"Got no job? We don't care. Got a prison record? We don't care...Don't expect to pay us? That's when we care."
Posted on 06/04/2008 12:44:24 PM PDT by dcarey
A recent editorial in the Arizona Daily Star takes the view that payday loans should be outlawed in Arizona, as scheduled, in 2010. Payday loans are very small loans that accept future paychecks as collateral and charge high fees and rates of interest. .
While I agree with the Star that it's not good for people to be using payday loans on a regular basis, I think the choice should be left to individuals, not government. Generally, it's a bad idea to finance a business startup with credit cards. But I know a millionaire who did exactly that to get started in the highly competitive restaurant business. Just exactly what similar opportunities might be lost if payday loans are made illegal I can't say. I can say with certainty, however, that they're out there.
It's worth noting, I think, that a recent study shows that the payday loan business is only moderately profitable, with a return on equity of about ten percent. This is due to high overhead and high default rates. Lenders take a risk on risky people.
By outlawing payday loans, the government drying up a potential capital resource for the people who need it the most.
I’m starting to wonder what the mob used to do (before drugs) that made it so bad? Cut the government out of its take?
Booze (regulated heavy by most states, but not to control consumption)
Numbers games (the mob never dreamed of so many enticements and so a lousy payoff)
Solicitation (Fewer people pay for the cow anymore, when the governement war on marriage has resulted in the milk being free)
Corruption of labor unions (The government is now in the labor union busioness with AFSCME and NEA, making the mob an also-ran in that department)
and now loan sharking (private businesses do what used to be outlawed, they just pay the gov. its cut)
Usurious rates have long been considered unbiblical.
There must, therefore, be something inherently sinful in them.
And free markets are not enhanced by the unethical or the injurious. They’re advanced by straight talk and honest dealings.
Well reasoned and worded comment.
I should buy stock in plaster making companies since we can expect a dramatic rise in bone breaking.
Need it most? No one needs a loan with 3,000% interest.. these people are snakes, violators of every states usary laws and proof that big banks don’t have to obey the laws.. (Look up just how these places get away with ignoring usary laws, they do it the same way credit card companies do).
The maximum which could be borrowed was around $2500
BUT...
In the fine print was their interest rate of 99 and 3/4%.
Kinda like those Blue Hippo commercials where a valid checking account is your ticket to buying a $5000 home computer.
I’m not sure I’d agree with outlawing them, but I severed a longtime friendship with a fellow when he started his own payday loan business. I don’t need the friendship of a vampire.
Very well said
Thanks. While “let the buyer beware-ism” is probably wisdom, that doesn’t mean it is a desirable state of affairs.
Any way you slice it, the loan business is harsh. This is why, traditionally, tight fisted banks had the extraordinary gall to actually ask people what they wanted the loan for.
If you wanted a bunch of money because you *knew* that a horse was going to win at the track, the bank would unfairly tell you no. While it was really mean of them to do so, in the long run it didn’t just help the bank, it helped the consumer as well.
Granted, some people were so persistent that they were willing to go under the table, and get money from loan sharks. But this guaranteed indebtedness often for the rest of your life, or until the police arrested the loan shark, because the loan shark didn’t want you to pay back the loan, they wanted you to keep paying interest forever.
But then came along the credit card companies, to a large part run by the children of organized criminals, who had the law passed in their favor that they didn’t care how you spent the money, and you could deeply impoverish yourself if you wanted to. And not too long ago, they got another law passed so even if you went bankrupt, you will still be in debt to them.
This just illustrates how harsh the loan business can be.
Now, if we eliminate a part of the loan system that is particularly hard on the poor, will that help? Well, to some extent it will deprive people of opportunity. But to a greater extent it will keep people from spending beyond their means.
In balance, it is better to do without than go into debt.
Even the US navy is now putting payday loan companies off limits. This is because they have long had a rule that sailors deep in debt cannot ship out. And some sailors were using this to avoid being sent to the Persian Gulf. Others were being tricked into going into debt by these companies even though they wanted to ship. Subtle tricks to ensnare people over time, so they almost *had* to get a payday advance, yet never got out of debt.
The bottom line is that while some of the poor will improve their lot, the vast majority won’t. Those who will, will find some way to do it, so they need less help than the majority who shouldn’t be ruined.
I will take two or three lousy jobs before I deal with payday lenders.
Those operations are really entrenched here in SC and they will probably be here for the duration.
Wait until the Obama Presidency. He will take your money and give it to those who have too many bills.
"Got no job? We don't care. Got a prison record? We don't care...Don't expect to pay us? That's when we care."
One of the major nationwide practitioners and leaders in this type of lending is a relatively small, southern cal bank called Santa Barbara Bank & Trust.
They have received lots of grief from regulators, customers, and shareholders since the lending is so usurious and made for idiots frankly.
But it’s been a moneymaker for them for years, and despite the bad pub, they plan to continue it indefinitely. Maybe it will get legislated out and they’ll have to figure out a way to do it differently but the same.
Pay Day Loans = legalized loan sharking
The companies in question prey upon the financially illiterate. It’s just a legalized form of loan sharking. While I generally disagree with government involvement in markets, this is an amoral practice that should be curbed.
It’s interesting when you look back at how our culture has changed and how the things that were once considered sinful or taboo are now major industries. For example, gambling, pornography, and loan-sharking.
Actions have consequences. And a culture that tolerates gross immorality or amorality will eventually reap a bitter harvest.
“It’s shocking to me that almost every poster on this thread favors government-mandated price controls, which is what state usury laws impose.”
Why is that so surprising? This is not Anarchist.com. Responsibility comes part and parcel with freedom. Those who don’t act responsibly should not be surprised when the state intervenes.
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