P2P Lending / NFT Lending Forum

General Category => Investing - General (not P2P) => Topic started by: SeattleSun on October 24, 2013, 11:00:00 PM

Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: SeattleSun on October 24, 2013, 11:00:00 PM
FYI

We've compiled some of the most shocking facts about the payday loan industry from the Milken Institute report  http://www.milkeninstitute.org/pdf/PaydayLenders.pdf     below:

In the U.S., 12 million people borrow nearly $50 billion a year through payday loans.

The rates charged on payday loans can be up to 35 times those charged on credit card loans and 80 times the rates charged on home mortgages and auto loans.

Most borrowers owe payday lenders for five months out of the year and typically end up paying $800 for a $300 loan.

The estimated annual percentage rate on payday loans in the U.S. ranges from a low of 196% in Minnesota to a high of 574% in both Mississippi and Wisconsin.

Borrowers with six or more loans each year make up more than half of all payday revenues in California, and they end up paying at least $525 for a $255 loan.

Payday loan stores tend to aggregate in areas with higher rates of poverty. The six counties in California with the highest number of payday lender stores per 100,000 people have an average per capita income of between $17,986 and $26,300, compared to the statewide average of $44,980. The average unemployment rate among those counties is nearly 15.8% compared to the state average of 11.8% and one in five people lives in poverty compared to 15% nationally.

Read more: http://www.businessinsider.com/outrageous-facts-about-payday-loans-2013-10#ixzz2imOugXJO
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: Rob L on October 24, 2013, 11:00:00 PM
I've posted this before, but Michael Milken was railroaded into a plea, served in prison, and lives with a bad rep he doesn't deserve. I'm convinced he committed no crimes, and was brought down by lesser men with political agendas. Our world is a much better place for his having been in it. My view isn't typical or popular and I don't care. Thanks for the interesting piece from the Milken Institute.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: DanB on October 25, 2013, 11:00:00 PM
from: Rob L on October 25, 2013, 09:47:48 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: dontvote on October 26, 2013, 11:00:00 PM
Milken's history is a bit more complicated. Some of the things he did are now illegal and nobody would argue that he didn't push the envelope of the market he basically invented/developed (junk bonds). He ignored and humiliated regulators and encouraged or allowed his subordinates to actually break rules.

However, aren't you supposed to wait until someone smears Milken to defend him?
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: neals384 on October 27, 2013, 11:00:00 PM
What people don't seem to realize is that any brick and mortar business must price its products and services high enough to cover cost of the physical plant and the labor to run it.  A drive-thru coffee shop charges $2.00 or more for a 25c cup of coffee in order to cover expenses and still make a profit.  Yet no one write inflammatory articles claiming they are screwing their customers.

PayDay lenders have the same overhead as other brick and mortar businesses, except that they also have significant bad-debt losses.  It's as if every 3rd or 4th customer drove away without paying for that coffee.

Of course, it is troubling that PayDay customers are almost all poor to begin with, and in the long run, PayDay loans aren't going to solve their money problems.   But PayDay Loan customers clearly see it as a worthwhile service.

Disclosure:  I have a friend who used to manage a PayDay Lending store.  In addition to originating loans, he would spend a large portion of each day doing collections - which was essential for his store make its numbers.  So he needed to be proficient at collections and up-to-date on legal collections methods on top of everything else.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: core on October 27, 2013, 11:00:00 PM
I don't see how charging 574% interest is "screwing consumers".  It doesn't even matter what the default rate is or what brick-and-mortar overhead is.  That has absolutely nothing to do with it because until the socialists control this country, you don't get to decide what a fair price is.  The customers do.  The interest rate is posted right on the wall in large font.  It's on the document you signed.  You walked in there and freely made the decision to pay that price.

If you need some more money to cover bills then get off your butt and get another job for a few weeks.  Strap on a leaf blower and blow some leaves.  (Rich people are afraid of leaves.)  Deliver some pizzas.  Stop putting your paycheck up your nose.  If the matter is so urgent that you cannot wait, then go right in there and get the loan, but don't whine about your own decision.

And yes, I have taken out several payday loans in my younger more irresponsible days.  I do have experience in the matter.

If you don't like Walmart selling Chinese goods don't shop there
If you're against Nike's abusive overseas labor practices don't wear the shoes
If you're against toys in McHappy Meals go somewhere else
If the grass in my yard is too long for you don't look at it

But oh no, none of that is good enough anymore.  In the last couple decades now everybody has to go on a crusade trying to dictate to others how to be righteous and how they can and cannot live their own lives.  Whatever happened to 'Mind your own freaking business'?  Has anyone really said that lately??
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: New Jersey Guy on October 27, 2013, 11:00:00 PM
Holy Smokes Core!  Who peed in your Cheerios this morning!
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
from: New Jersey Guy on October 28, 2013, 12:17:43 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: yojoakak on October 27, 2013, 11:00:00 PM
from: core on October 28, 2013, 12:24:32 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
from: yojoakak on October 28, 2013, 12:42:07 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: bobeubanks on October 27, 2013, 11:00:00 PM
In my community the local food bank and churches practically beg people to come get free day old bread. And I live in a blue state.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
from: core on October 28, 2013, 01:20:13 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
from: yojoakak on October 28, 2013, 02:30:56 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
"....some kind of bakery conspiracy"

Core....you gotta be living some sort of paranoid life with all these conspiracies!  A bakery consiracy?  That's the best one yet!  I guess now I'll have to be checking my cupcakes for bugging devices.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 27, 2013, 11:00:00 PM
Maybe that was too strong of a word.  But what would you call it when a group of bakery owners gets together and decides to lie to their customers about day-old bread laws in order to get the customers to shell out more cash for higher priced bread?  Bakery understanding?  Bakery memorandum of agreement?

Besides, yojoakak is the one who came up with it.  I'm just agreeing with him, is all.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: New Jersey Guy on October 27, 2013, 11:00:00 PM
"But what would you call it when a group of bakery owners gets together and decides to lie to their customers about day-old bread laws in order to get the customers to shell out more cash for higher priced bread?"

Maybe Bigfoot is making them do it.  I dunno!  Better call in DanB Cooper to set the record straight!
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: rlv99 on October 27, 2013, 11:00:00 PM
It's probably not every day that customers go in there to buy bread wearing guns.

Core- Appearance is important!     So you walk into this bakery, strapped, in your overalls wearing your wife-beater tee shirt that says "If your name is Stephanie, draw!"  The baker obviously doesn't know you.  He says to himself,"feed the deer? yea, right! This guy wants the bread to feed the illegals in his meth lab!"   So, he makes up the story to get rid of you.  Appearance is important!     :)
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: dontvote on October 27, 2013, 11:00:00 PM
This thread got a lot funnier but I'm not sure there is a lot of good arguments against the fact that payday loans are screwing consumers.  What default rate would you need to charge 200% APR and make a profit of 15% after expenses? 40%? I'll be these guys are facing like 10%-15% defaults (though I don't know). I'm unswayed by their rental charge and paying someone 45K to mind the store and do collections.

I'm not sure that armani suits screw consumers any less. just different consumers. When your business is predicated on 'subsistence' activities like food gaps (is that what the kids say now?) and covering basic rent etc. you are in an interesting moral position. Margins on high end goods are certainly a lot higher than most margins on low.

That being said your comment may apply well to people who are actually lazy morons with lawnmowers in their noses but doesn't take into account people with dependents. Those little shits ARE a second and third job and the pay sucks.

Quote"> from: core on October 28, 2013, 12:00:33 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on October 28, 2013, 11:00:00 PM
I'm not sure that armani suits screw consumers any less.

Of course they don't !  It is strictly a business with the payday lenders as well.  Here in Florida we have over 600 Amscot "stores" which are actually the banking institution for the low wage earner.  I use their facilities to wire money to the off-shore casinos that I deal with.  There is nothing immoral about the way they do business from my observations.  They provide financial services to a segment of the population that doesn't even have a checking account.  They are providing  services to a customer that can't get it anywhere else.  IMO, they are being paid what the market will bear.  Just like the baker ( who won't sell day-old bread to core for his deer), the pharmacist, the mechanic, and the doctor. 

Milken's Institute probably conducted the study to see how he could get into the business!   :)

If you are going to question the ethics/morality of the payday lenders, then you need to look at every  profit making company, and some non-profits, as well.  Who is to judge?



 
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 01, 2013, 11:00:00 PM
to be clear, I don't think there is anything immoral about these businesses, as long as they aren't stealing or committing fraud. vultures parasites and the little fish in the amazon that swim up your peehole are all part of the natural ecosystem and have as much right as anything else to live and try to thrive. I'm just pointing out that there is a financial death spiral that occurs when you have to borrow money at high rates to pay for basic needs that is pretty sad. Imagining that a person's labor and honest effort go completely to the benefit of a payday lender (or a credit card at 30%, or an insurance company or living in a motel etc.) instead of directly paying for those basic needs or building even a modest capital base to guard against tragedy or give their dependents a leg up is tough. call me a bleeding heart libertarian if you must.

dontcarehowyougetitbutyoubettergetmemymoney
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: investforfreedom on November 03, 2013, 11:00:00 PM
I can still recall that right after 9/11, there were gas stations exploiting the situation by jacking up gas prices.  Following your line of reasoning, there is nothing immoral even about that, since they weren't "stealing or committing fraud"?   How about legalizing the sale of organs?  There is an ample supply of poor people in the third world who are ready to part with one of their kidneys for $20k or less.  They can never afford to buy from us, since we would probably be charging 10 times or more to be willing to forgo one of our kidneys.  Just by sheer luck of natural lottery, we from the first world could buy a whole bunch of spare organs from them and perhaps even resell them at a profit!  And there is nothing immoral about taking advantage of people in dire straits.



from: dontvote on November 02, 2013, 04:26:54 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 12, 2013, 11:00:00 PM
That slippery slope has two sides. Why don't we outlaw the exploitation of a person't labor. From everyone according to their ability - to everyone according to their need!

from: investforfreedom on November 04, 2013, 04:11:18 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 12, 2013, 11:00:00 PM
From everyone according to their ability - to everyone according to their need!

OMG, Lenin's ghost is our thread!   Doesn't work, my friend- been proven!  The greed of man is still present even in your scenario.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 15, 2013, 11:00:00 PM
You are setting up a false alternative, which I am not interested in: free-for-all libertarianism or a cynical socialist view of the exploitation of labor under market capitalist systems. 

I am just asking you this question: "If you pulled up your car to a gas station that jacked up their gas prices right after 9/11--over the dead bodies of some 3000 people, how would you feel?"  We can take a vote if you don't think there's a problem.   



from: dontvote on November 13, 2013, 11:46:14 AM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: core on November 15, 2013, 11:00:00 PM
from: investforfreedom on November 16, 2013, 11:28:13 AM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: DanB on November 15, 2013, 11:00:00 PM
from: core on November 16, 2013, 11:44:37 AM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 15, 2013, 11:00:00 PM
from: DanB on November 16, 2013, 09:03:51 PM
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 15, 2013, 11:00:00 PM
Core...............What part of "isolated small town" did you not read?

Price controls,  limitations on pure supply & demand, social services, the courts or some other system to settle disputes etc etc................are the price we pay, the understanding we strike, in order to live in a close proximity "civilized" society, such as it is. These are far from perfect solutions to problems, but they are much better than the alternative descent into savagery without any of these checks. We must all temper our greed Core, for the good of the community. So hand over those bottles of Evian for a "fair price" or my buddies & I will just come over & take them from you by force. Who determines what a fair price is, you ask?? We the community do!  :)
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: bobeubanks on November 16, 2013, 11:00:00 PM
Core is looking forward to the day when it is just him vs. the Koch brothers. I'd put my money (if I had any left) on Core.
Title: 6 Outrageous Facts That Show How Payday Lenders Screw Consumers
Post by: TravelingPennies on November 16, 2013, 11:00:00 PM
from: bobeubanks on November 17, 2013, 02:23:41 AM