Posted on 09/14/2019 2:10:34 AM PDT by C19fan
Lenders charge more to people known for not paying their bills on time... Drive by one of these payday loan places and most of the cars in the lot are less than 4 years old...
According to Fox News this evening, they are also working on state-wide rent controls.
Shylocks are exempted of course.
The bill would cap consumer loan interest rates at 36 percentage points above the main interest rate set by the Federal Reserve, which is currently around 2%. Consumer advocacy groups say some loan companies charge interest rates as high as 225%.
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36%! 225%!! The mafia makes better loans.
While I generally don’t approve of price controls, this doesn’t bother me if the cap is “high enough.” People who can’t borrow at less than 38% (current fed rate plus the 36%) shouldn’t borrow. Perhaps a much higher day or week rate can be allowed, which then settles into a capped (but high) longer term rate.
Remember all of the complaining about predatory lending during the last recession? Most of that was BS. Anything that approaches this cap rate... that’s what real predatory lending looks like.
California legislature has gone full wackadoodle.
This is what happens in a one party state. Add to that the fact the news media is nothing more than a mouth piece for the Democrats. There is no opposition to the Democrats in California. They owned it.
The Democrats have the public employee unions bought off as well as the educational system. Amazing the support you get when you open up the public purse to what ever group supports you.
Not going to change until the state is bankrupt. When that happens everyone is going be “shocked” since they did not see it coming.
Let's say I'm in the "payday lending" business and I lend someone $1,000. If I charge a seemingly exorbitant interest rate of 36% on that loan and the borrower repays it within one month, I'm getting $1,030 back at the end of the month ($1,000 x 36%/12). The 36% rate sounds ridiculously high, but when you consider the cost of running a business the $30 I'm getting on this loan probably doesn't even make it worth my while to do the paperwork for it.
On top of all that you have to factor in the very high risk to the LENDER who makes these loans. If the borrower defaults on the loan I described here, it would probably cost me more than $1,000 just to get my money back through any kind of legal process.
So, yeah -- there's a lot more to this whole business than just an interest rate.
The problem with this business is the clients aren’t very disciplined to start with. There is a reason why they are rejected by traditional banking system. They won’t pay back in month, in another month and further. Then they end up in debt twice as high as original loan and start crying usury. And there are a whole lot of people to feel for them.
In my humble opinion a person who are making debts deserves no mercy regardless conditions. Nobody forcing them into it.
I’m well aware of risk premia, as are all lenders.
The thing to look at is the net margin of the business for the different credit risk classes. In the credit card business, rates of 20 to 25% are not uncommon. The default rate on these is quite high, but the net margin after default is so profitable that many financial institutions are eager for this type of business.
So, at some point, if you have an extremely risky class of borrowers, a cap cuts into their ability to borrow. But, at some level of interest the business changes—default rates become extraordinarily high, and you’re in leg-breaker territory. Is it societally wise to cut off that sort of lending? That’s the issue to debate.
And yes, on a pay day loan, I’d allow a very high annualized rate for the first week or month, with the understanding that it is the motivator for quick repayment. But at some point, you’ve got to limit the loan rate for a longer term, or it will never be paid off anyway.
The Bible does not condemn the charging of interest.
Most people do not even know what an APR is or what it represents. Many loans people make to family members, friends, coworkers have triple digit APRs. Suppose you loan me $10 today and I pay you back in 3 days and you charge me 10 cents, then you charged me a triple digit APR. Even though the interest you charge is 1% the APR is about 122%. Does that make charging a dime a sin???????
Most people do not realize that for many utility companies, banks, credit card companies, land lords. etc., the late charges they charge would be triple digit APRs if those late charges were deemed interest. What I make is peanuts compared to what the local utility company makes in late charges and 55$ reconnection fees. Many large utility companies make upwards and over one million dollars a year just in late charges....and it is not the rich that is paying all those late charges.
In many states retailers, utility companies. land lords, etc are allowed to charge upwards to $30 (or more) for a returned check. Bounce a $20 check and get hit with a $35 charge from the bank and $30 charge from a retailer. That would be about 325% interest....with NO RISK being taken at all!!!
Get $25 overdrawn at the bank today and get hit with a $35 charge. Your paycheck gets deposited 3 days later and clears it up. That $35 charge on that $25 overdraft would be about 140% interest and over 15,000% APR.
Someone owed me $25 and I deposited the $25 check they gave me into my checking account. That check bounced and I got charged $15 because that check bounced. The bank charged that person who wrote the check $35. The bank made a total of $50 on a bounced check and took NO RISK AT ALL.
I know a person who had bad credit and bought a house. Because their credit was bad the best a lender would give them was 13.99%. Over 39 years, $155,000 loan at 13.99% mans they person will pay over $300,000 in interest on this sub-prime loan. Some kids entire lives are being ruined, many will go to their graves owing their student loan simply over the fact the lender is capitalizing the interest on those loans. People who have 20k on a credit card at 19% interest and pay the minimum amount can take over 2o years to pay it back and cost tens of thousands in interest. I would rather do a payday loan every month of every year for 30 years before I get caught up in some loans others have gotten caught up in.
What I am getting sick and tired of are the millions upon millions of sanctimonious holier than thou reprobates that sit up in a building on Sunday morning pretending to be something they are not. They live in adultery, lie, cheat steal commit all kinds of sins yet their so called “pastor’ will not say a word to them for he does not want to lose his job. Yet that sorry reprobate ‘pastor’ has no problem about condemning payday loans even though he cannot produce one verse from the Bible that says it is wrong. If me charging some $4 for a $25 two week long is sinful, then just about every business out there is sinful in what they are charging.
I have read that the lottery takes away about 9% on average of the annual household income of those at the bottom of the income ladder, the ones who can least afford it. Yet local “Christian” colleges where I live take lottery money scholarships. Evidently it does not matter the financial harm the lottery is bringing to the poor as long as the coffers of these “Christian” colleges are being filled up with lottery money. How can they ever with a straight face condemn the lottery when they are happily taking money from it??
THis is NOT a Christian nation, never has been. Working in the payday loan industry has made it easy for me to see why most people in this country do not want to have anything to do with organized religion.
You basically said it all.
I like that quote, very clever.
It is attributed to “The Demon,” an alien mafia lord in a series of books by Steven Brust, but Mr. Brust probably cribbed it from another source.
Yeah, they are missing the forest through the trees.
APRs on Payday loans run up to 2400%...
Thought that was illegal already.
Sucks as I was working for the US DOD and international companies for 20 years, and I came back to the USA with a FICO score of 0. I now make over $135K a year, yet the largest loan I was offered after I applied was $500 at 2400% interest. Fucking worthless.
Yet Indian and Communist Chinese H1Bs fresh off the plane can get new cars, home loans and credit cards, all backed and guaranteed by Microsoft, Facebook, Google etc.
Hi,
Actually I just skimmed the surface. I did not mentioned what these sleazebag bankruptcy attorneys get away with, how damaging social security has been to the working poor and the general hypocrisy people have towards payday leading. Their ignorance of payday lending is only exceeded by their total ignorance of the Bible. If they would spend more time reading and studying the Bible instead of thumping it they might actually learn something about it.
Liberal states as California probably do not make a lot money off of alternative lending businesses other than yearly licensing fees. Yet they make an enormous amount of tax money off of “vices” as smoking, the lottery and beer/liquor sells. The poor pay much if not most of these taxes.
Bill Clinton and the liberals thought everyone would live the American dream and be home owners so they used Jimmy Carter era laws to force lenders into make risky loans to the poor with no concern for their ability to repay these mortgages and created one of the the largest economic melt downs in history.
Obama let the gov’t take over student loans. Obama was too busy counting all the money he would make from those loans to pay for his socialism and was unconcerned about an 18-19 year old’s ability to repay that loan finacially ruining the lives of many.
But these liberals are concerned over a person’s ability to pay back a $200-$300 dollar small payday loan. Yet I am concerned about a person’s ability to pay me back for if I make a bad loan I pay for it in bad debt. I do not make loans for people who are at poverty levels which is about 12k a year. A person has to at least make double that before I even consider making them a loan. My average loan is $288 (including fee). The average household income of my customer base is 40K year. That means my average loan is just .007% of a borrowers yearly household income. I do business with people who make upwards to $100k year household incomes. These people are not ‘poor as dirt’ as the liberal liars in the media would have you believe.
In the state I live in, before alternatives loans as payday loans were available, the maximum amount a lender could chare was 24% APR. That means if you made a $50 loan payday today and it was paid back in 2 weeks you would make about 46 cents. A $100 payday loan paid back in 2 weeks you would make about 92 cents. Who would waste their time trying to run a business on such a small amount?? I could not EVER make any profit with a 24% APR on small short term loans. Just ONE bad loan would wipe me out. Yet these holy than thou sanctimonious hypocrites think a 24% APR is ‘fair and reasonable’. But I do not see these hypocrites out there making these short term risky loans for a few cents. Where are they at????
If it was up to me, I’d made serial failed borrowers pay with their body organs. Live within your means.
My landlord charges a $75 late fee per day, including weekends and holidays. And the online payment system they use, you can’t pay prior the the 1st. In September, because the 4th was the first business day of the month, my automatic payment was not credited until the 4th, although deducted on the 1st. $225 and an eviction notice on all apartments (maybe 20 on my building alone). Now I have to go to court, waste a day of work and pay an additional $300 for the eviction notice.
Been through eviction once with this place (I won), and I noticed that the judge was awarding the landlord all remaining rent on a lease, which could be over $10000 in some cases, plus court costs. Most of the tenants are lower-class, living month-to-month. So can’t break my lease until March... not giving this filthy landlord free money.
Chinese Communist absentee landlord with powerful Denver-based attorneys.
Oh, to pay online there is a minimum additional fee is $30. And they don’t accept checks or cash.
Colorado legislators removed the late fee limits and set eviction to 24 hours. Funny this from a now blue state.
Way, way back when I was in high school, they required 3 years of English Lit. and only a half a year of Economics and the teacher that taught Economics did not have a background in it. So the public education system is churning out people who are ignorant about money management but can quote Shakespeare.
In recent polls, they show 40-45% of all Americans do not have any savings. About 60% have $1000 or less in savings about 75% have less than $10K in savings.
In another recent poll, if I remember correctly, more than half polled said they would rather remain in debt and keep their luxuries rather than get out of debt and not have those luxuries.
This may help explain why households that make $40K up to 100K a year go get alternative type loans.
People also abuse credit. Recently I had a person who has over $100k annual household income file bankruptcy. The bankruptcy papers showed almost 60 creditors, [there may have been more], this person owed. How/why do people get themselves into these financial messes?!?! Yet society wants to blame the lenders and will not hold the borrower accountable. It’s blaming the fast food places for obesity and not holding the eater accountable for what they put in their mouths.
I do all I can to make sure a person can pay me back, that is good for me and the borrower. But I cannot be held accountable for the credit abuse that takes place which is ENORMOUS.
A person not long ago pulled up on his brand new, about $25k motorcycle to pay his loan. He paid more for his customized helmet than what he owed me. Over the years this person has taken out many loans with me. I have no problem at all making him all these loans. If he can afford a very nice house, nice clothes, expensive vehicles, motorcycles, yearly vacations, a $700 cell phone...he can afford to pay me. (I have not had a vacation myself in many years.)
I would add, I have many customers that make as much or more money than I do.
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