Regulators launch major crackdown on payday lenders

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LA Times:
Regulators launch major crackdown on payday lenders
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Federal regulators are launching a major crackdown on payday and other short-term, high-interest lenders by proposing tough new regulations to halt the cycle of debt that cripples some consumers.The planned rules from the Consumer Financial Protection Bureau would require lenders to determine a borrower’s ability to repay and to limit how often a consumer can roll over existing loans into new ones.
The proposed regulations are designed to keep cash-strapped Americans from falling into what the agency describes as a predatory debt trap in which they must take out new loans to pay off the old ones — ultimately paying more in fees than the original amount they borrowed.
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Payday lenders: In the March 26 Business section, an article about proposed rules restricting payday lenders said that one provision would require lenders to determine borrowers’ ability to repay loans. The article also should have said the proposal provides an option that would let lenders instead offer more affordable repayment plans.
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“Extending credit to people in a way that sets them up to fail and ensnares considerable numbers of them in extended debt traps, is simply not responsible lending,” Richard Cordray, the bureau’s director, said at a public hearing on the issue Thursday in Richmond, Va.
“It harms rather than helps consumers. It has deserved our close attention, and it now leads to a call for action,” he said.
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Normally I’m not a fan of more regulation but I would be glad to see these payday lenders put out of business.
 
didymus said:
LA Times:

Normally I’m not a fan of more regulation but I would be glad to see these payday lenders put out of business.
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I am sure that there are a lot of sleazy practices in the industry, but is leaving people with no options an improvement? I mean these are people who cannot even get a cash advance on their credit cards, their credit is that bad. I don’t know what the solution is.
 
stinkcat_14 said:
I am sure that there are a lot of sleazy practices in the industry, but is leaving people with no options an improvement? I mean these are people who cannot even get a cash advance on their credit cards, their credit is that bad. I don’t know what the solution is.
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Well, it means they do without…we had to do this a few times in the past, we had days when we had to watch how much we ate until we got our paychecks, nothing wrong with this.

I remember our community did just fine before all the payday loan places came in, people would be fine if they were suddenly gone again.
 
stinkcat_14 said:
I am sure that there are a lot of sleazy practices in the industry, but is leaving people with no options an improvement? I mean these are people who cannot even get a cash advance on their credit cards, their credit is that bad. I don’t know what the solution is.
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I think there are also people living on the edge on fixed incomes, or new immigrants, who do work for food etc. and get paid by checks (not paychecks with taxes taken out, etc.). Some don’t have or can’t have banking accounts … but these places will cash their checks.

Putting them out of business completely might mean not only the layoffs of their employees but some of these “on the edge” folks being put out of their motel rooms (where they live) when they run out of cash near the end of the month.

Some of those fixed incomes are too small to live on … and if one gets an “extra job” it sometimes puts the fixed income in jeopardy. The folks who recycle for cash, babysit, walk dogs, or “work for food” sometimes get paid in checks.

Loansharking should certainly be curbed by the Government. But these little oases for staving off the wolf at one’s door are all some people have to get them through until payday. I wouldn’t go for a “solution” that benefits government … and no one else.
 
CaptFun said:
I think there are also people living on the edge on fixed incomes, or new immigrants, who do work for food etc. and get paid by checks (not paychecks with taxes taken out, etc.). Some don’t have or can’t have banking accounts … but these places will cash their checks.

Putting them out of business completely might mean not only the layoffs of their employees but some of these “on the edge” folks being put out of their motel rooms (where they live) when they run out of cash near the end of the month.

Some of those fixed incomes are too small to live on … and if one gets an “extra job” it sometimes puts the fixed income in jeopardy. The folks who recycle for cash, babysit, walk dogs, or “work for food” sometimes get paid in checks.

Loansharking should certainly be curbed by the Government. But these little oases for staving off the wolf at one’s door are all some people have to get them through until payday. I wouldn’t go for a “solution” that benefits government … and no one else.
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There are other places you can get checks cashed, without falling into the hands of these people. A lot of grocery stores, for example.

I know people who’ve fallen for this. Payday loans are anything BUT an “oasis.”
 
stinkcat_14 said:
I am sure that there are a lot of sleazy practices in the industry, but is leaving people with no options an improvement? I mean these are people who cannot even get a cash advance on their credit cards, their credit is that bad. I don’t know what the solution is.
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Why does your idea of a solution involve spending more than you have?
 
Vasallus said:
Why does your idea of a solution involve spending more than you have?
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The problem is, our incomes and our expenses don’t always line up exactly, and there are times when it can be prudent to borrow. Before I took my first professional job, my alternator blew out when I was moving to the area where the job was. I spent more than I had to get it fixed, because without a car I wouldn’t have the job. It was a good decision, even that the outrageous interest rates the credit card companies charged. So people sometimes need credit, and if someone is willing to lend, why should we stand in their way?
 
Payday lenders charge exorbitant interest rates, and yet they often have loyal customers who keep coming back. Nobody forces them to.
 
JimG said:
Payday lenders charge exorbitant interest rates, and yet they often have loyal customers who keep coming back. Nobody forces them to.
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The fact that nobody forces them to go back to these lenders is not in itself a defense. Nobody is forcing drug addicts to go back to their junkies either.
 
LeafByNiggle said:
The fact that nobody forces them to go back to these lenders is not in itself a defense. Nobody is forcing drug addicts to go back to their junkies either.
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Quite true. The payday lenders and the drug dealers seem to be filling a need.

I once worked with a lady whose husband went into payday lending for a brief period of time, among the many business he tried. She was a little defensive about the whole thing. She says that his customers kept coming back even when he told them they didn’t need the money.
 
stinkcat_14 said:
The problem is, our incomes and our expenses don’t always line up exactly, and there are times when it can be prudent to borrow. Before I took my first professional job, my alternator blew out when I was moving to the area where the job was. I spent more than I had to get it fixed, because without a car I wouldn’t have the job. It was a good decision, even that the outrageous interest rates the credit card companies charged. So people sometimes need credit, and if someone is willing to lend, why should we stand in their way?
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Apparently your credit card company determined that you had a good chance of being able to repay your loan. If payday lenders follow this practice, this regulation would not stand in anyone’s way of using their services.
 
didymus said:
LA Times:

Normally I’m not a fan of more regulation but I would be glad to see these payday lenders put out of business.
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Here in Oregon they capped their interest at 36% with a ten dollar set up fee per loan. You get a few months to pay back the debt.
 
stinkcat_14 said:
The problem is, our incomes and our expenses don’t always line up exactly, and there are times when it can be prudent to borrow. Before I took my first professional job, my alternator blew out when I was moving to the area where the job was. I spent more than I had to get it fixed, because without a car I wouldn’t have the job. It was a good decision, even that the outrageous interest rates the credit card companies charged. So people sometimes need credit, and if someone is willing to lend, why should we stand in their way?
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Oh how did we ever survive before payday lenders?!?!
 
LeafByNiggle said:
Apparently your credit card company determined that you had a good chance of being able to repay your loan. If payday lenders follow this practice, this regulation would not stand in anyone’s way of using their services.
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The problem is, people who use payday lenders usually have such bad credit that they cannot get a cash advance on a credit card. If people had reasonable credit they wouldn’t need payday lenders.
 
didymus said:
LA Times:

Normally I’m not a fan of more regulation but I would be glad to see these payday lenders put out of business.
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These companies charge super-exorbitant interest rates and prey on the poor, working poor, and sometimes the middle class. With certain rare exceptions, they are loan-sharks with not an ounce of integrity.
 
Does anyone know the average profit for these types of businesses? Or what the default rate for these loans?

I suspect it’s not as profitable as it might seem. Remember these are very risky loans. Just to break even I suspect the average interest rate is considerably higher than the average bank signature loan.
 
Vasallus said:
Hmm never used either. Somehow managed to survive.
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It is a really bad idea to generalize from yourself. I never used either payday lenders or loansharks myself. On the other hand, I had parents who lent me money to go to college. Not much different than a payday lender, just lower interest rates. On the other hand, I have a friend whose father made her move out of the house when she was 16, he didn’t have the money to take care of her. For someone like her, it is not unreasonable to think of situations where a payday loan might be the best of a bunch of bad alternatives.
 
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