Elizabeth Barrette (ysabetwordsmith) wrote,
Elizabeth Barrette
ysabetwordsmith
  • Mood: busy

The Problem with Payday Loans

I've always known that payday loans are a bad idea. They are used only by people so desperate that even living paycheck-to-paycheck is not possible. Payday loans are a last resort for instances where the car dies (and there's no other way to reach work) or someone gets a toothache (and can't work through blinding pain), etc.

What I didn't know was the cislunar rate of interest. It's not in the 30% range of, say, usurious credit card companies. It goes up to ...

... 800%. For people who don't have the original amount of money to pay whatever bill they took out the loan to cover in the first place.

Now, I'm not against charging interest on loans. I am against charging unfair interest. And I am absolutely against any business practice which can be demonstrated to be consistently and predictably harmful -- in this case, doing far more harm than good, as it creates a rapidly expanding problem at the direct expense of the debtor to the advantage of the lender. That's parasitical behavior and should be condemned. You have a right to make a living; you don't have a right to make a living by hurting people. That is wrong even if you find a way for it to be legal.

Note that society at large pays the price of the collateral damage in situations like this, as for example the current housing crash, to which usurious loans (both mortgage and payday) are contributing factors.
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  • 7 comments
xterminal

xterminal

March 28 2008, 19:10:38 UTC 13 years ago

Oh, yeah. It's sick. Ohio passed a law five or six years ago that check cashing companies have to post the annual interest on the loan somewhere in the building, in the interests of full disclosure; the lowest I've ever seen is 495%.

Didn't this country used to have usury laws? What the hell happened there? (I'm someone who believes credit card companies should be prosecuted for 25% interest. Those schmoes should be raked over the coals somethin' fierce.)
christinaathena

christinaathena

March 28 2008, 23:18:26 UTC 13 years ago

We still do, they're just ridiculously lax. I'm not sure about these payday loan companies, but credit card companies get around them by incorporating in states that permit very high interest rates, and the Supreme Court has ruled that credit card companies can charge interest based on the laws of the place where they're located.

I suspect the payday loan companies get around it by not charging their fees as "Interest" but as "service charges".

I've had to use them before, and I can see how it would be very easy to get caught in a trap of having to take out loans to repay loans.
ayoub

ayoub

March 28 2008, 19:18:26 UTC 13 years ago

That interest level is insane!
je_reviens

je_reviens

March 29 2008, 00:19:16 UTC 13 years ago

yeah what's even worse is that if you use them once then when usage is down the store managers call all the old customers to encourage them to come in and use their service too

Anonymous

April 2 2008, 18:23:08 UTC 13 years ago

Payday loan arepayday loans (http://www.checkcity.com) awesome they are a good option for unexpected financial needs.

Payday Loans

Anonymous

April 16 2008, 00:20:45 UTC 13 years ago

Yeah you have the point but I think the problem in the first place is not really in the Payday Loans (http://www.onlineloanresources.com/)company. I think people who made the loans got the problem. Why they continue if they knew they can't pay those interests. In the first place they can always say no if they think it's unfair and find a good source of money for their emergency needs.

ysabetwordsmith

Re: Payday Loans

ysabetwordsmith

April 16 2008, 00:30:43 UTC 13 years ago

People who borrow money from payday loan companies do have a problem: they're poor. When you're poor, reputable people don't want to loan you money on a fair basis. If you have a toothache, nobody will help you unless you give them money -- and they'll probably demand more than you make in a week, or even a month. So to stop the pain, you have to find that money somehow. It can force people to do a lot of things they would not otherwise choose to do. Most of those things continue to cause problems afterwards.