risky enterprise – particularly when the ramifications of said decision could be very serious for them – nonetheless deserve no scrutiny whatsoever when the entirely predictable consequences unfold? And really… not “natural arithmeticians”? Not “cynical enough to think the worst of anyone who wants to lend them money”? Do you genuinely regard poor people as ignorant rubes, or is this just a convenient line of attack at the moment?
FWIW, the woman in the original article is an Ohio preschool teacher, and thus – to the best of my Googling ability – would therefore be required to hold at least a Bachelor’s degree (open to correction). Are you seriously arguing that she was incapable of working out how much the loan would cost, and how much she would be able to pay?
Their cash flow problem was created because they were not wealthy enough to be able to get a low-interest loan from a bank
See my previous comment.
Because there exist people too poor to get loans from banks and credit card companies, and who have no alternative but to accept the massive interest rates that unscrupulous people will offer them.
Care to comment on the alternatives I outlined in my first post?
While apparently, to you, the crooks who took advantage of their need are exempt from blame – it’s only their victims who ought to be criticised for falling victim to the suckers.
Absolutely not; I think Hilzoy covered the objections to the system quite well in her post. But to refuse even to acknowledge the role played by reckless borrowers in producing stories such as the one above – to regard them as hapless victims, with no agency of their own – is to display a rather cavalier attitude towards intellectual honesty. Payday loans, as Sebastian outlined earlier, can be useful when handled with even the most minimal regard for financial reality; and, as I said in my original post, the reason that their interest rates are so exorbitant is because people are willing to take them on, even in situations as blatantly foolish as this.
This is why at least one microloan charity is extending operations to the US – with a government indifferent to the welfare of the very poorest, the poorest people in the US are effectively living in a Third World country, and need the same charitable help from other countries.
Hmmmm, this places me in something of a quandary. I think this is a good thing, and yet somehow feel a responsibility to maintain the crude poor-hating persona you have constructed for me. Awkward!
Who demands that others should be criticised, had bloody better be prepared to accept criticism himself and not whine about how people aren’t being nice.
I’ll keep that in mind.
Of course, they might get help from their own country if not for the prevalence of superior SOBs who think that it’s better to criticise them for being victims that to criticise the sharks who take advantage of their need.
Up yours too, buddy. See? I’m learning!
Hilzoy:
The reason is not that I think they’re above criticism. It’s because while I do think it’s important to think about the question, What should policy be here? And who is most likely to set it correctly?, I do not think it’s particularly important for me to arrive at a judgment of the character of people who take out these loans. Really, nothing turns on my opinion of them.
I have no desire to make judgements on the characters of borrowers who get in over their heads; the woman from this story might be, for all I know, a lovely person, and her case is very sympathetic. My point is merely that some acknowledgement of the role played by the kind of recklessness she displayed is warranted in thinking about this system, how it is perpetuated, and how best to tackle it. For instance, the microloan organisation that jes linked to offers advice on loans and financial planning; eva suggested something similar earlier. Approaches such as these may prove effective in reducing interest rates, by slashing the payday agents’ clientele; they would, at minimum, produce a better system than a cap alone.
The last line in my comment above would be more accurately rendered as “produce a better outcome than a cap alone”, insofar as it would result not only in an improved system, but – hopefully – more astute clients thereof.
The solution is simple; don’t reward people who engage in this sort of behavior.
Fannie Mae’s Daniel Mudd and Freddie Mac’s Richard Syron stepped down. […] By conservative estimates, Mudd, 49, and Syron, 64, will leave with an additional $7.3 million and $6.3 million, respectively, as part of a severance package, according to an analysis by Paul Hodgson at the Corporate Library.
The personal savings rate is falling off of its post-tax rebate bloom and headed back to sub 1% levels again. The average American household owes more than 20% than what it makes in a year. The government just had to de-privatize Fannie Mae and Freddie Mac, and WaMu is on life support.
In an environment like this, offering instant McLoans to anyone and everyone doesn’t sound to me like the way back to national solvency.
I agree that the overhead is higher relative to the loan amount for a two-week loan than for a multiyear loan. But that part of the overhead should be independent of both the time of the loan and the amount. Therefore it should be a fixed one-time fee per loan, regardless of the loan amount or how long it takes to repay, not a percentage of the amount or a weekly charge. Then a more reasonable interest rate can be added on top of that.
Is that how the costs are actually structured? If so, the objection to converting it to an annual interest rate seems valid. If not (as I suspect is the case), then it’s not misleading.
I’m always stunned and dismayed when I see payday lending defended on free market grounds, describing it as a service for people who lack credit cards.
It’s usury. Interest rates of 391 percent are not necessary and are ciminally excessive.
The business model bears a great resemblance to sharecropping, which trapped poor farmers into a cycle of forced purchases on credit.
…”that payday loans exist, and tend to have greatly inflated interest rates, precisely because they service a high-risk niche that credit card companies and banks wouldn’t touch with a ten-foot pole.”
Precisely the same logic used by a heroin dealer defending his business model.
“The solution is simple…”
Yes. Fewer poor people, please.
TTMYGH: Care to comment on the alternatives I outlined in my first post?
Certainly not. You asserted that you “can’t abide” a complete lack of criticism of poor people who need more money for essentials than they’re able to earn, and sheesh: I just don’t think I can provide the level of criticism you say you want directed at others, while you feel that people shouldn’t criticise you.
justcorbly: The business model bears a great resemblance to sharecropping, which trapped poor farmers into a cycle of forced purchases on credit.
Yeah, same deal. I’m sure that people who had never been in that situation were happy to criticise the poor farmers, too, and annoyed with people who didn’t…
A few thoughts that I didn’t notice in the comments:
1. The original post noted that there are a great many payday loan operations in the US. From that fact we can conclude that the market for payday loans is competitive; from that we can conclude that the interest rates are at the lowest level that permits a decent rate of pay for the operator. Ergo, capping interest rates will serve only to put these operators out of business and remove this source of loan from the poor.
2. One possible justification of such a cap would be to eliminate a self-destructive behavior. If you regard payday loans as intrinsically damaging to the borrower (a big if), then restricting them is no different than, say, restricting gambling or pyramid schemes.
3. Perhaps a better solution would be federal legislation encouraging employers to provide payday loans under some standard scheme. Employers have a form of security that the payday lenders don’t have: they simply dock the employee’s wages. That greatly reduces the cost of the loan.
Sebastian: Payday lenders really do fill an important niche, and “Yet somehow, banks and credit cards remain in business. I wonder how?” is incredibly horrible logic. They stay in business by specifically not offering to the people who are using payday loans.
Indeed. I’m not an expect on the banking industry, but I suspect that banks and credit cards have lower overheads than people offering short term loads of small amounts of money to customers who’re bad credit risks.
Let’s take Hilzoy’s proposition — that lenders can lend to these types of people at vastly lower interest rates and make money — as true. If it’s true, then one could presumably profit by setting up a firm doing so, undercutting the existing lenders, and making lots of money. Of a credit union doing the sasme thing. Or maybe something like microlending over the Internet (a bit like Kiva).
I notice with interest that three out of the four people who have spoken up declaring that the important thing is not to ensure that a working single mother is financially supported so that she can afford to provide for her child, but to criticise her financial decisions – are Von, Brett, and Sebastian: all of whom have declared they believe in forced pregnancy.
I literally have no idea what this means, or why it applies to me. All I wrote was:
“I have to agree with Sebastian that “Yet somehow, banks and credit cards remain in business. I wonder how?” is terrible logic. Payday lenders make high-risk loans that banks and credit card companies would not (and, if they can help it, do not) make. The margins in the payday loan* industry are surprisingly thin.
“Now, that does not mean that payday loans are a moral good; nor is it an argument against greater regulation. But Hilzoy’s bafflement is, well, baffling.”
[Footnote omitted.]
You don’t hear about people getting their legs broken by loansharks much anymore, and there is a reason.
The way some of these companies work, the police become the legbreakers for modern loan sharks. A friend of mine worked for one in Louisiana, and it worked like this: you wrote a post-dated check for the amount of the loan and the interest. When it came due, the company either deposited the check, or you brought in another one, with another origination fee attached. Quite often, there would be some miscommunication between the company and the borrower, and the check would bounce–and the check would happen to be just above the local limit for a felony. Then, if there were any question about who was getting what money, the sheriff’s office would show up at the borrower’s house with an arrest warrant. So please, let’s not act like much has changed here from the days of loan sharks and legbreakers.
I agree that the overhead is higher relative to the loan amount for a two-week loan than for a multiyear loan. But that part of the overhead should be independent of both the time of the loan and the amount. Therefore it should be a fixed one-time fee per loan, regardless of the loan amount or how long it takes to repay, not a percentage of the amount or a weekly charge. Then a more reasonable interest rate can be added on top of that.
What the payday loan defenders in this thread seem to be ignoring is that the interest, while excessive, isn’t where these people make their real money. They make it in origination fees, and renewal fees, and in tons of other fees. Hidden costs to the borrower are what really get them trapped in this cycle. The high interest is like getting kicked in the junk after you’ve been mugged, just because the mugger has you down and feels like it.
So please, let’s not act like much has changed here from the days of loan sharks and legbreakers.
Whoa! There’s a GIGANTIC difference between breaking somebody’s legs and using the law to resolve disputes. We have laws precisely to prevent the sort of personal justice that loan sharks relied upon. And there is nothing, absolutely nothing wrong with resorting to criminal law to enforce contracts.
What the payday loan defenders in this thread seem to be ignoring is that the interest, while excessive, isn’t where these people make their real money.
OK, the lenders add all sorts of other fees. If their additional fees are in any way hidden or misrepresented, then they have broken lending law and should be prosecuted for that. If, however, they are honest about those fees, then there’s nothing wrong with them. And the fact that their market is intensively competitive insures that their overall fees, whatever they are, have been driven as low as is practically possible.
3. Perhaps a better solution would be federal legislation encouraging employers to provide payday loans under some standard scheme. Employers have a form of security that the payday lenders don’t have: they simply dock the employee’s wages. That greatly reduces the cost of the loan.
NO. Absolutely not. People are already tied to their jobs in a myriad of other ways, from health care to other opportunity costs. Horrible horrible horrible.
We just had our Saturday sales meeting: sell 10 cars this month or you’re done.
Sold 13 in July; 3 in August; 2 so far in September. So who knows? Give me a customer, and I know what to do; lack of customers have been the problem, but tell that to ownership, constantly in denial.
Management by threat. Always a favorite. I really hope things get better for you bedtimeforbonzo.
“Therefore it should be a fixed one-time fee per loan, regardless of the loan amount or how long it takes to repay, not a percentage of the amount or a weekly charge. Then a more reasonable interest rate can be added on top of that.
Is that how the costs are actually structured? If so, the objection to converting it to an annual interest rate seems valid.”
Payday loans typically have an administrative fee (usually 10 or 15 dollars) plus an interest fee. From the math it looks to me like it looks to me like the fee creates a very large portion of the scary rate. (Payday loan of $400 for 2 weeks with $15 fee and ZERO interest would work out to an annualized rate of about 97%. On $300 that would be about 130%.)
If these other fees are not being included in the calculations that produce the extraordinarily high numbers for interest rates, then Sebastian’s objection that the calculations are misleading seems to be invalid. Are they being included?
MattH, you object to my proposal for federally encouraged payday loans from employers, on the grounds that this would tie people to their jobs even more tightly than they currently are. I think you have it backwards: the employee would be able to take the money and run by simply quitting after receiving the payday loan. The biggest problem with my idea arises from the need to provide employers with some sort of protection against such behavior. (There are a number of other problems as well, but your objection is not one of them.)
I should clarify though that many businesses will agree to rare paycheck advances, which, not being loans, don’t have that problem. If we are going to have an employer do something, this is a much better approach. Besides, if they are a “flight risk”, the employer can always deny the advance, whereas if we get them in the business of payday loans, we create a much more antagonistic relationship between the two, potentially impacting the business itself if things turn sour.
Plus, it means that they’ll be creating entire departments around a bank model that operates in it’s own interest, not that of the overall business model. Seems like a bad idea all around.
There’s a GIGANTIC difference between breaking somebody’s legs and using the law to resolve disputes. We have laws precisely to prevent the sort of personal justice that loan sharks relied upon.
You seem to be missing the point.
Loan sharks use violence to compel payment of illegal loans. Payday lenders, at least in that one jurisdiction, use the local cops to compel payment of what ought to be an illegal loan. All I see are scumbag lenders suckering poor people into taking out usurious loans and relying on the threat of the cop at the door as their enforcers.
In other words, payday lenders are loan sharks who have replaced thugs with cops.
I think you have it backwards: the employee would be able to take the money and run by simply quitting after receiving the payday loan.
Hahahahaha. HAAAAAhahahahahaa. Ah hahahahaha.
Excuse me.
BWAAAAAAAAAAAAAAAhahahahahaha!
Think about this for, like, two seconds. If there were any risk of this actually occurring on any sort of regular basis, the number of employers willing to institute any such program would be equal to zero.
And if it did occur on any sort of regular basis, you know what companies really aren’t into? Letting people just take money from them and run. The repercussions that anybody who did this would face would make a payday lender look like Big Rock Candy Mountain.
Hilzoy-
I apologize for threadjacking here, but if you wouldn’t mind posting an update to let everyone know that Publius and his family are o.k., I would greatly appreciate it.
“Management by threat. Always a favorite.”
Cannot. Understand. That.
Never have.
Things are bad for me, but I’m sure they are much, much worse for many others.
I think my situation and this payday phenomenon is a sympton of the larger economy as a whole.
And I often wonder if the candidates — John McCain, of course, but also Barack Obama — know just how bad it is for so-called regular working people. Politicians always make it sound like tax cuts are a cure-all, and I think it’s going to take much more than that.
Thanks, mattH.
Payday lenders, at least in that one jurisdiction, use the local cops to compel payment of what ought to be an illegal loan.
OUGHT to be illegal? It isn’t illegal, it’s perfectly legal. It’s an enforcement of a contract that was entered into voluntarily and knowledgeably by both parties. Do you believe that contracts should not be enforceable?
Look, if we’re going to have a society, we’re going to have disputes between people. How do you propose to settle those disputes, if not by law?
Phil offers derision against my arguments, but the logic he follows up with ignores what I wrote. He writes:
If there were any risk of this actually occurring on any sort of regular basis, the number of employers willing to institute any such program would be equal to zero.
completely ignoring my statement:
The biggest problem with my idea arises from the need to provide employers with some sort of protection against such behavior.
Can we please just set aside the bombast and ridicule and concentrate on the logic?
Best of luck, BedTime.
Some unsolicited advice: I find that not having cable has both financial and medical benefits. 😉
Hi!
I wonder if the managers of the pay-day loan institutions are “incentivized” to stay late at night and reduce the number of hours their pay-day loan employees have logged, or maybe fudge whatever commissions their employees have earned.
If Wal Mart and restaurant managers feel free to engage in this type in the current American environment, why not pay-day loan employers, too?
The upside of course is that the employees would be “incentivized” to become borrowers from their own employers, thus hiking up the sales numbers this month.
I don’t see how the “incentives” described in the CBS report to increase lending can’t be viewed as predatory. Salespeople are incentived to be predatory, kids. Wolves always smile before they eat you and offer that useless undercoating.
And the charmingly named “Community Financial Services Association of America” knows very well that they are representing predatory behavior. Titles like that are mulled over to hide intent, not reveal it.
Please!
The Black Hand was a nickname. Their business cards carried the more anodyne “The Society for the Preservation of Sicilian Neighborhood Values”.
I am disappointed in Sebastian, he said on the lighter side, letting himself go to such an extent that he need a payday loan. I don’t know how a guy can get so over-extended on lentils.
What, you thought you’d splurge on a hambone to add flavor?
I was told by a stockbroker friend years ago when I expressed an interest in the profession that the point of his job was to make sure all of his clients money became his money.
Actually, lipstick on pigs is very important. Out of Obama’s mouth, these words threaten the marginal pig vote. You can’t win an election with just the wolf vote.
John McCain knows he must carry the pigs-who-wanna-be-wolves-vote.
Church charities and predatory lenders: the Republican methods of eliminating taxes and social spending.
Thanks, CharleyCarp. Actually I worded that wrong — I always say that $200 is for cable when actually it is cable/internet/phone (Comcast’s triple play).
“It’s an enforcement of a contract that was entered into voluntarily and knowledgeably by both parties.”
That depends. The assertion\premise that this is a bi-party “contract” in any meaningful sense in the generally accepted use of that term is at the heart of the matter (cf “sharecropping” and “heroine” above).
Precisely the same logic used by a heroin dealer defending his business model.
An apt, if perhaps unintentional, comparison. The choice is not between low-interest legal loans for people with poor credit and high-interest legal loans for people with poor credit. It is between open, regulated high-interest lenders and black market high-interest lenders.
There is a demand for these loans, eliminating legal providers will simply move the market underground. Ironically, the people who will suffer the most are the ones you are most interested in protecting, just as it is drug addicts, not dealers, who suffer the most from impure dope and dirty needles.
Whoa! There’s a GIGANTIC difference between breaking somebody’s legs and using the law to resolve disputes. We have laws precisely to prevent the sort of personal justice that loan sharks relied upon. And there is nothing, absolutely nothing wrong with resorting to criminal law to enforce contracts.
In this case, not really. You’re threatening the borrower with a physical response–legbreaking versus incarceration–unless the borrower makes good on the loan. That one is legal and the other is extralegal makes no substantive difference. Factor in that in both cases you have a predatory lender looking to take advantage of a person who has limited other options, and those differences get ever smaller. We’re talking about a difference of style, not of kind.
Yah, the problem’s been around for a while …
bedtimeforbonzo, good luck! I’m sorry to hear about your troubles. I’m not as bold as you in sharing details of my finances, even psuedonymously, but my income-outgo balance is not much better than yours, and prices keep rising. Fortunately, debt maintenance rates are fixed…but every time a medical bill has to go on credit card, there’s a little extra cost per month, and so it goes. I am not in immediate danger of losing my job, but I have a ferocious race to run over the next 2-3 years before up-or-out time.
Re payday lenders:
The laissez faire arguments for usury prove too much. A contract for indentured servitude would also be fair, market-driven, freely entered into, and only necessary in emergency. But we don’t allow them, because not every free deal is good policy. Y’all correctly point out that the borrowers usually have nowhere else to go (tho Ms. Minda apparently had alternatives). But by the same reasoning, Jean Valjean had no reasonable alternative but to steal bread for his children. Hugo spent several hundred pages pointing out that the solution to Valjean’s dilemma was not to condone theft on a case-by-case basis, nor to imprison millions, but to fix the system so that Valjean has better choices. If payday loans are outlawed, will this leave more people destitute forever, force them into wiser habits (because they know that particular safety net isn’t there), or force all of us to generate some better solutions — more welfare, more reasonable loan institutions, debtors’ prisons, bankruptcy reform, more collective bargaining power, whatever? Legitimizing usury is probably not the best answer we can come up with, it’s the lazy, greedy answer. If we are using usury so much that outlawing it would send serious shocks through the economy, that is a good sign that we are on the wrong road.
There is also real doubt, by the way, that the worst of the terms of payday loans are in fact entered into freely. The law recognizes that fraud or extreme overreaching means there was no true consent — but those laws do not help people who do not know their rights or cannot get to court. A common pattern is, loans are made on a revolving basis, renewed each week or month, and the lender changes the terms in a clause buried in fine print on the back of one of the loan renewal vouchers, with no other notice to the borrower. Another loan term puts any disputes into arbitration before an arbitral panel of the lender’s choice, often in another state. In practice, the borrower has no recourse against unlawful contract terms or formation, because he cannot get them in front of a fair court.
John Thullen: The Black Hand was a nickname. Their business cards carried the more anodyne “The Society for the Preservation of Sicilian Neighborhood Values”.
…is a hero of the revolution.
The background story is depressing and yet not terribly surprising.
I think Sebastian made a reasonable point that if you effectively shut down this business by capping rates, it will go underground in some form or another, probably in a bad way. Analogies with abortion come to mind on that score.
Those who say “let her borrow from friends or family” are overlooking another problem with that solution – it will spread the financial stress to other families who may be just barely making ends meet now but can’t afford to carry the load for other people whom they nonetheless will be unable to refuse for social reasons which override the fiscal ones. That could lead to violence – most assaults are between people who know each other in some capacity, and when I contemplate the potentially combustible mixture of booze, guns and bad debt within an extended family, it doesn’t sound like a recipe for a happy ending (not in this specific case, but more generally for some of the people who find themselves in these straits).
I think we are again dealing with symptoms here, in the same way as the discussion of GSEs and mortgages the other day. The root problem is a lack of income. When I read this story and put together “needed cash to buy clothes and school supplies” and “A preschool teacher” my immediate thought was of Henry Ford thinking that he needed to pay his workers enough so they themselves could afford to purchase the product coming off the assembly lines they were manning.
How is it that a teacher cannot afford the expense of sending a single child to school with adequate clothes and supplies?
Is this not Henry Ford’s workers redux?
Is this not a shocking indictment of what has happened to wages in this country for working class people?
In this case, not really. You’re threatening the borrower with a physical response–legbreaking versus incarceration–unless the borrower makes good on the loan.
You don’t get incarcerated for failing to pay back a loan. Civil penalties do not include imprisonment.
chris, it is an illegal loan full stop, no one bothers to enforce usury laws. Also there is a difference between useing the law to collect a defaulted loan and convicting them of a felony crime if they don’t pay. That people are actually defending a de facto 300% intrest rate is stunning
You don’t get incarcerated for failing to pay back a loan. Civil penalties do not include imprisonment.
But you can go to jail for passing a bad check, which is what the people I was talking about would be charged with if they didn’t either make a new loan or make good on the old one.
Dbn, read the comment by Incertus above that started this subthread. The charge is not failing to pay back the loan.
and it’s your taxes paying for the incarceration for a private loan. Debtors prisons ain’t free just ask England how those worked out
“An apt, if perhaps unintentional, comparison.”
Nice try. Both models are built on the goal of building a profitable customer base built on the attribute of addiction.
Please do continue…..
I heartily agree with the comments that it is the underlying unfair situation that needs to be addressed, not the symptom of the payday lender. I would much rather alter our society so that the Gini Index is much reduced. A high Gini Index is corrosive to social comity. So yes, let’s make the more fundamental changes necessary to pull the rug out from under payday loans. But let’s not attack the symptoms. Payday loans fill a genuine need and, if society will not address that need, at least payday loans provide a band-aid solution. Ripping off the band-aid doesn’t help anybody.
I also agree that the ugly realities of poor enforcement of lending laws casts a shadow on the whole industry — but I’ll add that just about EVERY commercial transaction involves some degree of this kind of sliminess. That’s one reason why government intrusion into the marketplace is so difficult to make effective: you simply don’t have the wherewithal to enforce many such laws. Again, attacking the underlying problem is a more effective approach than patching the symptoms.
I continue to disagree with the claim that enforcing the law is a form of physical response different only in style from private revenge. The law is the only civilized way to handle disputes. You can’t just wish disputes away; you’ve got to have a civilized means of resolving them, and the law is that means.
But for the third time, I will emphasize that solving the underlying problem of the high Gini Index is the best strategy for solving the payday loan problem.
That’s a classic blame-the-victim line. Yes, these people borrowed money without realising that the interest charges were such that they would be unable to pay off debt and interest completely and still have enough to live on. Their cash flow problem was created because they were not wealthy enough to be able to get a low-interest loan from a bank: and because there exist unscrupulous people who regard these people as cash cows that can be bled indefinitely, or until they lose their homes, which ever goes first.
The Crafty Trilobite: “I am not in immediate danger of losing my job, but I have a ferocious race to run over the next 2-3 years before up-or-out time.”
I think I’ll be fine with the job, even if I don’t hit the “mandated” 10 (although I need to do that just to keep my head above water). I am very close to the GSM and he tells me there are two guys with bigger bull’s-eyes on their back than me. I just don’t like the whole let’s-crack-the-whip-and-they’ll-do-better mentality. I am astonished after five years in the car business that ownership pretends to be immune to market conditions (to their employees at least).
I think the only way I would turn to a payday loan place is if it meant putting food on the table, paying the utility bill or something like that. (Don’t have any sympathy for folks who frequent these places to have money to go to the local slots parlor, which does go on, and other such nefarious things.)
Do you believe that contracts should not be enforceable?
Don’t believe I said that. Besides, a contract involving criminal activity is not enforceable.
I said payday lending should be illegal.
Attempts to give it some kind of backdoor respectability by going off on tangents about enforcing contracts or police detaining alleged felons, or by taking refuge in something lifted from Econ 101, are not convincing arguments for the legality of that trade.
Rather than sending the cops to arrest people suckered by payday lenders, we’d be a better society if we could send the cops to arrest the payday lenders.
Me: Do you believe that contracts should not be enforceable?
justcorybly: Don’t believe I said that.
That’s why I asked.
Your basic argument is that, in your opinion, payday loans should be illegal, therefore they are not legal. If you want them to be illegal, then you need to go through the legislative process. But payday loans are currently legal and therefore contract enforcement is the only proper response.
When payday lenders break the law, they should be prosecuted. I agree that such prosecutions are not common enough. But enforcing the laws against illegal loans no more imperative than enforcing the law against passing bad checks. Both practices are illegal and both should be prosecuted.
Chris Crawford, while I support enforcing the law against passing bad checks, I’m not sure I’d put a great deal of priority on enforcing it when the bad checks are being passed to people who know very well that the checks they’re coercing people into writing are extremely likely to be bad.
there are more payday lending stores than Starbucks and MacDonalds combined
and
96% of them went to borrowers who took out more than five payday loans per year
It’s interesting to talk about why lending stores need to charge an annualized rate of almost 400% to cover the cost of short-term, high risk loans. I can see their point of view, they need to cover their risk and make a dollar.
It’s also undeniable that the practical effect of lending stores and check cashing places is to further impoverish people who are already hard pressed to keep their heads above water.
I’m not sure the blame for this can be placed at the feet of the lenders. They are providing a service that is, apparently, necessary. Almost all folks who use it use it several times a year. That means it’s a NORMAL PART OF THEIR ECONOMIC LIFE. It’s not an exceptional situation, nor is the normal case folks who do this once or twice while in grad school.
As an aside I will offer my opinion that experiencing transient episodes of short funds while in grad or professional school DOES NOT COUNT as a realistic example of the experience of being poor. Just my two cents.
The problem is that a hell of a lot of people in this country are having a very hard time keeping up. That set of people extends well beyond irresponsible knuckleheads and dumbass f*ckups, and now includes serious, responsible, hard-working people who are quite simply getting squeezed.
The solution that we, as a nation, appear to be offering our countrymen and women is an emerging private market of lending that inevitably will drive many of them further and further into poverty and debt.
I guess we can blame the lenders, and I’m quite sure many of them deserve some blame for making their dollar off the backs of folks who are just struggling to get by.
But if the best solution we can come up with is to keep the lending rates somewhere just south of blatantly, vampirically predatory, I think we have much, much bigger problems on our hands.
This country is falling apart at the seams, and folks want to argue about whether it’s fair to criticize the folks who are bearing the brunt of that, and who are just trying to keep their heads above water, for being feckless and lazy. Go ahead and criticize them if that makes you feel better, but it won’t make the basic situation any better or worse. They’re still going to have to try to keep the lights on, so the lenders are still going to have a market.
Major financial institutions are being nationalized because if they are not they will tank and take the entire economy down with them. Personally, I think talking about how irresponsible Tracey Minda is for trying to get her kid some school clothes is kind of beside the point.
Payday lenders are the toxic mold growing on the rotten heart of our bankrupt, hollowed out economy. We can poor some bleach on them, but the wood’s still rotten.
These people are our neighbors. We better freaking take care of them, because we’re next.
Thanks –
…in your opinion, payday loans should be illegal, therefore they are not legal…
Not what i said, either.
BTW, they are illegal in my state.
The root problem is a lack of income.
TTL has it right. The problem is the lack of income and the resulting lack of access to reasonable credit to enable Minda to meet a short-term financial need.
To express doubt that putting a cap on lenders’ rates is going to do much to solve the problems faced by people like Minda is not a sign of Scrooge-like indifference. It is just looking at some plausible consequences of such a cap, and asking how much it would really help.
This is not the sort of laissez-faire argument rightly criticized by Trilobite. It’s the argument that the cap actually might not do much good. Some people will get loans at lower rates, and benefit. Some will get loans and still get into deep trouble. It’s not like 36% is a bargain. Others will not be able to get legal credit at all. Maybe that all nets out to the good, but it doesn’t have to.
btfb: Yikes.
John Thullen: you have returned!
(I actually met John Thullen in Denver. He’s the first person I’ve met from ObWi who wasn’t more or less as imagined, since when my imagination tried to come up with something John Thullen might be like, it just sort of wilted at the very thought. So I had nothing to compare the actual Thullen to. But very nice and very funny, as one might imagine, if one’s imagination were braver than mine.)
To express doubt that putting a cap on lenders’ rates is going to do much to solve the problems faced by people like Minda is not a sign of Scrooge-like indifference.
Agreed. But a rate cap at something an order of magnitude below 391 percent would certainly result in fewer people being ruined by this scam. The societal costs incurred by those who find themselves trapped by payday loans are real.
I’d prefer we just outlaw it nationwide.
Come to think of it, does anyone know how many people take out payday loans to pay for health care they would otherwise have neglected?
I very much agree with the arguments that we are being pennywise and pound foolish in attacking this problem. The payday loan people are not getting rich on this commerce; they are small operations, not giant banks. The ripoffs done by the large corporations are much greater in effect than the payday lenders. The difference is that the effects of the payday lenders are immediate and obvious, whereas those of the big corporations are diffused throughout the whole system. For example, the takeover of Freddie Mac and Fannie Mae will cost taxpayers billions and billions of dollars, probably more than the entire take of the payday loan industry. The collapse of Enron stole billions from the middle class.
One of my neighbors, a really sweet old man, lost the bulk of his retirement savings in that collapse. Over the years he has grown steadily more despondent, and recently lost his temper and struck another person, doing some significant injury. Here’s a man who has done nothing but contribute to society for an entire lifetime, and then he has had all that taken away by some crooks at a big corporation, and it has ruined his life.
We are wasting our time worrying about these lenders. They’re not doing much real damage. The big task is to crack down on the practices of the wealthy. The rich get richer, and the poor get poorer — that’s the iron law that we must controvert.
hilzoy… you tease… pix? scan of the bar tab?
a rate cap at something an order of magnitude below 391 percent would certainly result in fewer people being ruined by this scam. The societal costs incurred by those who find themselves trapped by payday loans are real.
A rate cap like that would obliterate payday loans. Do you wish to deny them to the poor? I can respect the argument that payday loans are just like gambling — a way to take money away from the innumerate, and on that basis I could see eliminating them. But I would prefer an explicit statement that, in effect, the poor are too stupid to handle payday loans properly.
Hi, Hilzoy. I trust you are well.
And, I’m sure not voting for Obama! McCain is the man who should be President.
Sincerely, Sean
We are wasting our time worrying about these lenders. They’re not doing much real damage. The big task is to crack down on the practices of the wealthy.
Yes, but doing the one does not preclude doing the other. Besides, are we certain that large financial institutions have no involvement in payday lending?
A rate cap like that would obliterate payday loans. Do you wish to deny them to the poor?
I’ve no idea what it costs a payday lender to stay in business or what kind of profit margin they have, but I need to be convinced they need an interest rate of 391 percent to make money.
Payday lenders scam the poor, they do not provide a service to the poor. (That’s the industry’s usual propaganda.) It has nothing to do with any alleged “stupidity.” Most folks who use payday lenders have little or no experience with any financial insitution (tens of millions of Americans do not have even a simple checking acount).
These people are our neighbors. We better freaking take care of them, because we’re next.
For some reason the phrase “I am my brother’s keeper, I am my sister’s keeper” comes to mind.
I’ve no idea what it costs a payday lender to stay in business or what kind of profit margin they have, but I need to be convinced they need an interest rate of 391 percent to make money.
The data you need is already in existence: there are lots of payday lenders. That means that there’s competition between them. Which means that, if they are charging excessive rates, then a newcomer could take away their business by charging lower rates. But the rates are pretty stable, which means that they’re about as low as they can go. Anything lower means that the lender won’t make a justifiable profit and will just leave his money in a savings account where it earns a profit without his having to lift a finger.
Let’s assume for the sake of argument that:
1) Payday loans are a needed service; and
2) Payday lending is profitable.
Question: Why should not Uncle Sam get into the payday lending business?
If you think that’s a silly question, consider that even (or perhaps, especially) Republicans are content with Uncle Sam getting into the mortgage-lending and investment-banking business.
–TP
… there are lots of payday lenders… there’s competition… if they are charging excessive rates, then a newcomer could take away their business by charging lower rates.
It mean nothing of the sort. You’re letting that Econ 101 class blind you to how people really behave and what really motivates them.
Nor am I willing to concede that cometition is rampant among the lenders. How sure are you that each lender operates independently? It would be unusual of most weren’t owned by a small number of large concerns. In any case, we have lots of evidence of seemingly competitive businesses who collude to maintain high progit margins.
Besides, the size of a payday lender’s profit margin has no bearing on the legitimacy of their business. A scam is a scam. You don’t get to claim legitimacy by pointing to a skinny profit margin.
Chris: The data you need is already in existence: there are lots of payday lenders. That means that there’s competition between them. Which means that, if they are charging excessive rates, then a newcomer could take away their business by charging lower rates.
Ah, the myth of the free market providing low prices.
Alternatively, payday lenders know damn well they benefit from keeping interest rates as high as possible, and so don’t compete with each other to lower rates: this is even more strongly true if, as has been claimed, payday lenders are charging just what they need to stay in business.
My guess is that payday lenders operate on “what’s the most we can charge and get away with” not “what’s the least we can charge”. It’s not as if people coming to payday lenders have any choice.
Chris, the same logic can be used to demonstrate that almost any proposed business legislation will lead people to keep their money in savings accounts rather than operate such businesses. Some of us are less confident in the perfection of the market.
For the sake of comparison I see that my bank is willing to give you an advance to your checking account of up to 1 and a half weeks, up to $500 if you have a regular direct deposit from your employer. They give it only in $20 increments and charge $2 for every $20. Unless I’m horribly wrong on my math that annualizes out to 347% on what should be a much safer loan with little to no extra overhead costs (they have regular direct deposits, a long term record of them, and they have all your account information already).
You’re letting that Econ 101 class blind you to how people really behave and what really motivates them.
OK, if you have an argument from your Econ 202 class, let’s hear it.
It would be unusual of most weren’t owned by a small number of large concerns.
We’re both speculating here, but I would expect large concerns to take advantage of their size by adapting uniform advertising, a logo, a name — that sort of thing. But the payday loan services that I notice — admittedly a statistically insignificant sample — are all different. “Joe’s Payday Loans”, “Cash Now!”, “Quickie Loans” — that’s the kind of thing I see. Do you know of any consortia of payday lenders?
Besides, the size of a payday lender’s profit margin has no bearing on the legitimacy of their business. A scam is a scam. You don’t get to claim legitimacy by pointing to a skinny profit margin.
This statement is why I continue to disagree with you. You’re making a value judgement that is your own personal judgement and you’re treating it as Absolute Truth. There are lots of people engaged in commerce that I find objectionable. Some people sell hunting stuff — I find that objectionable. Some people sell automatic weapons — I find that objectionable. There are other commercial activities that other people find objectionable. Some people sell contraceptives to women — there are people (I am not among them) who find that objectionable. There are all sorts of things that different people find objectionable. And the way we sort all this out in a democracy is to pass legislation that declares some things to be illegal (such as selling drugs) and other things to be illegal. In some states, payday loans are illegal. In some states, they are legal. That’s how the system works. It doesn’t work by you simply declaring the Truth. You’re welcome to your opinion — but other people have different opinions.
Brett,
I don’t exempt myself, most of the troubles in my life have been due to things I did, which I should have known, or worse DID know, were foolish.
Im not sure what your life has been like Brett- but in my experience the difference in the results of mistakes is often middle v lower class. People get in trouble in the middle class, and they can usually claw their way out via their connections- a family member loans some money, a friend helps out, just having the middle-class skills helps them navigate the system or talk their way into a better position.
Im thinking in particular of someone I know who screwed up several times as a young adult, the sort of mistakes that would’ve led to disaster if they hadn’t had middle-class parents to step in & clean things up. And when he finally got his act together, he became a right-winger & basically sees himself as a ‘self-made man’.
Not saying that this applies to you, but that’s what it made me think of. Ive been fortunate in the same way- middle-class enough to goof off as a young man & then talk my way into a middle-class job.
Chris,
The original post noted that there are a great many payday loan operations in the US. From that fact we can conclude that the market for payday loans is competitive; from that we can conclude that the interest rates are at the lowest level that permits a decent rate of pay for the operator. Ergo, capping interest rates will serve only to put these operators out of business and remove this source of loan from the poor.
I think that you ought to be very suspicious of this sort of reasoning when it has no empirical evidence to back it up. Actual economic behavior is messy and difficult to predict.
Case in point, empirical evidence is presented upthread that suggests that this reasoning may not be correct.
A similar case is often made against minimum-wage laws, but the empirical evidence so far does not support it. Given that, it’s interesting to watch which people change their minds and which decide that the empirical evidence must be wrong.
Imagine if he’d had ultrarich parents. He might have become president of the United States.
TTMYGH,
In my experience, people are often willing to harshly judge the poor decisions of others. Do you eat red meat frequently (causes colon cancer)? Do any sports (risk of injury)? Not get exercise (risk of cancer, cardiovascular disease, diabetes)? Eat lots of sugars and simple starches (risk of diabetes)? Smoke (risk of cancer, lung disease)? Woodworking or other hobbies with power tools (risk of injury, hearing damage, lung damage)?
The list goes on.
but I cannot abide the lack of criticism applied to – indeed, the attitude that it is somehow *unseemly* to criticise – individuals who place themselves in this position
So, unless you’re a risk-free person, you’re all good with us coming to visit you in the hospital when some risk catches up with you, and pointing and laughing?
Sign me up.
Or, if you’d prefer, we could show up and be sympathetic because everyone makes mistakes.
Imagine if he’d had ultrarich parents. He might have become president of the United States.
yeah, I hadnt thought about it that way, but that’s just about perfect- some ghetto kid sells crack because there just aren’t any other options, ends up in jail, gets prisonized, and has a short, bad life. Rich kid gets a coke habit out of bordem, gets spared the horrors of Vietnam, gets spared the consequences of no business sense, and ends up in the Oval Office.
And has the luxury of not only considering themselves ‘self-made’, but to criticize those who never had the safety net that they themselves used over and over again.
The problem is there are people who use them to pay for necessities but don’t want to steal. Then there are those who supposedly blow the easy money on hookers and methods. I guess my question to the defenders here is why do you want goverment to support a system the gives easy legal money to the second group funded by the first group?
Wow, there seem to be some people denying basic economics. There have been MOUNTAINS of study on this and economists have shown beyond any reasonable doubt that a perfect market efficiently reduces prices to the lowest possible value. This has been shown in study after study after study.
Yes, there are plenty of factors that can make a market less than perfect. For example, if there are only a few sellers, then the market is by definition grossly imperfect. If the sellers collude, then the market isn’t perfect.
I decided that perhaps some raw data would help here. So I consulted the yellow pages for my area (population about 100,000) and found the following businesses that are apparently payday loan companies:
Advance America Cash Advance
Cash Back Payday Loans (possibly a national service)
Cash Connection
Check Cash
Check’N Go
Fast Check
Quick Check
Rent-a-Center
That’s eight competitors for my economic area. I don’t think that this quite meets the definition of a perfect market, so we would expect to see somewhat higher prices than the absolute minimum. However, we’re not so far from a perfect market that we’d expect a big difference here.
Yes, sellers can collude. But collusion is a crime, and it’s usually pretty easy to find in such cases: if in one area prices are significantly higher than in similar areas, there is reason to suspect collusion. Then the law enforcement person goes to one of the suspects and offers a deal if they will testify. Kaboom, the colluders are convicted. And the fact that they KNOW that’s how it works is enough to keep them honest.
Yes, big corporations are smart enough to know how to pull off collusion without getting convicted. But it’s a lot harder for these small-time operators to get away with. Their best protection is the hope that nobody notices the abnormally high prices — a pretty slim hope to gamble on.
And yes, there is the problem of irrational behavior on the part of the consumers. They are not good examples of homo economicus. But our problem here is that, in order to proceed, we must assume that they’re too dumb to make rational decisions. That assumption might be correct — but who’s willing to stand up, declare it out loud, and get the ball rolling?
Chris, there are no perfect markets in the real world. One huge factor you’re ignoring is that consumers don’t have perfect information about all the competitors, the differences in their products, and the full costs of the services, nor does the fact that there are N businesses in the phone book mean that a particular consumer is able to go to all of them, even if miraculously they were able to compare them by measures that the lenders naturally obfuscate as much as legally possible (and probably a little more so).
Chris, my argument is the same as jesurglisac’s. Payday lenders have more incentive to keep profits high by failing to undercut each other’s large margins than they do to cut margins in response to alleged competition. If I’m making a killing selling widgets, and I know every other widget seller in town is making the same kind of money, why would I upset the apple cart? More for me, more for them.
You’re making a value judgement that is your own personal judgement and you’re treating it as Absolute Truth.
If we had to wait for a vision of Absolute Truth, we’d never do anything.
Of course, I’m making a personal judgement. Personal judgements rule the world, not economic theory. It’s my judgement that payday lenders are scamming their customers, that they cause real societal damage and incur real — measured in dollars — societal costs, and that they should be outlawed.
I’m aware that other people have made conflicting personal
judgements. Determining who wins and who loses is something called politics.
Again, though, you seemed to assert that, all other things being equal, the existence of a profit margin justified a business’s existence. Perhaps that was not your intent.
Speaking of high profit margins…
Here in my part of North Carolina gas prices jumped as much as a dollar yesterday, well before Ike got anywhere near a refinery. Strange how all those dozens and dozens of gas stations littering the local terrain all raised their prices by about the same amount at the same time. Where was the impact of competition?
Any chance the relatively few wholesalers supplying the local retail gas market took the opportunity to engage in some good old fashioned gouging? The governor here has engaged a state law targetting retail gas price gouging, but as far as I know it says nothing about wholesalers.
Hi, Hilzoy. I trust you are well.
And, I’m sure not voting for Obama! McCain is the man who should be President.
Sincerely, Sean
Well, gee, I’m convinced. With that wealth of logic, how could I not be?
Yes, sellers can collude. But collusion is a crime, and it’s usually pretty easy to find in such cases
In these kinds of cases, what you usually find is that the industry’s trade group — in this case, the CFSA — has a recommended set of best practices to which member companies tend to adhere. Then it’s not collusion qua collusion — it just happens to be what everyone else is doing.
Advance America Cash Advance
Cash Back Payday Loans (possibly a national service)
Cash Connection
Check Cash
Check’N Go
Fast Check
Quick Check
Rent-a-Center
Did you do any further research on these outfits? That first one, I happen to know, is traded on the NYSE. Its major institutional holders include Allianz, Barclay’s, Vanguard, State Street and Bank of America. This is hardly what one would refer to as a “small-time operator.” Should we see whatever interesting facts we can discover about the rest of your local Yellow Pages?
Also, AEA’s market cap is about $285 million, and their profit margin is about 5.94% on revenue of $695 million. For comparison’s sake, Wal-Mart’s profit margin is a reported 3.38%. Exxon Mobil’s is just south of 11%. General motors is -34%. AT&T is 11%. Bank of America is 17%.
So it would appear that, from a data point of one, their margins are less than those of the financial sector, but larger than those of the retail sector. Hardly razor-thin.
I agree that the market is not perfect — nothing’s perfect. The question is, how close is it to a perfect market and how confident can we therefore be that the prices being set are the lowest possible? My impression — and nobody has offered any substantive data here — is that the payday loan market that is better than many others but is still well short of perfect. After all, we have only two full-size hardware stores in the area, only one big bookseller, and only two theater complexes. By contrast we have dozens of dentists and loads of used car sellers — I expect those markets to be closer to perfect.
From this I think it reasonable to believe that the payday loan market in this area has prices a bit higher than the lowest possible, but certainly not price-gougingly high.
Phil, that’s interesting data. I would expect a national outfit to do better than the average individual operator, because they enjoy some economies of scale — although economies of scale don’t play as large a role in this market as they do in many others. But a return of 5.94% is not indicative of price-gouging.
Do I think payday lenders compete? Yes.
Do I think payday lenders compete on price? No.
The entire basis of the industry is to get people to accept a deal that external, dispassionate analysis says is a bad idea outside of extremely limited circumstances.
Successful payday lenders are the ones who make their fees *look* low (so people take the bad deal) even when they are not.
Look, we live in a world where mortgages, car loans and credit card (products targeted at significantly more sophisticated consumers) need to have their disclosures regulated (and even then plenty of service providers find loopholes), not to mention a housing boom that was fed by millions of people who didn’t realize their monthly payment didn’t reflect the true cost of their mortgage.
I think payday lenders are well aware of common human cognitive biases related to finance and structure their products to take advantage of them. Competing on price isn’t a part of that – consumers who are careful enough to compare prices from multiple payday lenders aren’t their target market.
Chris, the market is value free. Decisions made by the market have no ethical or moral content.
Only if you think number of competitors is the most important factor in determining how close to perfect a market is. How much difference is there between buying a book at one bookseller and buying it at another, or seeing a movie at one theater versus another? While there could be differences in customer service, I doubt they’d be large, and people can who care about them can determine it easily from a single visit, with a small purchase and no great loss if the service isn’t great.
For dentists and car sellers (and payday lenders), on the other hand, the differences can be greater and things are less transparent. I’d expect those markets to be farther from perfect. There’s a reason car sellers have a worse reputation than bookstores.
Among the costs of operating a payday loan is marketing. Just judging from the saturation of advertising in my city, including TV and radio spots, billboards, and flyers on my windshield or mailbox every day, this is not a small cost for them. If the service they provide is so vital and necessary, why do they have to spend so much money promoting it?
Most are not small businesses; the ones in this town are chain operations and the largest chains are backed or partially owned by banks. They’re not competing with banks: they’re subsidiaries.
The argument that using police to enforce repayment is justified under the need to maintain the rule of law is a red herring: Nobody’s arguing against the rule of law; the issue here is the unjust law that allows them to be so used. I would also point out that law enforcement has been used in the past to enforce unjust laws whose effect is the oppression of the poor for the benefit of the rich. Do you think, for example, that local and state police defended striking coal miners from company-hired goons in the 1920s? For that matter, police have been used extralegally quite recently- the preemptive arrests of activists, along with their attorneys and the journalists covering them in St. Paul two weeks ago comes to mind.
So, these borrowers wrote bad checks so their incarceration is justified, right? But wait, isn’t it also illegal to post-date a check? A check is a legal document, and the date line is to indicate the date it is written- so writing a false date is actually falsifying a document- an act of fraud committed against the payee and the bank.
So, it seems that these payday lenders have built a business model that actually requires the borrowers to commit fraud against the lenders themselves and further requires that the fraud be large enough to be a felony if the check doesn’t clear- thus requiring law enforcement to act. Then, if/when the check doesn’t clear, they enlist law enforcement to punish the borrower for a crime that they solicited themselves.
Do you suppose they inform their customers that kiting a check above a given amount is a felony? Or that what they’re asking them to do is an act of fraud?
It’s as if I paid someone to spank me on the butt, with the assurance that it was perfectly legal, and then tried to have them arrested for battery. Cops would laugh in my face just before charging me with solicitation.
How anyone can defend this practice, not as an occasional courtesy done between friends or business associates (the normal, if illegal, practice of post-dating checks) but as their basic business model is beyond me. That the police end up acting as their collectors under the requirements of the law just says that the laws are supremely messed up. Which is kind of the point of this whole issue, right?
For those who cry for the poor folks who won’t be able to get credit at all- vote for Obama and his plan. It includes establishing alternate sources for affordable low-dollar short-term credit.
McCain doesn’t even acknowlege any issues with the economy at all. He has no solutions because he has no clue there are problems. His domestic plan is as incoherent and divorced from reality as his foriegn policy.
And yes, that’s the issue. That this economy is such that regular lending is needed for even working people with steady jobs to try to stay afloat is the problem. Whether we’re talking about minimum-wage folks who rely on regular payday loans or middle-class folks relying on credit cards, the result is the same: people are living on increasing debt- not to get ahead but just to keep up. The difference is the poor pay a lot more for their debt.
Oh, but LIPSTICK! ISLAMISTS! GAYS MARRYING! MEXICANS WORKING! HOLLYWOODSANFRANCISCO LIBERALS WANT TO TAKE YOUR GUNS AND TEACH YOUR KIDS TO SCREW YOUR PETS!
Nothing to see here. Move along if you know what’s good for you.
Leaving work with empty pockets again.
We had a rough Saturday in general.
And my customer was emblematic of the current problem: a 660 score, with a proven track record, who in the pre-credit crunch days would have been approved in an instant.
Thanks to the credit crunch — which was largely caused by banks giving away money like drunken soldiers — those same banks aren’t giving car loans to buyers unless they credit is A-1. (There were times you’d get a 560 done — always you’d get a “good” 660 done. No more.)
It’s an overreaction from the banks. But it is what it is.
I’d like to meet John Thullen right now, go to one of my favorite drinking spots, share some laughs and tie one on. But, sorry, John, I’d need you to buy.
P.S. One very hard part about going home after days like this is, looking your wife and kid in the eye and feeling like you are doing right by them. (I remember when Saturdays used to be our out-for-dinner night, since I’d usually have made a little money and my wife is on her feet all day cutting hair. Those days will return, right?) Again, I’m sure many so-called bread-winners feel this way, or worse.
Advance America Cash Advance: Discussed Above
Cash Back Payday Loans: Operates in 39 states. Appears to have no problem with annualizing those percentage rates, so i don’t know why we should either.
Cash Connection: Couldn’t find any info.
Check Cash: I found a “Check Into Cash,” don’t know if it’s the same. Has 1,277 locations, according to their website. Also has a mascot that is literally an anthropomorphic stack of dollar bills that makes personal appearances. Egads.
Check’N Go: A national outfit with more than 1,300 locations underwritten by First Bank of Delaware.
Fast Check: Couldn’t find any info. Interestingly, when doing a Google search for “Fast Check,” the first result relevant to payday loans is Check’N Go, which is the 6th result on the 1st page. Perhaps the same company?
Quick Check: 29 locations in Oregon, Idaho, Montana, Wyoming and Utah.
Rent-a-Center: RCII on Nasdaq. A 3.2% annual profit margin on revenue of nearly $3 billion. Its major holders include Barclay’s, Fidelity, Brandywine, Vanguard and State Street.
So, of Chris’s list, we have two publicly-traded companies whose institutional holders are among the largest investment and banking companies in the entire world; three companies who operate across the entire United States, more or less; one company who operates in five states; and two companies about which I couldn’t find any info and might be local.
Looks like your Yellow Pages search may have been a bit misleading, since what we end up with is an industry that appears to be composed more of Home Depot and Loew’s, and less of dentists and used car lots. But please, tell us more about these perfect markets and numerous competitors. Its fascinating.
(I don’t, of course, know what percentage of the markets these companies share. More importantly, neither do you. But I’m willing to guess that, if the big players here who operate more than a thousand locations in most of the country are doing so on profit margins of 3-5%, that the number of small local competitors is both small and short-lived.)
bedtimeforbonzo: P.S. One very hard part about going home after days like this is, looking your wife and kid in the eye and feeling like you are doing right by them.
That’s rough. I’m sorry. But you know you are doing right by them by being there to meet their eyes.
I’d buy you a drink, if we were to meet at the ObWi watering hole. (I’d buy John Thullen a drink, but the queue there is a couple of light years long….)
the market is value free. Decisions made by the market have no ethical or moral content.
Absolutely! Markets aren’t supposed to establish our joint moral constraints — laws are!
Phil, that’s good research, and I’m pleased to learn that there are in fact more national operations than I had thought. Because national operations are going to be a lot more careful about breaking the law — they know that they can attract federal scrutiny. Of course, in this day and age, with the Bush Administration looking the other way, that just isn’t true, but there’s always a good chance that an Obama Administration would actually start enforcing the law.
For those who cry for the poor folks who won’t be able to get credit at all- vote for Obama and his plan. It includes establishing alternate sources for affordable low-dollar short-term credit.
Absolutely! Blaming the lenders accomplishes nothing. Providing an alternative source is a much better solution.
Only if you think number of competitors is the most important factor in determining how close to perfect a market is.
Yes, I do. Sure, there are other factors at work, such as collusion. But the first rule of thumb is to ask what percentage of the market is taken by the biggest operations. If the market is divvied up in such a way that no seller has more than — what is it, 10%? — of the market, then no seller can survive for long providing the same service at a higher price.
But please, tell us more about these perfect markets and numerous competitors. Its fascinating.
Well, at least you’re not as snide as the typical conservative is. {sigh}
it’s funny how all these free market advocates first instinct is to ask government to collect for them.
Btfb – sorry to hear, we all in it together
Markets aren’t supposed to establish our joint moral constraints — laws are!
Enforcement of the law does not require agreement that the law is moral. The law establishes legal constraints on our behavior, not moral constraints. In a democracy, government rests on the assumption that all citizens feel an obligation to obey the law even if they do agree with it, and are prepared to accept the consequences for violating the law.
Blaming the lenders accomplishes nothing.
I think it accomplishes a great deal if it leads to legislation outlawing payday lending. I find your assertion difficult to reconcile with your agreement that the market is free of values. The market cannot determine if behavior is moral or immoral. That’s our obligation.
Justcorbly, the law is the community’s expression of what is moral. Because it is only an expression, it is only an approximation of that moral sense. Where the community cannot agree on what is moral, it can make no law. Yes, law is not morality: it is society’s attempt to codify its commonly accepted precepts of morality.
We seem to be in agreement that the question of payday lending should be addressed in the legislature. Where no such law is passed, you are welcome to continue to hold payday lenders in contempt, but you should at least recognize that your opinion of them is a minority opinion. When and where such a law is passed, then we get rid of them. I myself would prefer to let them continue doing business, because I am not prepared to declare the poor to be fools. Even better, replace payday lenders with any of a number of better schemes.
But our problem here is that, in order to proceed, we must assume that they’re too dumb to make rational decisions. That assumption might be correct — but who’s willing to stand up, declare it out loud, and get the ball rolling?
Can I just go with “Not perfectly rational actors?” Free market theory doesn’t assume that all people make perfectly rational choices all the time, merely that collective economic decisions converge onto rational choices. By definition, and in everyday observation, most people’s choices are not perfectly rational. More recent economists and law-and-economics scholars have been trying to identify how most decisions depart from pure rationality, and by how much. One of the leaders in that field is Obama’s advisor Cass Sunstein, whose work you might find interesting. (Tho I find its quality uneven). Then too, “rational” can include concepts such as “I don’t have time to look for a better deal on this particular occasion,” or “I assume that if it’s legal and common it won’t be too dangerous” (both of which factored into the recent housing boom). There’s also “it’s this or bankruptcy, so I might as well try this first and hope for a miracle,” which is rational but wasteful.
Most people do need help figuring out their options and making a financial plan, which is why financial planning is a multi-billion dollar industry. There’s not that much difference between a rich person’s accounts manager and a poor person’s credit-consolidation counselor. Maybe one policy solution would be government-provided credit counseling BEFORE the bankruptcy court judge has to do the job.
Chris:
1. In a democracy, the law is not necessarily an expression of the community’s consensus on morality. A law is simply the result of a political process that may or may not reflect a consensus. In a democracy, the law assumes that people will obey the law even of they don’t agree with it. The existence of a law does not depend on a communal consensus about morality. The U.S. has made plenty of law that lacked communal consensus.
1. I’d love to see better alternatives replace payday lenders. I’d prefer to expedite that by making then illegal. They do not serve the interests of the poor. And, I’m chagrined by your description of people who use payday lenders as “fools.” If people are desparate for money, the will go to any available source. If they go to payday lenders, it doesn’t mean they are fools, it means the rest of us have failed them.
Just a quick comment, before reading comments.
How about people get paid a decent liveable wage?
Payday lenders are regulated at the state level. The Constitution does not authorize the Federal government to regulate payday lenders, so it’s not an issue on which a presidential candidate should have an official position.
Oddly and coincidentally enough, I met Hilzoy in Denver, too.
Very nice and very funny, too, and she knows her stuff.
It was late at night, the evening before we were driving the kid to Vancouver for freshman year at UBC. I was whacked and a little subdued, but Hilzoy convinced me to run through the streets with her and throw bricks through the plate-glass windows of pay day lending storefronts, which were advertising 351% teaser rates on weekly loans.
I didn’t know whether to borrow money or throw my brick, given the costs of college these days.
Hilzoy did.
She’s a force of nature.
justcorbly,
“Payday lenders have more incentive to keep profits high by failing to undercut each other’s large margins than they do to cut margins in response to alleged competition. If I’m making a killing selling widgets, and I know every other widget seller in town is making the same kind of money, why would I upset the apple cart? More for me, more for them.”
Because if you could really reliably make 300% return on your money year on year with paycheck loans you won’t just be competing with the other currently existing payday loan people. You’ll be competing with all the people who want to make more money than the 3% they can make by putting it in the bank. Those people who enter the market will have to compete against those who are already there, and most of those new entrants will not be able to significantly improve quality of service, so they will compete on price. Which should be really easy to do if everyone else were really making 300% year-on-year return. Because 290% year-on-year return would make even Warren Buffet really happy.
“Here in my part of North Carolina gas prices jumped as much as a dollar yesterday, well before Ike got anywhere near a refinery. Strange how all those dozens and dozens of gas stations littering the local terrain all raised their prices by about the same amount at the same time. Where was the impact of competition?
Any chance the relatively few wholesalers supplying the local retail gas market took the opportunity to engage in some good old fashioned gouging?”
Yikes, this isn’t good economic reasoning. It almost certainly isn’t gouging. The reason this happens ‘before’ Ike hits a refinery is because the price is based on what happens to the cost to *replace* gas in the underground tanks below gas stations, not the price to put it there. In cases where local supply is likely to be severely restricted, the price before usually represents a slight overreaction to the estimated chances of the supply problem. If Ike is likely to hit a nearby refinery the price will go up 2 or 3 dollars, if somewhat likely 1 or so dollar, if not likely but somewhat possible 20-90 cents, if remotely possible you might not notice it in the other oil related issues.
What I love about Payday loans is that they are meant to be short term and can help in a tight situation if you are running a little short on cash during the month.
btfb,
Hang in there – there will be better days. My grandfather sold cars for a living starting in the late 1920’s – obviously that didn’t work out so well for a while, but he kept at it until Dec 1941, after which time there weren’t any cars left to sell to civilians any more for several years. He got back into the business again after the war.
I’m sure he had days like yours, only worse. His family was always proud of him.
The story I remember most about him from that period was about the day one of the families he knew (because they had been customers of his) called him up in a panic – they were Japanese-Americans and had just received their orders to be sent away to one of the relocation centers. Their house was being sold off on a moments notice (and for a fraction of its value) and they didn’t have any way to store their household goods (including some family heirlooms) which they couldn’t take with them.
He offered to keep their things safe for them until the war was over, and refused to accept any payment for doing so. He told me that he cried all the home on the drive back from their house, with their stuff piled in the back seat of his car, because it upset him so much. After the war was over they came back, thanked him and offered to pay him for his trouble, which he again refused.
People like that have every right to look their families in the eye and hold their heads up, regardless of how large or small the weekly paycheck may be.
Sebastian, I tihnk I’ve been pretty clear here.
I don’t believe decisions made by the market are in anyway moral decisions. I don’t believe that theoretical notions of how people behave — such as positing that people willing to accept 290 percent profit will magically enter a market to compete with people getting a 30 percent profit — accord in any reliable way with reality. Many things drive human behavior; economic reward is only one small component.
As far as gas prices go. I no longer believe oil corporations neceessarily repond to market forces. Yesterday’s gas price boost may be in response to legitimate market pressures, but I do not trust the oil oligopoly enough to assume that without seeing evidence. Put simply, I don’t believe them.
Make that 300 percent, not 30 percent.
Bottom line: I’m not prepared to accept market decisions as defining what society should or should not do Those are political decisions to which the market should always take a back seat. The market does not serve the greatest welfare of the greatest number.
Payday Loans:
Thank you.
Without you, I would have had to sell myself into prostitution to afford the hospital’s charge to have my nether regions scoped.
Of course, with you, I might need to sell myself into prostitution to pay the interest on the loan you were kind enough to extend to me in my time of trouble.
Do you have a drive-up blow job window, or can we reach terms?
I get paid grudgingly.
Wait a second. Is that you, Jes?
“I don’t believe that theoretical notions of how people behave — such as positing that people willing to accept 290 percent profit will magically enter a market to compete with people getting a 30[0] percent profit — accord in any reliable way with reality.”
That isn’t theoretical at all. People will and do non-magically enter a market to compete with people making a 15% profit or a 10% profit. Suggesting that it is overly theoretical that people would enter a legal market at 290% if other people were regularly making 300% puts an enormous and unrealistic burden on your ‘other factors’. It is one thing to not trust the market to be perfect, it is another thing entirely to act as if it would be entirely normal in the US for people to completely pass up a safe 290% annualized profit to protect those making a safe 300% profit. If such a thing really existed. Which of course it doesn’t.
Your type of economic analysis comports with reality much less than mine, additional factors or no.
“People like that have every right to look their families in the eye and hold their heads up, regardless of how large or small the weekly paycheck may be.”
Indeed, LeftTurn, and thanks for the heartwarming story. And thanks, Jes.
Work itself is dignifying. That’s why I hate it when people make fun of the work lower-wager earners do. I’ve met some pretty rich — by that, I mean classy — janitors in my time.
This whole payday thing got me to open up, so I will open up some more. I menioned how my GSM and I are very close; well, at the end of the day, he saw the stress and tension on my face and knows how I can worry. Anyhow, he confided in me that the owner had given him orders to fire one of my co-workers on Monday — one of the guys I mentioned who had a bigger bull’s-eye on their back.
Now I’ve been at the dealership five years, have a track record and built up numerous customer and co-worker relationships. Joe — not his real name — has been with us for little over a year and has had just a couple of decent months. Then again, he did sell five cars last month to my three — and has sold five cars this month to my two.
Joe’s problem is he is always pounding his chest. I think readers here have enough common sense to know that is not the tack to take when you consistently don’t back it up, especially in a recessionary environment — someone’s going to notice, maybe the owner.
Still, Joe can be a funny guy and my department has actually gotten to like him once we’ve come to realize it’s just his nature to come on strong.
So, yes, I’m relieved I still have my job. But I can hardly be happy knowing another man with a family is about to lose his.
In that way, Fledermaus is so right — we are all in this together.
I came down to the computer room a little bit ago after my wife settled in to watch “The Brave One,” the Jodie Foster vigilante film. We are both Jodie Foster fans — but that movie was just too depressing.
I’m looking forward to the “Saturday Night Live” premiere and the laughs I’m expecting it will provide.
Take care, everyone.
Sebastian, I’m not offering economic analysis.
I’m saying human behavior is motivated by many things in addition to economics. I’m saying we cannot allow the market to make our moral choices for us. I.e., that the decisions of the market carry no moral weight and that those who defned the morality of their behavior by pointing to the market are in error. I’m saying, in the context of this thread, that payday lenders make an immoral choice when they decide to go into that business.
I have a general question for those critical of Hilzoy’s position on payday loans, etc. Strangely enough (you may think) it’s not just carping or trying to “force” the right answer.
Let me start with a historical premise. In both the Christian and Islamic worlds, there have long been prohibitions on “usury.” Of course there have also been endless debates over what actually constitute “usury,” and complicated evasions of whatever rules are in fact established to define it, but the underlying principle – that charging certain rates/kinds of interest is intrinsically immoral – seems constant.
My question, then, is this. Do you believe that some kind of prohibition on “usury,” however defined, is justified? Or does the free market override these religious/moral objections automatically?
Any elaboration on your answer would be appreciated. E.g., if you believe “usury” is wrong, how would you define it, or suggest that we as a society define it? How much is too much?
Conversely, if you believe we should discard this long tradition of condemning “usury” because it violates the supremacy of the market, are there other nominally moral issues that you would set aside on similar grounds? Prostitution? Slavery? Abortion? Drug use (“abuse” being a loaded term)?
I’m genuinely curious.
This is like the gameshow To Tell the Truth.
Will the real Anarcho-Capitalist please stand up?
The root problem is a lack of income.
Can we put this in big bold neon-flashing letters at the top of the comments. Since I doubt anyone will disagree, it does away with some of the sillier responses.
======================
I notice with interest that three out of the four people who have spoken up declaring that the important thing is not to ensure that a working single mother is financially supported so that she can afford to provide for her child, but to criticise her financial decisions
That’s because the question of “ensuring that a working single mother is financially supported” wasn’t part of the post. And somehow payday loans are tied to abortion. Jeez.
===============
The root problem is a lack of income.
Can we put this in big bold neon-flashing letters at the top of the comments. Since I doubt anyone will disagree, it does away with some of the sillier responses. (yes, this is repeated on purpose.)
The root problem is a lack of income.
Can we put this in big bold neon-flashing letters at the top of the comments.
I’ve been trying to think how to respond to some of the comments here without making cracks about the validity of peoples experiences. I’ll probably be unsuccessful, but here goes.
It’s not just income, it’s time. The person in the article is a preschool teacher AND and single parent, and we have some sing the praises of how there must be all of these payday loan outfits so she can have such a wide choice of options that she must be getting the deal of the century. It doesn’t work that way.
The poor don’t only lack money, they lack the time and resources. All this talk of how she should have, could have explored all the options before settling on a payday loan outfit evaporate if you just take a minute to imagine what her life must be like. I imagine her driving to work, living some distance from the rest of her family, trying to get ready for school to start.
I think this community self-selects in a lot of ways, but one way is that almost everyone here has a lot of time. And because of that, a lot of people fail to understand what it is like to really not have enough time. That, coupled with a lack of income, is crippling.
I notice with interest that three out of the four people who have spoken up declaring that the important thing is not to ensure that a working single mother is financially supported so that she can afford to provide for her child, but to criticise her financial decisions–Jes
“That’s because the question of “ensuring that a working single mother is financially supported” wasn’t part of the post. And somehow payday loans are tied to abortion. Jeez. The root problem is a lack of income.
Can we put this in big bold neon-flashing letters at the top of the comments. Since I doubt anyone will disagree, it does away with some of the sillier responses. (yes, this is repeated on purpose.)”–Jeff
Setting aside the snark, then, you agree with Jes. As for abortion, I don’t think the link is hard to see–if someone is anti-abortion, providing a decent income for single mothers should be a top priority. Which again seems to be a message that you agree with.
Can someone clean up the sp*m at 08:22 and 09:11? We may disagree on the morality of payday lenders, but surely we all agree that they have no right to advertise in this thread.
“And somehow payday loans are tied to abortion.”
For Jes, everything is tied to abortion. She is the pro-choice version of the fundamentalist Christian friend who can tie everything you do into a need to come to the cross and submit to the will of God. You’ll get used to it.
Sebastian: For Jes, everything is tied to abortion.
No, Sebastian: for me, everything is tied to choice. To you, this shows up as “tied to abortion”, because you are a firm and enthusiastic supporter of forced pregnancy – you believe it is moral to prevent women having choices.
I was simply, sardonically amused that the majority of people showing up to argue that a single mother ought to be condemned for taking a payday loan rather than supported, were the same people who would have condemned this women utterly if, when she became pregnant, she’d decided she couldn’t afford to raise a child and had an abortion.
I’d love it if there were storefront birthday loan companies who extended low or no interest money to women who were contemplating abortion but might be persuaded to see the baby to term.
Maybe the profit margins would be too slim.
Never mind. Keeping folks on the edge at all times with low pay, spotty health insurance, and high-risk lending seems more rational.
In other news, my sister works for a firm who provides guidance to laid off corporate executives. Sometimes, she is present when firms lay off en masse. These people, probably recently extolled in the latest quarterly report as “our valued employees” are gathered into a room with a heavy security presence in case they get a little excited with their disappointment.
Frankly, I think the employees should be given a heads-up so they could bring their own security in case management and “human resources” decide to assault them.
Nice.
The Constitution does not authorize the Federal government to regulate payday lenders
So much for the Section 8 power to regulate interstate commerce.
Payday lenders are not engaged in interstate commerce. They’re dealing with people in the same city, not different states.
Eliding the “interstate” from the interstate commerce clause is one of the more blatant examples of the judiciary enabling federal power grabs.
…we have some sing the praises of how there must be all of these payday loan outfits so she can have such a wide choice of options ..
Liberal, what we’ve seen in many comments here is that actual human behavior means little to people who have fixated on some ideological notion of how the world works. They’ve done just enough reading to find a Magic Bullet that accords with and justifies their biases. No room for doubt or evidence remains in their minds. For, them, up is down and white is black… because they say so.
Singing the praises? It’s funny how you can defend the freedom of speech of NAMBLA without being fond of pedophiles, but you can’t defend the freedom of contract of payday lenders without being fond of THEM.
I think payday lenders are taking advantage of human frailty, and most of their customers would be better off putting some time in searching for better options. But so long as the terms are honestly set out, they’re not cheating anyone.
Brett: But so long as the terms are honestly set out, they’re not cheating anyone.
One could, on a point of principle, defend the right of freedom of speech even for men who like to talk about having sex with little girls or boys: without then thinking it follows that these men must have the right to advertise all over all the city blocks near a school that they’ve got free sweeties for any little kid who wants to come in and do something nice for them that won’t hurt a bit.
Or, I really just don’t see the parallel between NAMBLA and payday lenders.
Nor do I see it follows that the terms and conditions are honestly spelt out. Are payday lenders required to explain to their borrowers that unless they know in two weeks time they’ll have the $440 they need to pay back the payday loan, they’ll need to take out another loan or be hit with a felony charge, and that this can mean they end up owing thousands for a loan that was originally less than five hundred?
“Or, I really just don’t see the parallel between NAMBLA and payday lenders.”
Well, yeah, that’s the point: You’re willing to cut the ACLU slack on defending NAMBLA, because you accept freedom of speech as a basic liberty which must be protected even for the disgusting, but you’re not willing to cut anyone slack who defends the freedom of contract of payday lenders, because you don’t accept the freedom of contract as an important liberty.
That’s how liberals maintain the illusion that they’re in favor of rights, and conservatives aren’t: They just define away any right they happen to not like.
“Are payday lenders required to explain to their borrowers that” they’re expected to actually pay the loan back? That it’s not a gift? Yeah, I suspect they cover this. I’ve never gotten a payday loan, but every loan I’ve ever gotten they did get around to mentioning that I’d have to pay the money back.
Brett, find one comment, just one, where I defend NAMBLA’s freedom of speech. If you can’t, your analogy is a big fat lie. Or are you going to wave your hands and say that ‘you can defend the freedom of speech of NAMBLA”, which means that you are arguing with some strawfigures in your own head. Truly enlightening.
I pointed out that Obama proposes that terms be set out clearly and explained, which suggests that they are currently not honestly set out and they are cheating someone. Your next step will be to argue that the bill Obama writes is unclear, and therefore, it’s his fault.
Here’s some points, from responsiblelending.org
* 90 percent of payday lending business is still generated by trapped borrowers with five or more loans, even in states that have attempted reform;
* 60 percent of payday loans go to borrowers with 12 or more transactions per year;
* 24 percent of loans go to borrowers with 21 or more transactions per year;
* One of seven Colorado borrowers have been in payday debt every day of the past six months;
* Nearly 90 percent of repeat payday loans are made shortly after a previous loan was paid off.
There is also a racial component in this. From the same website
African-American neighborhoods have historically been disadvantaged by unfair lending practices. This study shows a continuing problem. Predatory lending in protected communities may constitute discrimination — not because it excludes minorities, but because it targets and exploits them by offering loans with abusive terms and conditions.
If these companies are setting out their terms honestly, why is their a racial component to their location?
The same website notes the following:
* Ninety percent (90%) of payday lending revenues are based on fees stripped from trapped borrowers, virtually unchanged from our 2003 findings. The typical payday borrower pays back $793 for a $325 loan.
This PDF is a research report from UNC, where the state banned payday loans. This research suggests that the claims made in support of such loans are unsupportable.
But this isn’t a second amendment issues, so why should you even be interested?
Brett, find one comment, just one, where I defend NAMBLA’s freedom of speech. If you can’t, your analogy is a big fat lie. Or are you going to wave your hands and say that ‘you can defend the freedom of speech of NAMBLA”, which means that you are arguing with some strawfigures in your own head. Truly enlightening.
I pointed out that Obama proposes that terms be set out clearly and explained, which suggests that they are currently not honestly set out and they are cheating someone. Your next step will be to argue that the bill Obama writes is unclear, and therefore, it’s his fault.
Here’s some points, from responsiblelending.org
* 90 percent of payday lending business is still generated by trapped borrowers with five or more loans, even in states that have attempted reform;
* 60 percent of payday loans go to borrowers with 12 or more transactions per year;
* 24 percent of loans go to borrowers with 21 or more transactions per year;
* One of seven Colorado borrowers have been in payday debt every day of the past six months;
* Nearly 90 percent of repeat payday loans are made shortly after a previous loan was paid off.
part 2 (filter seems to balk at 4 links now)
There is also a racial component in this. From the same website
African-American neighborhoods have historically been disadvantaged by unfair lending practices. This study shows a continuing problem. Predatory lending in protected communities may constitute discrimination — not because it excludes minorities, but because it targets and exploits them by offering loans with abusive terms and conditions.
If these companies are setting out their terms honestly, why is their a racial component to their location?
The same website notes the following:
* Ninety percent (90%) of payday lending revenues are based on fees stripped from trapped borrowers, virtually unchanged from our 2003 findings. The typical payday borrower pays back $793 for a $325 loan.
This PDF is a research report from UNC, where the state banned payday loans. This research suggests that the claims made in support of such loans are unsupportable.
But this isn’t a second amendment issues, so why should you even be interested?
I’ve never gotten a payday loan, but every loan I’ve ever gotten they did get around to mentioning that I’d have to pay the money back.
That glosses over quite a bit. I don’t think anyone doubts that it’s obvious that loans have to be paid back. I think it’s the fine print that people have problems with.
but you’re not willing to cut anyone slack who defends the freedom of contract of payday lenders, because you don’t accept the freedom of contract as an important liberty.
I’m not sure this is even remotely true, but at the very least it’s an exageration and an over-generalization. It would be hard for me to determine what anyone is willing to do or what anyone accepts, aside from myself. I personally thing that freedom of contract is absolutely vital to a functioning free society, but that doesn’t mean that anything that can be put into a contract and made sufficiently obscure is honky-dory.
Can we get back to whether or not people would be better off without payday loans, at least as they currently exist, and knock off all the far-flung, nebulous abstractions?
My apologies, LJ, if I mistakenly accused you of being a defender of freedom of speech.
“But this isn’t a second amendment issues, so why should you even be interested?”
What, I’m not allowed to depart from your stereotype of me? I know a number of people here have me pegged as a single interest gun fanatic, but I’m actually one of those “more consistent than the ACLU” civil libertarian types. I just get into arguments about the 2nd amendment because this is a liberal site, and the right to keep and bear arms is one of those civil liberties where ‘liberals’ demonstrate how liberal they aren’t.
Now, excuse me, but I’ve got some bread rising, (Kolach) and I have to check on it. Sunday is my baking day. 🙂
My apologies, LJ, if I mistakenly accused you of being a defender of freedom of speech.
My apologies if I ever thought you were honestly debating these issues, it was incredibly stupid of me. The speed of your reply means that you didn’t bother to look at the links and even make a cursory stab at pretending to be honest. Of course, you have bread rising.
What, I’m not allowed to depart from your stereotype of me?
You don’t depart from stereotype, which is that of a Republican cum libertarian hypocrite who can’t argue honestly, you merely confirm it every time you post. If the obfuscatory kind of language that is used for payday loans were proposed to slow down gun purchases, you’d be screaming at how your rights are being abridged and ask us how we justify misreading the founders intent. Note that doesn’t mean you are wrong about this, it just means that you fundamentally don’t care whether you are right or wrong. True to stereotype.
Enjoy that bread, I’m sure that people who have to take payday loans out don’t have time for leisurely Sunday afternoons like you, which I’m sure demonstrates to you how much more worthy than them you are.
…and the right to keep and bear arms is one of those civil liberties where ‘liberals’ demonstrate how liberal they aren’t.
That might be true if the reason people, at least like me, were for limitations on gun ownership wasn’t that they thought the right not to be shot was more important. Now, I know we can have all the arguments about what policy is more effective in that regard or what the Constitution says (or means), but that doesn’t change the basic fact that I don’t really care what type or number of guns people have so long as it doesn’t make people less safe overall.
The same goes with the freedom of contract argument. Freedom of contract is important because it helps people live better, at least to the extent that it helps people live better.
These rights were codified for practical reasons and are secondary to more basic rights. Once they begin to impede on those more basic rights, they need to be limited. That’s why I no longer consider myself to be a libertarian per se. I run into too much of this absolutism regarding rights coming from libertarians acting as if these rights sprung forth at the Big Bang and a part of the fabric of the universe. People put them there. They put them there for reasons, because they were helpful, at least to the extent that they were helpful.
Maybe we can disagree as to how far rights should be taken before they are no longer helpful, but don’t pretend that any limitation on a given right is a refusal to accept that the right exists or is important. It’s usually that there is a more fundamental right being infringed.
Maybe it’s just me.
Umm LJ, normally I wouldn’t accuse someone of arguing in bad faith just for assuming that you like free speech and drawing an analogy from there. Though your mileage clearly varies.
And some of your other arguments are showing a rather odd lack of analysis. I mean how can you honestly write “If these companies are setting out their terms honestly, why is their a racial component to their location?” without immediately thinking something like: racial minorities tend to be *poorer* as a rather obvious explanation?
I took a look at AEA’s site and noticed something. Though it’s not altogether clear it seems as if there is no provision for making partial repayments of payday loans. You either roll it over or pay it in full.
I suspect that, if that’s right, it’s a huge source of problems for borrowers. If you can start making a dent you can work yourself out, painfully and slowly maybe, but you can get there. Maybe you can’t pay off the whole $460, but with a little help can knock it down. But if it’s all or nothing then the problem is going to get out of control at 36% also.
The reason to take out a loan to buy something, like a car or a house, is to spread a major expense over time. Permitting (or requiring lenders to accept) partial payment actually lets the payday borrower do that.
Payday lenders are not engaged in interstate commerce. They’re dealing with people in the same city, not different states.
Um, I think a publicly-traded company headquartered in Tennesee that does business in more than 1,200 locations is, in fact, engaged in interstate commerce. These aren’t franchisees, they’re branch offices. All the revenue goes to one place that isn’t in the state where the branch is. This is not difficult.
And for all your blather about being a “better than the ACLU civil libertarian” combined with “freedom of contract,” which amendment is that, exactly?
Bernard: I took a look at AEA’s site and noticed something. Though it’s not altogether clear it seems as if there is no provision for making partial repayments of payday loans. You either roll it over or pay it in full.
That is my understanding of how payday loans work: borrower gets $400 in exchange for writing a post-dated check for $440 (say). There is no option for borrowing $400 and paying it back over 8 paydays at $56 a time. So if, after the $440 has come out of your account, you don’t have enough to live on for the rest of the month, you’ve got to borrow again… which is how payday loans are a profitable business.
Sebastian: “If these companies are setting out their terms honestly, why is their a racial component to their location?” without immediately thinking something like
…people who aren’t white are more likely to have difficulty securing a loan on reasonable terms from their bank.
Dr. NGO,
This, oddly enough, is an intrinsically conservative argument – a call to tradition (and a religious one at that) as justification for present day moral orders. Sorry, I’m an athiest and a secularist, and have zero concern for what religions have to say about financial conduct and morality, just as I dismiss just about everything else they have to say about morality regarding sexuality.
I don’t think it has anything to do with “free market” so much as it has to do with free people. If a person wants to lend money at a high rate and someone wants to take it, that’s not my business. Meanwhile, given that one can declare bankruptcy the most onerous consequences of “usury” have been eliminated – they aren’t going to debtors prison nor is that debt going to follow them to their grave. Bankruptcy sucks but the idea that we have to prevent anyone from risking it seems absurd to me.
I don’t think it’s wrong to lend at high rates at all. I think it’s wrong to trick people with fees and so forth, and I’m all for that being resolved through truth-in-lending type regulations, as well as prosecuting any fraud that may be happening.
Again, it’s not the market, it’s personal freedom that concerns me. And it’s roughly on those grounds that among your list of issues, it’s only Slavery that I think should be kept illegal.
And I guess I should point out my further extremism when it comes to personal freedom. Someone upthread mentioned that 90% of those taking out payday loans are getting completely in over their head. That’s really too bad, but I don’t consider it moral to say to the 10%, despite being a small minority, that can make use of these loans responsibly that they can’t do it because most other people are irresponsible. I think that is always wrong.
Phil, it’s the Ninth.
Jonas: If a person wants to lend money at a high rate and someone wants to take it, that’s not my business.
“If a person wants to go to the Emergency Room for all their health care needs instead of having a health insurance policy that pays for regular checkups with a family doctor, that’s not my business.”
“If a person wants to work 80 hours a week in a dangerous environment for less than minimum wage per hour, that’s not my business.”
“If a person wants to look after someone else’s children instead of her own for all her own children’s waking hours, that’s not my business.”
“If a person wants to spray pesticides without protective clothing for all their working life, and die before they reach retirement age, that’s not my business.”
I venture to suggest that people who take payday loans at exorbitant rates of interest aren’t actually doing that because they want to pay exorbitant rates of interest… they’re doing so because they need the money and they have no access to any other means of borrowing it.
To argue that because they do not actually have a gun to their heads (actual or metaphorical) they must want to take the payday loans, an absurd use of the word “want”.
Jes, we’re not going to get very far as I do not believe in protecting people from themselves. (Especially since I spent my 20s doing exactly what you describe in your first example and that’s nobody’s business but mine.)
They do “want” to take the payday loans. Some people will say, “To hell with this payday ripoff, I’ll be late on my bills this month instead.” There’s no gun to anyones head at all – its an absurd analogy.
Jes, we’re not going to get very far as I do not believe in protecting people from themselves.
Well, that’s why we hold elections, Jonas: to find out whether most Americans believe more as you do, or more as Jes does.
Of course, “protecting people from themselves” is your framing of the issue. If most Americans buy your framing, McCain wins. If most Americans decide that your framing is bogus, McCain loses. We shall see.
–TP
(Especially since I spent my 20s doing exactly what you describe in your first example and that’s nobody’s business but mine.)
And if you’d died of untreated toothache when you were twelve that would have been nobody’s business but yours?
So you actively preferred not to be able to go to a family doctor when you felt ill – you didn’t want to receive preventive healthcare?
Some people will say, “To hell with this payday ripoff, I’ll be late on my bills this month instead.”
Actually, in the particular example used in this post, it would be “to hell with a payday loan, I’ll send my 6-year-old son to school without decent clothes or school supplies”.
I agree that 391% APR is just way, way too high! It’s imperative that the reforms passed in June by the Ohio legislature are upheld by voters in November. The payday lenders have worked overtime to confuse the issue for voters and mislead signers of their petitions, but there is a clear decision to make on November 4th. Vote yes on issue 5 to lower interest rates! Vote yes on issue 5 to end the debt trap for thousands of Ohioans!
http://www.yesonissue5.com
Dr ngo,
Let me offer my own ideas on banning certain types of transactions. What we are discussing here is, at least nominally, a voluntary transaction. When should we ever stop people from entering into such transactions?
My tentative answer depends on my view that the line between voluntary and involuntary transactions is not bright. We do not enforce contracts entered into under duress, or by young children. Some “transactions” like “give me your wallet or I’ll shoot you,” involve crimes. These are obvious cases.
But there are forms of duress other than direct physical coercion. Financial strains may sometimes rise to that level, as may emotional or psychological issues, for example. So some seemingly voluntary transactions may be coerced. We can’t examine every transaction in the world to make sure it is truly voluntary. We can say that certain transactions are so close to being coercive we are prepared to make a general rule outlawing them. Saying, “give me $100 for a quart of water or die of thirst,” in some circumstances, is not much different from robbery.
I think that this is where the argument comes from, not only on usury but also on such issues as price-gouging in emergencies, etc. There are lots of arguments here, including questions of alternatives and so on. But that, I think, is where the issue lies.
Tony,
Not really. McCain might use similar rhetoric now and then, but the idea that he’s ever been dedicated to that would be hard to make. I’ll be voting for Obama (as I did in the primary) as he’s actually proven himself to be pretty respectful of such things, i.e. not making his health care plan mandatory.
… do not believe in protecting people from themselves.
By that tenuopus logiv, you coold do away with all government, including police protection. After all, if somoene manages to get themselvs murdered, they obviously made a bad choice of location and/or associates. Why should anyone else take any responsibility for them?
Jonas seems to be a prime example of the thinking that permeates many of the comments in this thread: A basic unwillingness to accept any personal responsibility for the welfare of anyone but themselves, coupled with a callous indifference to pain and suffering. Mot of these people can prattle off all kinds of wordy ideological bullet points intended to solidify their positions, but all that really achieves is to offer them an easy escape from both reality and morality.
Jonas: I’ll be voting for Obama (as I did in the primary) as he’s actually proven himself to be pretty respectful of such things, i.e. not making his health care plan mandatory.
While glad you’re voting for the better candidate, it is kind of depressing that you’re doing so because you don’t think Americans ought to have an effective, cheap, health care system. Obama’s position on health care is better than McCain’s (“Let them go to the emergency room!“) but that’s not saying very much by the health care standards of any other developed country.
Jes,
No, I do believe in protecting children and minors. I don’t believe in doing this to adults, because it is making adults out to be children who can’t take care of themselves.
I believed, and still believe, going to the doctor when you are young and have a cold, or a flu, or allergies is completely overrated and not worth paying thousands in premiums or taxes to receive. If I had actually cared I would have paid hundreds to get some checkups, but I didn’t, and that was my decision to make.
Which is still an option, and one that I’ve seen people take. And if we ban payday loans that would have been her only option. If we’re looking to expand her options in this regard let’s work on charities and government programs dealing with clothes & school supplies.
Jes,
Oh come on. I will gladly pay taxes to cover people who can’t afford it and want it. Just don’t make me spend my money on myself so you can feel better about yourself.
justcorbly,
No, you can not do away with government. I am asking that the government protect us from each other and not our own bad decisions.
By this strict paternalist logic, we should then prevent murder by banning things that sometimes lead to it – we could recriminalize adultery, have a curfew when night falls, ban alcohol again, we could go on and on.
I’m willing to accept my responsibility for others in society. I am willing to help them out when they fail and when they suffer. I am not willing to tell them how to conduct their own affairs or try to preempt failure or suffering from happening in the first place.
But there are forms of duress other than direct physical coercion. Financial strains may sometimes rise to that level, as may emotional or psychological issues, for example. So some seemingly voluntary transactions may be coerced. We can’t examine every transaction in the world to make sure it is truly voluntary. We can say that certain transactions are so close to being coercive we are prepared to make a general rule outlawing them.
Bernard,
That is a sensible way to frame the problem, to which I would add that another way a transaction can become non-voluntary is if it involves the sale of an addictive substance. That is one of the main rationales for criminalizing the sale of narcotics for example. This is a particularly difficult problem because addictions mean that transactions which are initially voluntary will become coercive over time as the addiction takes hold.
In this case, given the repetitive nature of many payday loans (as documented by others in this thread), i.e. the intial loan is very frequently the entry point to a recurring cycle of further loans (as a result of which the debtor gets in deeper and deeper the longer the cycle goes on), I think there is a reasonable case to be made here that payday loans are also in some sense a potential addiction whose sale requires careful regulation.
I’m wondering if that is where we should concetrate the regulatory focus on, not on the 1st loan, but on the subsequent cycle – the 2nd loan and the 3rd loan and so on. At some point before the nth rollover of the same loan, I think we have a recognizable problem requiring an intervention of some sort.
Perhaps we should be looking to the literature on gambling addictions for ideas.
Also, a shout-out to liberal japonicus upthread at 12:21 am for pointing out that time budgets as well as fiscal budget can be a real obstacle for people to deal with, which we need to remember.
I don’t believe in doing this to adults, because it is making adults out to be children who can’t take care of themselves.
Huh. So if, one minute past your 18th birthday, you’d died of an untreated toothache, that would have been entirely your own business, because as soon as you were an adult, you were miraculously equipped to get your own health care, and if you were financially unable to, it wasn’t anyone’s business but yours if you died of it.
I believed, and still believe, going to the doctor when you are young and have a cold, or a flu, or allergies is completely overrated and not worth paying thousands in premiums or taxes to receive.
You do seem to be assuming that people between 18 and 30 will never have diabetes, cancer, life-threatening allergies, or life-threatening injuries.
From when I turned 18 to when I turned 30, very roughly, I probably paid about £7200 total* for my national health insurance, or had it paid on my behalf when I was a full-time student or during periods of unemployment. Thousands, yes.
Was it worth it?
Well, I’m pretty much unable to work if I don’t have glasses that have been ground to my precise prescription – I’m astigmatic and very short-sighted. Through my 20s, my eyesight kept changing: I needed new glasses/new prescription every year.I also had two or three dental operations. (Teeth and eyes have co-pays, but they’re not onerous, and can be waived if you have no or very low income.)
I also had my tonsils out, which finally spared me some really vile sore throats each winter and made me much more productive. I can’t recall much else: as you note, the 20s are in general a healthy period of life.
I have no idea if what I paid in balanced what I got out: I don’t much care. I pay health insurance for my lifetime – since I turned 16 till I turn 65. In my own family, I’ve seen the benefits of free national health care so many times over – from my sister, who didn’t go broke when she had her son at 22, to my dad, who fell and broke his wrist when he was 78 and had to be operated on twice. All free at point of use.
*The figure is a very rough guess, but it’s based on what I recall as my average earnings over that period.
And if we ban payday loans that would have been her only option.
Alternatively: let people on a low income be able to apply for special grants to pay for one-off necessary items: let education budgets include free provision of essential school supplies: let preschool teachers be paid enough that they don’t have to borrow money to send their child to school properly supplied.
And, of course; have a proper health care system, that functions to care for everyone.
(Especially since I spent my 20s doing exactly what you describe in your first example and that’s nobody’s business but mine.)
Uh, actually if you spend an entire decade “[going] to the Emergency Room for all [your] health care needs instead of having a health insurance policy that pays for regular checkups” that’s a LOT of goddamned people’s business, because it routes Emergency Room resources away from, you know, actual EMERGENCIES to treat your non-emergency health care needs.
How solipsistic, exactly, does one have to be to not understand something so simple as that?
No, you can not do away with government. I am asking that the government protect us from each other and not our own bad decisions.
Great! By that logic, I want government to protect me — and others — from the people who use the emergency room for non-emergency medical care.
I am not willing to tell them how to conduct their own affairs or try to preempt failure or suffering from happening in the first place.
Imagine what a nightmarish Boschian hell this would be if we, as a society, could pre-empt even a little unnecessary suffering. The horror!
Jes,
It does sound as if you needed health care in your 20s far more than I did. Had you been American, I would have been perfectly happy to pay taxes to make sure you could afford it or received it for free if necessary.
I know you don’t care what you paid in versus what you got out. That’s your decision to make and I respect that. While the UK doesn’t give you that decision, in the US I’m quite happily willing to support and help those who aren’t willing to take the risks I did.
I’m not assuming it won’t happen – I’m assuming it’s not likely, and if it had happened, I probably would have still saved money as paying off the debt would probably be cheaper than coverage in all but the most extreme circumstances (cancer, etc.) I would have gladly bought cheap high-deductable catastrophic coverage but such coverage is not allowed in my State. Yet another choice I’m not allowed to make.
Sounds good to me!
Phil,
The Hospitals I went to (a grand total of maybe 2 or 3 times) have non-emergency walk-in clinics. It does not interfere with emergency care. I also paid in full in cash which the Hospital appreciates quite a bit given how laborious processing insurance claims is. A drain on the system I was not.
Well, let’s prevent the unnecessary suffering and death of competitive horseback riding by banning it immediately. I’m sure everyone will appreciate us using our individual judgements to prevent risks for others that we don’t find acceptable personally. And think of the health care savings, too!
Sebastian,
There is a slight difference of degree between offering up an analogy to free speech and accusing someone of somehow supporting NAMBLA. You obviously don’t see that, which is probably why you find yourself agreeing with Brett more often than not.
As for lack of analysis, I’ll try and connect the dots. I asserted that being poor is not simply a lack of money, but a lack of time and resources. I also cited hilzoy’s other posts on the subject of the military and paydays. This indicates that the invisible raised finger of the market is flipping itself, in the case of payday loans, at the poor and pressured. At some point, I (maybe not you, and certainly not Brett) have this strange notion that government and society is supposed to protect the weaker from the stronger.
This whole thread shows the wonderful one-two combo of the free-market conservative followed by the libertarian. You make the argument that this is just the market operating as it should and if we cap the interest, because the market is crimped, it will harm all of us. I quote Obama’s platform showing that he has anticipated your objection and pledges to do address that point. I then suggest that you free-marketeers are not seeing that being poor isn’t simply measured by how much money people have, but that this comes with a lowering of options, and a reduction of time. And then the louche libertarian brigade comes in and argues that dangnabbit, those gummint regulations are the problem, how and why should we stop people from getting ripped off? As if to put an exclamation point on that last, Jonas explains that it is not government’s job to actually prevent any suffering, unless it happens to someone against their will.
Brett’s foray comes in on your coattails, quotes me and accuses me of being hypocritical and tries to paint me as a supporter of NAMBLA based on comments I have never made on free speech issues. Either he is painting all liberals with a big fat brush, or he is lying like a rug about what I have written. Why is it that you tolerate that? Is it because the faux-libertarian can be counted on to support your arguments?
As to time, need I reference your argument that the poor simply needed to get a roommate and a rice cooker? I didn’t point this out at the time, but previous to that, you wrote about your anger that a friend of yours was raped by someone she knew while her child was there. Why is it that people who are poor get to spin the wheel and get a roommate who might be or have some psychopathic acquaintance? Because middle and upper class people could do the same thing but don’t?
The poverty industry takes advantage of poor people, who are pressed for time and lack options, by locking them into loans that create a cycle that they can’t get out of while the market takes advantage of the well-off by convincing them to spend money on things they don’t need. Do you honestly think this is a fair trade-off? Phil has shown that these companies are publicly traded ones, some related to even larger outfits. Clearly, asking them to voluntarily conform to some standards of behavior doesn’t work.
You imagine that if you were in that situation, you would know what to do, that you would bring all your knowledge and abilities to such a situation and find a way out. But if you were transported into such a situation, you would find that a lot of that knowledge and many of those abilities might not get transported with you, and that some of your abilities and knowledge are gained because you were born into a certain set of circumstances. You might find yourself needing protection from predatory lenders (Brett’s image of these places imagined as a lemonade stand, with a stack of clearly printed contracts that people can come in and peruse at their leisure and then make an informed and logical decision about whether to do it or not is telling) Predatory lending is such a powerful image that it is necessary to whip up a notion of ‘predatory borrowing‘, where those innocent, doe-eyed bank managers just get taken by some unscrupulous house buyers.
I appreciate the point that APR might be an unfair way to state interest. I appreciate the point that the poor need access to liquidity and these outfits serve that purpose and I would welcome an argument that explains why it has to be these methods and why the government can’t apply some regulation to the industry. But I have a hard time seeing Brett bringing anything discussing these points. You obviously do, so I hope you could explain why invoking NAMBLA helps these arguments along.
That is a sensible way to frame the problem, to which I would add that another way a transaction can become non-voluntary is if it involves the sale of an addictive substance.
Buzzz! Try again. Your definition would make grocery shopping and paying rent coercive transactions. It may make you sick going without heroin, but going without food or shelter threatens your life.
“There is a slight difference of degree between offering up an analogy to free speech and accusing someone of somehow supporting NAMBLA.”
You need to reread the analogy if you think he said you were supporting NAMBLA.
The rest of your comment compounds the error so I can’t really respond.
Thanks. 🙂
“As to time, need I reference your argument that the poor simply needed to get a roommate and a rice cooker? I didn’t point this out at the time, but previous to that, you wrote about your anger that a friend of yours was raped by someone she knew while her child was there. Why is it that people who are poor get to spin the wheel and get a roommate who might be or have some psychopathic acquaintance? Because middle and upper class people could do the same thing but don’t?”
Hooray, your chain of logic has now gone completely off the rocker.
I don’t believe that I’m talking about randomly assigning people roommates. And middle class people have roommates all the time so frankly I don’t have the slightest idea why you think invoking my friend gettting raped is helping your argument.
And for the record I thought it was plenty bad enough that she was raped full stop. The fact that her children were nearby was an additional psychological horror, but the rape alone would have been enough for me to be angry/sad.
Does anyone else think this is a bit much, or am I just being oversensitive?
Sebastian, here’s the statement in question
“It’s funny how you can defend the freedom of speech of NAMBLA without being fond of pedophiles”
Either show me where I specifically defended the freedom of speech of NAMBLA or explain how this isn’t a big fat smear.
It’s funny how you can complain about conservatives getting treated badly here without accepting criticism that you do the same damn thing.
Sebastian: I don’t believe that I’m talking about randomly assigning people roommates.
…and yet, you proposed that a woman who knew no one, struggling financially in a city new to her, ought to resolve her financial problems by “getting a roommate” – who would, under those circumstances, necessarily be a complete stranger. What precisely is the difference between telling a woman she ought to share her living quarters with a complete stranger, and “randomly assigning people roommates”?
Does anyone else think this is a bit much, or am I just being oversensitive?
I’d say you weren’t being sensitive enough, since you didn’t manage to feel your way from “it was terrible that my friend was raped” to “it would be terrible for any woman to be raped”.
Way up thread, someone (Chris Crawford, I think) asked if anyone’s willing to flat out say poor people (Presumably the target market here) are stupid. I’m willing to say that when it comes to financial matters, many are. But you know what? I’d be willing to bet just about as many middle-class are as well. I’ll even go out on a limb and say a sizable portion of the richer elements of society suck with money too, that’s why you hire an accountant.
You know what that means? Time for everyone’s favorite game! Anecdotes as Data!!!
My mom worked at GM for 35+ years and, thanks to the union, she made a bundle of money. Despite making enough to put us at upper middle class, I remember Christmasses (proper plural?) where I was lucky to get a couple of action figures. The best part of the holiday was travelling to the grandparents, since that’s where I got the good stuff.
My mom just didn’t know what to do with money, other than spend it ASAP. In contrast, her sister, who had to drop out of high school for a baby, never got much more than minimum wage at her 2 jobs. My aunt managed to afford a decent house, send my cousin to a private school for 12 years, and now she’s paying half of her college tuition.
My mom and my aunt are only a couple years apart, and they basically had the same childhood. Both of their husbands were pretty much stay-at-home dads because of disability so both families were pretty much single-income homes. Both are of pretty average intelligence and neither got more than a high school education. If it weren’t for my mom’s good fortune in getting a good union job, its a bit scary to think where her financial ‘stupidity’ would have brought us.
Jonas; That’s your decision to make and I respect that. While the UK doesn’t give you that decision, in the US I’m quite happily willing to support and help those who aren’t willing to take the risks I did.
Excellent. So from now on, you’ll be an ardent supporter of free national health care, paid for by taxes?
After all, people in their 20s who don’t want proper health care will still have the option of hanging around ER bugging the nurses and doctors there with their non-emergency health needs. People who for some reason or another can’t go to their registered GP can always do that. You will still be allowed to make your own indifference to your health everybody else’s business by refusing to register with a family doctor and get your health care efficiently and cheaply.
I’m wondering if that is where we should concetrate the regulatory focus on, not on the 1st loan, but on the subsequent cycle – the 2nd loan and the 3rd loan and so on
I could accept that as a Better Than Nothing approach.
But I would much rather see a legislative focus on the lenders. They’ve deliberately structured a business that, with purpose, planing and intent, lures the poor into ever increasing debt.
It is no secret that payday lenders do not open shop in middle class and prosperous neighborhoods. They do business in areas where the residents lack access to other financial alternatives. Their business is premised on the notion that people will borrow more than they can pay back, and that they will have no alternative but to go further into debt with the lender, lest they risk arrest and ruin.
The only differrence between payday lending and loan sharking is that one is legal and the other is not. Many have argued here that they feel no sense of responsibility for the behavior of others, i.e., that they just don’t care. Others have wrapped a similar argument in the jargon and trapping of an Econ 101 lesson. Both groups absolve themselves of any moral responsibility for the welfare of others.
Jes,
I’ve always been in favor of this, just not the part of the plans that make it mandatory to participate or a government monopoly.
I’ve already explained previously that I was not hanging around the ER getting in the way.
People with health care go to walk-in clinics sometimes because they want to see a doctor now as opposed to waiting for an appointment a couple days later. There is nothing inefficient about only going to the doctor when you need to when you are young and healthy.
“Either show me where I specifically defended the freedom of speech of NAMBLA or explain how this isn’t a big fat smear.”
You know, LJ, it’s not like the grammatical construct I used is a new one. So, unless you’re either a non-native speaker of English, or not terribly literate, you could be expected to know that “You can (do x}” doesn’t refer to the person being spoken to. But instead simply points out that it’s possible to do something.
Nor do I think defending NAMBLA’s freedom of speech is the stuff of smears. Defending their conduct, OTOH… That would be nasty in the extreme.
justcorbly,
Forcing people not to do things when conducting their own affairs over their own objections is not compassion, it is not charity, and it is not moral.
Let’s make it automatic that anyone having more than 14 drinks a week be never allowed to buy alcohol again and forced into rehab. Or do you not care about alcoholics well-being?
Jonas: People with health care go to walk-in clinics sometimes because they want to see a doctor now as opposed to waiting for an appointment a couple days later.
When I want to see my family doctor *today* (well, tomorrow, right now – only a medical emergency would get the attention of a doctor at ten to midnight…) I call the practice where I’m registered between 8am and 8:30am, and ask for one of the emergency appointments to see a doctor or a practice nurse *that day*. I’ve lucked into same-day appointments for non-emergency treatment when I called later, if someone cancels. That Americans can’t expect this kind of treatment from their family doctor somehow doesn’t surprise me; I gather you don’t even get house calls.
There is nothing inefficient about only going to the doctor when you need to when you are young and healthy.
Er, was anyone proposing anything else? There is extreme inefficiency in taking up the time of an emergency department with your non-emergency health care needs, which is what you said you used to do: there is efficiency in only going to the doctor when I need to, which is what I did and still do.
Forcing people not to do things when conducting their own affairs over their own objections is not compassion, it is not charity, and it is not moral.
Says who? It’s common for all kinds of anti-social behavior to be forcibly thwarted even if someone is “conducting their own afairs.” All criminals are “conducting their own affiars.”
Besides, you are evading the point of my argument. I do not want to change change the behavior of people who borrow at payday lenders. I want to outlaw the lenders.
Let’s make it automatic that anyone having more than 14 drinks a week be never allowed to buy alcohol again and forced into rehab. Or do you not care about alcoholics well-being?
I have no problem with forcing individuals whose alcohol problem has caused them to commit crimes or to harm others to enter therapy. Unless I’m mistaken, that’s a common practice.
However, alcoholism is an illness and should be addressed as such. Payday lending is not an illness. It’s a crime in my state and it should be a crime in every state.
Deliberately focusing on the individuals who fall victim to these lenders, rather than the damaging behavior of the lenders, is an attempt to avoid addressing the reality of what is going on. It’s tantamount to holding those who peddle drugs to kids blameless.
Jes,
Sometimes yes, sometimes no. If you think everyone should always get this level of service then you can’t very well care about the costs and efficiencies all that much. (Again, my personal preference is to pay less and receive less service.)
Going to non-emergency walk-in clinics is not burdening the emergency department. What aren’t you understanding?
justcorbly,
… and this is because they have committed crimes against others, not the fact that they are doing something that is bad for themselves.
Got it. Giving expensive short term loans to adults is the moral equivalent of giving drugs to children. Given that, what the distinction between children and adults is at this point is no longer clear.
If you think everyone should always get this level of service then you can’t very well care about the costs and efficiencies all that much.
Er, yes. Back when I was a kid, I think I probably got more house calls than I’ve ever done as an adult, because when I was a kid, the societal costs and efficiencies were better served by my parents asking for a doctor to make a house call to see a sick child, rather than taking all the kids, sick and well, to the health centre so that one kid could be seen by the doctor.
Equally, it was far more efficient for my great-aunt, when housebound in old age due to osteoporosis, heart failure, and increasingly poor vision, to wait in for a doctor to visit her than it would have been to arrange for her to somehow get to the health center to be seen by the doctor.
Costs and efficiencies. There are (my doctor brother says) instances of the ability to summon a doctor to a house call being abused – but on a practical level, if a person is unable to get out of the house without asistance, it costs less to assume they can call a doctor to pay a visit than to have them call an ambulance to pick them up and take them to a hospital.
Going to non-emergency walk-in clinics is not burdening the emergency department.
What you aren’t understanding is that the non-emergency walk-in clinic still has to be staffed by doctors and nurses who are wasting their time on you because you prefer to burden others with your own inefficiency about your health care.
Giving expensive short term loans to adults is the moral equivalent of giving drugs to children. Given that, what the distinction between children and adults is at this point is no longer clear.
Coming from someone who boasts that into his twenties, he behaved like a child who expects the adults to help him out when he needed it without taking any responsibility for his own needs, that’s… kind of weird.
(I admit that for most people, I’d assume they wanted decent health care in their twenties, and went with the inefficient and ineffective American practice only because they had no alternative. But as Jonas claims he could have had efficient, decent health care but chose to be inefficient and burdensome to others, well…)
Jes,
I hope this conversation isn’t headed in the direction of punishing those who are the biggest offenders.
The cost of deporting all of our illegals aliens could be steep.
Jes,
You’re implying that if I had regular care that I wouldn’t have had to go to the walk-in clinic. This is not true. There’s no getting around it – I needed to go to some sort of walk-in facility.
How are they wasting their time? They are providing a medical service and getting paid for it.
What? What do you mean “adults help me out”? I went to a doctor and paid for it. What is irresponsible about this?
Who was my behavior burdening?
MeDrew: “The best part of the holiday was travelling to the grandparents, since that’s where I got the good stuff.”
I couldn’t help but smile at that. Even now, no matter how much we put under the tree, later in the day, my Mom manages to thrill our 9-year-old. She gets Danny up-to-date gadgets and stuff that I can’t believe she even knows about.
—
So many of my customers have been lifelong GM employees like Drew’s Mom or those who have made a nice life from other union jobs. With those jobs disappearing, the middle class truly seeems to be an endangered species — these are folks who had decent lives without the benefit of a college education.
Seb: I think it’s a bit much.
For what it’s worth: I defend NAMBLA’s freedom of speech — I am, after all, a Skokie liberal, and defend the free speech rights of Nazis. I do not thereby defend NAMBLA itself, or Nazis, or any of the other people whose right to free speech I defend. So anyone who wants can use me as an example in what follows.
I hope this conversation isn’t headed in the direction of punishing those who are the biggest offenders.
No intention at all. I am directing this specifically at Jonas, who claims that as soon as he turned 18, he could have got health insurance, but he chose to be inefficient and waste other people’s time by using resources intended for people who could not get health insurance because they couldn’t afford it.
…this is because they have committed crimes against others…
The actions of payday lenders ought to be illegal. The actions of those who fall victim to payday lenders are not relevant to any discussion of the legality of the lenders. By continuing to focus on the victims of the lenders you are deliberately evading the point at issue.
Giving expensive short term loans to adults is the moral equivalent of giving drugs to children
The actions of a drug dealer knowingly and deliberately enticing children to purchase addictive drugs, knowing that, as addicts, they will have no choice but to buy more drugs, is essentially the same behavior as a payday lender who knowingly and deliberately sells loans to people who cannot afford them knowing that they have no choice but to go deeper and deeper in debt to him in an endless and unbreakable cycle. Both merit no respect and both merit being made criminal.
As I’ve aid before, you, and others, are avoiding the obligation of making a moral decision on this issue by taking refuge in valueless economic jargon.
The question on the table is whether or not you support the predations of payday lenders.
No, there are programs there to pay for the walk-in clinic or a regular doctors appointment for people who can not afford health insurance. The walk-in clinic is just a regular medical service.
The question on the table is whether or not you support the predations of payday lenders.
And I guess by participating to the threadjack on healthcare, I’m letting Jonas get away with not responding to that. So, I quit that threadjack. *waves at Jonas* You can answer the other questions now.
But Hilzoy, Brett isn’t smearing you or me, he’s hiding behind a grammatical construction to link the notion of being a liberal to the organization NAMBLA. When called on it, he first argues that because I don’t defend his bizzaro world version of how predatory loan outfits work, I am not a supporter of free speech, and then argues that he is as firm a believer in the free speech rights of NAMBLA and that I somehow misread him. He is just trying to disrupt the conversation.
If you mean the hidden fees and small-print tricks, no, I do not support those predations. If you mean lending someone $500 in exchange for $550 two weeks later, I do not consider that predation.
If a person wants to lend money at a high rate and someone wants to take it, that’s not my business.
This is a perfect demonstration of why libertarian arguments sound totally insane to anyone who is not a libertarian.
There is such a thing in economics as an “externality”. The economics professors would rather that they not exist, as they make the math harder and tilt the argument away from the conclusion they want (aka, “let the corporations do whatever they please”), but they exist, and are everywhere. You can not avoid them. They matter, and what is the best choice in any moral frame of reference depends heavily on what externalities are present.
And here we have someone making an argument that implies he does not even realize externalities exist!
And of course, that renders his argument totally and irredeemably insane.
“The actions of a drug dealer knowingly and deliberately enticing children to purchase addictive drugs”
In passing, I’d like to note that I’ve known a fair number of dealers in illegal drugs over the course of my life, and I’ve not only never met anyone who meets such a description, I’ve never even heard of anyone knowing such a person.
I’m sure there must be some out there, but cliches like this have next to nothing to do with the actual real world of people who use or sell illegal drugs.
I mention this because I really hate cliches that are disconnected from reality, but color people’s views. (This is not to say in any way that all people who deal drugs are nice people. But if nothing else, children actually aren’t a very good market.)
Oh, and in case anyone gets the wrong idea, aside from having smoked some dope at times in my past, and some trivial experimentation in my teens with LSD, I’ve never been a user of illegal drugs. I’ve just known lots of people from all sorts of walks of life.
Jonas, “lending someone $500 in exchange for $550 two weeks later” is not predatory. If a friend came to me and asked for a loan on those terms, I would oblige him. But: I would ask him what he expected within those two weeks. A check from his aged aunt? An insurance settlement? A tardy payment from one of his customers?
The reason I would ask those questions is that I can barely spare the $500 myself. I might even need to scrimp a little bit for those two weeks, myself. If my timely loan saves my friend more than $50 in, say, late fees, until his big royalty check, say, comes in — well, I won’t feel too bad about taking the $50 vigorish from him.
However: if my capital is for practical purposes unlimited, so that I can float him $500 indefinitely; and if my intent is to take $50 from him every two weeks to keep the loan rolling over; then I am a usurer. After 20 weeks, I have recouped my capital — and he’s still on the hook to me for $500. If that’s the scenario I hope and expect to play out, then I am a predator.
–TP
This is not to say in any way that all people who deal drugs are nice people. But if nothing else, children actually aren’t a very good market.)
Obligatory Tom Lehrer reference:
“When the evening light is falling,
Comes a fellow everyone knows.
It’s the old dope peddler,
Spreading joy wherever he goes.”
BTFB- I think I picked a bad time to chime in with that story. ^.^;
The union issue really ties back to something mentioned upthread: the real issue here is a living wage. The de-unionization trend is IMHO one of the most serious problems with the economy. Henry Ford was onto something when he paid his workers enough to afford a Model T.
Gary-I’ve never been a user of illegal drugs
Come on. You’re telling me you forget that week we had in Vegas?
I’ve known a fair number of dealers in illegal drugs over the course of my life, and I’ve not only never met anyone who meets such a description, I’ve never even heard of anyone knowing such a person
Your claim, then, is that people selling addictive drugs are unaware that the drugs are addictive and are oblivious to the fact that creating an addiction in a new customer is good for their business?
To Bernard: two cheers for invoking Tom Lehrer! I withhold the third cheer because the correct lyric is:
When the shades of night are falling …
–TP
If you mean the hidden fees and small-print tricks, no, I do not support those predations. If you mean lending someone $500 in exchange for $550 two weeks later, I do not consider that predation.
You are well aware that the issue with payday lenders is not the granting of a single short-term loan at 10 percent.
The predation is the suckering of people into very short-terms loans with the knowlege and the expectation that they cannot pay them off and will have to choose between incurring sprialing debt with the lender or being reported as a felon. The lender is running a scam, period.
Justcorbly, Gary was responding to a comment about drug dealers “enticing children”. How do you get from there to your bizarre idea of what he’s claiming?
Oh, and to follow up with the verse from the Lehrer song that may be most appropriate to this thread:
He gives the kids free samples
Because he knows full well
That today’s young innocent faces
Will be tomorrow’s clientele.
–TP
justcorbly,
I don’t think that is gary’s claim at all. While this is not his claim, I would suggest that drug dealers are much less likely to go after ‘children’ on the playground. Of course, this depends a lot on how one defines children, but if you are talking about pre-teens, I think he has a point.
Tony P.,
You’re right of course. My abject apologies.
Still, it’s evidence I relied on memory, rather than Google, which must be a mitigating circumstance.
Anyway, speaking of anguish:
“Here’s the cure for all your troubles
Here’s the end to all distress.
It’s the old dope peddler,
With his powdered happiness.”
(From memory).
“Your claim, then, is that people selling addictive drugs are unaware that the drugs are addictive and are oblivious to the fact that creating an addiction in a new customer is good for their business?”
“Addictive drugs” is an interesting label. Coffee and tea and coca-cola and most soda-pops are all about caffeine, which is an “addictive drug.” People are now said to be gambling addicts and sex addicts, and addicts to anything that gives them endorphin highs. All sorts of things are addictive. That doesn’t mean that anyone who makes them available to adults are either skulking villains or unaware of the hazards of what people cand do with their wares.
But it wasn’t my intent to sidetrack this thread. I suggest responding here, if anyone feels like responding, and I either might or might not discuss the topic further, though I’m just as apt to not, since I really wasn’t interested in initiating a lengthy discussion on the subject. I just, as I said, tend to respond to questionable language, as in uses of truly cliche cliches.
“You’re telling me you forget that week we had in Vegas?”
It must have been the drugs.
“It’s funny how you can defend the freedom of speech of NAMBLA without being fond of pedophiles”
Either show me where I specifically defended the freedom of speech of NAMBLA or explain how this isn’t a big fat smear.
It’s funny how you can complain about conservatives getting treated badly here without accepting criticism that you do the same damn thing.”
Brett’s point was that you can defend the freedom of speech of NAMBLA without actually defending the aims of NAMBLA. So he isn’t linking you or liberals or any non-NAMBLA member to NAMBLA in any way that suggests that you like them.
He wasn’t smearing you at all. You are dramatically misreading his statement.
Well, we’ll just have to disagree on that Sebastian. And my congratulations on taking on the job of being Brett’s amanuensis. Hope you enjoy the position.
Disagreement doesn’t increase the chances that you are correct. You’ve taken an incorrect position on the plain meaning of a statement.
You’ve compounded the error by taking drama queen levels of offense at the misunderstood statement.
You compounded it again by dragging in the rape of a personal friend of mine into the discussion as if it were even remotely pertinent.
And now you suggest that I’m Brett’s personal personal slave.
I keep hoping to find out that this is some incredibly vicious and nasty impersonator playing a particularly evil joke.
Sebastian: And now you suggest that I’m Brett’s personal personal slave.
Amanuensis literally means, in Latin, “manual laborer”, but in practice I think liberal japonicus must have meant it in the secretarial/clerical sense: or possibly in the academic sense. Neither one means “personal personal slave”.
Tony: However: if my capital is for practical purposes unlimited, so that I can float him $500 indefinitely; and if my intent is to take $50 from him every two weeks to keep the loan rolling over; then I am a usurer. After 20 weeks, I have recouped my capital — and he’s still on the hook to me for $500. If that’s the scenario I hope and expect to play out, then I am a predator.
Just so. And if my friend admits that there is no way she will be able to repay the $550 in two weeks, I will suggest a more sensible payments schedule which will enable her to get the money back to me and won’t entail her getting into fresh financial trouble.
amanuensis
* stenographer: someone skilled in the transcription of speech (especially dictation)
wordnet.princeton.edu/perl/webwn
* Amanuensis [ipa: əˌmænjuˈɛnsɪs] is a Latin word adopted in various languages, including English, for certain persons performing a function by hand, either writing down the words of another or performing manual labour. …
en.wikipedia.org/wiki/Amanuensis
* One employed to take dictation, or copy manuscripts; A clerk, secretary or stenographer
en.wiktionary.org/wiki/amanuensis
* An administrative office in universities, libraries and museums. The duties of amanuenses vary to a degree: some are also active in instructional …
wiki.uiah.fi/tokyo/index.php
If it’s any consolation, I think you’ve sewn up the category of drama queen for this year…
amanuensis
* stenographer: someone skilled in the transcription of speech (especially dictation)
* Amanuensis [ipa: əˌmænjuˈɛnsɪs] is a Latin word adopted in various languages, including English, for certain persons performing a function by hand, either writing down the words of another or performing manual labour. …
* One employed to take dictation, or copy manuscripts; A clerk, secretary or stenographer
* An administrative office in universities, libraries and museums. The duties of amanuenses vary to a degree: some are also active in instructional …
I’m just amazed by somebody at a liberal site, calling themselves a liberal, being offended at the suggestion they might be a civil libertarian.
Aside from that, I’m not terribly surprised, you get the same phenomenon from Jes. As has long been noted, English has a fair amount of ambiguity built into it, (The classic example is the phrase “pretty little girls school”, which can be resolved into something like 22 different meanings.
Ideology and animosity, combined with that ambiguity, allows people who are determined to find offensive meaning in other people’s utterances to reliably find them, regardless of what the original speaker was trying to say, or what an unbiased reader would have taken from what they said.
For shorthand, I call it the “secret decoder ring” effect.
Anyway, LJ, you might regard defending NAMBLA’s free speech rights as a horrible accusation, I just take it to be part of protecting everybody’s free speech.
IJWTS that I’ll defend NAMBLA’s freedom of speech, Nazis’ freedom of speech, and anyone and everyone’s freedom of speech.
That’s why they call it “freedom of speech.” Because either you defend everyone’s right to it, and most particularly the most hated people‘s, or it ain’t worth sh*t.
“Brett, find one comment, just one, where I defend NAMBLA’s freedom of speech. If you can’t…” then that’s a damn shame.
I too would defend NAMBLA’s freedom of speech, but also the state’s right to impose time, manner, place, and res gestae restrictions. (I may be misusing the latter term — I mean that I think fraudulent utterances, solicitations to illegal conduct, certain other lines of talk are outside the bounds of free speech).
Wow, the category of drama queen is filling up quite quickly.
Gary, Brett’s comment could be called a dogwhistle fork, to combine two terms. The dogwhistle is NAMBLA (similar to these sort of things) and the fork is creating some sort of purity test about free speech that allows him to line up on the opposite side no matter what response I give. I don’t think there ever been a front page post on the organization and its right to free speech and I don’t think that I have ever talked about NAMBLA. So why would Brett invoke it? Is he really interested in my opinion on some hypothetical free speech issue with NAMBLA of which he gives no details, no link and no background? Has he expressed his views on free speech so that we can be sure that attacks on free speech (like protest corners, maybe?) are like attacks on gun ownership to him? I think not and it demonstrates bad faith to think that he is.
The corresponding movie scene, which I know you are familiar with, would be this:
HARTMAN: I want that head so sanitary and squared away that the Virgin Mary herself would be proud to go in there and take a dump!
JOKER & COWBOY (in unison): Sir, yes, sir!
HARTMAN: Private Joker, do you believe in the Virgin Mary?
JOKER: Sir, no, sir!
HARTMAN throws down the garbage can with a loud bang.
HARTMAN: Private Joker, I don’t believe I heard you correctly!
JOKER: Sir, the private said “No, sir,” sir!
HARTMAN: Why, you little maggot! You make me want to vomit!
HARTMAN: You goddam communist heathen, you had best sound off that you love the Virgin Mary . . . or I’m gonna stomp your guts out! Now you do love the Virgin Mary, don’t you?!
JOKER: Sir, negative, sir!!
HARTMAN: Private Joker, are you trying to offend me?!
JOKER: Sir, negative, sir!!! Sir, the private believes that any answer he gives will be wrong! And the Senior Drill Instructor will beat him harder if he reverses himself, sir!
If I said that I defended it, I believe that he would bring up something about a hypothetical NAMBLA tract about picking up children and ask me if I would defend that. Or try to claim that I would defend mNAMBLA more than I would payday loan outfits. When I say that I have not expressed an opinion on that, so he is lying when he claims I have, he claims that the ‘you’ was everyone on the site, including him. So, suddenly, he is simply pointing out some home truth that everyone but me believes in? That’s the fork.
Would I defend NAMBLA’s free speech rights? As CharleyCarp points out, wouldn’t that depend on what they were claiming deserved the protection of free speech?
I look back at my previous three comments and I see no reason why NAMBLA should come up, and why it has any bearing on my opinion that Obama answers the complaints of reducing the possibility of financial liquidity for users of payday loan schemes and how the poor aren’t simply poor in cash, but also in time and options. These have nothing whatsoever to do with the question of whether something that NAMBLA publishes has the protection of free speech. If Brett really believed it did, why the accusation? Why not ‘I think that payday loan owners are operating under the rules of freedom of speech, just like the ones that liberals defend for NAMBLA and the Nazi organization’? Because he was trolling, pure and simple.
If every time someone posts a suggestion that government intervention in the market is something to consider, a defense of NAMBLA’s free speech rights is subsequently demanded, a troll like Brett can derail any conversation he wants. Caveat commentator.
Jes:
Well, I’m sure she could have taken a couple of days off of work to interview roommate applicants and check their references. (/sarcasm)
Jonas:Jes says:
You reply:
Then, when called on it by both me and Jes, you start frustratedly and repeatedly saying you were using non-emergency walk-in clinics. Is this some new meaning of the word “exactly” with which I am unaware? Words mean things, junior.
Brett:
Actually, smart guy, if one wants to avoid confusion, especially in a situation in which one has posed his statement in the form of a direct response to another person, the proper construction to use is: “One can support the free speech of NAMBLA without supporting their goals.”
Given that you apparently don’t know that, I’d tread lightly around accusations of illiteracy.
Gary was responding to a comment about drug dealers “enticing children”. How do you get from there to your bizarre idea of what he’s claiming?
Whether they seek new customers among children, adolsecents, or senior citizens, my point is the same: They know they are selling a product that results in addiction which will give them more and more repeat business. Payday lenders are selling a product fully aware that many of their customers will be sucked into a spiral of expanding debt, interest and fees, and that is their intent.
Hooray, we get to appeal to dictionary definitions.
“The word originated in ancient Rome, for a slave at his master’s personal service ‘within hand reach’, performing any command; later it was specifically applied to an intimately trusted servant (often a freedman) acting as a personal secretary.”
You should know this because it follows DIRECTLY after the definition you quote.
Thanks.
“I look back at my previous three comments and I see no reason why NAMBLA should come up, and why it has any bearing on my opinion that Obama answers the complaints of reducing the possibility of financial liquidity for users of payday loan schemes and how the poor aren’t simply poor in cash, but also in time and options. These have nothing whatsoever to do with the question of whether something that NAMBLA publishes has the protection of free speech. If Brett really believed it did, why the accusation?”
First, there was not at any time the accusation that you were somehow aligned with or sympathetic to the goals of NAMBLA. That accusation exists wholly in your head. If you believe otherwise you should try quoting it. At worst Brett accused you of being willing to support the free speech of NAMBLA as an analogy for how we defend rights even when they are exercised by unsavory characters.
Second, you are having a bit of a pot calling the kettle black problem here. After manufacturing an accusation that has not been made anywhere on this thread, and whining about the inappropriateness of bringing up NAMBLA’s freedom of speech you then raise *against a third party*, not even the one you were mad about regarding the non-existant accusation, THE FACT OF HIS PERSONAL FRIEND’S RAPE WHEN HER CHILDREN WERE THREATENED IN THE NEXT ROOM as if that were somehow usefully related to the topic of freaking payday loans.
I’m going to have a little bit of trouble drumming up sympathy for you since it is you who went there and not even against the person who you were mad at.
Sebastian,
1. that google page link does not have the definition that you cite and I intended the definitions that I DID cite. If you don’t believe that, I’m not sure how I can convince you, except to note that you took it upon yourself to tell me what Brett was thinking, which is much more like the first definition than that of being a personal personal slave, which seems as much if not more the drama queen. But accusing someone of being a drama queen is a way of suggesting that their outrage is faux, which is why you initially suggested it of me, correct? In fact, almost all of your discussion centers around my ‘dramatic’ misreading of Brett’s comment, so the underlying premise of your comments is that I am somehow lying about my outrage. I am not lying, I think that the whole comment, along with the backhand apology, reeks. You argue that you know Brett’s intention, but I see no reason to invoke NAMBLA, an invocation that seems quite ironic when we see that Brett was trashing Obama’s position on sex-ed laws.
2. you have a habit of intervening in conversations that other people are having not to clarify or further the discussion, but in order to score points, and this time, you picked a very bad time to do it. Using the phrase ‘how can you honestly write…?’ when you weigh in on a discussion seems calculated to attack my sincerity in the points I raise.
I do offer my sincere apologies for bringing up something personal that you wrote about here and I will not bring it up again.
Sebastian, lj: please. Breathe.
Oh, and Jonas- your assertion that plenty of middle class people take roommates sounds illogical to me. If they’re taking roommates because they want to share their home with a friend or just don’t want to live alone, that’s one thing.
If they’re taking roommates because they couldn’t otherwise afford their rent or mortgage, then I’m thinking they’re not really middle class.
What is middle class anyway? Didn’t it used to refer to a certain standard of living, one that included being able to afford to rent or purchase a place of one’s own- that is, not shared?
“You argue that you know Brett’s intention”
No. I argue that I know the words that appear in these comments. And you are misinterpreting them. And when I said dramatically misinterpreting I meant merely that you were way off.
The drama queen comment is in reference to your belief in the appropriateness of casually slinging around my friend’s rape in a discussion of payday loans and using it to discuss my ability to talk about class.
That is just vile, suggesting it was the move of a drama queen is frankly one of the toned down things I can think to say about it.
“you have a habit of intervening in conversations that other people are having not to clarify or further the discussion, but in order to score points”
I don’t even know which game we would be playing or how the points are scored. I don’t know about ‘a habit’ but in this case I was attempting to point out that you misunderstood the meaning of the analogy that Brett drew.
I don’t think anyone other than you is interpreting the statement the way you are–including such thoughtful people more on your side of the aisle as hilzoy and gary.
Now, if you think it is appropriate to viciously attack Brett for using a completely well-worn free speech trope that is used all the time by the ACLU and which appears almost every time a discussion of free speech comes up (and one which doesn’t implicate you at all)illustrating that we protect the speech of even those whom we personally disagree with (and if you insist on a personal implication, the plain meaning of the analogy would be that you DO NOT agree with them), what do you think I ought to do with the never-heard-of-before analogy between my personal friend’s rape and getting a roommate (complete with implications about my being unable to understand class issues and tying?? that to the rape).
Brett uses a well worn impersonal analogy and you take it as a personal affront proving that he is unwilling to discuss things fairly.
You use a hitherto unheard of and very personal analogy and I am to believe what about you?
“I do offer my sincere apologies for bringing up something personal that you wrote about here and I will not bring it up again.”
“Something personal” doesn’t really cover this situation very well. It isn’t as if you brought up my hair color in a discussion about hue or my sexual orientation in a discussion about personal liberties. You brought up my friend’s rape in a discussion about payday loans.
“Didn’t it used to refer to a certain standard of living, one that included being able to afford to rent or purchase a place of one’s own- that is, not shared?”
I think you’re talking to me. I’ve never thought of taking roommates as a defining line between middle class and lower class. I would say that if you take roommates for moonetary reasons you definitely are not upper class, but I wouldn’t have put the line down as a defining point between lower and middle class (my understanding is that lots of people that I would think of as lower class don’t take roommates, so I’m not sure it functions as a clear class boundary between lower and middle class).
I may just be mistaken, but that is how I have always thought of it.
“I don’t think there ever been a front page post on the organization and its right to free speech and I don’t think that I have ever talked about NAMBLA. So why would Brett invoke it?”
I have no idea what was or is in Brett’s mind, but obviously the only valid test of anyone’s commitment to freedom of speech is as regards a challenging, or extreme and provocative one, so you seem to be saying that no one should ever be allowed to ask anyone about their commitment to free speech with a worthwhile example, or they’re accusing you of supporting that cause, rather than free speech.
This strikes me as incompatible with an understanding of free speech, but YMMV.
“If I said that I defended it, I believe that he would bring up something about a hypothetical NAMBLA tract about picking up children and ask me if I would defend that.”
I dunno about you, but my response would be that I defend anyone’s right to say anything that doesn’t violate the law, but that has nothing to do with my stance on what they’re saying. So I don’t see a problem there. I’m unclear what that response doesn’t seem to be occurring to you.
I’m not quite clear, either, why I’m any more worthy of being called a “drama queen” than anyone else on this thread.
In a following comment, you address this to Sebastian: “you have a habit of intervening in conversations that other people are having,” and I have to say that you appear to be confused into thinking that you were having a conversation in email with someone, and believe Sebastian somehow stumbled across it. In fact, you weren’t having a coversation with “other people,” but were posting to a public blog, where everyone is invited to comment. If you don’t wish other people to comment on what you say, I suggest making sure that you are, in fact, using email, or some other form of private communication, where it will make sense to get huffy about someone else “intervening” with a response your completely public, not-remotely-private, posting of your observations.
Furthermore, asserting that someone does something “not to clarify or further the discussion, but in order to score points,” is, needless to say, a mindreading claim, and one you are therefore neither privileged nor entitled to make. That it’s an unpleasant accusation that you can’t possible support makes it even less called-for.
If there are other things going on in your life making you tense or upset or unhappy, I do sympathize, and wish you all best with any such situations.
Meanwhile, consider the virtues of taking a day off the internets, and the thought that if someone is wrong on the internet, there are yet greater tragedies in the world worth addressing.
Criticizing payday loans as though they are comparable to other annual credit options when they are clearly not has become commonplace. Yes, if these were annual-based loans then the APR would calculate to be 391%, but they are not. Your argument that “a payday loan is comparable to money from a loan shark or the Mafia” is completely invalid. These are 2 week loans and their rates are reflective of such. A 15% fee on a $100 payday loan is reasonable and quite favorable to many consumer alternatives. The APR’s of other credit options when expressed in 2 week terms are as follows: a $100 bounced check with $54.87 NSF/merchant fee is 1431% APR; a $100 credit card balance with $37 late fee is 965% APR; a $100 utility bill with $46.16 late/reconnect fees is 1203% APR. The proposed 36% rate cap is unfeasible for payday loans and will eliminate an affordable credit option to consumers. Competition is needed in this industry, as it is in every other industry, to help drive prices down.
To help customers make the best financial decision, CFSA of America Best Practices require its members to display their fees in large type on posters in all store locations and offer customers the option of an Extended Payment Plan if necessary, at no additional cost.
The Consumer Financial Services Association of America supports regulations that ensure the product is used responsibly and is doing its best to encourage responsible use. We want customers to use payday advances wisely and we want the service to be a solution, not a problem, for individuals who need low-dollar, short-term credit. To that end, CFSA member companies have taken a significant step forward in our ongoing commitment to responsible lending.
To ensure member-company compliance of the Best Practices, CFSA hired an independent firm, Global Compliance, to conduct audits of member company store locations. As of March 2008, 99% of CFSA members were in compliance. Any company that does not comply with Best Practices will risk losing their CFSA membership.
Doesn’t it make more sense to keep competition in this industry rather than eliminating choices for consumers? We would rather not have customers go to illegal lenders who will most definitely take advantage of them and their finances.
Rep, the bank’s checking-account business is not built on the idea that a person will bounce a check every two weeks. People are treating the charges as annualized because many borrowers have to get another loan every two weeks to pay off the previous loan.
With all due respect KCinDC, if payday loans were not available, there is a good chance that consumers would have to deal with check bouncing fees in its place. Payday loans offer an affordable way to avoid this (391% vs. 1431% since that is how many choose to look at it). The claim that payday lenders don’t consider borrowers’ ability to repay is irrational. All reputable payday lenders have underwriting criteria, in addition to the requirements of a steady income and checking account. It wouldn’t be good business sense to loan money to consumers who can’t pay you back. And in fact, regulator reports show that 90% of payday advances are repaid when due. CFSA members give its customers all the information upfront, including the fees involved with the loan. However, we understand that situations arise in the midst of the loan that might prevent a customer from being able to pay the loan back. Borrowers do not have to take out additional loans in order to repay previous loans. Your allegation here is not valid. Under our Best Practices, any customer who cannot payback their loan when due has the option of entering into an extended payment plan, allowing them to repay the loan over a period of additional weeks. This option is provided to customers for any reason and at no additional cost.
To add to Payday Lending Rep’s comments, compare the fees of consumers’ short-term credit options: $100 payday advance = $15 fee; overdraft protection = $29; late fee on a credit card bill = $37; $100 off-shore internet payday loan = $25 fee; bounced check and NSF/ Merchant fee = $55. * *Source: http://www.cfsa.net/cost_comparison.html
When payday lending is banned, consumers face other, more costly short-term credit products available, such as: overdraft protection, late fees on credit cards and other bill payments and off-shore Internet lending.
“there are more payday lending stores than Starbucks and MacDonalds combined” Doubt it. Payday Loans are prohibited in about 10 states, I see about 10 starbucks and mcdonalds each day driving to work and not 1 payday loan store.