What is going on with these cash advance/pay day loan places?

[TwixVoy]

Maybe it's just my city, but these pay day loan/cash advance places are starting to operate like gas stations. One on every corner.

I am guessing they are banking on peoples desperation in a huge way. A scene I find most interesting.... there is a small strip center near my home. Every business there has now gone out of business and the spaces are empty - with the exception of the one last standing business, the cash advance place.

[Systematic Chaos]

1. They are a bunch of fucking sharks and the absolute scum of the Earth.

My wife and I both know this from personal experience. The only way to handle them is to stay the fuck away no matter how desperate you think you are or how able you think you'll be to pay them back.

[Citizen Number 9]

2. They supply a vital service

at a time when the customer needs it the most.

Often, having a few hundred dollars available can mean the difference between sliding into disaster and having everything be okay.

Most of them only loan until next payday and they try to make sure you are making enough to pay back.

[Systematic Chaos]

6. Um... er... I think I kinda know exactly what "vital service" they provide.

That was, sorta kinda, my point.

And then when payback time comes and you discover you don't have enough to pay them back, and can only pay the interest, or maybe the interest and part of the principal, they soak you again next pay cycle.

Or - and this is the good part - if you find yourself too broke to pay anything, they'll just spam the living shit out of your bank account trying to electronically debit the money out of it, causing you an NSF fee every single day until you either beg a "payment arrangement" out of their legal department or you close your bank account and open another one with another bank. Then the real nightmares start.

You think any other financial institution has nasty collection departments, just fucking try and deal with these people (especially Dollar Financial Group. I listened in on our extension unit while my wife was on the phone being reduced to tears by some overtly adversarial fucking nutbag who sat there in his little cubicle belittling her and describing how inadequate she was as a human being because she couldn't pay them in a timely manner.

I have an idea for you: Why don't you go have yourself put in a desperate financial situation out of the blue with nowhere to turn. Then go take yourself out at least two of these "vital service" loans, and try to juggle the payments as you sink deeper and deeper in with no way to take control of your life back. Get back with me and tell me how much fun you had.

[Citizen Number 9]

14. I think I know what your problem may have been

Firatly, you're not supposed to borrow more than you can pay back at your next payday. In most cases they examine the records you bring in to make sure that's the case.

Secondly, you're not supposed to take out more than one loan at a time. That will help you avoid the "juggling".

Most states control the amount of times you can be charged an NSF fee on a single default.

They are an important resource for a lot of people and they exist because who else is going to risk going through the hassle of giving you a loan?

Clearly, most people pay back their payday loan, or the system wouldn't even exist, but it sounds like you, in particular, made a mistake getting one and they made a mistake granting you one.

[Name removed]

41. Deleted message

Message removed by moderator. Click here to review the message board rules.

[malaise]

55. Maybe you don't know what's really going on in these

scum bag operations. The best advise DUers can give everyone is stay away from them. Join a credit union and avoid these rip off artists.

[sentelle]

149. The best advice

Is to not take out a loan in the first place.

Seriously, anything can happen to keep someone from being able to pay even a small loan.

You could take out a loan, and then (hypothetically) someone could die.

Unless you can control the future 100%, you should not take out a loan. And if you can control it, you probably will not need to take one.

[AZBlue]

59. Um, sorry, but you don't have a clue about this industry.

I'm very familiar with it, as I have a good friend who works in it. (disclaimer: he hates it and is trying to get out, but it pays well and with the economy the way it is, he is having trouble finding another job that works with his school schedule that pays as well as this one does)

We also had a Propopsition on the ballot here this year about PDL stores, so I did a lot of research on them before I voted.

The PDL industry bets on the fact that the vast majority of those with loans will NOT pay them right back. If their clients did that, they couldn't stay in business. These companies make their money on those who have to string their loans along, payday after payday, paying a huge interest fee every time.

You said: "you're not supposed to borrow more than you can pay back at your next payday. In most cases they examine the records you bring in to make sure that's the case." Actually, that's baloney. They only look at your income and maybe glance at your basic expenses, so they have no clue what you can really pay back or not. Most don't really do more than a cursory examination of your situation before signing you up, they're too anxious to get interest out of you to really care.

You also said: "you're not supposed to take out more than one loan at a time. That will help you avoid the 'juggling'." You're obviously not speaking at all from experience or from knowledge of their average customer's situation.

Also, your claim that states control the amount of times you can be charged an NSF fee is completely false as well. And, the PDL stores know all sorts of tricks to get around stop payments - they use different company names or try to get differing amounts from your account so there's no way to really block them.

Sorry, but you should really stick to topics that you might know something about.

[Citizen Number 9]

64. Because payday lending can vary from state to state

it is difficult to say with certainty exactly what happens in all locations at all times, but I stand by what I said.

I'm not too big a believer in knowledge by osmosis so I will have to discount statements you attribute to your friend. That is just not a reliable indicator of knowledge about a subject, much less this one. As an investor in many types of businesses, I have detailed and factual first hand knowledge about what happens with payday lenders.

The payday lenders did not create the situations that lead people to seek a payday loan. All they can do is to make loans based on their lending criteria. They want you to make good on the contract you sign. If you assume an industry standard 15% fee (interest), the average borrower will have to take a loan and pay back 7 times before they default in order for the lender to break exactly even on the transactions. Even then, that doesn't take into account the value of the money at any interest rate over 14 weeks and the lender's overhead (store, utilities, supplies and labor), making it an overall loss.

Most payday loan offices require proof of income, and some continuity of the income before lending. Even your friend can tell you that there are loan to income guidelines that help assure people can pay the loan back at their next payday. If he can't confirm that then he would be an unethical lender. There is no doubt that some exist as in every industry.

As for "getting interst out of you", there is no interest to be had if the borrower does not pay the loan back in full, with the fee or interest included. Many states require the loan be paid back before a new loan is made, which would effectively address the "rollovers" someone mentioned. Again, if you are in a state which requires this, the practice of roll overs would be both unethical and illegal.

In order to facilitate this, many payday lenders even belong to subscription services which can help tell if borrowers are lying on the application and trying to take loans out at multiple locations.

My statement that states control the number of times that an check or ACH transaction is submitted as well as NSF fees that can be charged on a single dishonored check is true for the majority of states that regulate payday lending.

[AZBlue]

110. And I'll have to discount your statements since they have no relation to reality.

But good luck with that - and with the condescending, superior, know-it-all attitude you have. I'm sure that will take you far.

[Citizen Number 9]

132. Already has, thanks.

[Systematic Chaos]

73. See post #39, below.

Much will be revealed.

[AZBlue]

113. I've decided to simply ignore this idiot.

They are condescending, stupid, arrogant and unwilling to admit when they are wrong. Why would I want to continue discussion with anyone like that??

[Citizen Number 9]

136. Put me on ignore.

That's the best plan for you.

[LeftyMom]

63. He's telling you the truth of how they operate.

I've never had the pleasure but a friend of mine got in deep over a really tiny loan, I think it was $300. Now when you're broke enough that $300 is the difference between keeping the lights on or not (or whatever) shit happens. Cars break down, paychecks get delayed, etc. So they had this poor girl paying something like $60 a paycheck to roll over the loan, but not paying down the principle at all (they'd only take it all at once, otherwise she could just roll the loan over,) for close to a year. Finally her family got wind of it and helped her out, but in the meantime she got shaken down for god alone knows how much and repaid that loan I don't know how many times over.

The Mob offers better terms than that.

[Citizen Number 9]

65. Because the states require either payback or default

they don't allow partial payments, except in cases where the lender and the borrower can agree before the loan is in default.

First of all, I would say that you should not take out a loan that you can't pay back.

Roll overs are illegal in many states. It is required that the loan be paid back in full according to the very simple contract the borrower signs. Most people are paid every two weeks, so it is hard to pretend that circumstances unbeknownst to the borrower can occur in that short period.

As I've noted elsewhere in this thread, the lenders make an effort to determine if you will have enough in your next check to satisfy the loan you are requesting. If not, they will often offer an amount that is more reasonable for the borrowers' circumstances.

If the borrower finds that paying back a loan on the very understandable terms they agreed to only two weeks previous is too burdensome, they can always pay from their paycheck and then take out another loan for a smaller amount of money and maybe even do it again, reducing the principal each time until they are out of debt. If they don't think they can do that, then they shouldn't take out payday loans at all.

The Mob doesn't write contracts with the expectations clearly laid out in advance of making the loan.

[Hannah Bell]

157. if they could pay back the loan so easily, they'd get it from their credit card,

their credit union, their friend or their bank, not from a 300% interest payday lender.

You're full of it. Payday lenders are rip-off joints, with big-bank money behind them, they pop up every 25 years like mushrooms until they rip off enough people to get stomped down for a while.

you're full of it.

[acmavm]

85. They are scammers who have figured out how THEY can take advantage

of the poor and try troubled. Do you have any idea how big a problem it is to get out from under once you borrow? People get stuck having to continually reborrow because their situation hasn't improved, they're still poor. They're still broke. And they can't afford to give up that hunk of cash in one big chunk. That's HOW THEY GET THEM coming and going. This system was created specifically so that those with some money to spare could prey on the poor and call it helping them out.

In so many cases these 'companies' end up taking ten times what some people borrowed from them in the first place. At interest rates that in a just and fair country would be considered usury.

This Christmas seems to have brought the arrogant, the buffoonish, the worst of DU out of the woodwork.

[Citizen Number 9]

97. They are not poor BECAUSE they borrowed.

They are poor because they SPENT in the first place, and to some degree because they don't appear to be able to work enough to dig themselves out of their spending hole.

I know a lot of people who work themselves out of financial holes both of their own making and otherwise, but you don't hear about them very often, do you? Mostly you hear about people who need help yet again. That's about 10% of the population, you know. I think I might have said 20% in an earlier post and that is not the case. Ten percent need help routinely and maybe another 10% need help a bit more than "occasionally".

[alarimer]

118. They are usurers.

Often the interest amounts to something like 300%. That is fucking usury, even if it is technically legal. The payday loanshark places are predatory. They prey on people who find themselves in a bind. Fuck those piece of shit scumbags. ALL payday loan places, car title loan places need to be illegal, or seriously reformed.

Of course credit card companies are scumbag predators too but they at least are limited in the amount of interest they can charge.

[Citizen Number 9]

137. That is the Annual equivalent.

Payday loans are most often for about two weeks. They are intended to fill a short-term need. Everything in the contract is designed to make the borrower understand that it must be paid back at the end of that time and that is why they often tender a post-dated check for the loan maturity date.

[nadinbrzezinski]

93. You are clueless

why the DoD has had them closed near military bases

They suck people dry and they are leeches

Then again from other threads you are a hand of the marketplace, see free republic, kind of a guy

[Citizen Number 9]

98. That is incorrect.

First of all, the borrowers just drive farther to get their cash fix.

The DoD prevailed upon states to make it nearly impossible to loan to service members because their default rate was skyhigh and the unit COs could simply not field the calls from the creditor agencies any longer. They were terrifically disruptive.

[tabasco]

147. Local commanders make them off-limits. ALL of them.

It doesn't matter how far away the loan shark is located.

They are scum.

[nadinbrzezinski]

150. And if a soldier is found in an OFF LIMITS facility

at the very least there will be a long conversation with the OIC...

Our friend over here does not realize that violations of the UCMJ are not looked at midly, or that the trooper has no choice but to obey legal, lawful orders.

I'd say he is really, absolutely, clueless as to how the world works

[NeedleCast]

102. Nothing More than Digital Loan Sharks

They're the knee-cappers of the internet age.

Even the advertising these vultures use points to their malicious practices. The big one in Northern Virginia often shows happy young people saying things like "when I just can't wait for my money, I go to Pay Day Advance and get cash right away" and then they drive off in their blinged out car. The reality is that it usually desperate people who have an unexpected medical bill or some other problem that is forcing them into a situation where they're looking at getting fleeced at 21% interest.

To pretend they provide a useful service is to ignore the rapacious interest rates and practices they use, as if they're some kind of good samaratins.

[CBGLuthier]

152. You are truly

a grade a fucking idiot.

[madokie]

20. I agree with you

Not from personal experience but from seeing other people get bogged down with them. When we first got together my wife would buy things she needed at a rent to own place and it was the same way. First thing I did when we married was pay off all those sharks. Paid dollars on the penny in some cases but paid I did. Today we have a small morgage on our home and thats it.

[Blarch]

79. Sounds like you were taking loans you couldn't pay back.

Blame yourself.

[Systematic Chaos]

119. Wow.

Looks like assholes really do just grow on trees anymore around here.

Threads like this sure do bring 'em out of the woodwork, don't they?

[Citizen Number 9]

138. So far, you haven't contributed much

to the thread other than name-calling and personal abuse.

Feel free to relate why you feel the way you do so the discussion can continue in a meaningful way.

Unless you are embarrassed, in which case I'd entertain a PM.

[Systematic Chaos]

143. Can you re-do this one in calligraphy, please?

I'd like to blow it up to poster size and frame it, O Great Father Confessor!

"...entertain a PM." What a riot! :rofl:

[OnceUponTimeOnTheNet]

7. on second thought, nevermind.

:silly:

[Selatius]

8. The APR that they afford their customers is absolutely appalling, often times in excess of 200%.

Yes, they may offer "bridge loans" to make it to the next billing cycle, but it does not come without a hefty price.

[Citizen Number 9]

15. That's because they can't charge separate "fees" like other lenders can.

All of the cost to you has to be considered "interest".

That's sorta like a plumber coming out and doing his thing for a few hours and then having to give you an APR statement showing he charged you hundreds of percent "interest" instead of a fee of $75 for what he did.

[Selatius]

69. What you say is true, but at the same time, caution must always be warranted with these places.

It doesn't take much to get into a vicious cycle of fees on top of fees.

[Citizen Number 9]

99. Fees on top of fees

are generally prohibited in most states lending rules.

Legislatures are quite cognizant of the potential for abuse there and most worked quickly to regulate appropriately.

[Selatius]

107. Not necessarily true. Let me explain a bit further.

An example:

You need $100 to cover you until your next paycheck or money from home (from parents and such). So you go to a payday lender and borrow $100. The payday lender gets a check from you for $115 drawn on your bank account. Then 2 weeks later, when you get paid, or you get that check from home, the lender either cashes the check or lets you pay another fee to renew the loan for another 2 weeks. If you annualized the interest rate, you'd find that you're borrowing at an interest rate of close to 400 percent. Even worse, if your fee was $30 (that is, you borrowed $100 and gave the payday lender a check for $130 to cover your $100), you'd have paid close to 800 percent interest. Not a very wise way to borrow money, is it? One should remember that the best protection is knowledge with respect to how they operate along with the old saying, "A fool and his money are soon parted."

Currently, while some states have consumer credit laws that ban payday lenders, 19 states have exempted payday lenders from laws that limit interest rates, with 2 other states in the process of joining in. Still, other states do not have any laws that address the practice.

[Citizen Number 9]

129. The fee is for a two week loan

because most folks get paid every two weeks. It is not intended to be for a year. The very contract states that the lender will be paid back in full in two weeks.

If I pay someone to watch and feed the animals $40 for a week when I'm on vacation, it doesn't make much sense to say that's a shocking $2,080 a year, does it?

[Selatius]

155. Of course not, but in both your examples...

neither the plumber nor your animal sitter provide "liquidity." That's where I find it apt to extrapolate out into APR, and if I'm real particular, I extrapolate out into EAR. As far as the plumber goes, I mean no pun. Obviously, we will have to agree to disagree over when it's justified to use APR.

[Crunchy Frog]

11. As do heroin dealers. n/t

[Citizen Number 9]

16. If you feel money is like heroin

then, I can understand why you might get in trouble with a lender.

[Crunchy Frog]

39. .

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x4710728

Just sayin'.

[Systematic Chaos]

42. Thank you, Crunchy Frog!

I saw that the other night and looked around just now trying to find it to use as a response to this prick's posts towards me upthread.

I never entered this thread and told my story expecting any fucking pity from anyone, but I SURE THE FUCK didn't expect to be told that my efforts to keep a decent roof over my and my wife's head, and keep a car running, and have food in the fucking house while my health was deteriorating and I could barely work a fucking "mistake".

Excuse me for fucking living, O Great and Holy C#9. Shall I light myself ablaze now, or just go lie down on a railroad track?

[Citizen Number 9]

67. Really, you should only go looking for loans

if you can pay them back. If you can't, you're going to be in violation of a written contract and owe additional fees and interest. That just makes your financial situation worse.

Maybe it's better for some of you to ask a relative or a friend for money. If they feel you're a good risk, or even a good friend, maybe they will loan some to you.

How simple is that?

[Systematic Chaos]

72. lollerskatez

<a href="http://failblog.org/2008/12/22/interior-design-jargon-fail/"><img class="alignnone size-full wp-image-10325" title="fail-owned-interior-design-jargon-fail" src="" alt="fail owned pwned pictures" /></a><br />see more <a href="http://failblog.org">pwn and owned pictures</a>

[Citizen Number 9]

95. Straight talk seems to make you very very angry.

It's almost too much that you chose the screen name "Gentle Giant".

Even though I don't have any control over it, I'm sorry that this ended up in 'General Discussion" so that you had to see it.

[Systematic Chaos]

120. I'm not sorry I had to see it. Not at all.

For what it's worth, I don't need a condescending twit like you feeling sorry for me either.

Nor am I angry at this point. You're not worth the waste of emotional energy.

I'm simply going to make it my mission to spread awareness of just what an instigating little snit you are, so others can skip the anger and merely be amused by your presence as well. :hi:

[AZBlue]

60. Wow. So much condescension in one little post.

[hfojvt]

30. it's the other way around

often getting one of those loans can be the difference between sliding into disaster or burying yourself in high interest debt. There's no financial disaster that cannot be made worse by getting a 5,000% loan. Worse yet is the way they advertise - "get cash for a vacation" (or some other optional purchase). If people learned to create savings accounts, then they would always have a few hundred dollars they could tap into.

"at a time when the customer needs it most" is another way to say they take advantage of the desperate.

[Posteritatis]

50. And then there's the ones that sneak five-digit interest rates in under "service charges" (nt)

[Donnachaidh]

80. they are legal LOANSHARKS that prey on the poor

Vital public service my shiny metal ass.

The only thing different - they haven't got a thug going around threatening to break limbs - YET.

[CBGLuthier]

151. Say What?

They are leaches and you make them sound like charities.

Usurious beyond humanity and you think they serve a valuable service?

[meow2u3]

25. I had bad experiences with payday loan sharks

First, we make an agreement on when the loan will be paid, then the company turns around and deliberately submits the auto-debit a week before the date they were supposed to submit the electronic auto debit--after I told them the day I get paid, causing the "check" to bounce, so they can demand payment in full. I'm out extra money because of their irresponsibility, which they flatly deny. They know the debit will bounce, but they act on their own in blatant violation of the written agreement.

[Citizen Number 9]

32. What does your contract say?

There is a contract, isn't there?

[FormerDittoHead]

46. Merry Christmas. n/t

[Lorien]

108. Do you work for Amscot or one of the other outfits? nt

[Systematic Chaos]

121. Nah, he/she/it merely comes here to frustrate people and incite flames.

Spend some time perusing this entity's other posts and the pattern will reveal itself soon enough.

It's kinda funny, really. :)

[Citizen Number 9]

135. No.

I post in the interest of dispelling popular but false information. I believe people need to have actual facts to form good opinions as opposed to hearing and "believing" what others tell them.

[Hannah Bell]

156. & mostly run by bigger-name banks, through layers of disguise,

according to one analysis i read.

[depakid]

3. Responsible state governments send 'em packing-

Unfortunately- as with most criminals, they're not so easily deterred- and require diligence to keep in line.

Oregon's payday lenders are reaching even lower depths of roguery in their attempts to evade regulations approved last month by the Legislature.

Cory Streisinger, director of the state Department of Consumer and Business Services, says payday lenders are "redefining" their services to escape the interest-rate cap and fair lending practices imposed by the new payday-loan reforms.

Streisinger last week told the Senate Interim Committee on Consumer Protection that a number of payday lenders are interested in switching their lending licenses.

Here's how that would allow them to dodge the reforms taking effect in July 2007.

Oregon law allows two categories of lending licenses. Payday loans require a short-term lending license, which will have a 36 percent annual interest-rate cap—instead of no cap—under the just-passed reforms. A regular consumer-financing license has no interest-rate max.

Unlike short-term payday loans, consumer-finance loans are required to have a term of at least 61 days. Traditionally, borrowers repay part of the principal each month along with interest payments that tend to be below the 17-percent annual cap for federally licensed lenders. But payday lenders are charging up to 372 percent interest for the longer-term loans.

More: http://wweek.com/editorial/3228/7557

Interestingly enough, these sort of predators like to prey on so called Christians:

https://www.christianfaithfinancial.com/leads/leadform.jsp;jsessionid=930BFE63F102C9643838B2C5453F956A.w3

and in fact, the more so called Christian the state is- the more predatory lenders:

Study Says Payday Lenders More Prevalent In Areas Of High Christian Conservative Power

A law professor and associate professor of geography set out to create the most comprehensive map of U.S. payday lenders to date. What they found, to their surprise, was "a surprising relationship between populations of Christian conservatives and the proliferation of payday lenders." And it's not a side effect of a poor population that happens to be Christian, according to the authors: "Our research showed that the correlation between payday lenders and the political power of conservative Christians was stronger than the correlation between payday lenders and the proportion of a population living below the poverty line."

http://consumerist.com/357220/study-says-payday-lenders-more-prevalent-in-areas-of-high-christian-conservative-power

Not much of asurprise, really.

[Crunchy Frog]

12. I don't understand why Christians aren't picketing those places.

They Bible speaks out against that sort of thing far more clearly and definitively than it does about either homosexuality or abortion.

[rrneck]

24. Churches are the biggest "payday lenders" of the lot. n/t

[Lydia Leftcoast]

54. ExCUUSE me?

:wtf:

My church serves hundreds of free meals every week, supplies winter clothing, and sponsors families who are working their way off welfare, all without requiring them to attend a single service or say a single prayer.

[liberalhistorian]

57. Thank you! That was a major unnecessary and untrue

dissing; my very small church does what it can for people and my former large church did the same, albeit with more resources.

[rrneck]

90. Nobody doubts the good works

that churches do. And of course some are better than the others. But the revenues taken in by churches are largely devoted to the expansion of infrastructure and political power of the churches themselves.

Just like payday lenders help get people over the hump from one payday to the next but demand exorbitant interest rates, churches demand cultural renumeration far beyond the benefits they provide in the form of sectarian strife, political distortion, psychological and intellectual cognitive dissonance.

If the government would take over the task of feeding, housing, and clothing the poor in exchange for the elimination of the influence of religion in politics, science, and education, the country would profit from it.

[Lydia Leftcoast]

127. Oh, another refugee from a fundamentalist church

:eyes:

[rrneck]

134. Pride goeth before the fall.

[Lydia Leftcoast]

162. By the way, you wrote:

If the government would take over the task of feeding, housing, and clothing the poor in exchange for the elimination of the influence of religion in politics, science, and education, the country would profit from it.

One thing the churches do is provide services with no questions asked. To get food stamps you have to go through a lot of bureaucratic rigmarole, and if your food stamps run out at the end of the month, too bad.

To get a free meal at our church (and other downtown churches with which we coordinate service), all you have to do is show up at the designated times. No questions asked, even if a person doesn't technically "qualify" for free meals. Same with winter clothing. Furthermore, each clergy person gets a monthly "discretionary fund," which has to be accounted for at the end of the month but which is to be used to meet needs that are not part of our social services budget.

Some people have such a bug up their ass about religion (due to bad personal experiences, I assume), that they assume that everyone's experiences are the same as theirs.

[lapfog_1]

4. Have you ever read the fine print and see the actual APR the charge.

I go to them to reload my internet debit card (a "credit" card I only use for internet shopping). and I wait in line behind the payday loan customers... they almost ALL roll them over (pay off the interest but not a dime of the principal). And they have to do it every two weeks (or maybe every week). It's sick.

But those companies make huge profits on the ones who pay. huge. At a time when T-Bills are paying ZERO percent interest. If you are an investor, where would you put your money... into a fund for payday advance loans that collect over 200% APR or T-bills or Mortgage backed securities. Sure, some of the payday borrowers are dead beats that won't ever pay (and usually are charged with check fraud since they have to write a post dated check for the full amount when they get the loan), but the majority pay the interest.

It's sad.

Reminds me (this Christmas day) of "Potterville" from It's a Wonderful Life.

[hfojvt]

28. I still think they underestimate the APR

At least that's not the way I calculate APR on a mortgage or a bank CD. When you compound it every two weeks, then it really adds up.

http://journals.democraticunderground.com/hfojvt/46

[Citizen Number 9]

36. APR is not an "estimation" as you say.

It is calculated exactly and reported by federal law.

[hfojvt]

43. it's calculated wrong

they do a straight line instead of exponential, the way compounding actually works. 15% compounded every two weeks works out to much higher than 390% per year.

[RB TexLa]

58. Yes but if the loan is paid off in two weeks that's the way to calculate it

They can use those numbers based on the stated premise of the loan, X money to be paid back in 2 weeks.

[Citizen Number 9]

62. You don't appear to know what you are talking about.

Payday loans are calculated according to rigid guidelines. In most cases, the loan contracts and the APR disclosures required are very simple. There is a Principal, a Term and a Payoff Date certain with only one Payment.

[zeemike]

5. They used to be called loan sharks and were illegal

Un till the free market took over.
Now they are just another business sucking the life out of poor people.

[hfojvt]

26. I am not sure how illegal

In my history of business in a small town, I found a "Thorp financial services" going back to the 1960s, at least. They really seem to have exploded in the 1990s. I am not sure why. Maybe declining wages, maybe laxer regulations. Maybe consumers used to be more disciplined or get store credit. Credit cards used to be rarer too.

[Hekate]

9. Legalized loan sharks & a sign of desperate times. All they need is Vinnie to come break your legs

... for not paying the vigorish and they'd be more true to their roots.

In a sane society they would be illegal as hell.

What we really need are microloan banks for the US, such as the Grameen Banks founded by Professor Muhammed Yunus in Bangladesh.

http://www.grameen-info.org/index.php?option=com_frontpage&Itemid=68
http://en.wikipedia.org/wiki/Grameen_Bank

Hekate

[zehnkatzen]

10. Get To Work Outlawing Them In Your State. Now

No time like the present.

They do prey on the poor. Look at it this way: if you could afford to pay them back, you'd already have the money you need to get from them.

Also look at the ways people get to these places. Any new Lexuses, Mercedes, Priuses in there? No. The customers come in broken down cars and by public transit.

Before we here in Oregon got tired of them, they were ripping off the poor at an annualized rate of around 500 percent or more. They can only roll over the load three times, but they'd get round that by just creating a new loan at the new amount owed. A vicious circle.

And when they started to tighten the rules on them, oh how they howled! Freedom of choice! They provide a service the poor need! They can't make money if you limit them to a measley 36 per cent APY!

Just get to work tightening the regulations on them now. You'll be glad you did. They've all but left Oregon now,and credit unions are helping out the poor suckers who got swindled into them.

If you can't make money by ripping off the desperate for 36 percent a year, you don't deserve to stay in business.

[undeterred]

13. I don't think they should be outlawed, just make the high rate illegal.

They provide a service that poor people need and cannot get elsewhere. But these businesses could still make a lot of money charging 10%.

[Citizen Number 9]

17. How do you figure?

10% on a $500 loan for even two weeks would be in the neighborhood of $2.00.

How do you think they can stay in business charging you two bucks?

[undeterred]

18. Maybe an online business.

[Statistical]

22. Hardly.

Unsecured debt to the poorest of the poor. Often people with credit scores so low because they have failed to repay dozens of other people in the past.

10% seriously? Default rate on payday loans is about 37%. So by charging 10% you would be losing 27% or so compounded.

Won't take long to be bankrupt.

No I say eliminate them. Period. Make it a two for one and eliminate title loans at the same time.

[Citizen Number 9]

35. Okay, but

where are folks gonna get a few hundred bucks until payday?

Make a mistake with your debit card or a group of checks and you might end up with a dozen NSF fees on a total overage of what should have been a hundred bucks. At the going rate that might be $350 when a payday loan will cost you $15 to cover the hundred overage.

Let's say the snow comes and you don't have a couple hundred to cover some snow tires to get to work. Are you going to just miss the hours and go short on the next paycheck, or are you going to go down and be a troll by writing a bad check at the local tire dealer? That'll cost you about $55 right there on NSF fees and retailer charges not to mention the bad karma.

Or you can spend $30 to get $200 until payday.

I think they have a place for responsible people.

Who else is loaning you money these days?

Mom?

Your Brother-In-Law?

Your buddy?

[Statistical]

48. Not sure what the answer is.... but I don't think paydayloans are the answer

I often get flamed for being too much of a capitalist and I can see payday loans as a scam to bleed the poor dry.

The question I would ask is for about 220 or so years of this country there were no payday loans and we survived. How?

[Hannah Bell]

158. pawnbrokers. There's always someone to bleed the poor.

Might work to stop making people poor, though.

[ellie]

163. Exactly

Who do you go to when the bills are overwhelming? The bank? Bwahahahahaha! There are poor people out in the world who need help. I have used payday loans effectively on and off for a couple of years. I didn't go crazy. I didn't roll over any loan. I didn't go bankrupt. I have used them to see me through until I had the money. That is the way things are.

[Posteritatis]

51. A lot of them put the main hurt in something other than the rate

You've got your interest rate, and then you've got, say, a daily account maintenance fee here, another arbitrary service charge there, a third for not being a Super Platinum Borrower or something like that, and then you're charging the "low" interest on all of that...

[WillieW]

19. Those places are big rip offs, so are the "cash for your Gold" operations

[Zorra]

21. It's simple, and logical. Non-citizen workers cannot cash their checks

at banks, because they lack proper identification.

So these non-citizen workers use these pay day loan services to cash their paychecks, and take the loss as a consequence of working here illegally.

Another way that non-citizen workers often cash paychecks is to cash them at grocery stores (many times small mom & pop type places) that cater to a non-citizen worker clientele. The non-citizen worker gets her/his check cashed, and the store gets their business.

Kind of like a symbiotic relationship.

[skooooo]

23. I know 2 people who had lost jobs got hired by these places...

Now they get to call people up and ask them how they are going to pay their bills without a job.

They're the only places hiring!!

[NaturalHigh]

27. What's with them?

They're fleecing the poor and desperate. Basically, that's their business model. They just might be the most disgusting businesses in America.

Here in Oklahoma, our legislature was kind enough to finally make these leeches post a chart showing exactly what kind of APR interest a borrower would pay. According to the chart at one local vulture's window (conveniently located next to a video store and cell phone dealership so that one can get right to work spending that money), a two-week, $500 loan is paid back at a rate of about 399% APR.

[Recursion]

29. Yeah, but an APR is kind of silly on a 2-week loan

I mean, if you're keeping a payday loan out for anything close to a year, something is very wrong. There's not really an APR on a payday loan, there's a set fee.

[NaturalHigh]

31. You might have a point if everyone paid them back in two weeks...

but these business make their real money by people just paying the fee and renewing the loan or else paying off a little bit at a time.

[Citizen Number 9]

38. Only paying the fee and "rolling over"

is illegal in most places. Many states say that the loan has to be paid back in full before taking out another.

[Statistical]

49. your honestly don't believe that do you?

Here is how it works.

I take out a $480 payday loan. $600 due in 2 weeks.

I can't pay it back. The payday loan does 2 things at same time
1a) Issues me a new payday loan of $480 w/ $600 due in 2weeks
1b) collect $120 "vig"

2) pays off existing payday loan.

TAAAADAAA "Brand new" pay day loan for $600 due 2 weeks from today.

This happens every day for a total of hundreds of millions of dollars.

I remember seeing a report than less than 12% of all payday loans are paid off w/o revolving.

It is creating a new "semi-slave" class in this country.

Maybe they can reform the payday loan system.

Something like after the initial 2 weeks the loan can be converted to a tradtional loan, 1 year (24 bi-monthly payments) @ 36% interest. No prepayment penalty.
Something like that would work.

But the idea that someone gets stuck paying 1000% interest before they finaly are able to get from underneath the payday loan is rediculous and clearly an aversion of usary laws.

[Citizen Number 9]

68. I've already posted that "rollovers" are prohibited

in a lot of states.

Like I said at first, maybe some people just need to stay away from heroin and payday loans.

Difference being that when you take out a payday loan you sign a contract which states EXPLICITLY what your responsibilities and rights are.

[Statistical]

74. Rollover protection doesn't exist.

Payday loans NEVER loan out more than your net paycheck.

So you always will have enough to pay them back.

Net Paycheck: $800
Payday loan: $480.
Amount due in 2 weeks: $600

Now you pay the payday loan from next paycheck: $800-$600 = $200.
No way to cover bills this period so you are back in the EXACT SAME SITUATION.
So take out a payday loan: $480. = Money for this pay period: $680 = $120 less than before payday loan started.
Payday loan amount due: $600 (in 2 weeks).

2 weeks later:
Paycheck: $800
Payoff payday loan = $600.
Money left: $200.
Can't cover expenses on $200. So take out ANOTHER payday loan.
Look MR. REGULATOR this isn't a roll over. Loanee paid back each loan first. This just happens to be the 3rd unique loan in 3 pay periods.
Payday Loan: $480. Money for pay period: $200 + $480 = $680 (same as last pay period and still $120 less than paycheck before payday loan).
Amount due in 2 weeks: $600.

So total interest paid in 1 mo = $240 or 50% on $480 loaned.

If borrower keeps this up for another month they will have paid more than the principle without having paid down the debt $0.01.

Even CC (which are routinely bashed here) require you to paydown 1% of the balance. The new rules require a 2% paydown each month (in addition to interest & fees).

[AZBlue]

61. As I said earlier, you know NOTHING about this industry.

It happens in all states and is perfectly legal, whether you have a chance for a roll-over or you simply take the loan right back out after paying it off.

You're clueless, you really should stop while you're behind.

[Citizen Number 9]

66. Technically, a "roll over" is where the

borrower shows up with only the amount of the fee and gets the loan renewed for another fee. That is illegal in many states. States require that the loan be paid off in full; both principal and interest. At that point, the borrower is no longer on the hook and can walk away.

Here is a quote from a state's law concerning payday lending (small loans) which clearly indicates this.

WAC 208-630-770

May a licensee allow a borrower to refinance or "rollover" a small loan with another small loan?

A licensee may not allow a borrower to use a new small loan to pay off an existing small loan by the same lender or an affiliate of the lender. Licensees may not apply the proceeds from any small loan to any other loan from the same lender or affiliate of the lender.


Some states even require a cooling off period, although most will allow a borrower to make another loan once they have paid their outstanding loan in full.

You can only protect people from themselves so much before it gets ridiculous.

Before you start calling someone else clueless I think you should start supporting your allegations with a bit more obvious knowledge than that of conversations with your "friend".

[Statistical]

75. Which as multiple people have stated is NO PROTECTION.

The payday loan is due on the day of your paycheck.
The payday loan is NEVER (including fees) more than your net paycheck.

A payday loan payee will NEVER have a problem paying loan in full.
The problem is once they do they don't have money for EVERYTHING else that 2 weeks.

So they take out a new payday loan and the cycle continues.

Payday loans solve no problem. Every 2 weeks the payee is in the same financial problem they were in when they took first loan out.

Rather than have a 1 time hit on their finances (late payment, overdraft, etc) they just keep paying the payday loan company $120 (or 20%) every paycheck forever.

If it solves no problems then it doesn't benefit the consumer then it isn't a service.

[Citizen Number 9]

105. The borrower is happy to take the money in the first place.

With full and clear knowledge of the clearly disclosed fees and rates. If it is like you assert, how do borrowers ever expect to pay off the money they took?

The truth is that every time a borrower pays back, they have the option to NOT take out another loan.

If you take a "1 time hit" as you termed it on your finances, the fact remains that you are still short that amount of money, including the overdraft fees on it and all your other checks or debits and the resultant overdrafts as well. There's no such thing as the one-time hit that you are imagining.

You don't seem to understand or accept basic consumer mechanisms very well.

[AZBlue]

111. As I said before but you so conveniently ignored, I researched payday loans this fall.

Not only here but in Arizona. But you go ahead with your delusiions and false statements, the rest of us in the reality-based world will carry on just fine without you.

[Citizen Number 9]

133. Where is "here"?

[Statistical]

34. Except the fee is an insane % compared to the loan

A fee is an APR if it is substantial compared to the value being lent.

If mortgages worked similar to payday loans it would be something like this:
$200,000 mortgage = $120,000 in up front fees and then no interest.

Would you consider no interest loan like that to be fair. Just because 0% is charged monthly.
If you can't pay the loan in full in one year you need to refinance and tack on another $120,000 in fees.

Payday loans are a joke and get around usary by saying it is a "fee" not interest.
They prey on people. Their intention is to loan someone enough that they will NEVER EVER be able to pay off the principle and keep paying the "vig" for life.

I loaned some money to a lady on prosper who had been paying the vig on 4 payday loans for an average of 5 years.

She included scanned copies of all her contracts from payday companies. Over the last 4 years she had paid $26,200 on $3000 lent.
She had still not paid down $0.01 in principle.

She got a Prosper loan at 36% (max allowed by the site) and had it paid in full in 4 months. Payday loans are legal loan sharks.
The ability to have a "fair" (36% vs 283%) loan and one that easily allowed periodic payments enable her to clear the debt.

BTW: I strongly recommend people stay away form Prosper (too many deadbeats) but this lady did pay it off in 5 months.

[Justpat]

33. delete

[lifesbeautifulmagic]

37. all i know of these places is that they will cash pay checks when a bank

will not, even if the cashee has id and the check is obviously legitimate (paycheck). I have worked a couple of places (as a permanent employee) that used temp labor, and besides paying the temps the absolute minimum wage, the cost of cashing the paycheck and the bus ride to the fast cash place was just counted in as another bill.

It seemed to me that the price of cashing the check was outrageous, and predatory, and I have seen workers (usually female, and in a bad place in life) break down and cry under the stress of lack of funds. I don't see why banks couldn't provide this service for a more reasonable fee, especially if they are taking public tax money and the CEO's apparently have no consequences for their bad decisions.

Although, I am sorry to think about the former bank employees who will be using these services soon.

[Citizen Number 9]

106. If you can manage to keep a checking account, or even a savings account

in good standing, which usually means avoiding excessive overdrafts, or worse yet, a history in which you have defaulted on an account, then check cashing is made much easier and cheaper.


If you can't do that, the alternative is paying a hefty fee for someone else to take the risk of handing you cash in exchange for that draft you are holding.

[Greyhound]

40. We got rid of most of them by passing a law capping the usury they could charge

to 35%. Almost overnight, 3/4 of them closed.

Sounds like they moved to where you are.

Happy-happy, merry-merry!

[Liberal_in_LA]

44. Here's an article I posted a few days ago.

More in middle class using payday lenders

http://www.latimes.com/business/la-fi-payday24-2008dec2...

More and more middle-class families use the loans "to put off the day of reckoning," she said: "Too many families live with no cushion, so when something goes wrong they turn to payday lenders."

Payday loans aren't available only on payday. The term derives from the fact that they are designed to help borrowers get from one paycheck to the next, usually about two weeks.

Sheryl Loebig is a single mother of four who works as a paralegal for the nonprofit Legal Aid Society of Orange County.

After her aging Chevy Blazer died in early 2006, she cobbled together six payday loans for a $1,500 down payment on a new Toyota Corolla. She had no other credit options, she said, because medical bills had driven her into bankruptcy.

Two years later, the Anaheim resident had racked up $7,000 in fees to renew her loans every two weeks -- but still owed more than $1,000.

[Systematic Chaos]

45. But clearly, she should have read her contract...

... instead of making such a terrible, horrible "mistake". She should never have "juggled" more than one loan and should have instead just smoked a pistol so the State could take care of her children.

EXTREME :sarcasm:

[mrreowwr_kittty]

47. There are more payday loan places in Arizona than McDonald's and Starbucks combined. nt

[donco6]

88. One on every corner in Colorado.

Just like Starbucks.

Maybe they should merge?

[Posteritatis]

52. You can tell how hosed a local economy is by how many of them there are

When they start drying up, it's a sign that the community's doing well enough not to "need" them.

I spent a year in London, Ontario and there were seven or eight of the damn things on one of the main commercial streets. It was incredibly depressing. It really bothers me seeing a real business close and one of those things wind up in its place.

[Liberal_in_LA]

56. There is one in most mini malls in lower income Los Angeles neighborhoods

[Citizen Number 9]

71. Right. They perform a number of financial functions

that other banks and institutions simply refuse to do any more.

Legislating them out of existence closes off all kinds of options for their customers.

[Statistical]

77. Just like legislating the end of slavery ended a line of employement for blacks? (n/t)

[Citizen Number 9]

82. No, I don't think slavery and employment have any similarities other than

a method of occupying time.

[Statistical]

83. Exactly and a "loan" that consumes 20% of your take home pay forever is modern day slavery.

The only difference between payday loan and plantation owner.

Plantation Owner took 100% of labor of the slaves.
Payday Loan Owners are content to take "only" 20%.

[Citizen Number 9]

87. You're having a hard time understanding the basic facts.

A payday loan does not consume 20% of someone's income.

The principal on the loan belongs to the lender and is spent first by the borrower, creating the need for the loan. For the average borrower to spend 20% of their income, they would have to be spending $450 per month on payday loans.

I've now seen enough of your posting to see that you are either deliberately obfuscating facts and simple relationships in order to post, or that you do not have the perception level necessary to recognize these relationships yourself.

[Hannah Bell]

159. You're just lying now. Banks & credit unions don't "refuse" to perform those functions.

You can get a cash advance or small loan if you have a bank account or credit card, same as ever.

Banks have never made small loans to people without accounts or credit.

It's always been blood-sucking crooks who did that "service".

[Lydia Leftcoast]

53. It's the "poverty industry" coming to a neighborhood near you

Payday loan sharks charging exorbitant interest
Pawn shops, also charging exorbitant interest
Rent-to-own shops that have you paying twice as much as the item is worth
Check cashing agencies that take 10% or more out of every transaction

One of the many factors that keep poor people poor: you need to be financially sound to get reasonable credit terms. If you're poor, you're at the mercy of the vultures.

[Citizen Number 9]

70. People enter the Sub-Prime arena because they have not performed well

with regular credit, bank accounts, checking privileges, etc.

I don't think most consumers want to keep them in regular play as it would require higher rates from all the rest of us on many types of consumer contracts.

[cap]

76. A certain percentage of People cant "perform well" under the current economic and social system

In many cases, we are replacing the social safety net with payday loans. Medical expenses which should be at a reasonable percentage of a person's income are one of the drivers of payday loans. The salaries of the clients are too low to cover basic needs + a cushion and support a family. Paralegals at non-profits aren't paid a salary that is sufficient to support a family. People are not paid enough to be able to support a line of credit. Layoffs also hit the income stream hard as well. People need cars that work reasonably well instead of the cheapest junker that they can afford.


Maybe instead of payday loans we need a social safety net that hits the drivers of the clientele of payday loans: affordable health insurance, secure jobs that pay enough to support a family, a car industry that makes good cars and public transportation that ties neighborhoods where people live today with jobs that have higher wages (without a 2 hr commute), food and energy costs that are in line with what folks who make under $20K can pay. Unionization.

Most of the clients of these places make under $20K/year. There is no way these days that $20K jobs suffice to have a decent cushion for a family without a decent safety net. Everyone who is making it under $20K is rolling the dice that a number of things must fall into place: their job is steady, no health issues, their car is in good condition and is not asking for money during a family crisis. A certain percentage of people are guaranteed to be in a condition where they do need the money, ergo with a lack of a safety net, payday loan places flourish.

You know, when unionization was strong, these payday loan places were nonexistant. Think about it.

[Citizen Number 9]

81. There is no doubt that is true for a group of people.

Twenty percent of the population needs assistance of some kind to get through "life's challenges" on a regular basis, but that does not indicate a need to simply give people more money. When unionization was strong there weren't any iPods, but those don't have any cause and effect relationship, either.

Cap, you'll have to provide some substantiation for your claims. In fact, the average payday borrower earns more like $30,000 than $20,000 and the thing that distinguishes the greater portion of them from other workers is their propensity to spend, not the fact they don't earn enough.

[Hannah Bell]

160. yep, those places always sprout like mushrooms in bad times.

[Lydia Leftcoast]

78. You must work in the poverty industry yourself if you're justifying that

This isn't about "lending a helping hand" to people in need. If so, they would charge LOW interest. This is all about creating debt slaves out of desperate and often ignorant people--no matter what they told you in your corporate training program.

It's been my experience that sleazy companies ALWAYS claim that they're "performing a public service" or "making it possible for ordinary people..."

[Citizen Number 9]

84. In order to provide whatever service it provides,

A given company has to stay in business. Providing risky loans requires charging a higher interest rate. Can you explain to us why that might be?

Providing rental furniture to the subprime market requires higher rates than providing it on regular purchase contracts. Can you tell us why that might be?


People have choices. They make themselves debt slaves by the choices they make.

[Statistical]

86. Your agree the business model is to make people slaves?

The government has a responsibility to ensure the most disadvantaged of us are protected from modern day slavery.

[Citizen Number 9]

89. I'm having a hard time seeing where I said or even implied that the

business model is to make people slaves.

As I just pointed out, you seem to either have a perception problem or are deliberately misrepresenting things for us.

[Lydia Leftcoast]

125. No, you're the one who's defending an indefensible industry

Your corporate propaganda talks about giving the poor help when they need it, but your bosses know about "the miracles of compound interest" even if your clients don't. They charge interest rates that used to be exclusive to the Mafia and were highly illegal before the Reagan administration.

If you really believe that they're in business to help the poor, then you're a classic example of what one sociologist called a "dumb up," someone who takes his own privileges or other people's privileges as the natural order of things instead of as the way the rich and powerful have manipulated the rules to their own advantage. (Or you may be a "smart up," one who knows that the deck is stacked in favor of the rich and powerful and either doesn't give a damn or is thinking "Bwah-ha-ha.")

Here's the real reason the payday loan outfits and rent-to-own places don't charge low interest: people might actually pay off the loans, and then the company's income stream would be diminished.

It's like the credit card companies: They hate it when people pay off their balances. They'd rather have you carrying a balance and paying interest for the rest of your life.

If the payday loan outfits were REALLY working in the interests of the poor, they'd offer low interest loans that the poor could actually pay off.

When I was a graduate student, I didn't have the money to pay the deposit on an apartment because my T.A.'s salary wouldn't cover both the rent for my final time in the dorm and the deposit on my future apartment. The university lent me the money for the deposit for three months AT NO INTEREST. That's "serving the needs of the low income."

The rest is usury.

[Citizen Number 9]

139. You didn't have the money for a deposit

because you didn't plan for one, not because anyone or anything else harmed you. It's particularly nice that the (University endowment?) afforded money to help graduates get a start.

It's the default rate and the damages in the sub-prime arenas that cause the high rates, not an evil plan to enslave anyone. It's a market like anything else.

[Lydia Leftcoast]

148. I didn't have money for a deposit because my income was so low

and I had additional money from a TA job that first semester that allowed me to pay the loan back.

That's what bloodsucking usurers always say: That their victims aren't perfect like they are, that it's their own fault they're paying 500% interest.

Oh right, and we must never commit sacrilege against the Great Infallible God "Free Market."

[Statistical]

91. Truth about payday loans

http://www.rtoonline.com/images/CenterForResponsibleLendingPaydayLoanReport.pdf

Excerpts for those in a hurry

"Our analysis found that the industry relies almost entirely on revenue from borrowers
caught in a debt trap; ninety-one percent of payday loans go to borrowers with five or more loan
transactions per year"

"Over 62% of loans are to borrowers with 12+ transactions per year"

I would like to counter Citizen9's constant insistence that they are "emergency loans". That they are paid back and thus are a solution. The truth is the industry profits by keeping people locked into a cycle of debt. Consumer use a payday loan (often because they have no other choice) to avoid a 1 time fee (late payment, overdue, phone cut off, etc) and get trapped in a cycle. Ultimately they end up paying 100%, 200%, 500%+ MORE than they would have from the original financial event.

Payday loans are ONLY profitable by flipping customers over and over and over racking up a magnitude more "interest" than the original principle.

If payday loan companies actually cared about the consumer they could structure their products w/ a longer (realistic) time horizon.

Borrow $400. Pay back $600 as $100 per paycheck for next 6 paychecks. Yeah it would still be a horrible 50% "vig" (works out to about 300% APR) but it would be manageable. Most people wouldn't be forced to "flip" they could pay it off as 25% installments.

Why don't payday loans want such a model? 300% APR isn't enough? No. The reason is such a model would allow the consumer to actually pay it off. They don't want that. The goal is to keep people in perpetual servitude. Under most payday loans the "bank" has been repaid 100% of the principle after 4 paychecks. After that it is just pure profit and they bleed the consumer dry for as long as possible. Often times just trying to get ONE MORE payment. Why not? They have long since been paid back.

Taking the interest on the average payday loan principal as reported by state regulators, and multiplying
it by the average number of loan flips per year, we find that the typical borrower ends up paying
back $793 for a $325 loan. (See Table 3.)

Average principal (from state regulator data): $325
Typical fee for $325 loan: $52
Average transactions per year: 9
Total interest for original loan + 8 flips $468
Total principal plus interest paid: $793

The Georgetown study reveals the long-term nature of much payday lending... At a 300% APR, the
interest on a payday advance would exceed the principal after about 4 months. In these circumstances, the
loan starts to look counterproductive: rather than bridging a gap in income, the payday advance may contribute
to real financial distress...Advance America's disclosures show that repeat borrowing is important.

The loans are NOT a service they are modern day financial slavery. They are a horrible ugly industry that preys upon the poorest of society.

Ernst & Young published a report based on data from nineteen Canadian payday lending companies
with 474 stores totaling $830 million in loan transactions. They found that first-time loans are
twice as costly for the lenders as the cost of all loans averaged together, because of the extra time
and effort required to process new customers. Ernst & Young reached this conclusion: “The survival
of payday loan operators depends on establishing and maintaining a substantial repeat customer
base.”34

The payday loan model simply does not work in the happy fantasy world that Citizen9 lives in.

They NEED borrowers to flip the loan over and over and over to lock in a constant revenue stream while bleeding the poor slowly, not enough to kill them just enough to ensure they never get out.

Citizen9 lies about anti-"flipping or reborrow" laws. Those laws are a "feel good" nothing. Some states have laws on the books that say essentially the loan needs to be repaid before another one can be taken out.

The borrow doesn't have a problem w/ repaying the loan. The problem is that AFTER repaying the loan they don't have enough $$$ to SURVIVE until next paycheck So what do 91% of the borrowers do? They take out another payday loan.

BINGO. No violation of the anti-flipping laws. New week, new loan. Nothing flipped here. It is technically legal but goes around the entire purpose of the loan. Who cares if borrower just pays the fee every 2 weeks or pays off and then takes out new loan every 2 weeks.

Ultimately the same thing happens. 20% of the amount borrowed is taken. It creates a cycle that keeps the poor (those least likely able to afford it) paying over and over and over for the same product.

[Citizen Number 9]

94. I think the REAL truth is that

It is easier for people to pay the fees and interest on their payday loan than it is to earn enough to actually pay it off.

I think people routinely make bad decisions, but you appear to believe that people are absolutely and pathologically unable to make their own decisions and that we need to make them for them by demolishing their options.

Have you thought at all about the portion of consumers who handle payday loans safely and responsibly? I doubt very much that any of the people here who have expressed such vehement and misleading arguments against them are in any position at all to assist these folks, even if they were motivated enough to.

In case anyone who has been lurking wants to know the truth about what brings people to the payday lender in the first place;

For the sake of illustration, I will very roughly divide this out as follows;

About 1/3 have a bona fide need by an unexpected expense or a purchase desire, such as amassing a downpayment on a needed item, usually a vehicle. Fess these people pay would otherwise go to finance charges, increased item price or checking and debit overdrafts.

About 1/3 are chronic purchasers of luxury goods and services and never have enough money to satisfy their desires between paychecks. Fees these people pay would have gone mostly to the afore-mentioned goods and services or overdraft fees.

About 1/3 gamble, drink, smoke or do drugs to the limit of their income whatever it is. As soon as they get a dollar it is gone. Fees these folks pay would otherwise go to gambling, drinking, smoking or the drug dealer.

[Statistical]

96. Laughable

What is "responsible use"?

91% of consumers had to revolve their loan 5 times paying an average of 100% interest. Are those the responsible consumers? If not then the "responsible" market is 9%.

62% had to revolve their loan 12 times paying an average of 240% interest.

The truth is payday loans are predatory.

Are you aware DOD now considers them uncollectable debt. No garnishments or collection attempts are legal against military personnel. Wonder why? I guess the DOD just wants to see it's employees "suffer" by not having access to 300%+ APR "products"?

I doubt very much that any of the people here who have expressed such vehement and misleading arguments against them are in any position at all to assist these folks
Wrong. I did. Prosper Loans. I loaned $50 (as part of a pkg of $3000 to help a consumer break the continual cycle of debt caused by payday loans. She had $3000 in loans and had paid $26,000 in interest. The loan was at usary limit of 36% but even still the ability to have a reasonable (36% vs 300%) interest and more importantly the ability to spread payments out over a rational time frame allowed her to pay off the loan.

Bad news for me; she paid it off in 5 months. I didn't feel bad though; I was glad she did. 5 months and $400 in interest vs years and $26,000 in interest with no chance to pay it off.

[mbperrin]

100. Right. Here's the info on the military regulation:

http://www.defenselink.mil/releases/release.aspx?releaseid=11369


IMMEDIATE RELEASE No. 1168-07
October 01, 2007
New DoD Predatory Lending Regulation Takes Effect

The Department of Defense today put into effect a new regulation that protects service members and their families from high-cost, short-term loans.

The regulation limits the fees and interest that creditors can charge on three specific types of loans: payday loans, vehicle title loans, and tax refund anticipation loans. These three products were targeted because they have high interest rates, coupled with short payback terms.

Payday loan and vehicle title loans can often lead to a cycle of ever-increasing debt. Refund anticipation loans provide seven to 14-day advances on tax refunds, but at a high cost to the borrower. The financial stress service members and their families suffer in turn causes a decline in military readiness.

The new regulation is part of wide-ranging DoD efforts to increase ‘financial literacy’ among servicemembers and their families. These efforts include 24/7 access to confidential financial planning and counseling, a variety of financial readiness training courses, improving the availability of small low-interest loans from financial institutions, promoting the practice of setting aside a $500 emergency savings account, and educating service members on the availability of counseling, grants, loans and other services from military aid societies.

“We equate financial readiness with mission readiness,” said David S. C. Chu, under secretary of defense for personnel and readiness. “This is part of a larger effort to create a culture that encourages our service members and their families to develop sound financial strategies. Preparing for emergencies is an important step forward and vital to avoiding predatory practices and a cycle of debt.”

The regulation limits the annual percentage rate charged to servicemembers and their families on payday loans, vehicle title loans, and tax refund anticipation loans to 36 percent. The method for calculating the annual percentage rate encompasses all fees required at the time of obligation, with very few exceptions. All financial institutions – without exception – are subject to the new regulation.


My personal feeling about these payday places? Burn 'em. They're tapeworms, and like all parasites, should be eliminated. I warn my own students all the time that the real problem is that your credit is NOT cut off when your rating is poor - you just have access to incredibly expensive, incredibly deceptive credit.

[Citizen Number 9]

101. $50 That's great.

I'm sure we could find some takers for your generous offer of 50 bucks to alleviate the money needs of these poor consumers. Will you be making this on a regular basis or is this a one-time offer?

Actually, if yo have so much fire, maybe you could open up a place of your own for the community with donated premises and donated labor and donated capital such as you've just offered. That way you could screen the applicants yourself for quality and "neediness".

[cap]

115. by your own reckoning

the people taking payday loans are either:

people forced into it by a life event (in which case, these companies are preying on another person's misery. Misery that in previous times would have been met by the social safety net. I'm sure that you can agree that these people would be better off with things like universal health care rather than a payday loan? Or Unionization?).

or people who are not using the money for worthy purposes-- so why allow them to borrow money at all? Shut the payday loans down completely. Just like many communities lobby against casinos -- they don't want the accompanying social ills. Why lend money to the unworthy?

No need for payday loans. Either have a properly functioning welfare system and end income inequality. I see no reason to permit the unworthy to get loans to spend on items that they shouldn't own. No reason at all whatsoever for the industry. I'm sure you can agree. Shut down pay day loans.

[Citizen Number 9]

131. Who am I to decide what's worthy?

I don't smoke, drink (to excess) :P or gamble either, but all those are legal activities. I have no interest in forcing people to do what I think is best. If more people felt like you, you'd be very surprised at the things that might either disappear from your life, or alternatively, be rammed down your throat.

I have no idea what you're talking about with respect to "social safety net". Are you talking about their brother or their Mother?

You keep forgetting about the borrowers who have a need, take out a loan, pay it back and are helped by the service.

Finally, can you tell me why the banks and particularly, Credit Unions might hate Payday lenders and lobby against them?

[AZBlue]

112. Don't bother trying to discuss this with them -

they are obviously so superior to the rest of us we should all just bow and thank them for spending time with us.
:sarcasm:

[Citizen Number 9]

142. That may be your perception of the situation

I have my own ideas of what is and isn't good behavior, but I try to keep from forcing them on others.

[Systematic Chaos]

144. Well, even you aren't THAT good.

You're still on the early stages. You know - passing judgements on people, casting asparagus on teh intertubez - stuff like that.

You're still waiting for the voices to grant you the power to control us, I'd imagine.

What a hoot! :D

[FormerDittoHead]

116. 91% of the people are suckers then. I got mine, fuck 'em, RIGHT....?

You see, those people, they're not "hard working" - they don't know what it's like to "really work" and to "make the sacrifices" that one needs to make to get ahead, and then fuck 'em if they can't make it.

You see, I didn't get a speedboat for Christmas, even though I really, really wanted one, so I know what it's like to make sacrifices...

...and I don't mind if I live in a society which doesn't protect others, unless we personally know them. If they're not my friends, then fuck 'em. In the meantime, I have a job with my benefits, so let THEM work as hard as I did to get there, they're just dumb and lazy.

It seems that SOME people WANT to say that, but will use OTHER WORDS to say the same fucking thing.

Why they're not tombstoned yet is a little beyond me.

[dsomuah]

92. They are a symptom of a problem

This is a country that has lived on debt for the last 10 years.

[mrreowwr_kittty]

103. There's an unmistakable odor of Freeper in this thread.

Am I the only one who notices?

[Lorien]

109. No, you're not

it reeks.

[AZBlue]

114. No, I'm noticing it too.

Perhaps we should alert?

[mrreowwr_kittty]

117. Hasn't worked so far.

Unfortunately, being a douchebag on the economy is not enough to do it. There are so many legit DUers who've drunk of the Corporate Koolaid, that it might be hard for mods to know where to draw the line. Maybe he'll out himself on a thread about a social issue and get the long-overdue pizza delivery.

[AZBlue]

122. Well, I just did the same.

Maybe if the mods get multiple e-mails it will help.

[Systematic Chaos]

123. I gotta tell you, though:

In over six years on this site, this thread is the first - and damn sure last - time someone has caused me to have a complete melt down. Congrats to 'em for being the first to pierce my thick intertubez armor! Or something....

[Lydia Leftcoast]

126. He may or may not be a freeper but he's DEFINITELY

working in one of the poverty industries, either payday loans, rent-to-own ("Own a computer by paying $35 a week for a year!"), or check cashing.

[mrreowwr_kittty]

128. I think so too.

I guess you can do that and live with yourself if you honestly believe that the people you harm deserve it.

[Lydia Leftcoast]

130. Or if you don't give a shit and are a self-serving slimeball

who is good at thinking up rationalizations.

That's the other explanation, and it's in line with all the other right-wing rationalizations of screwing the poor, such as the idea that minimum wage laws hurt the poor.

[Citizen Number 9]

140. Sorry to disappoint you. Democrat my whole life.

I am an educated person who has questions about things like anybody else.

The difference might be that I make an effort to find out the truth about things as opposed to letting other people tell me what is and isn't true.

[mrreowwr_kittty]

141. Amazingly, your efforts have led you to embrace Freeper views on a host of economic topics. nt

[Citizen Number 9]

145. A lot of people, but you in particular

should reconsider your animosity towards people who aren't just like you. I think it leads you to make assumptions that just don't do you or discourse any good. As much as I'd like to thrash those who voted (twice) for the current Administration, the fact is that they comprise aobut half the population.

Hasn't the President-elect put a lot of emphasis on coming together to determine a more sensible course in the future?

[mrreowwr_kittty]

146. We've tried your Freeper Economy for 30 years now. It's a miserable failure.

You may call it "animosity" but it's really just recognition, on the part of many here, that you are wrong.

[Hannah Bell]

161. Truth about the payday loan industry. 34% profit margins. blood-sucking scum.

http://www.responsiblelending.org/issues/payday/briefs/page.jsp?itemID=29557872

[flvegan]

104. The doctor said I wouldn't have so many nose bleeds if I kept my finger outta there.

[Systematic Chaos]

124. But I guess the real question is:

Are boogers vegan?

:evilgrin:

[Critters2]

153. One here actually has a drive-thru window! nt

[WeDidIt]

154. They should be shut down forever

Every last one of them.

They are leaches who suck off the bad breaks of others.

They should be put out of business forever. It should be illegal to charge the interest rtes these usuers charge.

They are the lowest scum on the face of the earth.