"If We Could Just Get Our Arms Around the Internet"

Katherine Mangu-Ward | July 7, 2008

With gloomy economic news all around, people are fretting a little more than usual about cash flow these days. So thank god Oregon has already taken steps to keep people from safely, legally getting their hands on a little extra cash in an emergency.

Neon signs like the one at right are going out all over the state as three out of every four payday lenders close their doors after the state imposed a cap on the amount of interest they can charge. The storefronts that remain open to wrap up pending business are having to turn away prospective customers:

"The sad part is we have 25 people a day coming into our stores begging to borrow from us," said [Ken Wayco, president of small, high-interest lender], "but we can't lend to them." 

So where are those people going? Online, of course:

In Oregon, officials now worry most about residents going into debt with payday lenders on the Internet, Tatman said.

Internet lenders selling to Oregonians are required by law to register with the state and abide by its regulations, but many do not.

It is difficult for the state to control Internet payday lenders who charge triple-digit interest rates, Tatman said. "If we could just get our arms around the Internet better to make sure people don't jump out of the fire and into the frying pan."

We'll give the final word about this state of affairs to the upbeat Angela Martin, director of economic fairness for Our Oregon, a nonprofit "consumer advocacy group" in Portland.

"It is fantastic for Oregon."

More on payday lending here and here.

Comments

|7.7.08 @ 2:49PM|#

The people that run these stores are the lowest of the low. I have more respect for drug dealers and the mafia than I do for people that make their living by essentially enslaving the poor, desperate, and ignorant.

Fluffy|7.7.08 @ 2:53PM|#

The entire debate about so-called payday lenders exposes the idiocy of attempting to measure "usury" using the government reporting figure known as the APR.

If you ran one of these shops and had a flat fee that you imposed on every transaction - say, 25 bucks - you would end up generating absurd APR's for customers who come in looking for a loan for $250, because your nominal transaction fee would represent 10 points of APR, or more, depending on the term of the loan.

Essentially what the people agitating against these loans are saying is that if someone works for an hour to arrange a small loan for someone, they should make less than $25 for that work. And that's ridiculous.

|7.7.08 @ 2:56PM|#

"
Essentially what the people agitating against these loans are saying is that if someone works for an hour to arrange a small loan for someone, they should make less than $25 for that work. And that's ridiculous."

Yes, of course the logical thing to do is allow frauds to become millionaires by exploiting the underclass. Perfectly reasonable.

Chuck|7.7.08 @ 2:57PM|#

The people that run these stores are the lowest of the low. I have more respect for drug dealers and the mafia than I do for people that make their living by essentially enslaving the poor, desperate, and ignorant.

I think you've got the wrong thread. You want the political hyperbole thread...scroll down a bit.

|7.7.08 @ 3:00PM|#

I suggest then, Ben, that you do not patronize these establishments. Oh, wait. You're worried about all of those poor ignorant folks who are so much less sophisticated and knowledgable than you.
You're right. You probably know a lot more about their needs than they do.
Carry on.
(And fortunately, after the payday lenders close, the poor can always turn to those mafia loan sharks for whom you have so much more respect.)

|7.7.08 @ 3:01PM|#

Yeah citizen nothing, there are only two choices--legal loan sharks or illegal loan sharks.

God forbid we do something crazy like educate the poor in our schools on how to open a real bank account and build credit. That would be SOCIALISM!

|7.7.08 @ 3:03PM|#

I have more respect for drug dealers and the mafia than I do for people that make their living by essentially enslaving allowing the poor, desperate, and ignorant credit challenged from having a way to gain short term money when needed.

There, fixed it for you Ben. Unless of course you think it better for the "poor, desperate and 'ignorant'" to have no other recourse than starve, loose their only means of transportation or get evicted from their house when something unexpected comes down the pike.

Short-term, high interest loans are just that. Short-term for when things unexpectedly pop-up. The high interest is to cover for the high rate of loan faults by borrowers. If the borrowers were "credit worthy" consumers that a bank would loan money to at a "reasonable rate", I doubt they would need the type of short term loan these lenders provide.

Disclosure: I, in my much poorer days, used both "payday" loans and pawn shops to finance day to day things like buying groceries and keeping a roof over my head after loosing a job.

Kyle|7.7.08 @ 3:04PM|#

God forbid we do something crazy like educate the poor in our schools on how to open a real bank account and build credit. That would be SOCIALISM!

Learning about opening a bank account and building credit happens in a bank, not a school.

|7.7.08 @ 3:05PM|#

Yeah, Ben. You get right on that.
In the intervening generations, what if I need a quick $200 for a week?

|7.7.08 @ 3:06PM|#

"In the intervening generations, what if I need a quick $200 for a week?"

I don't know, maybe we could have some kind of safety net the government provides for people in dire straits through no fault of their own.

But that would be Big Government, and We Can't Have That.

|7.7.08 @ 3:07PM|#

I often forget that the poor are just too damn stupid to run their own affairs.

anon|7.7.08 @ 3:08PM|#

C'mon folks, be nice to Ben. He places the blame on our government-monopolized schools.

|7.7.08 @ 3:08PM|#

I never said anything about being "stupid".

I said ignorant. If you're a high school drop out at the age of 16, you may or may not be stupid but you're sure as hell ignorant.

anon|7.7.08 @ 3:09PM|#

So sorry that people don't live up to your expectations, Ben.

|7.7.08 @ 3:10PM|#

Ah. The ignorant masses. What would we, and our leaders, do without them?

|7.7.08 @ 3:11PM|#

God forbid we do something crazy like educate the poor in our schools on how to open a real bank account and build credit.

Judging by the test scores the schools are having a tough enough time getting kids to learn to read and write and do simple math. Good luck with that "learn 'em high finance" thing.

And before you pull the "the schools don't get enough money" act, check some facts.

|7.7.08 @ 3:11PM|#

Payday borrowers are poor. Obviously they're stupid. They need protection provided by the state to ensure that they live the happier, more responsible lives as they are too stupid to do on their own.

Food stamps should be prohibited from being used to purchase "unhealthy" products as well. It's for their own good.

|7.7.08 @ 3:11PM|#

Ben, why aren't you blaming the banks that aren't ever open when some people need them to be. Or that have all those great rules like 'We'll hold your check for 3 days before it's credited to your account' or 'You can't have any cash because you don't have enough to cover this check in your account'.

And you really think that people only know about the Check Cashing store down on the corner? You think they don't know about the 2 banks on the other corners, and what they do? There are reasons people choose to use those places, in spite of the obvious downsides. But their reasons aren't worth anything to do-gooders, I guess.

|7.7.08 @ 3:12PM|#

No credit for the cash-strapped! I have spoken!

|7.7.08 @ 3:12PM|#

Issac, its not that the schools don't get enough money. Its that they get too much money and wasted it on stupid crap like DVDs and laptop computers instead of hiring competent teachers or reducing class sizes.

|7.7.08 @ 3:13PM|#

The fact that three out of four of these payday lenders are allegedly closing their doors ought to at least kill the proposition that the industry is as lucrative as Ben thinks it is. And speaking of death, this is Oregon right? The state that passed the Death With Dignity Act, the ultimate commitment in the right to self determination. It is a shame consumer advocates spend so much of their time trying to limit people's choices, but as we all know, they know the needs of the poor and downtrodden better than the poor and downtrodden do themselves.

|7.7.08 @ 3:15PM|#

"
And you really think that people only know about the Check Cashing store down on the corner? You think they don't know about the 2 banks on the other corners, and what they do?"

If you've ever been to an inner city neighborhood before, you would realize how dumb that statement is.

Those neighborhoods don't have banks( just as they often don't have real grocery stores). And if you have no car, as people there often don't, you can't get out to a legitimate bank in the suburbs. So you're stuck with the shady loan shark store, and the 7-11.

short, fat bastard|7.7.08 @ 3:15PM|#

Hideous interest rates on pay-day loans are still far cheaper than bouncing checks (and we all know that kiting checks is illegal as well).

|7.7.08 @ 3:17PM|#

Excellent! Its about time someone put their foot down on companies who exploit people. What their interest rates amounted to prior to this were the equivalent of strong arm robbery and extortion!

JT
www.Ultimate-Anonymity.com

ed|7.7.08 @ 3:18PM|#

through no fault of their own

I'll bet you'll find one if you look.

|7.7.08 @ 3:18PM|#

Disclosure: I, in my much poorer days, used both "payday" loans and pawn shops to finance day to day things like buying groceries and keeping a roof over my head after loosing a job.

When I was keeping the free world safe from democracy, sailors would charge 20 - 50 percent for a loan period of one to fifteen days. I'd like to say that I never borrowed from a "slusher". But that last day in port, tapped out and facing ??? days at sea ...

tarran|7.7.08 @ 3:19PM|#

OK, who's behind this new Ben fellow? He's too much a parody of Dan T/Jersey McJones to be a joke.

Cesar is that you?

Fess up.

|7.7.08 @ 3:20PM|#

The same thing is happening to payday lenders in Ohio. It was a win-win, bipartisan effort. The Demos got to pretend to help the poor and the Repubs got to screw the poor. Everybody is happy. Well, everybody who matters.

|7.7.08 @ 3:22PM|#

"If you ran one of these shops and had a flat fee that you imposed on every transaction - say, 25 bucks - you would end up generating absurd APR's for customers who come in looking for a loan for $250, because your nominal transaction fee would represent 10 points of APR, or more, depending on the term of the loan."

Some of these loans work out at over 400% APR.

kinnath|7.7.08 @ 3:23PM|#

So did Ben just stumble into H&R from some other liberal wonderland? Or is Ben a new sock puppet for one of our many recurring trolls?

|7.7.08 @ 3:23PM|#

If you've ever been to an inner city neighborhood before, you would realize how dumb that statement is.

Those neighborhoods don't have banks( just as they often don't have real grocery stores). And if you have no car, as people there often don't, you can't get out to a legitimate bank in the suburbs. So you're stuck with the shady loan shark store, and the 7-11.

I live in fucking Detroit, Michigan. And that is unmitigated bullshit. You no longer have credibility.

|7.7.08 @ 3:24PM|#

And speaking of death, this is Oregon right? The state that passed the Death With Dignity Act, the ultimate commitment in the right to self determination.

Well, Oregon is also the state where you cannot pump your own gas. Take it for what it's worth.

|7.7.08 @ 3:26PM|#

Funny how no one seems to mention the usual reason people use such check cashing places is that they are often:

1. Behind on child support
2. Illegal immigrants
3. Behind on taxes
4. Working under the table
5. Otherwise have reasons to not want the government to know about their income as they would if a regular bank were used.

As for payday loans, if the state governments want to protect people from unconscionable ripoffs that relay upon idiocy and desperation, they should get rid of their lotteries.

|7.7.08 @ 3:26PM|#

Ben/Cesar,

You don't know what you're talking about. The Community Reinvestment Act forces banks to provide banking services to people in poor areas, as do other anti-discrimination acts. While they may have fewer branches in such areas, it's not true that there aren't any branches.

Also, the reason why poorer people don't always use banks isn't due to any one factor. Some people don't trust banks. Remember that bank fees are high for low balance accounts and that NSF checks are expensive to the person who bounces a check. There's also the fact that banks generally don't offer loans to subprime customers (at least, not directly). So the word "no" is heard regularly and loudly by people with cash flow problems. Incidentally, the fees for NSF checks or for the service of advancing funds to cover NSF funds would have a tremendously high APR, if such things were called loans. Which in the latter instance, of course, they really are.

Generally speaking, the payday lenders are providing a mechanism for allowing people to cover expenses when they are living paycheck to paycheck. It's not cheap, but it's all that's available to people with problems securing credit (prime or subprime). I'm not suggesting that payday lenders are wonderful people with no evil practices, but that's a criticism I could level at banks, too.

|7.7.08 @ 3:31PM|#

Looks like a huge business opportunity here for Ben and Our Oregon. If they wanted to, they could put these payday loan creeps out of business in a minute by opening places that offered fair interest rates. Same with grocery stores, heating oil dealers, and all the other businesses that allegedly get super rich off the backs of the poor. I'll bet you can even get some churches to offer you free rental space in their basements to run these establishments. Waht's that? Oh, you never studied management, finance or economics in school so you know nothing about how to run a business? But just enough to "know" that obscene profits must be being made.

Michael|7.7.08 @ 3:33PM|#

Ben, the two of us need look no more
We both found what we were looking for
With a friend to call my own
I'll never be alone
And you, my friend, will see
You've got a friend in me
(you've got a friend in me)

|7.7.08 @ 3:34PM|#

As someone who used to work for a by-here-pay-here car lot, I'm of two minds when it comes to these sorts of high-interest loans.

1. There is no doubt that it is an unseemly practice. You are, quite literally, making money directly off the misfortune of other people. Yes, the interest is high because a huge percentage of loans will be defaulted on. Of course, that's just another way of saying that the responsible people pick up the tab for the irresponsible.

2. Just because it's an ugly business doesn't mean it should be illegal. By and large, the people that require such loans are not being duped by anyone. They know exactly what the deal is and have no qualms with defaulting when it's necessary. The choice between eating this week and making your loan payment is not difficult to understand.

No matter what kind of safety net is provided, there will always be unexpected problems that require a quick influx of cash. If you have bad credit, a history of defaulting on loans and a minimal income, then you will have to pay the high interest if you want a loan. It sucks, but to severely limit the amount of interest a lender can charge or to make it outright illegal will only serve to make those necessary influxes of cash completely out of the reach of the most desperate in our society.

|7.7.08 @ 3:40PM|#

Why is it always the same people who write "Stupid people who took out stupid loans deserve to suffer" on threads about sleazy mortgage companies, who show up on payday loan threads and accuse others of being elitist?

Apparently, the definition of the term "elitist" no longer bears any connection to believing one's self to be superior to some group.

Guy Montag|7.7.08 @ 3:42PM|#

Ben,

I don't know, maybe we could have some kind of safety net the government provides for people in dire straits through no fault of their own.

Okay, that was the final bit of logic I needed so I can get out of the way of the $1,000,000.00/year minimum wage act. It now has my support.

We can pay for it with a 100% tax surcharge on lottery winnings. Now, if those cheap States would just increase their prizes, it will all work out just fine.

Those neighborhoods don't have banks( just as they often don't have real grocery stores). And if you have no car, as people there often don't, you can't get out to a legitimate bank in the suburbs. So you're stuck with the shady loan shark store, and the 7-11.

What Ivy-Leaguw Liberal Arts Department planet are you from again? You are under the impression that people who can get around to work get locked up in European-style 1930s era ghettos between shifts? Or are you thinking more of the 1930s era mining towns with a company store and script?

Seriously now, stop trolling here and take up creech's suggestion. Hang out your shingle and start making loans at really good rates, to the same customers that these other business were servicing. Should make for some good vocals at your next poetry slam.

lunchstealer|7.7.08 @ 3:43PM|#

Wasn't Ben one of Dan T's aliases? I just assumed that was him, going for a little retro-hip H&R baiting.

So if the answer is public school improvements which will take at least 20 years to show any benefits, and some sort of safety net in the meantime, what exactly should that safety net look like, and why did Oregon think it was a good idea to shut down the pay-day-loan business without putting that safety net in place?

Elitist Prick|7.7.08 @ 3:45PM|#

Why is it always the same people who write "Stupid people who took out stupid loans deserve to suffer" on threads about sleazy mortgage companies, who show up on payday loan threads and accuse others of being elitist?

People that borrow money that they can't pay back on terms that any semi-intelligent borrower would refuse to agree to deserve what ever they get. Doesn't matter whether they use the money to buy a house or tonight's supper.

|7.7.08 @ 3:50PM|#

One problem with easy credit is that people today don't blink an eye at defaulting, declaring bankruptcy, etc. I think we did better when there was a social stigma in not meeting your commitments. Samuel Clemens had to declare bankruptcy, but he made it a point to pay off his creditors when he finally did have the money. That's not the practice today. . .for rich or for poor.

For me, even though I think these types of loans should be legal, I can't say that I think much of taking advantage of people who lack the means to get out of the vicious circle. I can't help but wonder if doing so helps perpetuate the problem.

joe,

I defy you and your elitist elitism. Besides, my feeling sorry for people and my right to interfere with their decision making are two mutually exclusive things. I've bailed out friends and family who've made stupid decisions. But that was my stupid decision to make.

ed|7.7.08 @ 3:52PM|#

if the state governments want to protect people...they should get rid of their lotteries

Touché.

|7.7.08 @ 3:55PM|#

What is the rate of return on a dollar invested in the lottery? Of course, lotteries are sold to voters as being for the children, so that doesn't really matter.

Maybe payday lenders should help fund education, too. Then everything would be hunky-dory.

|7.7.08 @ 3:55PM|#

The CRA isn't there to help geuninely poor people, but to help working- and middle-class people who live in areas that are, or have historically been, poor.

Traditionally, the banks, insurance companies, and other financial service businesses avoided certain areas, to the point where even people who would have no problem maintaining their balances, paying a mortgage, or keeping up on their insurance payments couldn't get any company to service them, because whole sections of the map were just redded out.

The bank branches that open in these neighborhoods aren't special poor-people banks; they operate, usually, with the same minimum-balance requirements and other policies as their suburban branches.

So it's not so much the physical absence of banks in poor neighbohoods that's the poor people's problem, but the fact that they are poor.

Guy Montag|7.7.08 @ 3:57PM|#

Erÿk Boston, J.D.,

Excellent point. However, what if someone is a few bucks short when the lottery payout is really big and they have some can't miss numbers? Huh? Huh? Huh?

|7.7.08 @ 3:58PM|#

joe,

I was just saying that it wasn't right to talk about banks not being physically present in poor neighborhoods. The lack of realistic access to loans, with some very small exceptions is not debatable. Banks lend the lion's share of their money to prime borrowers with lots of discretionary income. Thus, we have the hierarchy of banks, subprime lenders, payday lenders, and Guido.

|7.7.08 @ 3:58PM|#

Thinking that poor people don't make good economic decisions because they are teh stoopid, lazy, or shiftless = elitism. This would apply to people who's resonse is "so screw them" just as much as to those whose response is "the poor dears!"

Thinking that poor people don't make good economic decisions because their options are limited to a few bad options != elitism. This is would apply to people who's response is "not my problem" just as much as to those whose response is "let's help them out."

Elitist Prick|7.7.08 @ 3:59PM|#

So it's not so much the physical absence of banks in poor neighbohoods that's the poor people's problem, but the fact that they are poor.

Who in their right mind would lend money to poor people?

squarooticus|7.7.08 @ 3:59PM|#

What their interest rates amounted to prior to this were the equivalent of strong arm robbery and extortion!

I find it interesting that people call two parties voluntarily engaging in a contract "robbery," while the actual robbery-taxation to pay for Ben's social safety network-is somehow overlooked.

Kolohe|7.7.08 @ 4:00PM|#

I don't subscribe to "ben's" trollfoolery, but for payday lenders, I'm almost ready to turn in my libertarian card. I understand that by banning these, you are literally leaving people with no other options. But, I think in aggregate, and in most specific cases, the cure is worse than the disease.

To use another piece of hyperbole, I don't think it should be allowed to volunteer yourself into slavery; it's a 'free choice' that simply shouldn't be allowed because of a severe power imbalance for those engaging in that transaction. On this more prosaic level, the people who are patronizing these payday advance/ title loan places (vice a credit union, or bank) possess such a severe information asymmetry that they do need to be nanny-stated.

otoh, it's really easy for me to be self-riteous and smug about this; i have never been poor, i have have never had the joy of a welfare christmas.

(btw, j sub d, i'm not sure if it's at the big navy level, or the regional commanders, but most sailors are prohibited from using cash advance places. or it maybe the soldiers/sailor relief act that has reimposed usury caps on loans to military members, and so the cutoff was at the business owners end.)

|7.7.08 @ 4:01PM|#

Pro Lib,

I was agreeing with you.

The CRA worked, for its intended purpose - you can now get a bank account, a mortgage, business insurance, and other financial services in most inner city neighborhoods. And it's played a big role in the rebirth of many formerly-redlined neighborhoods.

Timothy|7.7.08 @ 4:04PM|#

Pro Libertate - My understanding of the CRA is that it prohibits discriminitory lending practices based on zip code, but that enforcement is more carrot than stick. I'm not an expert, though, and my experience with it is tangential.

As an evil banker who has several years of experience with customer profitiability analysis and reporting under his belt, it's pretty obvious to me that the reason there aren't many branches in poor areas is that there isn't any money there. While NSF/OD fees do represent substantial revenue, at least in our market, that's presuming that the customers actually pay them back.

Most NSF/OD happens incidentally, on accident, and most people don't like the fee but can at least afford to pay us back. In poor areas with extremely high default rates on things like that, we'd end up just charging that stuff off, which negatively affects the balance sheet (for the OD balance) and the income statement (for the uncollected fees), and which our shareholders don't particularly like.

We evaluate branches on a cost/revenue basis like we evaluate anything else, so if a branch consistently performs poorly we're going to move it or shut it down - that's just smart business. The great secret is to only do things you can make money at...often putting a branch in a poor neighborhood isn't one of those things.

Regarding Oregon, specifically, this just sounds like another attempt by the legislature to gut any business that has the audacity to turn a profit. I think they long ago cut the head off the economy, but are just now getting around to shitting down its throat.

Guy Montag|7.7.08 @ 4:05PM|#

JsD,

Not sure what era you were speaking of, and perhaps things are different now, but for quite a long time it was a UCMJ violation to charge other service members interest on personal loans like the ones you describe. At least through the 1970s/80s and 1990s I believe.

Fluffy|7.7.08 @ 4:05PM|#

Ben,

Your indignation is noted, but does not actually address my point in any way.

I will repeat my point and expand on it so you can understand:

The nominal interest rate on these payday loans is often not that much greater than the rates for credit cards for people with troubled credit. The only reason they have a reputation for being particularly abusive is because the government reporting number used to talk about credit rates - the APR - is not just based on the interest rate charged, but also on any fees paid to obtain the credit. Comparatively small fees can loom very large in the APR if the loan amount itself is very small. APR also is highly - highly - dependent on the term of the credit.

That means that if I charged someone looking for a $250 loan the exact same rate as a credit card company, but charged them a $25 processing fee, and had the loan pay off in two weeks instead of being open-ended, the APR of my offer would seem wildly higher than that of the credit card company. So much so that the APR would be misleading with regard to the real-world differences between the two credit offers. And so much so that suburbanite liberal arts types with no idea how these markets work can be misled, and can gasp and say, "Oh, those poor people are being so exploited!"

But that exploitation is not so evident if you consider the advancement of credit to be a service that is worth a certain baseline of compensation. Even something pathetically small, like $25.. The problem isn't that these payday lenders are charging too much; the problem is that the borrowers are requesting loan amounts that are too small, and the terms of the loans are too short.

Guy Montag|7.7.08 @ 4:07PM|#

Timothy,

We evaluate branches on a cost/revenue basis like we evaluate anything else, so if a branch consistently performs poorly we're going to move it or shut it down - that's just smart business. The great secret is to only do things you can make money at...often putting a branch in a poor neighborhood isn't one of those things.

Now you are just being an evil corporitist fascist! Don't you know that businesses are supposed to operate for the good of society?

|7.7.08 @ 4:18PM|#

(btw, j sub d, i'm not sure if it's at the big navy level, or the regional commanders, but most sailors are prohibited from using cash advance places. or it maybe the soldiers/sailor relief act that has reimposed usury caps on loans to military members, and so the cutoff was at the business owners end.)

They may be place off-limits. I've been out for while so I really don't know. I will confidentally assert that somebody aboard your ship, in your division, etc. is doing it. It's illegal, every E-5 and below knows who they are, and for the most part, they operate discretely without adverse consequences. I could easily have borrowed $200 for $250 on payday on both ships that I was a junior sailor on.

What I'm saying is that if the military prohibits using the slushers/usurers/payday lenders in town, the ones on base will get the business.

|7.7.08 @ 4:22PM|#

Not sure what era you were speaking of, and perhaps things are different now, but for quite a long time it was a UCMJ violation to charge other service members interest on personal loans like the ones you describe. At least through the 1970s/80s and 1990s I believe.

Gosh, I was talking about the '70s, '80s and '90s. It turns out that enlisted folks, scum that they are, will violate regulations and the UCMJ for profit.

Who'd a thunk it?

|7.7.08 @ 4:22PM|#

Who in their right mind would lend money to poor people?

Banks looking to cultivate economic growth and stability in an area in which they are already heavily invested, to keep it from going down the tubes and taking the bank's money with it.

Banks looking to cultivate economic growth in an area that has the potential for a major comeback, and perceive an opportunity to get in on the ground floor, securing for themselves a large share of what will become a sweet market in a few years.

Generally, you find this behavior more often among smaller, local banks than among the branches of national banks.

Naga Sadow|7.7.08 @ 4:23PM|#

Guy,

Really those types of personal loans are illegal? Whenever I loan friends money, I never ask the reason. I just tell em' to pay me back whenever with a $5 upcharge. For example, a sushi chef in the casino I work with got off early and wanted to go gamble. I told him I had $30 on me and just give me $35 back whenever.

Brian Costin|7.7.08 @ 4:27PM|#

Several states are considering severe limits or even bans on certain types of short-term loans, often called "payday loans." The practice of payday lending, often including a high interest rate or substantial collateral, is indeed quite risky--but not only for an under-educated consumer.

Private enterprise takes on enormous financial risk when it loans money, at any rate or fee schedule, to a consumer with no credit history or a severely blemished one. Consumers facing a sudden, staggering expense with no credit history or conventional access to liquid funds spurred creation of a self-regulating market: An unusually high-risk portfolio of consumers can get loans, but at interest rates or fees higher than those charged by traditional institutions lending to traditional-risk consumers.

While payday loans are controversial, they serve an important purpose in the market: to provide short-term emergency loans when other sources of financing are unavailable. These loans clearly are more desirable than bounced checks and late fees, which only further damage a blemished credit history.

Some advocacy groups claim payday lending is inherently predatory, since statistics show the highest percentages of consumers who use such loans are poor or undereducated. But several of these studies have been proven flawed. Moreover, this seems to be a case of the chicken and the egg: Advocacy groups draw a connection between payday lending and the cause of poverty and poor education; in reality, payday lenders are serving a group of consumers essentially blacklisted from more mainstream lending practices.

Brian Costin|7.7.08 @ 4:27PM|#

Heartland Institute Research & Commentary on Payday Loans.

http://www.heartland.org/Article.cfm?artId=22705

|7.7.08 @ 4:29PM|#

Payday loans make perfectly rational sense for a maxed-out person needing money to cover a bill or monthly payment.

$100 + $15 charge OR $29 late fee, plus $29 over limit fee, plus that much more in the hole.

I know, I've been there. Allowing yourself to get in that situation may be ignorant, I'll allow, but nobody is there just because they have no idea that there are banks or credit cards.

Another benefit to the customer of such a place is the preservation of some dignity. In need of a quick $100 or $200, would you rather have the impersonal business transaction, embarrass yourself by hitting up a friend, or endure a lecture from Mom and Dad?

Just saying---some of the conditions of a maxed-out life make the payday loan seem like a bargain and a lifeline. Most of the people who debate this stuff (and the ones passing the laws in Ohio and Oregon) have no idea.

|7.7.08 @ 4:32PM|#

a consumer with no credit history or a severely blemished one.

Unfortunately, even a responsible, trust-worthy poor person, who's made a point of living within his means, is probably going to fit this description.

This isn't a problem of the bad, evil people being bad and evil, or the stupid lazy people being stupid and lazy. It's not a consequence of moral shortcomings at all - it's a structural issue. Therefore, efforts to address the problem of undercapitalization in poor neighborhoods shouldn't be based on a premise of getting those bad guyz.

Gilbert Martin|7.7.08 @ 4:34PM|#

"Well, Oregon is also the state where you cannot pump your own gas."

Huh?

I never heard of that.

What possible reason could there be for prohibiting people from pumping their own gas?

|7.7.08 @ 4:36PM|#

Guy Montag,
This may surprise you as well. Gambling is illegal in the military as well. Does anybody other than Pollyanna believe that a poker game can't be found on every U.S. military installation?

Consenting adults who engage in proscribed economic activity don't, as a rule, turn in those they do business with.

|7.7.08 @ 4:38PM|#

What possible reason could there be for prohibiting people from pumping their own gas?

Global warming. It drive the cost of driving up, people do less of it.

[/snark]

|7.7.08 @ 4:41PM|#

You can't pump your own gas in New Jersey, either.

I think the laws date to the old days, when gas pumps weren't as sophisticated, and it really was a good idea to only have people who know how to work them fiddling with the flamable liquids machine.

Now, why do the laws STILL forbid that? Probably because the gasoline retailers can charge more for Full Service.

Fluffy|7.7.08 @ 4:45PM|#

Actually, Joe, as far as I am aware the Full Serve Only laws in Jersey date from before the Americans with Disabilities Act and were designed to prevent self-service gas being offered to the young and healthy at a discount.

That might be an urban legend though.

|7.7.08 @ 4:54PM|#

For my own sake, I have decided that reading this thread is unhealthy and, therefore, illegal--because (1) I haven't learned anything useful and (2) it is counter-productive to my current goal: working. Please be aware that this legislation was written in the palm of my hand and will wipe off in a few minutes, so soon I can waste more of my time.

A person should be free to spend his money on whatever he wants as well as borrow money as he sees fit, no matter whether the spending or borrowing is wise or viewed as a detriment to a person's financial well-being--and he should be free to suffer the consequences as any free person deserves. If we make a habit of constricting financial choices in the name of safety, then--for the sake of argument--what should a government's position be on casinos, lottery tickets, and risky stocks?

I see the decision as political only--to seek votes from those who do not need these lenders (meaning the brick and mortar lenders, not online) and consider them unsightly, both physically in their neighborhood and fiscally. I could be wrong, but I wonder if this is an election year in Oregon for some lucky politician who just nabbed a few votes--and money to place in his campaign coffers.

Unintended consequences . . . I bet officials never thought that a citizen could find a worse lender. But we as citizens can always prove them wrong.

Gilbert Martin|7.7.08 @ 5:04PM|#

"Now, why do the laws STILL forbid that? Probably because the gasoline retailers can charge more for Full Service."

Sounds kind of like those lstate laws that "protect" the consumer by preventing Wal-Mart from selling gas cheaper than the franchise and independent gas stations.

Nigel Watt|7.7.08 @ 5:05PM|#

Banks looking to cultivate economic growth and stability in an area in which they are already heavily invested, to keep it from going down the tubes and taking the bank's money with it.

If these banks exist, why are payday loan places even in business?

|7.7.08 @ 5:08PM|#

You can't pump your own gas in New Jersey, either.

Not only that -- but their gas prices are significantly cheaper than their neighboring states.

As for Payday lending...I am all for it.

The reality is that most people that have to resort to payday loans probably don't have too many options. If you have bad credit -- or you want a loan amount in the hundreds of dollars..where are you gonna go?

A nice anecdote:
My mother in law was looking to redo the floor of her dining room -- she needed a couple grand to do it NOW, and it was gonna take her some time to liquidate to get the cash she needed. She has very good credit but when she inquired to banks/lenders about a loan that she wanted short term (she was gonna pay it off in less than 6 months) -- all the traditional lenders said "No thanks -- that loan amount is too small and you will be paying it back too soon for it to be worth us even processing such a loan" -- so she basically spread the charge out among 2 credit cards with low apr promos.

She could do this because she has good credit and a number of credit cards. What would someone who isn't creditworthy do? What bank is gonna process a $200 loan? Not too many.

|7.7.08 @ 5:30PM|#

I think the laws date to the old days, when gas pumps weren't as sophisticated, and it really was a good idea to only have people who know how to work them fiddling with the flamable liquids machine.

Speaking as a (self-serve) gas station manager until 2 years ago, I assure you that gas pumps are still way too sophisticated for 10% or so of the people driving. True, new technology to make it harder to spill gas is constantly being deployed, but people always find ways to "outsmart" it by putting the spout in the tank upside down, pulling the spout partially out of the tank to top off, and many other imaginative ways to risk self-immolation. We could have had a full-time position for a spill cleaner.

.|7.7.08 @ 5:37PM|#

Guys from my high school used to lend money to po' folk all the time. It was no big deal.

Paul|7.7.08 @ 5:45PM|#

God forbid we do something crazy like educate the poor in our schools on how to open a real bank account and build credit. That would be SOCIALISM!

Nope, that would be capitalism. Something they've been keeping out of education for decades.

|7.7.08 @ 5:46PM|#

Ben and joe are right.
In fact, I think both of them should get together and open a bank in a poor inner-city neighborhood that lets people open accounts and borrow money without regard to their credit-worthiness.
I'm sure it'll be a smashing success!
Fucking retards.

|7.7.08 @ 5:48PM|#

It's not a consequence of moral shortcomings at all - it's a structural issue.

That's your worldview in a nutshell. I remember reading a similar argument in Das Kapital.

Paul|7.7.08 @ 5:48PM|#

I assure you that gas pumps are still way too sophisticated for 10% or so of the people driving

I have it on good authority that it's the same case with people driving and talking on a cell phone. There oughtta be a law.

|7.7.08 @ 5:52PM|#

A. The county shall use all practicable means, consistent with other essential considerations of state policy, to improve and coordinate plans, functions, programs and resources to the end that the state and its citizens may:

1. Fulfill the responsibilities of each generation as trustee of the environment for succeeding generations;

2. Assure for all people of Washington safe, healthful, productive and aesthetically and culturally pleasing surroundings;

3. Attain the widest range of beneficial uses of the environment without degradation, risk to health or safety, or other undesirable and unintended consequences;

4. Preserve important historic, cultural and natural aspects of our national heritage;

5. Maintain, wherever possible, an environment that supports diversity and variety of individual choice;

6. Achieve a balance between population and resource use that allows high standards of living and a wide sharing of life's amenities; and

7. Enhance the quality of renewable resources and approach the maximum attainable recycling of depletable resources.

|7.7.08 @ 5:57PM|#

I hate to break it to joe and the other bleeding-heart cock-strokers here, but:

Most people who have bad credit are shitty with money either because of their lifestyle or their ignorance.
I'd even go so far as to say that most of them, I'm sure, are stupid-as-shit moral failures.
Even if you happen to fuck things up in the short term, you can easily rebound your credit in a year.
If dirt-poor fuckheads can't even manage that, then they can suck my middle-class dick and eat that usurious interest rate.
-- Paid for by a man who never took a dime in federal or state money to finance his college education.

|7.7.08 @ 6:24PM|#

Nigel Watt,

If these banks exist, why are payday loan places even in business?

First, there's a difference between working class and po'. Second, banks of any sort don't typically lend you fifty bucks for a couple days, preferring things like mortgages and car loans and other loans of substantial size. Third, see my comment about poor individuals vs. poor or redlined neighborhoods.

Oh, wait, I'm not supposed to understand any of that, because Jamie Kelly can't read. Please, Einstein, tell me more about finance in poor neighborhoods. I'm sure your standard planning board reporter from Montana is light years beyond me.

|7.7.08 @ 6:25PM|#

I'd even go so far as to say that most of them, I'm sure, are stupid-as-shit moral failures.
Even if you happen to fuck things up in the short term, you can easily rebound your credit in a year.
If dirt-poor fuckheads can't even manage that, then they can suck my middle-class dick and eat that usurious interest rate.

And this is somebody who will turn around and accuse people of elitism.

|7.7.08 @ 6:27PM|#

Tell us, Kelly, did you gain that brilliant insight into the habits of the proles during the time you spent reporting from the mean streets of Helena?

Chump.

|7.7.08 @ 6:29PM|#

stupid-as-shit moral failures

What the hell does this even mean?

|7.7.08 @ 6:42PM|#

Is Jamie Kelly really from Montana? Isn't Montana as a state one of the biggest so-called welfare queens among the fifty?
Seriously Jamie, no matter how bitter you are, you might want to at least send thank-you notes to a few of the states that prime the federal pump. Then when you spout liberatarian nonsense from atop your cockhorse it will at least seem like humor and not rank hypocrisy.

|7.7.08 @ 6:47PM|#

Is Jamie Kelly really from Montana? Isn't Montana as a state one of the biggest so-called welfare queens among the fifty?
Seriously Jamie, no matter how bitter you are, you might want to at least send thank-you notes to a few of the states that prime the federal pump. Then when you spout liberatarian nonsense from atop your cockhorse it will at least seem like humor and not rank hypocrisy.

What kind of logic is that? Unless the guy actually votes for the assholes who bring home the bacon to Montana, your comment makes no sense. Might as well say that any American who criticizes George Bush is a hypocrite since he was elected President by the country as a whole.

Other Matt|7.7.08 @ 6:55PM|#

stupid-as-shit moral failures

What the hell does this even mean?

Specifically in this case, I don't know yet as I started at the bottom and started reading up. Generally, though, look under "joe".

|7.7.08 @ 7:20PM|#

The logic, Jordan, is that Jamie Kelly clearly has not problem stereotyping large groups of people - people with the dreadful taste not to have as much money as him, for example - so perhaps a taste of his own medicine would have a palliative effect.

Naga Sadow|7.7.08 @ 7:58PM|#

Your my hero Jaime Kelly!!! I salute you sir!

|7.7.08 @ 8:02PM|#

As an Oregonian, I'm going to say that I absolutely love the gas jockey law. When it's blowing rain sideways at gale force or above, it's really really nice to just roll down the window a little and give the poor bastard pumping my gas my gas card or cash, roll it back up and be nice and cosy in my car. Maybe that's just a coastal thing, though... :)

I'll never understand why folks think pumping their own gas is a good thing and are all fired up to do so.

The new law. I don't know. 99% interest (a shop that just closed here because of the law..without notice to it's employees by the way, charged that). I can't feel too bad for them. It's legalised loan sharking.

|7.7.08 @ 8:55PM|#

Huh?

I never heard of that.

What possible reason could there be for prohibiting people from pumping their own gas?

Good question... And yes, as joe mentions New Jersey is the only other state with a no self-service law.

But no, it's not the gas/oil companies keeping it that way. Every few years it used to come up on the ballot here in Oregon (hasn't been on in some time though -- guess they gave up trying) and the gas companies (at least the large ones) always supported it. Despite (or perhaps because?) of that, it always got voted down. I think it's more that too many people have gotten used to not pumping it and, witness capelza above, are quite happy with not allowing anyone else to pump their own either. I'd guess the main reason is they know that once self-serve is allowed here those that want someone else doing it for them will, as in other states, have to pay a premium and they'd rather the rest of us subsidize their laziness. :)

When it has come to a vote it's hard to just argue self-interested laziness so there is always some talk of safety or the "little old lady" who might have to get out of her car at night in the cold blah blah blah... Of course such arguments are patently absurd given that 48 other states (some with little old ladies even) manage to make it work.

Usually I don't care too much except when I'm stuck waiting in line of cars as one guy is running around trying to pump the six cars on his three islands, or worse, which seems to be happening more frequently. I doubt it's a coincidence that the only other time I've had to wait in such a line was when I used to live in DC and made the mistake of stopping for gas in NJ on my way home from NY.

tom|7.7.08 @ 11:05PM|#

Even if payday lenders are offering people worse rates than they deserve they don't have to be banned. Couldn't the state open up their own short-term loan agency charging lower rates and maybe even turn a profit? The private payday lenders would go out of business anyways in that case.

Obviously libertarians such as myself will see problems with this approach, but for liberals who don't really care if the government operates financial enterprises, why not support that?

Mike Laursen|7.8.08 @ 3:18AM|#

Why is it always the same people who write "Stupid people who took out stupid loans deserve to suffer" on threads about sleazy mortgage companies, who show up on payday loan threads and accuse others of being elitist?

A classic example of joe just casting out a lazy hook to see what kind of argument he can drag up on an obscure topic.

Guy Montag|7.8.08 @ 4:05AM|#

JsD,

Thanks Mr. Helper, but I was fully aware of that one too.

|7.8.08 @ 4:26AM|#

The machines that count your spare change and give you cash for it, charge you 10% for the service. People that use these machines need to be protected from their own laziness. Therefore I will pass a law banning said machines. (It feels good to save those who are not as good as me.)

|7.8.08 @ 9:32AM|#

The reason that Oregon and New Jersey quite properly require an expert to pump gas for consumers is to avoid any freak gas fight deaths. Although most gas fights are clean, wholesome fun, on rare occasion, they result in block-shattering explosions.

|7.8.08 @ 6:00PM|#

A classic example of joe just casting out a lazy hook to see what kind of argument he can drag up on an obscure topic.

Gee, thanks, Marv. You got a color guy in the booth with you for this thread?

|7.8.08 @ 6:39PM|#

There are work arounds for everything. All you have to do is "sell" them something rather than take interest from them. You could write up 2 seperate binding contracts 1: that they get an interest free loan for x number of dollars. 2 they promise to buy a $100 dollar ink pen from you at a specified time. When they sign both contracts, you get your profit, and they get the dough they wanted.