177% APR, legal loansharking

[tkingdoll]

They publish their APR in big letters, no-one challenges it as excessive, so a big company gets away with loansharking.

http://www.providentpersonalcredit.com/

Typical APR 177% although they quote 220% for some loans.

I am trying to fight anger because my not-great-with-money mother just got caught out by an agent for these people, who did not inform her of the APR or the total amount payable before selling her the credit (in the form of shopping vouchers).

Annoyingly, the agent in question is a friend of my mother's so she's refusing to pursue this.

Any other examples of insane-but-somehow-legal business practices?

Also, shall I get someone to kneecap the agent to give her a taste of REAL loansharking tactics? :D

[fagin]

Interest rate is quite clearly stated on their website - not even in the 'small print'.
So what's the problem. It's high but if anyone is stupid enough to borrow from them....................

[tkingdoll]

Interest rate is quite clearly stated on their website - not even in the 'small print'.
So what's the problem. It's high but if anyone is stupid enough to borrow from them....................

The problem is that their agents do not tell the customers what the APR is, despite being legally obliged to do so. Or at least, that didn't happen in this one case. I have already explained that so you've just called my mother stupid for no reason.

Anyone can become an agent for this company, it's like being an Avon representative. You can do it in your spare time and you get a commission for every loan you sell. It's a subprime company so they specifically target the unemployed, single parents, those in poverty. The agents are not trained financial advisors, they are selling peer-to-peer. Housewives selling loans to their neighbours.

Those in poverty generally have a lesser degree of education and do not necessarily understand how much they will be paying back in total. They just see that they can get their kid's xmas presents for £4 a week.

To sell a loan at those interest rates to those who can least afford it is indefensible. It's barely even legal. It's only stated clearly on the website because it would be illegal otherwise. Oh, and that same demographic is also the one with the least internet access.

[OnlyTellsTruths]

Interest rate is quite clearly stated on their website - not even in the 'small print'.
So what's the problem. It's high but if anyone is stupid enough to borrow from them....................

Support legalized loan sharking, stupid people are open season, don't forget to equate old people and mentally challenged with being stupid, brilliant!

[madurobob]

"payday lending" has been doing this for years... some with much higher APRs. Clearly this is legal loansharking but the purveyors insist they are providing a much needed service. The service, I suspect they are referring to, is to their personal bank accounts.

There have been state Attorneys General fighting this behavior and some states have passed laws significantly limiting the interest rates they can charge. But, there is obviously a lot of money to be made and with laws differing by state its easy for the loansharks to find a friendly place to do business.

As for your neighborhood loanshark - don't cap him, but at least pull him aside and let him know that you will personally see to it that he suffers physically for any excess interest your mother has to pay. That may rattle his cage enough.

You might also check the laws in your state. What he's doing may in fact be illegal.

[Lothian]

I think you might want to do a bit of research. There was a case a couple of years ago “Tony and Michelle Meadows” They had a loan which grew and grew. In the end the court wrote off the debt as the rate was excessive.

It was only! 34.9% but was over 15 years. There may have been other factors in that case.

You will know that excessive bank charges are illegal it may be the same here.

[balrog666]

I was about to add that "title lending" and "payday loans" are usually the biggest such frauds, but I see that that has already been posted.

In fact, it is quite common for small loan companies to have effective interest rates of 50% on high-risk loans (after buying such notes at a steep discount). And they get that discount because they are assuming the risk.

[The Atheist]

*Note: My company is in the business of offering payday loans.*

In terms of the OP, if UK credit law is anything like our credit law, then failure to disclose fully the interest rate/APR negates the contract.

Whose fault is it that payday loans exist - the borrower for being a slacker unable to access a bank overdraft at an APR of maybe 25%? Or the lender, for providing a service which people may choose to use or not, knowing full well what the costs are?

[madurobob]

knowing full well what the costs are?
Thats the arguing point.

I know people who have used payday loan services and swear it saved them from complete ruin. On the other hand, the target demographic often appears to be people who for one reason or another can't use normal banking services - such as migrant workers. When the customer base is generally uneducated and has no other option it looks suspicious when rates are extremely high.

Much like having to pay $100 to fix a flat tire in the desert with no other service station for a hundred miles. The mechanic feels justified since its a vital service and the rate is what the market will bear at the time. That doesn't make it any less predatory.

Here in NC they recently passed new legislation on payday lenders. I'm not sure of the specifics, but the lenders were none to happy about it.

[Gravy]

Teek, that's not unusual for short-term loans. For example, in some US states where payday loans are legal, the interest rate can be as high as 900%. Such loans would typically have a 2-week term, but that doesn't mean they get paid off then. Several states have banned such loans entirely, and others have max interest rates that are more in line with credit card rates. Lawmakers have trouble plugging all the loopholes that lenders find. Next month a law goes into effect that caps interest on loans to US military personnel at 36%. These people have averaged loan payments of 2-3 times the loan amount for small loans. Killer.

[quixotecoyote]

Don't you have to sign a contract when you take out a loan?

One of my pet peeves when I worked at Chrysler was having to tell people, "No you can't just give the car back and call it even, didn't you read what you signed?" Half the time they say no.

[Wolfman]

Whose fault is it that payday loans exist - the borrower for being a slacker unable to access a bank overdraft at an APR of maybe 25%? Or the lender, for providing a service which people may choose to use or not, knowing full well what the costs are?I wrote a whole long diatribe...but decided that I could simplify it this way.

I grew up in a village of 900, many of whom had minimal education, and little money. They were farmers, grocery store staff, gas station attendants, mechanics, etc. Not people that I would describe in any way as being "slackers". They are hard-working, honest, decent people with very limited financial resources.

I've seem people from companies like yours prey on such people intentionally. They know just how to frame the sales pitch so that it all seems so reasonable, so affordable.

"Slackers"? This is the bullcrap rationalization of someone who either intentionally is lying, or who is deceiving themselves. Yeah, some of these people are slackers; a hell of a lot more suffer for the 'crime' of not being educated/sophisticated enough to see through the crap being thrown at them.

And "knowing full well what the costs are?" Really?!? Okay, maybe your company happens to be different from every other company in this business. But in my experience, the agents/salespeople are actually trained to do everything possible to avoid giving a complete, honest, full picture of what they are getting into.

So, before I go further, a point of clarification from you.

In your company, do you tell your salespeople/agents that they should, up front, disclose in full detail the full amount that the borrower will have to pay? ("If you pay this back in three months, you'll pay this much; if you pay it back in six months, you'll pay this much; if you pay it back in one year, you'll pay this much") Regardless of whether the client actually asks such a question (and therefore, the claim that they "know full well what the costs are" would, in fact, be a fair and accurate claim)?

Or, do most/all of your salespeople/agents do their absolute best to avoid giving the "big picture", and instead try to break it down into amounts that make it sounds reasonable? ("It will only cost you $2.00/day, which is less than the cost of a coffee at Starbucks!"; "It will only cost you $20/week, which I'm sure is well within your budget, right?")

Funny, the way you describe it. On the one hand, you view your clients with complete disdain. They are "slackers". Lazy, no-good bums. If they had any integrity, if they were willing to work hard, they wouldn't be in this situation. whatever happens to them is their fault.

Yet, in the very next sentence, they are suddenly transformed into economic whizzes who, based on minimal information given to them by an agent who doesn't really give a damn about them, and only seeks to get his commission, nevertheless "know full well what the costs are".

Personally knowing people who've been taken in by scams like this, I'm certainly quite confident in stating that a good number of them are not slackers. And most of them really don't have much understanding at all about the full cost of what they're agreeing to. And the agent trying to convince them to do it does everything they can to maintain the impression that the cost is quite minimal.

Now, you can do whatever work you want to do. I know that I've taken criticism from some people for my professional choices, particularly in regards to working with the Chinese government.

But skip the self-justifying bullcrap like the statement I quoted. Its quite a damning condemnation of the credibility or integrity of any statements you make regarding this industry.

[Wolfman]

Hmmmm...may have to re-visit and reconsider that whole "Business and Civility" thread :D

[LordoftheLeftHand]

Typical APR 177% although they quote 220% for some loans.



Wow that's obscene!

LLH

[madurobob]

You have to sign it, you don't have to be able to read and/or understand it... or care.

I've found car sales folks to be a bit pushy about this. One of my favorites was when a friend of mine was trying to sell a car to a young couple who complained "but we don't have any money!" His response was "we sell cars to people with no money all the time! Sign here.

They did. My friend and I went out for drinks. He guaranteed me the car would be repo'd within 6 months - he didn't care. I lost a little respect for him that night.

[geni]

The rates are extreamly high but somewhat more comprihendable than say the rates on my credit card.

[The Atheist]

Thats the arguing point.

Correct, that's why I asked for someone more familiar with UK credit law to state what disclosure provisions must be made at the start.

Next month a law goes into effect that caps interest on loans to US military personnel at 36%. These people have averaged loan payments of 2-3 times the loan amount for small loans. Killer.

Is that right? A law is being enacted which will only cover military personnel?

How's that possible?

Don't you have to sign a contract when you take out a loan?

Absolutely.

Hmmmm...may have to re-visit and reconsider that whole "Business and Civility" thread :D

I'll deal with your post in more depth later, those questions have been asked and answered before.

Wow that's obscene!

LLH

As Gravy noted, 177% is mild.

You have to sign it, you don't have to be able to read and/or understand it... or care.

In NZ, that's completely wrong. The responsibility is entirely on the lender to ensure that the borrower understands what the cost of credit, costs of default and remedies avaible for defaults. Our laws are very specific and "sign on the line" is asking to have the contract revoked and be penalised for it.

I would imagine that actual disclosure laws elsewhere are quite similar - it's whether those laws are adhered to is the problem. I'm guessing that with tkingdoll's mother, they weren't and she's not prepared to take it up because a friend is involved. A friend? With mates like that, you'd save time on having enemies.

[The Atheist]

I wrote a whole long diatribe...but decided that I could simplify it this way.

Ok, pistols at dawn then!

I grew up in a village of 900, many of whom had minimal education, and little money. They were farmers, grocery store staff, gas station attendants, mechanics, etc. Not people that I would describe in any way as being "slackers". They are hard-working, honest, decent people with very limited financial resources.

Yet when it comes to understanding a fairly simple document - and payday loan docs are - you don't think they should take some responsibility for it themselves? That's the sense of "slacker" I'm using, especially as payday loans are only given to people who have a payday - i.e. in a job, so they're not the other type of slacker at all.

The facts are quite plain:

Amount of loan $200
Amount to repay $250

The borrower can see that he's going to pay back $50 more than he borrows, which is really the only thing he cares about. If the repayment is in four weeks' time, the APR is roughly 300%. So, it is necessary to explain to the borrower that that is his effective interest rate, on an annualised basis. If someone's not happy with that, there is no need for him to proceed.

I've seem people from companies like yours prey on such people intentionally. They know just how to frame the sales pitch so that it all seems so reasonable, so affordable.

So have I, mate. Personally, I can assure you that I don't work that way, there's no sales pitch involved and no commissions are paid. We have a small clientele of purely internet-driven business and people apply to us, we don't advertise at all and all of our business simply comes from searches*. We have no telephone book listing.

*As it happens, I've suspended even the website in recent months - we have a really stable clienetele of people who borrow off us 3-4 times annually and are 100% happy to keep doing so and we have enough at the moment.

Yeah, some of these people are slackers; a hell of a lot more suffer for the 'crime' of not being educated/sophisticated enough to see through the crap being thrown at them.

How uneducated is the average customer?

I can only speak to my personal experience, which covers my operation and several others which are known to me, as "competitors". I use the term loosely, because while they're in the same line of business, we simply don't have any competitors.

So, who borrows from payday lenders?

1 You must have a [stable] job to be considered
2 You must have a stable address - meaning a telephone or internet directory listing*
3 You must have a reasonable credit rating
4 You must have identifiable assets
5 You must have an identifiable cheque account in your own name

*In our case, a residential e mail address is also a pre-requisite - no hotmail/vmail, etc.

Are those the type of people likely to be so dumb they don't know what they're getting into? That cannot understand what the terms of repayment are?

I don't personally know any lenders who would advance money to someone unemployed, for starters. Some companies do, but they operate another level down again. Certainly in NZ, payday loans are fairly respectable and well-legislated for, although I do struggle to accept a system which allows unlimited APRs and have seen some over 600% pa. Legislation is due to fix that.

And "knowing full well what the costs are?" Really?!? Okay, maybe your company happens to be different from every other company in this business. But in my experience, the agents/salespeople are actually trained to do everything possible to avoid giving a complete, honest, full picture of what they are getting into.

Ditto the above. I don't think it's just me, but I do admit that my business is run along more ethical lines than almost all of the others. Without trying to sound like a saint, I entered this market because I have a mate who charges up to that 600% mark and I don't agree with going that far. I saw an opportunity to make some good money without being outrageous about it. I can verify that my loans company operates at the very lowest rates of the spectrum of payday lenders, but then, it isn't an essential part of the business, it's a little cream on the top for very little work and we're extremely selective about who we lend to. Accordingly, we make a lot less (but still plenty) and we have no bad debts.

So, before I go further, a point of clarification from you.

Pretty sure I've covered all that. Again, without wanting to blow my own trumpet, but I'll say it because I can back it up**: I run ethical businesses as a matter of my own peace of mind. I disdain industry groupings for industries I'm involved in, because I don't believe their ethics match up to mine. I am certain that nobody we've ever lent to was in any doubt at all as to what the true cost was.

I accept that lots of companies don't operate like that and that's one reason why I'd never have people selling the service on commission.

**Oodles of evidence if ever required.

But skip the self-justifying bullcrap like the statement I quoted. Its quite a damning condemnation of the credibility or integrity of any statements you make regarding this industry.

I hope I've disspelled at least my role in all of it, like I said, if I wasn't happy that I could back my own position up, I wouldn't be doing it. Even though I agree with you that lots of the companies which operate payday loans are unscrupulous at best, and sharks at worst, I repeat the earlier question - who's to blame for the existence of payday loans? The company which offers them, or the borrower who seeks them?

When we had the website operational, we found an average of a dozen people would find the site daily by searching for "payday loans" while the rest (another dozen or so) found us through links on the recruiting website.***

Out of that, we used to get 2-5 applications a day (more after the weekend - funny that), of which almost all were discounted virtually immediately: no job, no e mail, bad credit rating...

Of the rest, we'd investigate and usually offer a loan, making full (and yes, I do mean full) disclosure of the terms. As I said, now, all of busines is repeat business and I think the only one-off customer we've ever had was the only #### who made getting it back hard work.

The demand for payday loans is huge.

I can accept rules being instituted to cap rates - another thing I've been very publicly in favour of - but I can't accept that the business itself is immoral.


***Just to reassure you that I'm no scammer, I used to have a link on the front page of the recruiting website to the payday loan pages. Considering we do recruiting for two of the world's largest engineering companies, it's not likely we'd be connecting ourselves to any dodgy dealings. Recruiting provides over 20x the income from a few piddling loans.

[Gravy]

Is that right? A law is being enacted which will only cover military personnel?

How's that possible?It's possible in several ways, but what eased the law's passage was making it a military benefit, rather than an exception to existing lending laws. There's a summary here (http://www.pliwatch.org/news_article_060921A.html) and a detailed explanation of the history and rationale behind the law here (http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-4264.pdf) (pdf). The law is confined to payday lending, vehicle title loans (not vehicle purchase loans) and tax refund anticipation loans.

[Normal Dude]

It's possible in several ways, but what eased the law's passage was making it a military benefit, rather than an exception to existing lending laws. There's a summary here (http://www.pliwatch.org/news_article_060921A.html) and a detailed explanation of the history and rationale behind the law here (http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-4264.pdf) (pdf). The law is confined to payday lending, vehicle title loans (not vehicle purchase loans) and tax refund anticipation loans.

I'm glad to hear this. Having been in the military myself and an NCO, I told my privates that if they were getting loans or purchasing something on credit, they had to run it by me first. Some of the terms and interest rates I saw made my blood boil. It's no secret that there are plenty of people around military bases ready to take advantage of young 18-year-olds away from home for the first time and inexperienced with handling money.

[balrog666]

I'm glad to hear this. Having been in the military myself and an NCO, I told my privates that if they were getting loans or purchasing something on credit, they had to run it by me first. Some of the terms and interest rates I saw made my blood boil. It's no secret that there are plenty of people around military bases ready to take advantage of young 18-year-olds away from home for the first time and inexperienced with handling money.

Maybe it's okay to do that if you are a banker?

[Normal Dude]

Maybe it's okay to do that if you are a banker?

Can you clarify this statement please?

[The Atheist]

It's possible in several ways, but what eased the law's passage was making it a military benefit, rather than an exception to existing lending laws. There's a summary here (http://www.pliwatch.org/news_article_060921A.html) and a detailed explanation of the history and rationale behind the law here (http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-4264.pdf) (pdf). The law is confined to payday lending, vehicle title loans (not vehicle purchase loans) and tax refund anticipation loans.

Amazing.

Anyone suggesting one law for military personnel and another for the general public would be run out of town on a rail looking for tar remover, on this side of the planet.

I'll be interested to see where it leads - the legitimate providers will shut up shop at that rate but I doubt that demand will decrease, so there could be a nice little earner there for some genuine crooks to move in.

[madurobob]

I wrote a whole long diatribe...but decided that I could simplify it this way...
That was your simplification? Damn, I'd hate to see the diatribe!:D

[madurobob]

It's possible in several ways, but what eased the law's passage was making it a military benefit, rather than an exception to existing lending laws. There's a summary here (http://www.pliwatch.org/news_article_060921A.html) and a detailed explanation of the history and rationale behind the law here (http://a257.g.akamaitech.net/7/257/2422/01jan20071800/edocket.access.gpo.gov/2007/pdf/07-4264.pdf) (pdf). The law is confined to payday lending, vehicle title loans (not vehicle purchase loans) and tax refund anticipation loans.
Interesting, they cap the interest rates private lenders can charge members of the military - but there is no guarantee that any credit will be available at that rate.

Its been about a year since the law passed - I wonder if the overall value of loans to military personnel has decreased significantly or if there has been a change in the bankruptcy rate? If payday lending has effectively been eliminated for the military this may not be an entirely good thing.

[Wolfman]

TA,
So, who borrows from payday lenders?

1 You must have a [stable] job to be considered
2 You must have a stable address - meaning a telephone or internet directory listing*
3 You must have a reasonable credit rating
4 You must have identifiable assets
5 You must have an identifiable cheque account in your own name
So, you call a person who has a stable job, stable address, reasonable credit rating, identifiable assets, and an identifiable cheque account a "slacker"? And, as I stated before, most of the farmers/mechanics/etc. who live in my home town would qualify in pretty much all those categories, yet many haven't even finished high school.

I'm still waiting for you to address your description of your clients as "slackers". I note that you've now changed your argument somewhat, avoiding the issue of the people taking the loans, and now trying to focus only on the issue of "providing a service". But your description of the people who take loans from you and your company -- that is, "slacker(s) unable to access a bank overdraft at an APR of maybe 25%" -- shows a huge amount of your attitude towards these people, regardless of any personal claims of 'altruism' that may be involved in your own business. "Oh, yeah, they're a bunch of slackers, but I do my best to treat 'em nice."
Even though I agree with you that lots of the companies which operate payday loans are unscrupulous at best, and sharks at worst, I repeat the earlier question - who's to blame for the existence of payday loans? The company which offers them, or the borrower who seeks them?
This is a misleading question at best. I've heard a similar argument used by weapons dealers, for example. And by drug dealers.

"Who's to blame for the existence of arms dealers? The company that offers them, or the warmonger who seeks to buy them?"

"Who's to blame for the existence of crack and heroin? The people who offer them, or the addicts who seek to buy them?"

In all of these arguments, it is self-evident that if nobody were seeking to buy weapons, or nobody were seeking to buy drugs, that those people would be out of business. However, that argument has nothing whatsoever to do with the morality of the product that they are offering to sell. The fact that there are people who "want it" doesn't automatically justify "selling it".

You use great arguments in deconstructing what other people say; yet your own defenses here are, in my opinion, extremely weak.

[The Atheist]

TA,

So, you call a person who has a stable job, stable address, reasonable credit rating, identifiable assets, and an identifiable cheque account a "slacker"? And, as I stated before, most of the farmers/mechanics/etc. who live in my home town would qualify in pretty much all those categories, yet many haven't even finished high school.

I did point out that we were using different meanings of the word, but I will stick by them to that degree. People need to take responsibility for themselves, and if they don't understand this kind of thing, there are a multitude of free services (in this country at least) which will help people learn about them.

Again, where do you draw the line on personal responsibility for finances?

The people you're talking about have enough savvy to have a job, buy food, have kids and raise those children, but not enough to understand a $200 loan?

I'm still waiting for you to address your description of your clients as "slackers".

As above, plus one thing I will note; the enormous majority of people who apply for payday loans are smokers. I bet they spend a lot more on gaspers than they do on interest and my guess is that if they cut the cigs, they'd probably avoid the need for payday loans.

If someone fails to live within his means thanks to pointless [and dangerous] addictions, I class that as slacking. If they're too dumb to understand a $200 loan, what the hell are they doing procreating? How stoopid are their kids going to be?

I note that you've now changed your argument somewhat, avoiding the issue of the people taking the loans, and now trying to focus only on the issue of "providing a service". But your description of the people who take loans from you and your company -- that is, "slacker(s) unable to access a bank overdraft at an APR of maybe 25%" -- shows a huge amount of your attitude towards these people, regardless of any personal claims of 'altruism' that may be involved in your own business. "Oh, yeah, they're a bunch of slackers, but I do my best to treat 'em nice."

Yeah, I'm blunt, eh? I have to confess that when lists are made of my good traits, tact is never on the list!

But I am calling it as I see it. Why can't they access a bank overdraft? Because they're slackers! They don't have great credit history, they've almost certainly had bounced cheques.

(You wouldn't want to hear how I class recruitment candidates ;) )

This is a misleading question at best. I've heard a similar argument used by weapons dealers, for example. And by drug dealers.

"Who's to blame for the existence of arms dealers? The company that offers them, or the warmonger who seeks to buy them?"

"Who's to blame for the existence of crack and heroin? The people who offer them, or the addicts who seek to buy them?"

The bad news is that I agree with those sentiments. I've long been in favour of complete decriminalisation of drugs. Surely, we've had suffcient evidence that prohibition doesn't work and it just moves the operators underground?

In all of these arguments, it is self-evident that if nobody were seeking to buy weapons, or nobody were seeking to buy drugs, that those people would be out of business. However, that argument has nothing whatsoever to do with the morality of the product that they are offering to sell. The fact that there are people who "want it" doesn't automatically justify "selling it".

No it doesn't, but as 1920s prohibition showed - illegality is irrelevant to supply and demand.

You use great arguments in deconstructing what other people say; yet your own defenses here are, in my opinion, extremely weak.

Crikey, I thought they were impeccable!

I'll be very interested to see what the results of the changes to military payday loans does. If the problem disappears and lenders continue to lend at vastly reduced rates, then you're right - all that's needed is a big stick to keep lenders within boundaries. If the problem goes underground and people end up beholden to actual loan sharks, then I'm right. At least with a payday loan, the worst that can happen is bankruptcy, with a shark, it might be a pound or two of flesh is the price of default.

Time will tell.

[balrog666]

Can you clarify this statement please?

It was a joke, Dude!

[CFLarsen]

*Note: My company is in the business of offering payday loans.*

...

Whose fault is it that payday loans exist - the borrower for being a slacker unable to access a bank overdraft at an APR of maybe 25%? Or the lender, for providing a service which people may choose to use or not, knowing full well what the costs are?

What makes you think it's a choice?

[Giggywig]

What makes you think it's a choice?

Are there no other alternatives?

[joobz]

This reminds me of the rent-to-own businesses that exist.

First job out of college my brother had was a manager at one. He showed me how people would come in to rent a $200 TV for $7 a week with a pay off time of 18months (~$500). at one missed payment would forfeit the contract and they would lose the chance to "own" the product.

People would rent entire living room set ups at nearly $60-80 a week, with the expectation of paying 2-3times the retail price of the items.

Each time someone came in, my brother would clearly explain that they are losing money doing this. If they just waited 3 weeks and saved that $60, they could buy themselves a TV, then wait another 3-weeks and buy the couch....

Regardless of his explanations, they would want to buy it becuase they wanted the stuff now.

He quit after 2 months. He couldn't handle facilitating people's own financial self destruction.

[Esperdome]

What makes you think it's a choice?

I think, at least for people in the U.S. and other industrialized nations, you choose to live paycheck to paycheck. No one is forcing you to spend all your money, you have only yourself to blame. Either get a better job, work longer hours, or start living within your means.

I think TA and others provide a valuable service, they keep the P to Ps from hitting me up for an interest free loan. :D

Teek's mother may be in a different category, fixed income, where it can be hard to budget with increasing costs on all sides. But to save for the holidays she'd do much better with a passbook savings account.

[kookbreaker]

Of note: During Philadelphia's mayoral primary, one Knox presented himself as a 'Self made man', having made a fortune on his own. He was a front runner in the race.

Then it was revealed that his fortune was made by predatory payday lending.

His campaign crashed pretty quickly. Nobody was thrilled with that. All the candidates did suddenly have 'fair lending practices' bills on their agendas soon after that, however.

[Gravy]

Interesting, they cap the interest rates private lenders can charge members of the military - but there is no guarantee that any credit will be available at that rate.

Its been about a year since the law passed - I wonder if the overall value of loans to military personnel has decreased significantly or if there has been a change in the bankruptcy rate? If payday lending has effectively been eliminated for the military this may not be an entirely good thing.The law goes into effect October 1.

[JoeEllison]

The fact that predatory subhuman scum can find willing victims doesn't make them any less predatory, or any less subhuman. I can't wait for someone to defend drug dealers by saying that people could just say no. :mad:

[Esperdome]

The fact that predatory subhuman scum can find willing victims doesn't make them any less predatory, or any less subhuman. I can't wait for someone to defend drug dealers by saying that people could just say no. :mad:

Are you saying that some people are predestined to spend every dime they've got three days before payday? They have no free will and shouldn't pay a price for extreme fiscal irresponsibility?

And those who loan them money at a rate commiserate with the risk of default are not human?

How much of the service industry do you view as predatory subhumans? Lawyers? Doctors? Policemen, Firefighters? They all make their livings off our inadequacies.

[The Atheist]

What makes you think it's a choice?

Oh, go on. This I have to see.

Please feel free to suggest any possible way a lack of choice is involved.


I think TA and others provide a valuable service, they keep the P to Ps from hitting me up for an interest free loan. :D


Glad to be of service!

Excellent answer just above this post, too.

[JoeEllison]

Are you saying that some people are predestined to spend every dime they've got three days before payday? They have no free will and shouldn't pay a price for extreme fiscal irresponsibility?

And those who loan them money at a rate commiserate with the risk of default are not human?

How much of the service industry do you view as predatory subhumans? Lawyers? Doctors? Policemen, Firefighters? They all make their livings off our inadequacies.

Nice strawman there.

I'm sick to tears of sociopaths who think that exploiting the mistakes of others is good, because people who make bad decisions deserve to be taken advantage of. There's something wrong with a society that thinks part of the population should be preyed upon by another part.

[JoeEllison]

What makes you think it's a choice?

Clearly, poor people choose to be poor. They choose to be born to poor parents, they choose to be born without the advantages that rich people have. They choose to work difficult jobs(sometimes two of them) for low pay because they are clearly lazy. They choose to get sick or have car accidents or other so-called "unavoidable" things that force them to have bills they can't keep up with.

Everything is a "choice". That's how the predators and the folks who lack empathy make themselves feel better about their lack of compassion... by blaming their victims.

[Esperdome]

Nice strawman there.

I'm sick to tears of sociopaths who think that exploiting the mistakes of others is good, because people who make bad decisions deserve to be taken advantage of. There's something wrong with a society that thinks part of the population should be preyed upon by another part.

Eliminate payday loans and what will these people do? Change their spending habits? Most will go back to what they did before these were readily available, pawn enough stuff to keep the lights on and keep from getting evicted.

They often lose these items at the pawn shop, get a little bit ahead a few months later, and buy more nice stuff. Times get tough and the cycle repeats. They don't see as much value in a healthy checking account balance as in tangible stuff. People make poor choices all the time.

If you think the rates charged by payday loaners are extreme, set up a company providing loans at what you think is a fair rate. That's just what TA did. You might find this isn't as easy as it looks.

[baron]

The fact that predatory subhuman scum can find willing victims doesn't make them any less predatory, or any less subhuman. I can't wait for someone to defend drug dealers by saying that people could just say no. :mad:

People could just say no.

[madurobob]

If you think the rates charged by payday loaners are extreme, set up a company providing loans at what you think is a fair rate. That's just what TA did. You might find this isn't as easy as it looks.
I don't want to speak for Joe, but I think you've missed his point. Maybe the rate thats charged for an 8-ball of coke reflects the risks inherent in being a coke dealer, but that by no means justifies the coke dealer being in the business in the first place.

I think Joe is against the payday loan business in general

[JoeEllison]

I don't want to speak for Joe, but I think you've missed his point. Maybe the rate thats charged for an 8-ball of coke reflects the risks inherent in being a coke dealer, but that by no means justifies the coke dealer being in the business in the first place.

I think Joe is against the payday loan business in general

That's exactly right.

[Geek Goddess]

I'm glad to hear this. Having been in the military myself and an NCO, I told my privates that if they were getting loans or purchasing something on credit, they had to run it by me first. Some of the terms and interest rates I saw made my blood boil. It's no secret that there are plenty of people around military bases ready to take advantage of young 18-year-olds away from home for the first time and inexperienced with handling money.

My brother was a warrant officer at Fort Bragg, and he had the same rule for his privates. Many of them had never had a paycheck before they joined, and frequently came from family backgrounds with no experience in handling finances. The main roads out of the post are lined with used car dealerships that are only too willing to convince this young kid that he can have his first nice car for not much money. My brother arranged for them to go to seminars on budgets and handling money.

I lectured Sailor Boy on this a bit before he went off to boot camp and school 'do NOT go buy some fancy car. Do NOT take out loans from car dealerships or any other organization that is not a bank or your credit union.' He saved up his money for several months, and then bought a used car through his credit union, and financed it for six months. One of his ship mates, 18 years old, had never owned a car and didn't even have a license. Some "tote the note" dealership sold him that car! He had to go take driving classes, and because he had no driving experience and couldn't be bundled into his parents' insurance, his own insurance was $500 per month! That, on an E-1 salary! He had no money for rent or food. SB tried to talk him out of it, but the kid thought he was rich because he was getting a steady check.

[Paul C. Anagnostopoulos]

I'm confused. Paying back 495 on a 300 loan in about 1 year is an APR of 65%.

~~ Paul

[jsfisher]

I'm confused. Paying back 495 on a 300 loan in about 1 year is an APR of 65%.

~~ Paul


Payments are made weekly for 55 weeks. I come up with an APR of about 103%. Not the 177% quoted on the site, but still outrageous.

[Esperdome]

I don't want to speak for Joe, but I think you've missed his point. Maybe the rate thats charged for an 8-ball of coke reflects the risks inherent in being a coke dealer, but that by no means justifies the coke dealer being in the business in the first place.

I think Joe is against the payday loan business in general

That's exactly right.

Funny thing is, I am too. But I see the problem from the other side. If people would quit being whinny about it and take personal responsibility for their finances, these companies would dry up overnight.

It ain't gonna happen. Those giving out the loans are financially responsible and provide a vital service to those who refuse to be.

[JoeEllison]

Funny thing is, I am too. But I see the problem from the other side. If people would quit being whinny about it and take personal responsibility for their finances, these companies would dry up overnight.

It ain't gonna happen. Those giving out the loans are financially responsible and provide a vital service to those who refuse to be.

Way to blame the victims. Clearly, they "refuse" to be rich, so they deserve whatever they get.

[tkingdoll]

I think, at least for people in the U.S. and other industrialized nations, you choose to live paycheck to paycheck. No one is forcing you to spend all your money, you have only yourself to blame. Either get a better job, work longer hours, or start living within your means.

I think TA and others provide a valuable service, they keep the P to Ps from hitting me up for an interest free loan. :D

Teek's mother may be in a different category, fixed income, where it can be hard to budget with increasing costs on all sides. But to save for the holidays she'd do much better with a passbook savings account.

My mother has a good job. She has savings and disposal income. She bought the vouchers as a favour to her friend, not because she needed a cash advance. Her friend did not tell her there was any interest payable at all, let alone the crazy amount that she's ended up paying. Her friend simply said "you can pay this back at £2.50 a week, and I get commission, you'll be doing me a favour". She's been paying it back for months.

My mum was foolish not to read the contract and not to figure that her friend's commission was coming from somewhere, but as I said she is lousy with money and extremely trusting.

Not sure I can do anything though, my mum is refusing to take any further action, mainly because she works with this woman.

I thought about reporting the friend to their employer, as she is not only moonlighting as a Provident agent, which I assume is a breach of contract, but is selling vouchers to her colleagues under false pretences. But...my mum will know it was me, I guess.

[Esperdome]

Way to blame the victims. Clearly, they "refuse" to be rich, so they deserve whatever they get.

You don't need to be rich to stop living paycheck to paycheck, you just need to be responsible.

[joobz]

You don't need to be rich to stop living paycheck to paycheck, you just need to be responsible.
Having lived pay check to pay check as a grad student, I can say you are wrong. Being responsible prevented me from gaining debt. Living pay check to pay check was the best I could hope for.

[Paul C. Anagnostopoulos]

Payments are made weekly for 55 weeks. I come up with an APR of about 103%. Not the 177% quoted on the site, but still outrageous.
How did you calculate that? Isn't 195 paid on 300 in about one year approximately 65% APR?

~~ Paul

[Paul C. Anagnostopoulos]

Her friend simply said "you can pay this back at £2.50 a week, and I get commission, you'll be doing me a favour". She's been paying it back for months.
Is there some sort of no prepayment clause? Why not pay it all back now and avoid some interest?

~~ Paul

[Modified]

How did you calculate that? Isn't 195 paid on 300 in about one year approximately 65% APR?

~~ Paul

Only if you pay the entire total at the end. Imagine the extreme opposite, you pay $299 the day after you get the loan, and $196 a year later. APR is then approximately 19,600%.

[Esperdome]

Having lived pay check to pay check as a grad student, I can say you are wrong. Being responsible prevented me from gaining debt. Living pay check to pay check was the best I could hope for.

Having been one myself, college students tend to always be poor, but you're investing in your future. :D

I think we're talking about the working class P to P's primarily. But you might be shocked to find how many making 100G a year are still paycheck to paycheck.

[jsfisher]

How did you calculate that? Isn't 195 paid on 300 in about one year approximately 65% APR?

~~ Paul

If there were only one payment, that would be correct. With multiple payments per year, you need to take the annual interest rate and divide it by the number of compounding periods.

Since payments are weekly, and there would be 365/7 compounding periods per year (or 360/7 depending on the banking convention), the interest calculated at the end of each week would be:

Balance * APR / (365/7)

If you have Excel or similar spreadsheet program handy, you can use the PMT function.

Weeky payment = -PMT(APR/(365/7), 55, 300)

(The 55 is the total number of payments for the loan.)

[tkingdoll]

Is there some sort of no prepayment clause? Why not pay it all back now and avoid some interest?

~~ Paul

She won't even discuss it, she's not confrontational. That's one of the reasons I'm so mad. My mum is the world's meekest person (goodness knows where I get my feisty temper from) and her friend either took advantage of her or wasn't aware herself what she was selling. Either way, the chances of my mum having any sort of conversation with her friend about this are zero. She'll do anything for the quiet life. Her response when I explained about the APR was "oh, well, it's only money, it doesn't matter." I could tell she was upset but would just let this slide for the sake of peace.

It's my mum's sixtieth birthday party next weekend. I am so tempted to take the friend aside and ask her if fleecing gullible widows helps her sleep at night.

[JoeEllison]

You don't need to be rich to stop living paycheck to paycheck, you just need to be responsible.

Right. Of course, people that get sick or hurt or laid off or have medical bills or other financial emergencies are obviously irresponsible. :rolleyes::rolleyes:

[JoeEllison]

Having lived pay check to pay check as a grad student, I can say you are wrong. Being responsible prevented me from gaining debt. Living pay check to pay check was the best I could hope for.

I'll bet one or two bad weeks could have wiped you out, especially if your parents weren't able to bail you out... no matter how responsible you were.

[Paul C. Anagnostopoulos]

If there were only one payment, that would be correct. With multiple payments per year, you need to take the annual interest rate and divide it by the number of compounding periods.
Well, of course. I was confusing APR with annualized percentage rate, or some such thing.

~~ Paul

[Normal Dude]

It was a joke, Dude!


Sorry. I just wasn't sure what you meant. I guess my joke-radar wasn't functioning very well. :D

[Normal Dude]

My brother was a warrant officer at Fort Bragg, and he had the same rule for his privates. Many of them had never had a paycheck before they joined, and frequently came from family backgrounds with no experience in handling finances. The main roads out of the post are lined with used car dealerships that are only too willing to convince this young kid that he can have his first nice car for not much money. My brother arranged for them to go to seminars on budgets and handling money.

I lectured Sailor Boy on this a bit before he went off to boot camp and school 'do NOT go buy some fancy car. Do NOT take out loans from car dealerships or any other organization that is not a bank or your credit union.' He saved up his money for several months, and then bought a used car through his credit union, and financed it for six months. One of his ship mates, 18 years old, had never owned a car and didn't even have a license. Some "tote the note" dealership sold him that car! He had to go take driving classes, and because he had no driving experience and couldn't be bundled into his parents' insurance, his own insurance was $500 per month! That, on an E-1 salary! He had no money for rent or food. SB tried to talk him out of it, but the kid thought he was rich because he was getting a steady check.

Yes, it is amazing what some do with their money. And lenders love military because if they don't pay, they can go straight to their chain of command. A lot of people wonder why I was involved in my soldiers financial affairs, and my answer is that their financial state affects the units readiness as a whole. Plus, being in debt can be a security threat.

[The Atheist]

Well, of course. I was confusing APR with annualized percentage rate, or some such thing.

~~ Paul

It is annualised - the bit you've missed is that annualising the interest rate used the daily [reducing] balance of the loan. Accordingly, the rate is well over 100% as the amount of interest paid is well in excess of the loan average, which will be somewhere under $150.

Note also that those kind of loans don't usually allow for interest refunds so there's often no point in early repayment.

[Esperdome]

Right. Of course, people that get sick or hurt or laid off or have medical bills or other financial emergencies are obviously irresponsible. :rolleyes::rolleyes:

If this were the case with most people living P to P you'd have my sympathetic ear. But the vast majority are able-bodied healthy workers trying to bite off a bigger piece of pie than they can swallow. In this country, most live like kings compared to the richest elite 100 years ago. And most of the world's population today. Get over the fact you aren't as rich as Bill Gates and live within your means. Is this too hard?

[jsfisher]

Well, of course. I was confusing APR with annualized percentage rate, or some such thing.

~~ Paul


Apparently, there is an across-the-puddle difference in how APR is expressed. In the US, APR is the interest per payment period times the number of periods per year. In the UK, APR is what the USians would call the effective annual rate.

EAR = (1 + APR/n)^n - 1

where n is the number of payments per year.

A US APR of 103% is the same as a UK APR of 177%.

[JoeEllison]

If this were the case with most people living P to P you'd have my sympathetic ear. But the vast majority are able-bodied healthy workers trying to bite off a bigger piece of pie than they can swallow. In this country, most live like kings compared to the richest elite 100 years ago. And most of the world's population today. Get over the fact you aren't as rich as Bill Gates and live within your means. Is this too hard?

You're missing the point. Can I assume that it is intentional on your part? Your childish fantasy of poor people living like kings is pretty pathetic.

[Esperdome]

Teek, sorry for the derail. I'm going to start a separate thread to address P to P workers.

[DmKrispin]

If this were the case with most people living P to P you'd have my sympathetic ear. But the vast majority are able-bodied healthy workers trying to bite off a bigger piece of pie than they can swallow.

Is this just anecdotal or do you have any documentation for this? I would very much like to know what the percentages are.

[Esperdome]

Is this just anecdotal or do you have any documentation for this? I would very much like to know what the percentages are.

This is where I come up with a 41% of Americans are living paycheck to paycheck figure. www.nhc.org/chp/p2p/

I'm trying to find something with a breakdown by income level, not having much luck.

If the 41% is correct, most of these people can't possibly be in dire straits, the country would be near collapse. They are your neighbors and co-workers who are six weeks from being homeless without a paycheck.

[JoeEllison]

If the 41% is correct, most of these people can't possibly be in dire straits, the country would be near collapse.

Yes... now you're getting close to reality. Step into the light!!!

[tkingdoll]

Teek, sorry for the derail. I'm going to start a separate thread to address P to P workers.

No no, derail all you like, my OP was a rant so how the thread develops is up for grabs, I had no particular direction in mind.

[OnlyTellsTruths]

If you think the rates charged by payday loaners are extreme, set up a company providing loans at what you think is a fair rate. That's just what TA did. You might find this isn't as easy as it looks.

You really think charging $25 a week for a $200 loan is a fair rate?

[Esperdome]

You really think charging $25 a week for a $200 loan is a fair rate?

It depends on the risk involved. Like I said, if you think its too high, start up a company charging much less interest.

[joobz]

I'll bet one or two bad weeks could have wiped you out, especially if your parents weren't able to bail you out... no matter how responsible you were.
Actually, this is exactly true.

having to front the cash for a conference (schools only reimberse), forced me to have to put things on a credit card. Well, since schools never operate on a rapid schedule. I didn't get paidback until two months later, of which I had to start paying interest. It took a while before I could go back to zero debt. If I was to have gotten sick or anything during this time, I would have been in huge trouble.

[Paul C. Anagnostopoulos]

It is annualised - the bit you've missed is that annualising the interest rate used the daily [reducing] balance of the loan. Accordingly, the rate is well over 100% as the amount of interest paid is well in excess of the loan average, which will be somewhere under $150.
Oh yes, absolutely. Somehow I must have stupidly thought that an APR was just a simple annual interest rate.


Note also that those kind of loans don't usually allow for interest refunds so there's often no point in early repayment.
Yikes!


Apparently, there is an across-the-puddle difference in how APR is expressed. In the US, APR is the interest per payment period times the number of periods per year. In the UK, APR is what the USians would call the effective annual rate.

EAR = (1 + APR/n)^n - 1

where n is the number of payments per year.

A US APR of 103% is the same as a UK APR of 177%.
Fascinating (and colourful).


You really think charging $25 a week for a $200 loan is a fair rate?
I would avoid using the word fair where loans are involved.

~~ Paul

[The Atheist]

Oh yes, absolutely. Somehow I must have stupidly thought that an APR was just a simple annual interest rate.

Very few bankers are mathematicians. ;)

[jsfisher]

Very few bankers are mathematicians. ;)

Still, they somehow are marvelously creative with numbers. As evidence, I offer the Rule of 78 as a prime example of something that can be made to sound so numerically reasonable, but really isn't.

[Paul C. Anagnostopoulos]

Very few bankers are mathematicians.
And yet, in my case, I have no excuse. I just finished production on the Study Manual for Exam FM/Exam 2 for the Society of Actuaries. Volume 1 is Financial Mathematics. I should read it more carefully.

~~ Paul

[The Atheist]

Still, they somehow are marvelously creative with numbers. As evidence, I offer the Rule of 78 as a prime example of something that can be made to sound so numerically reasonable, but really isn't.

Ah, dear old Rule of 78. That's been banned here for some time, but I used to use it daily in the early 1980s.

And yet, in my case, I have no excuse. I just finished production on the Study Manual for Exam FM/Exam 2 for the Society of Actuaries. Volume 1 is Financial Mathematics. I should read it more carefully.

~~ Paul

I suggest a prolonged bout of self-flagellation!

[CFLarsen]

Oh, go on. This I have to see.

Please feel free to suggest any possible way a lack of choice is involved.

What is the choice? The mob?

[The Atheist]

What is the choice? The mob?

What? Shifting the goalposts only second post? Claus, that Air Marshall business must be getting to you.

Your previous post was:

What makes you think it's a choice?

Now, could you please explain in what way there is a lack of choice for people to deal with payday loan companies.

Thanks.

[DmKrispin]

This is where I come up with a 41% of Americans are living paycheck to paycheck figure. www.nhc.org/chp/p2p/ (http://www.nhc.org/chp/p2p/)

I'm trying to find something with a breakdown by income level, not having much luck.

If the 41% is correct, most of these people can't possibly be in dire straits, the country would be near collapse. They are your neighbors and co-workers who are six weeks from being homeless without a paycheck.

Thanks, but I actually wanted to know if any studies have been done to determine what the percentage of those living in paycheck-to-paycheck are, in your words, "able-bodied and just trying to bite off bigger piece of pie than they can swallow". I think we all know that lots of people do live beyond their means, but I wondered what the percentage was and how it breaks down by age, income, education, etc. Since you stated that it was the "vast majority", I thought that you had some specific info.

[Rob Lister]

What? Shifting the goalposts only second post? Claus, that Air Marshall business must be getting to you.

Your previous post was:



Now, could you please explain in what way there is a lack of choice for people to deal with payday loan companies.

Thanks.

Actually, Clause makes a valid observation inasmuch as absent the payday loan industry, the mob is exactly where people often went. Whom would you rather owe, Clause? The mob or a legit business?

[Mashuna]

Now, could you please explain in what way there is a lack of choice for people to deal with payday loan companies.

Thanks.

I'm looking forward to the way this debate is going, I'm just wondering what the odds are that it's going to turn into another discussion on free will.

:boxedin:

[The Atheist]

I'm looking forward to the way this debate is going, I'm just wondering what the odds are that it's going to turn into another discussion on free will.

:boxedin:

Excellent idea!

Are Payday Loan companies deterministic?