Economics: PayDay Loans- Bastards or Black Sheep?

[Speaker to Animals]

Here's the thing: the high interest rates are commensurate with the risk. This is what lending to the poor means. Banks aren't going to do it, and they spend money maligning these pay day loan businesses because those businesses usually also provide check-cashing and alternative banking services that actually are more affordable and better than what banks provide. That's why you hear nonstop "ZOMG the pay day lenders!!" It's not really because of the loans. It's because of the check cashing and banking services.

I shit you not, once you use them, you will see that they are actually far more honest than any bank or credit union.

[Hanarchy Montanarchy]

Payday loan businesses are basically charities, operating on razor thin margins to provide for under-serviced communities out of the kindness of their hearts.

The villainous practice of democracy should be banned, cruel as it is to these paragons of virtue.

This sentiment highlights something I hope others will notice as we move through these topics - What is good economically and what is good politically are often polar opposites. This is a truism we can highlight countless ways.

Imagine for a moment that I’m running for office, and my platform is this:
“No more predatory payday lenders, a ban on exploitive price gougers, and more rent controlled housing for the people. It is time for the rich to stop abusing the poor!”

That’s fairly good politics. A lot of people will favorably react to that messaging because they have no love for “the rich” and they feel compassion for the poor.

But once the policies are in place, how do the poor actually fare?
Not well:

• • They lose their lenders.
  • During disasters all needed supplies are cleared out by the first people to reach them (aka being poor or rich matters little, being first counts)
  • A housing shortage commences (except for luxury housing which is typically exempt from rent control)

Popular political policies championed as protections for the poor can actually harm them. But that doesn’t matter to a politician. A politician needs votes, not effective economic policies. So it is important that voters understand basic economics in order to choose leaders with ideas that actually help them, rather than ideas that sound “right” but wind up hurting them.

Hey now, I already agreed with Clubby's comment that they are better than loan sharks, and, if nothing else, a necessary evil.

And, they are better than loan sharks because they are subject to the rule of law and the regulations therein. I am not overly concerned if certain regions want to make payday lending a difficult practice. I leave it to various municipalities to determine what they think is acceptable, and what should count as usury.

But to pretend like people in dire straits should be tearfully grateful to their payday lender, or to go into orgasmic paroxysms over the triumph of markets because payday lenders exist, seems a little, as the kids would say, extra.

[Hanarchy Montanarchy]

Yes, indeed, competition among lenders and freedom to trade are really bad for poor people.

How much is Bank of America paying you, Martin and HM?

I am a card carrying statist in the service of BoA pro bono bro.

[Speaker to Animals]

I don't recall payday lenders almost crashing the global economy, bankrupting entire third world nations, defrauding millions of home owners in perjury-riddled foreclosure documentation, plundering the national treasury to the tune of 11+ trillion dollars, etc. etc.

Cry me a river about the noble banks and those dastardly payday lenders.

[K@th]

But to pretend like people in dire straits should be tearfully grateful to their payday lender, or to go into orgasmic paroxysms over the triumph of markets because payday lenders exist, seems a little, as the kids would say, extra.

Tearfully grateful? Lol.

Nobody is forced to use them. Once the couch diving for change plan no longer works, and you've got no friends nor family who will loan you a few bucks, there are two choices. Payday loan or suffer through it.

Why take away the option? If paying the higher rates means the difference between eating or not, or homeless or not, or heating or not.... I know I chose eating a few times. I lived through it; even learned from it.

[Speaker to Animals]

When you go to a payday lender / check cashing business, ALL the fees are right there on the board. There are no hidden fees. No surprises. No looking at your balance and wondering where the fuck all you money went.

They are FAR more honest than any bank or credit union. It's not even in the same ballpark. Does that mean they are the best option for you? Probably not. But there exist lots of people for whom they are superior options to banks and credit unions. Like, not even comparable.

[DBTrek]

But to pretend like people in dire straits should be tearfully grateful to their payday lender, or to go into orgasmic paroxysms over the triumph of markets because payday lenders exist, seems a little, as the kids would say, extra.

I’m not asking folks to praise, celebrate, or even like payday lenders. I’m just asking them to understand how and why the system works as it does before they decide to deprive their neighbors of an economic tool.

[DrYouth]

I'm with you on this DB...

The facts of Economics do not belong to the left or the right.

The laws of supply and demand are forces of human nature and systems theory.

They are not evil of good.

Mercury is a God of Neutral alignment.

Trying to reign in economic forces tends to result in perverse incentives and harm to the economy as a whole.

But as a society we do need to think about those that don't have access to the economy to thrive.

And knee jerk reactions and emotional politics rarely accomplishes what we think it will.

More education on economics and myth busting both on the left and right is very welcome... thanks for the crash course DB!

[Speaker to Animals]

I mean.. this debate is silly. Are we really going to pretend like bankers are the good guys?

[Hanarchy Montanarchy]

Are we going to pretend like there is no such thing as usury?