I knew payday loans were bad but wow!!!

[GoodSteward]

I was watching a documentary about payday loans in UK. I'm sure it is the same in the us, but apparently at some point, they had to start listing the APR on the tv ads. And people keep using them!! 2356%!!!! Apparently they go up to over 5800% APR. The fees must be absurd.

[GoodSteward]

Great googly moogly! How about this percentage. wow!

[disneysteve]

It is insane. Thank Congress, at least in the US, for passing legislation years ago that allowed this to occur.

In a few months, the tax refund loans will start and those aren't a whole lot better. The interest on those often tops 200%.

Unfortunately, as with credit cards and other things, people only look at how much it will cost in dollars. They ignore (or don't understand) the percentages. Yes, that loan may only cost you $50, but that $50 might represent a 500% interest rate.

[james.hendrickson]

Disneysteve is correct.

The good news is that lawmakers don't appear to be holding large amounts of shares of publicly traded payday loan companies, so the industry may not have the same pull that the petrochemical sector does.

[disneysteve]

The good news is that lawmakers don't appear to be holding large amounts of shares of publicly traded payday loan companies, so the industry may not have the same pull that the petrochemical sector does.

I'm sure those lawmakers have plenty of ties to the banking industry and that was a key factor in changing the laws that made all of these insane lending practices possible.

[frugal saver]

The pink slip loans are worse, in my opinion. The interest rates aren't as high, but if you're late your car is repossessed.

I guess if you're desperate, they're an option. But they prey on the people that can least afford to lose even more.

[disneysteve]

they prey on the people that can least afford to lose even more.

Exactly. It is all predatory lending, and it's perfectly legal. Immoral, but legal.

You don't see these places in nice neighborhoods. You see them in poor areas along with the check cashing stores, pawn shops, and laundromats. The only exception is the tax refund loans which can be found everywhere taxes are done like H&R Block. Considering it only takes 10-14 days to get your refund if you file electronically so I never really saw the point of paying a couple hundred percent interest to get it a few days earlier.

[frugal saver]

Exactly. It is all predatory lending, and it's perfectly legal. Immoral, but legal.

You don't see these places in nice neighborhoods. You see them in poor areas along with the check cashing stores, pawn shops, and laundromats. The only exception is the tax refund loans which can be found everywhere taxes are done like H&R Block. Considering it only takes 10-14 days to get your refund if you file electronically so I never really saw the point of paying a couple hundred percent interest to get it a few days earlier.

There's pink slip loan and check cashing places in my neighborhood and I'm in a regular middle class suburb. Unless that means my neighborhood is going downhill.....

[bjl584]

People that are desperate and in need of money right now don't care about interest on those loans. Most of the people taking out those loans don't even understand interest or what APR even stands for.

[Fishindude77]

I don't buy the "predatory lending" angle.
This is a service that people want and are willing to get raked over the coals for, or these places would not exist. They probably need to charge 200% interest, because a large percentage never pay back a thing.

If it wasn't for these places, they would be going to hustlers and getting their arms broken (or worse) when they didn't pay back on time.

[disneysteve]

I don't buy the "predatory lending" angle.

Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn't need, doesn't want or can't afford.

I think these loans fit the definition of predatory lending perfectly. They prey on poor, uneducated customers and use misleading and deceptive marketing to get them to sign for loans with insane terms that the borrowers can't really afford.

These places exist because Congress changed the banking laws to allow them to exist. If reasonable lending laws were still in place, many of these people wouldn't qualify for a loan, which would be a good thing as it would force them to learn to manage with what they've got.

[Fishindude77]

Because we all know imposing additional laws and regulations at the federal level always works out for the best.

You can't protect people from themselves by adding new laws.

[Singuy]

Talking about payday loans, John Oliver just did a great piece on subprime auto lending loans. Blew my mind!

[disneysteve]

Because we all know imposing additional laws and regulations at the federal level always works out for the best.

You can't protect people from themselves by adding new laws.

In this case, the government removed existing protections by changing the usury laws. I don't recall all of the details but I would assume the banking lobby had something to do with it.

I agree that you can't legislate away stupidity, but I'm not opposed to consumer protection laws.

[james.hendrickson]

Talking about payday loans, John Oliver just did a great piece on subprime auto lending loans. Blew my mind!

Got a link or a referance?