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Free Minds & Free Markets

How Payday Lenders and Check Cashers Help the Poor

An Ivy League professor went to work in the industry to figure out why so many Americans choose to remain "unbanked."

Payday lenders and check cashers have never been more popular with consumers. There are more payday lenders in the U.S. than there are McDonald's locations and Starbucks combined. Yet their business practice of charging extremely high fees and interest rates is widely condemned.

Do alternative financial service providers merit their reputation as rip-off artists? Why do their customers choose to remain "unbanked?"

To better understand how these businesses operate and why people choose to patronize them, Lisa Servon took a break from teaching at the University of Pennsylvania to work as a teller in the South Bronx and Oakland. She discovered that traditional banks are neglecting the poor and bilking the middle class, leaving payday lenders and check cashers to fill a crucial need.

Reason's Todd Krainin spoke with Servon about The Unbanking of America: How the New Middle Class Survives, a first-hand account of what may be America's most widely misunderstood industry.

Read J.D. Tuccille's review of the book from our March 2017 issue.

Read Finance on the Fringe, our look at alternative banking services fifteen years ago.

Produced, edited, and hosted by Todd Krainin. Cameras by Meredith Bragg and Josh Swain.

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This is a rush transcript—check all quotes against the audio for accuracy.

Todd Krainin: The first thing that really struck me in the book is that there are more payday lenders and check cashers in the United States than McDonald's and Starbucks combined. Is that true?

Lisa Servon: Yes.

Todd Krainin: That sounds crazy.

Lisa Servon: It's actually just payday lenders, right?

Todd Krainin: Right.

Lisa Servon: Not even counting the check cashers, and that's an important difference because, in 13 states, payday lending is illegal.

Todd Krainin: That speaks to some incredible need for this, what you call, alternative banking services.

Lisa Servon: Exactly. Exactly. Particularly in the case of payday lenders for short term credit; small amounts of money for a small amount of time.

Todd Krainin: What gave you the idea to take a break from your Ivy League job and work, of all places, in the South Bronx?

Lisa Servon: I was interested in why so many people were using alternative financial services ... Payday lenders, check cashers, pawnshops ... when the story about them that you hear in the press, and even from consumer advocates and from policymakers, is that they're predatory, they're taking advantage of poor people, and yet, in the early '90s, you started to see an upward trajectory of use. These businesses are growing an incredible amount. Payday lending grew from a $10 billion business to a $30 billion business in about 10 years in the early 2000s.

The implicit message in all of that writing was that low income people who were presumed to be the primary users ... I found out that wasn't exactly true either ... were somehow making bad decisions, that they weren't informed enough. If only they had the information that wealthier upper middle class people had then they would choose differently. That's the whole implicit message, even in the FDIC's categorization of people who's banked, unbanked, under-banked.

By looking at the numbers, I couldn't really figure it out. I knew from working in poor communities for 20 years that low income people know where their money goes, probably more than people who have more of a buffer. I realize that if I wanted to really understand it, I had to get as close to the problem as possible. When you're a researcher, you have to match the method to the question. The only method I could really figure out was to get really close.

I knew that even just talking to people and interviewing them would not give me the full story. It turned out to be right. Really, by working behind the window for months and looking at the way that people manage their money, I learned a ton.

Todd Krainin: These check cashers are often targets of journalists and academics as people who do or organizations that do, pray on poor, minority clients. Did you go into it with that expectation? Because that's the dominant narrative that's out there.

Lisa Servon: It's certainly what I thought before I began to look into it more deeply. A pivotal moment for me was having this man, Joe Coleman, who runs a chain of check cashers in the South Bronx and Harlem, come to a class I was teaching. At the moment that he walked in the door, my students and I all thought exactly what you said: these are bad guys; now one of them is coming to our class. We get to really ask him the tough questions.

Joe came in and he made a very compelling argument for why he felt like his businesses were serving people in those communities the way they needed to be served, and that banks were not doing that and banks didn't really want their business. That made me think maybe there's more to the story. I tried to go in with a really open mind once I went to both of those businesses and worked at them.

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  • Johnny B||

    I understand how a pawnshop gets its money back -- by keeping the pawned item as collateral -- but this article did not explain how a payday load operation gets its money back. Anyone know the answer?

  • Meh.||

    Typically, when you sign up, the loan company makes you give them your bank account information, and once the loan is due, they automatically withdraw. If the charge is too big to go through, they'll break it up into smaller chunks to try to get as much as they can (and of course you get hit with a bank fee for each failed attempt). Interest continues to compound the whole time, and a lot of people are still stuck with exponentially larger loans years later. They can't take legal action against you, but they can contact the references you provided when you signed up to try to harass them into hounding you to repay the loan. Basically, payday loans can make a low-income individual's life hell, but there's no guarantee they'll get their money back, especially after they tack on all the interest and fees.

    I'll have to read the article and follow the links later (when I'm not supposed to be working - LOL), and maybe payday loans are indeed wonderful from a libertarian perspective, but since these companies do prey on the most economically vulnerable, I don't know how I feel about it ethically.

  • Meh.||

    Oh, I didn't realize there was an MP3 file. I think her experience would have been totally different if they would have had her work on the dark side, doing the dirty work of a payday loan collector instead of the friendly, fulfilling work of a teller... but I see how this is sometimes the only way poorer people can make ends meet. I still want to look into this further, but I think she summed it up well with, "ultimately, we have to respect people's judgment without judging them and without judging their choices."

  • MikeP2||

    ""ultimately, we have to respect people's judgment without judging them and without judging their choices.""

    complete BS. I'm sure she disrespects and judges other people all the time.

  • ||

    Re: "Typically, when you sign up, the loan company makes you give them your bank account information, and once the loan is due, they automatically withdraw."

    But the point is the lenders do not have bank accounts - I believe that is the point.

  • ||

    Sorry - correction.

    Borrowers not 'lenders'.

    My bad

  • Meh.||

    I'm not sure if you were in a hurry to critique or what, but please read the first few words of the very next paragraph :)

  • Mark22||

    and a lot of people are still stuck with exponentially larger loans years later

    That is the nature of compound interest; doesn't matter whether your interest rate is 0.001% or 10%.

  • Stormy Dragon||

    It's $15 per $100 lended per week. If a week later they can't pay back the $100, you offer them a new $100 loan for an additional $15. And so on.

    So after 6 weeks, you've already recovered your principal and every thing after that is pure profit whether they ultimately pay it back or not.

  • Stormy Dragon||

    The reason that the rich were so rich, Vimes reasoned, was because they managed to spend less money.

    Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

    But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that'd still be keeping his feet dry in ten years' time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.

    This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.
  • Mark22||

    This was the Captain Samuel Vimes 'Boots' theory of socioeconomic unfairness.

    Well, Vimes was a fool for multiple reasons: he gets his pricing wrong, and on $38/month you can, in fact, buy $50 boots; people buy stuff regularly that's a much bigger multiple of their monthly income. You need to do a bit of saving, of course.

    And depending on how serious Pratchett was about this, he may have been a fool too.

  • ||

    So after 6 weeks, you've already recovered your principal and every thing after that is pure profit whether they ultimately pay it back or not.

    Since you have it all figured out I bet you could make a fortune undercutting all of those predators.

  • Stormy Dragon||

    those predators

    Arguments are so much easier when you can just pretend people said something and respond to that instead of what they actually said.

  • ||

    respond to that instead of what they actually said.

    I was being sarcastic, let me respond to what you actually said. With the economic illiteracy you demonstrated in your facile summation of the finances of operating a payday advance service and complete lack of understanding of the concept of risk I doubt very seriously you could make a fortune at anything. Unless you find a market for condescending smugness and virtue signaling.

  • No Yards Penalty||

    Talk about projecting.
    Maybe read a few comment threads before you decide who you're smarter than, Parrot.

  • ||

    That's the point; the incentive is 'pay back the loan'.

    Do some folks think that free loans are a right??

    Once upon a time borrowing money was a last resort.

    That's why pawn shops and other money-lenders such as 'Fagin' where in back-streets.

    Come on - you can't even manage your money? Wuss!

  • MarkLastname||

    People who go to payday loans are generally high risk borrowers, that is they have high default rates; indeed that's the biggest reason they can't get credit from a normal bank. Even if payday loans were 0% profit, just make up for the pool of risky borrowers they'd have to charge exorbitant rates. And 15% is way higher than what they typically charge in reality.

    Most of the complaints about payday loans ignore the harsh reality that if you want to get credit at a reasonable rate, you actually have to be a creditworthy borrower.

  • Mark22||

    Most of the complaints about payday loans ignore the harsh reality that if you want to get credit at a reasonable rate, you actually have to be a creditworthy borrower.

    That's racist! Somehow, that's racist! I don't know how, but it simply has to be racist!

  • ColoradoKook||

    That scenario would not be a 15% rate because you're typically dealing with a two-week period. It would be a much higher APR.

  • ||

    It did - the interest rate.

    Just like a credit card - which most folks don't even worry about - "don't pay the money back we punish you".

    Pay off in full and there is no problem beyond what you signed up for.

  • juris imprudent||

    People using these services don't understand their own best interests!!1! /std-proggie-response

  • MikeP2||

    "People using these services don't understand their own best interests!!1! /std-proggie-response"

    That's not just a proggie response. That's simple reality. People are economically illiterate.

  • Meh.||

    It kind of raises the question, how do poor people get by in the 13 states where payday loans are outlawed? Does the absence of payday loan companies force them to make better economic decisions? I feel like the whole concept of payday loans is a very gray area, but I have a pretty superficial understanding of the whole thing and would have to do more research so I can have an informed opinion.

  • ||

    The author did mention that folks with cashflow issues understand their economics. Lack of 'pay day lending' reduces they options.

    Do the 13 States have a large traditional backing presence / influence?

  • Meh.||

    That seems like a very bold collective statement, and I think it could be argued that if you asked most people, they would say they understand their economics, which still doesn't stop a lot of people from making questionable financial decisions. And yes, that's kind of the point. It reduces their options in the short run, but there are so many alternatives that will be more beneficial in the long run, like going to a credit union, as esteve7 mentions below.

    As for your second question... I have no idea. I really don't understand banking at all, just had an opinion on payday loan companies. As I mentioned, I struggle a lot with this whole idea because I believe people should be free to do whatever they want with their money, even go into debt... but I still have a lot to learn about this whole situation.

  • Diane Reynolds (Paul.)||

    Watch the video, it's quite informative.

  • MarkLastname||

    has poverty ceased to exist in states where payday loans are outlawed?

  • Meh.||

    Uh, major red herring, because obviously we had poverty before payday loan companies existed. We would have to see some actual data and numbers, because we're pretty much just arguing idealogy, Ms. Servon mainly provided us with anecdotes (in this interview), etc. Exactly why I keep saying I will have to look into this more. But even that data couldn't account for individual situations, so I guess it's like my views on other things I object to for ethical reasons - that it's your choice whether you want to use them, regardless of whether I think it's a good idea or not.

  • MarkLastname||

    Yes it is, as was what you said: " how do poor people get by in the 13 states where payday loans are outlawed?"

    See the similarity? Poverty is nor purely dependent on whether there are legal payday loans or not, for good or ill, so your rhetorical question is as beside the point as mine.

  • Ride 'Em||

    My guess would be illegal pay day lenders, aka, Louie the Loanshark. I believe there are always sources willing to lend it is only a matter of the "vig" and the collection method. The question is do you want to shine the light on it or not?

  • JFree||

    That's crap. They understand their own interest. They are just getting screwed by their govt which has granted a de facto monopoly over the money system to private banks and those banks are more interested in excluding part of the citizenry from that money system.

    I have no problem with payday loans and pawn shops and that stuff. But check cashing and money transfer/settlements is a necessary part of the money system. Banks are not interested in fulfilling the terms of their monopoly grant and they are too powerful now for it to be taken away.

    The only solution is for the govt to set up a checking/transfer/settlement system via the post office. The reality is that that competition for basic checking/money will draw deposits not just from the poor but from everyone who is being bilked by banks. Fastest way to eliminate banking cronyism - and it is completely constitutional and will prevent the next banker-induced extortion/crisis as well.

  • MarkLastname||

    "They are just getting screwed by their govt which has granted a de facto monopoly over the money system to private banks..."
    Almost, but not quite. They've granted a monopoly to the federal reserve, and regulated the distribution of credit (which is one step away from money creation) so as to create an oligopoly among about 20 financial institutions that get to buy or sell treasuries to/from the fed daily in its management of the money supply.

    "The only solution is for the govt to set up a checking/transfer/settlement system via the post office."
    Hahahahaha, that's not even close to being a sane idea.

    There are many purported solutions, but the best one is to eliminate regulations that grant special privileges (like special access to the Fed in the origination of credit) and thereby allow true competition among myriad credit providers, which would drive down costs and interest rates to the benefit of consumers.

    In as much as "private banks" do anything as a collective, it's because of the government herding them into a cabal with an inappropriately close relationship with regulators and the Fed. The solution is not more government; government is, as usual, the problem; the solution is more competition, so banks (or anyone willing to lend) have to compete with each other for consumers and therefore exercise negligible control over market prices.

  • JFree||

    the best one is to eliminate regulations that grant special privileges...to buy or sell treasuries to/from the fed daily in its management of the money supply.

    That's exactly what a post office bank DOES. It takes in (no-interest) checking/demand deposits - and it invests them solely in short-term Treasuries. There is no balance sheet mismatch and no FDIC risk. And because anyone can open a PO checking account, it PERMANENTLY eliminates those special privileges by broadening the distribution of those treasuries to everyone. It is not trying to leverage those Treasuries into a pyramid of longer-term credit and it is competition that is based solely on the distribution of the govt's own money.

    You seem to have a notion that there is some untapped unleveraged economy out there that will thrive/grow if only it can tap into the checking deposits of poor people. That is simply stupid nuts. And in the meantime, the legitimate monetary rights of even poor people - to exchange money, to settle payments, and to do so without forcing self-harm (those transactions currently do nothing but raise their rent payments) because they are (and will always be) at the end of the line for credit-creation and asset-inflation - are being violated.

  • esteve7||

    Most people do not understand that before payday lenders and the like, the biggest source of revenue for the mob was illegal banking.

    Now I've worked at a credit union for 12 years and as a teller for the first 4-5, and helped countless people get back on the grid. CUs really are the way to go and they help the poor the most, with very low fees and most stuff is free. I really don't get people paying $3 to use an ATM when if you are at a CU in the co-op network or something similar, you should NEVER have to pay an ATM fee. Same thing with cashing checks or payday loans; a CU is a much better option.

    I once helped a gentlemen who was dragged in by his GF, mad that he had no money saved up, and cashed his weekly check and spent it all. No other place would open an account for him due to bad credit and a chexsystems record, but we were able to open up a special account for him. It had limited access, but still helped him build up his savings. After 3 months he had over a thousand dollars saved up, and he was amazed. He never thought something like that would be possible.

    If you stay off the grid, you are pretty much assuring yourself that you will never be on a stable financial footing. Saving up money is even MORE important when you are poor; you need that emergency buffer more than anyone. if you don't have a lot of money, you can't really afford the high fees that check cashing places and payday lending places give you. A Credit Union could literally change your life

  • Diane Reynolds (Paul.)||

    I really don't get people paying $3 to use an ATM

    I use an atm maybe half a dozen times a year. Less so now that I can deposit my check via cameraphone.

    At least half of those times I pay an ATM fee. I see it like driving around looking for cheaper gas. You're going to spend gas, time and money and save $1 on a 20 gallon tank if you can find gas 5 cents cheaper. I know people who would drive across town for that.

    When I do have a fee, I simply withdraw more money to reduce the percentage loss. No fee? Pull out $60-80. Fee? >$100

    In the big picture, that fee is insignificant to the convenience of hitting the atm right where I'm standing, right when I need it.

  • MarkLastname||

    Yeah I almost never use cash anymore, so ATM fees are a negligible part of my life.

  • Diane Reynolds (Paul.)||

    According to Gavin Newsom, black and Hispanics aren't smart enough to protect themselves from using these services and need his benevolent white hand. If you disagree with Gavin Newsom and suggest that black and Hispanic people are smart enough, guess who gets called the racist?

  • Citizen X - #6||

    Irish?

  • skunkman||

    Well Gavin is an elitist fool and when he run for governor I will write in beelzebub before I'd vote for him. But Payday lenders aren't just honest business people trying to help the poor. They are abusive actors that make their living off of taking advantage of the poor. And they isn't much worse than that.

  • Diane Reynolds (Paul.)||

    I see you didn't see the video.

  • Sevo||

    "...But Payday lenders aren't just honest business people trying to help the poor..."

    Neither is Safeway, in case that's a surprise to you.

  • Diane Reynolds (Paul.)||

    "Grocery stores operate on a margin so small, it takes a microscope and a CP-fuckin-A to find it? This affordable-food-for-the-masses shit is bleeding us to death!" - Riles, Thick as Thieves.

  • Last of the Shitlords||

    "If you disagree with Gavin Newsom and suggest that black and Hispanic people are smart enough, guess who gets called the racist?"

    Trump?

  • Brandybuck||

    Once again, affluent east coast liberal shocked, SHOCKED, to discover the poor are not like them.

    "Why don't you just talk to your buddies at the country club and get a loan from them?"

  • Mark22||

    I believe the more common expression is "Let them eat cake."

  • MikeP2||

    I can't believe Reason is publishing a fluff piece on payday lenders.

  • Sevo||

    "I can't believe Reason is publishing a fluff piece on payday lenders."

    Pointing out how things work is not 'puffing' anyone.
    You're lost; Huffpo and Vox are off to the left somewhere.

  • MikeP2||

    "Pointing out how things work is not 'puffing' anyone."

    Up your reading comprehension. Nowhere did she "point out how things work", but rather explained in a very loose correlation how she perceived the benefits the payday lenders provided.

    If she had explained how things work, she would have detailed how the hyperregulated financial system exists to skim wealth from the populace at all levels, whether you're poor, rich, old, young, middleclass.
    Payday lenders are the bottomfeeders of the parasitic banking industry, preying on those with the least options.

    Let's do a fluff piece on credit card companies next and talk about how they perform and important service to people. I'm sure Reason can get behind that.

  • JFree||

    Kind of the standard Reason cocktail-party perspective on 'free markets' imo. The only things the poor really need care about is the drug war and libertarian TopMen are the vanguard of the poor for that. As long as the free market provides payday loans, Reason can ignore all the cronyism and distortion that makes poverty more pervasive.

  • Sevo||

    "...As long as the free market provides payday loans, Reason can ignore all the cronyism and distortion that makes poverty more pervasive."

    Do you ignore half the articles, or are you just stupid. Maybe a sock for SIV? Same sort of ignorant comment.

  • MikeP2||

    His comment was entirely valid. Reason barely does lip service to "free minds and free markets" outside of a few pet areas like trade.

    Publishing this piece is pathetic because it is nothing more than a clueless professor, with a clear proggy view of the world, detailing her feelz around the people involved in these industries. It's complete BS.
    We all know exactly how payday lenders and check cashing services work. Libertarians can agree that these sorts of industries are what you get in a "free market", although their existence is more related to how hyperregulated banking is, but Libertarians should also be able to recognize that these industries are not worthy of respect. They should be held with scorn for the predatory scum that they are. Pawn shops, payday lenders, check cashers, and credit card companies solely exist to skim wealth from people in crisis or people without the knowledge to see the scam.

  • Bill||

    You are correct. It was better when the Mob ran it.

  • sparkstable||

    No... in a free market they exist simply and only to fulfil a service that someone else agreed to needing. Predatory would need to include force... the payday lenders MAKING poor people take out these loans. That's not happening. You do not have to find the economic transaction to be of value to you and believe it would not be in your best interest and therefore not engage in it. But given that value (plus time preference) is subjective, the transaction may be supremely valuable to others. I may just trade my house for tickets to the Stanely Cup Finals... you might not. Per your worldview I am just as authorized to proclaim your refusal to engage in such a transaction as somehow morally bad and should be rejected by the masses.

  • MikeP2||

    in banking/lending terminology predatory does not imply force

    predatory implies that the lenders are going after the weaker in society and gaining their business through other than forthright communication regarding terms of the arrangement

    payday loan and check cashing outfits would lose a large portion of their clientele if the actual terms and conditions of the service were made clearer.

  • Sevo||

    MikeP2|4.14.17 @ 3:18PM|#
    "in banking/lending terminology predatory does not imply force.
    predatory implies that the lenders are going after the weaker in society and gaining their business through other than forthright communication regarding terms of the arrangement
    payday loan and check cashing outfits would lose a large portion of their clientele if the actual terms and conditions of the service were made clearer."

    Lefty bullshit.
    You just posited that any trade based on asymmetric knowledge is improper.
    So, as a lefty, you have defined the terms such that you and you alone can decide the morality of the exchange, and, as a lefty, you are willing to use coercion to enforce your views.
    There is a well-earned response to such horseshit:
    Fuck off, slaver.

  • sparkstable||

    No... in a free market they exist simply and only to fulfil a service that someone else agreed to needing. Predatory would need to include force... the payday lenders MAKING poor people take out these loans. That's not happening. You do not have to find the economic transaction to be of value to you and believe it would not be in your best interest and therefore not engage in it. But given that value (plus time preference) is subjective, the transaction may be supremely valuable to others. I may just trade my house for tickets to the Stanely Cup Finals... you might not. Per your worldview I am just as authorized to proclaim your refusal to engage in such a transaction as somehow morally bad and should be rejected by the masses.

  • mtrueman||

    Can employers offer to pay their employees in cash provided they can skim some 3% off the top of their wages as a 'service fee?' Employers could milk their employees just a little bit more and save them a troublesome trip to some similar service.

  • ||

    Have you ever worked for a living?

    Such practices are the options - OPTION - of off-books, none tax paying 'employer'. !!

  • Diane Reynolds (Paul.)||

    If I had to wait 5 days for my federally regulated bank to clear my check, it might be worth it. And for a low wage worker, 3% of not a whole lot isn't a whole lot. And for many of these low wage workers, getting their cash right away is a better option than the federally regulated bank who won't let them have any of it. I see you too didn't watch the video.

  • ||

    Diane (Paul) ..

    I support you; as does the article - inadvertently.

    Having a Bank Account immediately exposes one to the Federal Machinery, particularly the IRS.

    If one can mitigate that exposure whilst managing your finances - damned good for you

    'On the books' employers and Bank are under the leash of the Feds. Regulations forces compliance.

    My belief is the responsibility for reporting income belongs to the the individual - i.e. responsibility. If you f*** up it your prob.

    Any mechanism that takes your money then requires you to claim it back is ........ adding insult to injury.

  • mtrueman||

    "I see you too didn't watch the video."

    I don't watch reason videos and rarely do more than give the articles a quick read. Does it explain why employers are letting these payday lenders take business that could just as easily be taken by the employers? If there's an easier way to make money,

  • Diane Reynolds (Paul.)||

    No, but the video explains a lot of nuance that retards like Gavin Newsom are too stupid to understand.
    However, one can guess that employers aren't set up to handle large amounts of cash. That's not their business model.

  • mtrueman||

    I don't know Gavin Newson, not really curious to find out either. If they can get what amounts to a 3% kick back for paying wages in cash, maybe they could consider adjusting their business model. Unless it were illegal, in which case Reason would be decrying these laws as well.

  • Sevo||

    "...If they can get what amounts to a 3% kick back for paying wages in cash, maybe they could consider adjusting their business model..."

    Maybe you could learn to read?
    Naah; learning anything is not one of your skills.

  • mtrueman||

    Inappropriate semi colon. Otherwise OK.

  • Sevo||

    mtrueman|4.14.17 @ 11:19AM|#
    "Inappropriate semi colon. Otherwise OK."
    Wrong and more than OK.
    Correct reply to ignoramus.

  • Sevo||

    mtrueman|4.13.17 @ 7:54PM|#
    "...Does it explain why employers are letting these payday lenders take business that could just as easily be taken by the employers? If there's an easier way to make money,"

    Well, the stupidity of your post suggests why you are held in contempt here.

  • mtrueman||

    Keep it up. As long as you're not wasting your time.

  • Sevo||

    "As long as you're not wasting your time."

    Notice I'm not wasting time explaining anything to you.

  • mtrueman||

    I did notice that. But don't let that interfere with your bluster and insults.

  • Sevo||

    "But don't let that interfere with your bluster and insults."

    Nothing you haven't earned.

  • Last of the Shitlords||

    I'm keeping it up. This argument is hot. Keep it going until I finish please!

  • Sevo||

    trueman shows up now and then hoping for two outcomes:
    1) Someone mistakes his inane sophistry for profundity.
    2) Someone mistakenly clicks on his handle and adds one eye to the other one which visited his blog this week.
    He is un-lettered in most every subject which he has addressed here, makes stupid claims and then can't seem to find any cites for the claims, so I find it enjoyable to call him on his constant bullshit.

  • Sevo||

    "...Employers could milk their employees just a little bit more...

    I see your ignorance is wider than we supposed.

  • MarkLastname||

    Why would they do that when they could just pay you 3% less in your salary? And if they did plenty of people would just go work for a conpetitor.

    See, employers are not a monolithic class at war with the proletariat; they are individual producers competing with each other for both customers and employees. Try being less retarded.

  • mtrueman||

    "Why would they do that..."

    If I were an employer who paid my workers by cheque and found that employees were paying a payday lender 3% of there wages to cash them, I'd see a chance to make money by saving the employees a trip to another business and pocketing the 3% for myself. I could pocket the 3% by giving the employees the option of taking cash instead of a cheque minus a very reasonable service fee of 3%. What is so retarded about that? Something to do with class warfare?

  • Sevo||

    "What is so retarded about that?"

    If you have to ask, it's obvious that any explanation would be a waste of time.
    Man, you are STUPID!

  • mtrueman||

    " would be a waste of time"

    Preposterous. Nothing is a waste of your time.

  • Sevo||

    "Nothing is a waste of your time."

    Trying to explain anything to you would certainly qualify.

  • MarkLastname||

    You seem to miss the whole point of a payday loans. People aren't (generally) just taking a paycheck to the place and cashing it with a 3% fee; they are, rather, taking out a loan *before* they get their paycheck, with the agreement that they will pay the loan back once they get it.

    Leaving aside that most business, not being banks, don't like holding lots of cash on hand (which they'd need to do to pay employees in cash) because they'd forgo interest on that money and of course security concerns, cashing of checks isn't the major service provided; for an employer to fill the role of a payday lender, it would have to agree to loan next months paycheck (in cash) to an employee this month.

    If you're asking why they don't do that, then you're asking why non-banks don't pretend to be banks for their employees. You may also ask why my employer doesn't offer to repair my car for a fee despite not being in that business. Specialization is the answer. Also, when it comes to moneylending, there are a lot of regulations that prevent non-banking entities from loaning money, including to their employees (perhaps especially to their employees).

  • mtrueman||

    Thanks for your considered reply. Employers lending to employees seems a good way to make money, but there are regulations and I imagine the banker's lobby is powerful enough to bat down any proposed changes.

  • Sevo||

    So someone wasted their time explaining it to you and you STILL didn't get it.
    No one can say you haven't earned your rep.

  • phenryinohio||

    1) Thanks for the transcript. Otherwise I would not have "read" it. Well I suppose you could pay me and I would make a transcript.

    2) Payday loans actually work. Have done it in a transition period for about 4 pay periods. Nonbanking is also a real thing, None of this is pretty, but don't blame those who find a market in it or need it. Regulation is the problem. Christ, I thought this was a libertarian site.

  • MikeP2||

    "Christ, I thought this was a libertarian site."

    No...no it isn't.

    It's more libertarian than Breitbart or HuffPo. but that's about it.

  • ||

    Has anyone had a credit card?

    So 25% interest rate is okay because it is corporate.

    A member of my family asks for a 'loan'; I give it - $10,000, no problem.

    I do not expect to get the money back - because it is family!

    A person walks of the street and makes the same request - I am going to enquire!!!

    It translates to risk and, particular, what happens if you don't get your money back.

    After all it is your money? Not Bank's don't forget.

  • MikeP2||

    "So 25% interest rate is okay because it is corporate."

    No, it isn't. CCs and payday lenders are the same scam, just with different target groups. Both are scum and both should be looked at with scorn.

  • MarkLastname||

    Credit cards are a scam? Haha ok, do you also want to bring back usury laws?

  • MikeP2||

    Yes, credit cards are a scam. It is possible to point that out, while not demanding that the state fix the problem.

  • Sevo||

    MikeP2|4.14.17 @ 10:56AM|#
    "Yes, credit cards are a scam."

    I see Mike is here to lead us all to.............
    Oh, shit. Hihnfected.
    Fuck off.

  • NoVaNick||

    Proggies hate anything Black people like, but that won't stop them from shamelessly demanding their votes.

  • MartieUp||

    Our politicians' job is to help create jobs. Remember: the "economy, stupid" philosophy? Well that is highly apropos for this issue as well. People are taking payday advances because their paydays are not making ends meet. But instead of working to improve incomes through better jobs, for this issue, politicians are coming up with ways to micromanage borrower behavior.

  • ColoradoKook||

    Something about this piece just strikes me as painting the poor as noble savages. It is my experience that poor people tend make terrible financial decisions and do not know where the money is going.

    Servon does a good job explaining the check cashing scheme, which seems like a defensible practice because it's an agreed-upon fee. The math doesn't add up, though. If the state caps it at 1 1/2 %, how did the place get a 4% vig? Maybe I need to go back and watch that section.

    It's interesting that she's ok with that fee but wants people to send money out of country for no fee, though.

    The part where it breaks down is the payday loan. Maybe they didn't have time and it's in the book; maybe Todd didn't bother asking about compound interest; or maybe the perfesser just didn't want to talk about the ugly truth that a $15 fee on a $100 loan would be about 400% APR for a two-week period. I wonder if the payday lender reveals this, or are they selling it as a simple interest loan?

    I sure as hell would charge high interest on a risky loan; I'm just wondering if they communicate it.

  • MikeP2||

    "painting the poor as noble savages."

    That's exactly what it is. The piece refuses to address the fundamental reality that far too many people are financially illiterate. A stupid proggy professor who wants to believe that everyone understands their own best interests and these are just services to help them do what they need to do. That's a sad joke.

    these are predatory businesses that skim the wealth of people who are in crisis or don't have the financial skills and knowledge to avoid those situations. Why don't we do a fluff piece on how store credit cards are simply a service to help women stretch their income to properly cloth their kids, instead of the blatant scam they are designed to trick people with sales and cash-back schemes into buying things they can't afford and end up paying far more then they are worth due to finance charges and late fees.

  • MarkLastname||

    And what does that make you, a good libertarian who understands that people are too stupid for their own good and need their choices guided by the loving hand of the state?

    And store credit cards are designed to ensure a steady, stable spending pattern among consumers at the store, in return for which they offer a discount. Nothing really shady about it. Some people are idiots and spend more than they can afford, but that goes for all forms of credit; i suppose you think all lending is some kind of scam?

  • MikeP2||

    "And what does that make you, a good libertarian who understands that people are too stupid for their own good and need their choices guided by the loving hand of the state?"

    Yes, people are stupid.
    No, I never said the state should fix this. Up your reading comprehension. There is a large difference between looking at something with disgust and preaching to the world how they should avoid it and look upon it with scorn, and wanted the State to take over. There is nothing non-Libertarian about the former. Only a prog thinks you can't point out flaws in practices and people.

    "i suppose you think all lending is some kind of scam?"

    There is a world of difference between a loan at a fixed APR and a credit card with incentives to encourage people into situations where they get hit with high fees and absurd 20+% APRs.

    Yes, the latter is a scam and should be held with the same scorn that any business that preys on people's poor choices and understanding is.

  • Sevo||

    MikeP2|4.14.17 @ 10:50AM|#
    "Yes, people are stupid."

    Thank you for proving your claim, at least as applies to you.
    Fucking stupid!

  • MikeP2||

    "And store credit cards are designed to ensure a steady, stable spending pattern among consumers at the store, in return for which they offer a discount"

    Wow. you are naïve.

  • Gracchus||

    A stupid proggy professor who wants to believe that everyone understands their own best interests and these are just services to help them do what they need to do. That's a sad joke.

    Isn't that the basic argument for free markets in general? If people don't understand their own best interests, that would logically suggest that someone else does. And once you make that connection, it's kinda hard to argue against having some kind of Top Men making decisions for everybody (not endorsing the idea, just pointing out the obvious flaw in this logic).

  • Sevo||

    "If people don't understand their own best interests, that would logically suggest that someone else does. And once you make that connection, it's kinda hard to argue against having some kind of Top Men making decisions for everybody (not endorsing the idea, just pointing out the obvious flaw in this logic)."

    You just busted Mike.

  • JFree||

    Technically - people can be manipulated into not understanding their own best interests. We are biological animals and our brains are still wired so that the amygdala and limbic system drive much of our perceptions/response to outside stimuli. And we now understand enough of science/psychology to be able to manipulate that system as we have long been able to do for herd animals. This isn't just theory or conspiracy. Public relations and 'public opinion' and propaganda was created/scientificized by guys like Creel, Bernays, Lippmann - and modern stuff like psychographics (which drives most advertising nowadays) goes way beyond even that.

    Doesn't mean that TopManism is the only outcome. It merely means that a)we are NOT as rational as methodological individualism requires we be and b)the real enemy of the individualist/libertarian is not the abstract 'state' but the 'mass society' which really does only lead to both TopManism and a coercive state

    A guy like AJ Nock understood this - the coercive mass/anonymous 'state' directly undermines local/knowable 'social power' - not the heroic individual in isolation from everyone. Hell FDR understand this as late as 1930 - http://www.lexrex.com/enlighte.....ddress.htm

  • BradA||

    Haven't watched the video but the transcript barely scratches the surface on why people and businesses used check cashing services. It frequently boils down to trying to hide income from someone. Girl friend/SO, child support, IRS, garnishment, accumulated bank fees, etc. There is also an interesting class of migrant workers (I'm not talking about farm workers here) who do work all over the country and who frequently are not in a state or area where their bank has a branch. Then there's the immediate access to funds vs clearing time necessity. Businesses frequently pay in cash not only to illegals but to legitimate workers because they too are unbanked. As well as to under the table "employees" which saves both employer and employee on payroll and income taxes. Win, win. And regarding the unbanked, in many cases this is self imposed by those who, regardless of education, lack impulse control and who thus cannot manage a "bank account." Forcing yourself to live on cash only means that you will never overdraw, ie. spend more than what is in your pocket.

  • MikeP2||

    "There is also an interesting class of migrant workers (I'm not talking about farm workers here) who do work all over the country and who frequently are not in a state or area where their bank has a branch. Then there's the immediate access to funds vs clearing time necessity"

    I don't understand this. My experience is that you can always cash a paycheck at the bank it was drawn from, regardless of whether or not you had an account there. It's been a few years since I had to do that, but I spent many a Friday leaving work to drive to their bank to cash the paycheck because I didn't want to wait the two days for it to clear in my bank.

  • Sevo||

    MikeP2|4.14.17 @ 3:23PM|#
    "I don't understand this."

    Get trueman to explain it to you; you're dumber than he is.

  • BradA||

    Some banks won't accept out of state IDs and frequently the paychecks are also from out of state. Multinational or large service companies providing contract labor for big construction and maintenance projects on everything from highways & bridges to refineries and other industrial plants. And because of the nature of the skills and the work, it's not unusual for their weekly checks to be more than the monthly income for a middle class family.

  • CatoTheChipper||

    Lots of folks don't like people who charge usury, especially when the rates of usury seem disproportionately large for poor credit risks. Fifteen bucks on a $100 loan for two weeks does seem excessive. However, you have to consider how much you, yourself, would charge for this service to a stranger who obviously does not have credit quality to get a Visa card. And, in considering that, you have to include the costs of renting and maintaining a storefront, payroll for lending clerks, accounting, regulatory compliance, security systems, and your own cost of capital. I'm impressed that anybody is doing this for $15.

    Progressives like to argue that the $100 loan on these terms is irrational, and that payday lenders are preying on poor people with irrational impulses. The payday lender's business practices exploit their customers when they eventually repay, and the lender's collection methods can be abusive if they don't get repaid. I get it. So, your typical progressive solution is for government to shut them down.

    What progressives fail to consider is that government is even worse than a payday lender. It demands that payment of taxes without ever advancing a loan in the first place. Then, if you're late in paying those taxes, its interest and penalties would make a payday lender blush. And, if your non-compliance puts government in collection mode, its methods can be far more brutal than those a mafia collection goon.

  • Sevo||

    Nice explanation of how the market isn't perfect, just better than the government alternative.

  • Animal||

    "Progressives like to argue that the $100 loan on these terms is irrational, and that payday lenders are preying on poor people with irrational impulses."

    Even if this were true, why is it the role of government to shield people from the consequences of their own stupidity?

  • cashpaydayadvanceloan||

    payday loans is a good choice if you need money immediately but it is not economically.

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