Usurious Payday Loans: Myths, Flawed Studies, and Solutions

[Donnachaidh]

http://www.ourfuture.org/blog-entry/2010051912/usurious-payday-loans-myths-flawed-studies-and-solutions


The trade association for payday lenders objected to what they called my "name calling" in their blog yesterday ... then called me a "pig."Why? Because I quoted Aristotle and told a story about Jesus. Well, to be fair, I did suggest their industry might be "evil" according to traditional definitions of the term. But that doesn't explain the payday defender who called me "Doofus Major du Jour."

There are some more civil arguments being used to defend payday lenders, however, and many commenters repeated them in the Huffington Post and in the DailyKos. These arguments are myths. They're being repeated by reasonable, well-intentioned people who have been misled by a wealthy lobby and its flacks.

Here's the truth, for all those well-meaning payday defenders out there: Payday loans weren't created to help underserved populations, but to exploit helpless people. Payday lenders are deeply connected to traditional banks, who freeze out certain customers so they can be preyed on by usurers. And that study you keep citing? It was paid for by industry money and used industry data, and a number of other studies refute it. But there's good news: Congress can fix the problem now.

A population in need? One common argument is that payday loans serve a group of people that can't get needed loans any other way. Shouldn't people be free to enter into contracts with one another, even if the terms seem outrageous to others? There are two problems with this argument. First, as a commenter pointed out, it can also be used to justify moral wrongs like slavery, too - although slavery wasn't a perfect analogy. A better one would be "indentured servitude," where poor people would trade away their freedom for a period of years in return for a cash loan. Civilized countries decided that these agreements, although they were legal and enforceable contracts, were immoral and must be stopped.


Much more at the link --

[leftstreet]

1. K&R

Well worth the read

[Wapsie B]

2. I sometimes wonder if the MBAs in charge of the banks behind these payday loan companies

are descendants of old-guard Mafia families? Send grandpa to jail for racketeering and loan-sharking but send Jr. & Missy to Wharton to become CEO of a bank.

[mimitabby]

3. excellent article, thanks

[Rex]

4. Payday loans are for people with such bad credit rating they cannot

get a credit card imo. We have embraced predatory capitalism as it eats our head.

[gratuitous]

5. We ain't got the bandwidth

To accommodate everything I have to say about the nest of snakes that is the payday/car title loan industry. The only good thing I have to say about them is that they are an object lesson for the nitwits who want to privatize social security, and who think that every individual who plays the market with his or her social security account will outperform the experts.

[Statistical]

6. Stop picking on payday loans. They don't need any reforms ....

they simply need to be outlawed. Period.

Payday loans need about as much reform as drunk driving needs reforms.
Both ruin lives, destroy families, and provide no benefit to society thus they should be illegal.

[donco6]

7. ad hominem is their only weapon.

I got into it on a news blog here in Colo when they were debating regulation of payday loan shops. The shill denied my calculation of percentage interest rate. They HATE when you reflect it in annualized terms. It's pretty hard to argue that that's what the rate is, considering the calculation has been around since . . . money? They're all total crooks and liars.

[Recursion]

8. Don't forget the check-cashing racket

Banks deny accounts to people with bad credit, then fund these check cashing places (generally the same storefronts with payday loans) which charge ridiculous fees to cash checks.

Though now banks are doing this too. The other day I got a check from a client drawn on Bank of America. There's one right next to my office, and the closest branch of my bank is out in the burbs. So, I went there to cash it -- they wanted to charge $5! I asked "is this a bank or a liquor store?" and left. Since when have banks been allowed to charge a fee for cashing their own check?