I am constantly baffled that elements of the left focus on the evils of, for example, private equity, when there are so much riper targets to point at. Now, we're all for freedom of contract, but some practices in payday loans are a little alarming to contemplate. Not only that, but the appliance rental industry can be a pretty questionable as well. Throw the two together and you have a firm that will pull support from food charities at the drop of a hat. Talk about management already in possession of a "on the backs of the little guy" reputation that is just asking to be demonized. Anyone ever tell them that public relations firms exist?
In a series of telephone calls in recent weeks, Rent-A-Center executives warned America's Second Harvest and its Ohio affiliates that Rent-A-Center would yank charitable contributions from hunger programs in the state unless the local food banks withdrew from the Ohio Coalition for Responsible Lending. The coalition has been pressing the state legislature to cap high interest rates charged on payday loans.
Payday Lender Presses Charity to End Support for Tighter Rules [WSJ]
Posted by guest , May 01, 2008 10:28AM
Do poor people really need help with food if they rent TVs? Maybe more spending on good food, less on TVs etc...
Posted by guest , May 01, 2008 10:41AM
Please. While PE and payday loan shops might seem worlds apart (esp. to those of us on Wall St. who think we're way removed from the little people because we work in PE), you do realize many payday loan shops securitize their loans via firms like Fortress right? PE shops are not above demanding their 25% coupon from the unwashed masses!
Posted by guest , May 01, 2008 10:43AM
What's the problem? Payday lenders and rent-to-own retailers have to charge usurious interest rates because their customers are grubs and schlubs, who are more likely to default on their 20-inch television than pay it off.
Maybe I'd be more sensitive to the plight of the little guy if this particular class of little guy didn't end up where he was by huffing paint and spending his welfare money on lottery tickets.
Posted by guest , May 01, 2008 10:52AM
You people are far too insensitive. Yes, many of the patrons of these places are deadbeats. However, many of them are good, hard working people that lost their jobs and fell on hard times. Those are the ones that might need to use a payday loan service to pay a sudden medical expense or go to the rent-a-center to get a stove or washing machine that they can't afford to buy outright.
Have a freaking heart.
Posted by guest , May 01, 2008 10:53AM
"I am constantly baffled that elements of the left focus on the evils of, for example, private equity, when there are so much riper targets to point at."
Ummm...we are going after them, what exactly do you think the "Ohio Coalition for Responsible Lending" is? Something tells me they aren't criticising the IB syndicate behind the Blackstone/ADS deal.
Posted by Anal_yst , May 01, 2008 10:59AM
Save extreme circumstances, I'd venture a guess that the vast majority of the payday loan industry exist solely for the purpose of people who are living so far beyond their means that paycheck-to-paycheck still isn't enough for them. These types, I pity not.
I remember a few months back an op-ed in the WSJ from a guy who was something like the president of the payday lenders association (or some such nonsense) eschewing the benefits his industry provides and the reasons for their (purely beneficial) existence. Rationale included that many don't have basic bank accounts (why? because they're paranoid/retarded/etc) and need payday lenders' services to take their place. I can't remember verbatim the rest of the argument(s) but it was similar hogwash.
I'd like to say sometimes we need to protect people from themselves, but at the same time, as EP pointed out, we have freedom to contract, and as the old adage goes, a fool and his money...
Posted by guest , May 01, 2008 11:04AM
to hell with the poors!
Posted by big r , May 01, 2008 11:19AM
@ 10:52
"have a freaking heart"
wrong crowd
Posted by guest , May 01, 2008 11:21AM
@ big r
yeah, i'm sensing that.
Posted by american bandersnatch , May 01, 2008 11:24AM
They poor should try cheesing. It's very inexpensive and the high is so much better than TV.
Posted by guest , May 01, 2008 11:24AM
@ Anal_yst
Part of it is definitely an issue with bank distrust. I remember the cribs where Russell Simmons was pushing some sort of pre-paid debit card scam. Also, pre-paid phone cards.
Pretty much any article you ever read about inner city poverty deals with how difficult it is to live within means and not debt. The issue usually seems to be shocks, without any buffer/savings/non-usurious credit line it is very difficult to keep your head above water, let alone get-ahead.
It's a completely different (and admittedly myopic) worldview.
Posted by guest , May 01, 2008 11:28AM
@ 11:24:
"Pretty much any article you ever read about inner city poverty deals with how difficult it is to live within means and not debt."
Do these articles mention how two hundred dollar basketball shoes factor into the equation?
Posted by guest , May 01, 2008 11:30AM
"Maybe I'd be more sensitive to the plight of the little guy if this particular class of little guy didn't end up where he was by huffing paint and spending his welfare money on lottery tickets."
I read an article a few years ago that amazed me. A woman and her toddler son lived in one bedroom slumlord's apratment in Chicago.
Their rent was more than mine and I lived in a great 3 bedroom apartment that was acroos the street from Wrigley Field.
They had been living there and paying rent for 2 years. They had no running water and the owner wouldn't come over and fix the problem.
They paid this much because she couldn't come up with a deposit and the first months rent. People who exploit poor people like this are scumbags.
Posted by guest , May 01, 2008 11:30AM
One summer I worked in accounting at a local plant of a Fortune 500 manufacturer that had a petty cash window that would cash employee's personal checks and was open from 2:30 to 3:30. One guy, a mid level manager, figured out that if he cashed a check it wouldn't be brought to the bank till the next day and wouldnt get to his bank till the day after that. So he had his own salary anticipation system: cash a check; next day, cash another check and deposit the proceeds the next AM to cover the prior check. And on and on till payday. Cashier was convinced he was rich, cause over the course of a week he would cash $2500 in personal checks. I figured out what he was doing and informed her otherwise. If I was mean, I would have had her make a special trip to the bank before 3 to topple his house of cards. Lesson is not only poor people spend more than they earn.
Posted by guest , May 01, 2008 11:31AM
@11:28
It's a completely different (and admittedly myopic) worldview.
http://www.slate.com/id/2181822/
Deals with your Q.
Posted by guest , May 01, 2008 11:37AM
Feinberg was in the 82nd Airborne, not sure if he made it through Ranger School though. So, he has an appreciation for what Blackwater does.
Posted by girl , May 01, 2008 11:40AM
I don't think any of us can begin to understand what it is to be poor, nor really comprehend the circumstances that drive attainment of said loans...so once again, not really a well placed article in the (grand?) scheme of DB...
Posted by guest , May 01, 2008 11:46AM
@girl
Yeah, but who ends up taking action? It's definitely not the poor, the action that (I would imagine) Rent-A-Center is going to take now is the direct result of being shamed on the front page of the Journal. It's our responsibility as citizens to at least try to stay informed about these things.
Posted by guest , May 01, 2008 11:47AM
ep: Why the implicit assumption that only elements of the left talk about the evils of PE or payday lending? You can be a religious conservative and still be disgusted by these scumbags.
Personally, I'm a libertarian, which to me means that I love capitalism, but distrust most capitalists.
Posted by guest , May 01, 2008 11:48AM
Ha. They cap the rates on those loans and that just means that some people won't get loans. In terms of appropriate reward for taking on risk, I wonder how bad the payday loan rates actually are.
Posted by guest , May 01, 2008 11:54AM
@11:47 Libertarian: someone who conveniently underestimates the value of what the government provides to them and uses that as the basis for championing tax reduction.
Posted by guest , May 01, 2008 11:58AM
girl @11:40 Nice. Think of that in the context of the current crappy state of banking jobs. How many of us are really worrying about loosing out apartments, being hungry. Much as our pride makes it hard to admit, we have lots of safety nets that truly poor people don't have. The ultimate one being a little cash from the 'rents to tide us over.
Posted by merkin capital partners , May 01, 2008 12:02PM
"However, many of them are good, hard working people that lost their jobs and fell on hard times. "
yeah that's why you don't have a 90 inch television and 400 channels when you make 20k a year....save ese'.
Posted by Pro_Forma , May 01, 2008 12:06PM
Trust me, the loan rates are pretty ridiculous. If you want the best of both "evil" worlds (PE and payday lending), take a look at Golden Gate.
Posted by guest , May 01, 2008 12:07PM
I am looking forward to meeting the execs of RAC one day far in the future to inquire if any helpless, defenseless hungry children were included in the alleged threat.
Regards,
St. Peter
Pearly Gates
Heaven
Posted by american bandersnatch , May 01, 2008 12:07PM
@girl "I don't think any of us can begin to understand what it is to be poor".
you might be surprised at the variety of people who end up in finance.
Posted by Suits , May 01, 2008 12:09PM
Every bank in this country is in the payday loan business. What do you think a $35 overdraft fee is?
Posted by guest , May 01, 2008 12:12PM
@11:58. I work in banking and I am not poor. However the only "safety nets" I have are the ones that I have put in place. You can't lump the entire industry into the silver spoon crowd just because your's is firmly jammed in your balloon-knot.
Posted by Pro_Forma , May 01, 2008 12:12PM
As an funny aside, Golden Gate's payday lending portfolio company (California Check Cashing, which also acquired Fast Cash) is the only investment not listed on the portfolio company page of its website.
Posted by guest , May 01, 2008 12:14PM
Did you read the article, or just the headline?
'"Greed is a nasty business," said state Rep. William Batchelder, a self-described Reagan Republican from Medina County and one of the main sponsors of the rate-cap bill.'
Filthy liberals.
Posted by guest , May 01, 2008 12:18PM
@12:12
You can't get a credit card because you were never able to obtain credit in the first place?
You are an orphan with no place to go that has heat, running water or meals if you were thrown out of your apartment tomorrow?
No friends/network who have the wherewithal to make you a loan on reasonable terms if oyu fell on hard times, or at worst a meal?
You had no access to basic services to allow you to obtain your education in a safe environment? And you weren't born with any mental deficiencies due to factors beyond your control?
I don't know your situation at all, but if those are all true - congrats to you, you are a true bootstrap, self-independent success and I would call you a minority of the population.
Posted by guest , May 01, 2008 12:19PM
@12:14 - EP was the only one who said "elements of the left".
Posted by guest , May 01, 2008 12:23PM
The payday-loan industry is far less regulated in Canada. Read about the abuse here: http://register.thestar.com/Special/article/279328
Posted by guest , May 01, 2008 12:24PM
Is the Rent-A-Center story true? Until that, I thought energy traders were the dumbest people on the planet.
Posted by guest , May 01, 2008 12:27PM
St Peter @ 12:07, the ticker is RCII, not RAC, get it together.
Regards,
God
Posted by guest , May 01, 2008 12:27PM
@12:18........Excellent post.
Posted by guest , May 01, 2008 12:32PM
Could we all just agree that we're lucky enough to be reading DB at our desks rather than dancing in the subway for nickels?
Posted by guest , May 01, 2008 12:33PM
@ 11:37
Feinberg may have gone to jump school, but he served in the Reserves, not the 82nd Airborne or any other active unit.
In a tangentially related note, a law was enacted capping interest rates payday lenders charged military personnel at 36% after the DoD found payday loan debt was negatively impacting readiness.
Posted by Anal_yst , May 01, 2008 12:35PM
As with most social issues in this country, this boils down (at least partially) to education. To over-generalize, the majority of people being 'taken advantage' of by payday lenders etc don't have the financial education, upbringing, and experience (maybe discipline also) to live within their means. Just like even some "sophisticated" investors were lured by the promise of returns on shady real estate and credit products, it is difficult for people - of all standings - to resist temptation, especially when its so easy to say yes, and so hard to say no.
Posted by guest , May 01, 2008 12:36PM
Yahweh @ 12:27, sorry....I am on a "slave screen" and am not permissioned for equities. Please don't have the IT guys yank Dealbreaker!
Yr O'bt Serv't,
Peter
Posted by guest , May 01, 2008 12:45PM
@12:18 That's a fantastic simple way to boil down life into a half a dozen basic life assumptions. You were correct not be be presumptuous of my background or situation. The view is a lot different when you look up from suckling on mother's golden tit (or sucking on Dad's silver cock....whatever the case).
Posted by american bandersnatch , May 01, 2008 12:46PM
Anal_yst: Well said. The old-fashioned virtues of responsibility, respect, honesty, hard work and thrift still go a long way. It falls to parents to impart them to their children and is far more important than money. Failing to do so leaves your children vulnerable to the temptation you point out.
Posted by guest , May 01, 2008 12:48PM
It's not all fun and games at the top of those pay day loan companies either.
http://www.hamilton-co.org/appealscourt/docs/decisions/C-070753_03262008.pdf
Posted by guest , May 01, 2008 12:49PM
Back when I was a lieutenant and platoon leader in the Army we'd have to deal with these problems all the time. Payday lenders would set up shop outside Ft. Lewis and convince my soldiers, typically the 18-20 year old Specialists and PFC's, that they could easily buy that new car or TV they'd always wanted. Were the lenders scumbags who preyed on the uneducated and inexperienced in our units? Absolutely. Did we confront the problem by whining about how unfair the situation was and attempt to free soldiers of their contracts with the lending "thieves"? Absolutely not. You do what you can to educate financially inexperienced young men and women on the dangers of doing business with those types of lenders. If they still screw up, you give them a kick in the ass and tell them they had better learn their lesson because they're going to have to live with the consequences of their personal choices. You'd be amazed at how quickly people learn to be responsible when they realize no one is going to save them from their poor choices.
Posted by guest , May 01, 2008 12:50PM
@12:33
did not realize he was only in the Reserve, but at least we wasn't a Screaming Chicken
Posted by mrpink , May 01, 2008 12:51PM
So, who's going to front me $200 so I can get these new 'Air Jordans' at Modell's???
LOL
-mrp
Posted by guest , May 01, 2008 1:02PM
@12:45 And yet you presume to know mine. I was an analyst in IB before PE as well. My parents never gave me a dime. The State gave me an education through HS and a land grant University gave me scholarship to go to college.
I don't see how ANY of that gives me the right to be an asshole or deny ANYONE the right to have the opportunity to succeed in this nation. It always seems like those who came from the least are always the most eager to pull the ladder up behind them, and I've never understood that.
Posted by guest , May 01, 2008 1:12PM
Modells is owned by white devils.
Posted by guest , May 01, 2008 1:13PM
Renting furniture, appliances, and TVs in the inner-city was part of a way of life rooted in segregation and poverty. The stores were unpretentious and located in the neighborhood, and the owners frequently knew the customers by name, leading uneducated people to trust them on terms of the sales.
Different legal approaches have been taken over the years to beat back the abuses, but they crop up again, especially when times are bad. It was easier to win cases when the owners of these businesses were small businessmen obviously preying on their clientele.
However, some of the worst abuses now are perpetuated by national credit card companies, who have used their economic power to roll back state usury laws.
Posted by guest , May 01, 2008 1:15PM
@11:04 "the poors"
love that.
Posted by guest , May 01, 2008 1:18PM
"The ultimate one being a little cash from the 'rents to tide us over."
You cast a large net over the crowd with this statement. It makes two assumptions - 1) we all have parents 2) our parents have cash they can afford to lend us. Actually you didn't even say lend...you just said cash.
Posted by diablo , May 01, 2008 1:20PM
For those here who don't know what they are talking about, please at least volunteer your time to a charity such as a soup kitchen or homeless advocacy group. I do.
One thing you would observe immediately is the disproportionate number of mentally ill clients. Another thing is the high proportion of people who have some type of employment, but no way to obtain credit, or afford housing, furniture, etc. The mentally ill live on the streets, the working poor are targeted by predators. Where is this place? 15 miles driving distance from Wall Street.
Posted by guest , May 01, 2008 1:23PM
National credit card companies? Challenge that. There is a huge gap between even the subrprimiest of subprime credit card rates and the annual rate on a payday loan.
Posted by guest , May 01, 2008 1:25PM
@12:45 The point is not that we're living off parents (or friends, or credit cards) but that we could if we needed to. So we have a safety net that the lowest rungs of society doesn't. Which mean if things get bad, like say loosing a job, we don't have to worry about starving or being homeless. The value of which is extraordinary and which you underestimate greatly. Certainly allows me to sleep at night. That's all.
Posted by guest , May 01, 2008 1:29PM
@1:18 You actually have parents that dont have the resources to give or lend you money? America is the land of opportunity. For them to be poor clearly indicates some mental or moral failure. Just kidding of course. But one would conclude this, based on the remarks here.
Posted by guest , May 01, 2008 1:29PM
@1:23 - not credit card, but close
Golden Gate Capital (California Check Cashing Stores, LLC)
One Embarcadero Center 39th Floor | San Francisco, CA | 94111 | United States
Phone: 415-983-2700 Fax: 415-983-2701
Posted by girl , May 01, 2008 1:34PM
@ 1:20 and 1:25,
I could not agree more.
In certain situations, the ideals of hard work and determination are simply not enough. Consider a family that does live hand to mouth (but at least within their means). A family member falls ill and must go to the hospital without health insurance. Money that would have been payed toward rent (apt, furniture, what have you) is now put toward the more pressing expense, and the family finds themselves in debt. It's really rather sad.
Alot of interesting points on this thread though.
Posted by guest , May 01, 2008 1:39PM
So what recourse do payday lenders have to clear the defaults on their books? Their customers have no assets and virtually no income so going after them in civil court would be like squeezing blood out of rocks. These aren't charities, so staying in the black means front end charges that make up for the uncollectables.
You could argue that the payday lending sector is better at pricing risk than the rest of the financial industry.
Posted by onetwo , May 01, 2008 1:42PM
Percentage of households that possess at least one television: 99
Number of TV sets in the average U.S. household: 2.24
Percentage of U.S. homes with three or more TV sets: 66
Percentage of households with a car: 92
Percentage of Americans who pay income tax: 45
Our "poor" have it GOOD!
Posted by guest , May 01, 2008 1:51PM
@1:39 I though that, because of the way its structured operationally. The lender sends an electronic debit to your bank account on the same day that you get paid (also electronically). Not foolproof, but minimizes credit risk. Its the only way that such small loans can be economically viable for the lender.
Posted by guest , May 01, 2008 1:54PM
Two observations: 1) averages are funny. Average of my net worth and that of Bill Gates: six trillion. 2) % who pay income tax. I assume you mean households, not individuals. Take into account payroll taxes and that will jump significantly.
Posted by guest , May 01, 2008 2:00PM
If poor people worked harder, didnt drink or take drugs and went to school, they wouldnt stay poor for long. Getting some good shoes and going for a walk is a good start.
Posted by girl , May 01, 2008 2:00PM
@ 1-2
Actually I disagree that "good"/"bad" is binary when it comes to poverty ...
Posted by guest , May 01, 2008 2:17PM
To 1:39's point, so much for a logical conversation about the pricing of risk, right? The reason these rates are so high is because a large portion of people never get around to paying any money back, so those that do need to make up for it. A cap on rates only means that this business is a losing proposition, and anyone without means to a credit card or loans from friends won't even have the CHOICE to be "swindled" to pay for those medical bills (in the most honorable case everyone likes to point to).
Either people really need the money (medical emergency) and so this business ought to exist and charge high rates to make up for defaults. Or, people are uniformly using this service to live above their means and the business shouldn't even exist at (yet in this scenario, it's the borrowers own fault). Either way, don't blame the guy who cashes the check.
Posted by HAM05 , May 01, 2008 2:25PM
@girl,
i think his overreaching point is that relative to the rest of the world (see: dirt cookies, no water, etc) americas poor dont have it all that bad. they have access to social programs to ensure they dont go hungry (food stamps) and government housing to keep from homelessness. someone else made a point about mental illnesses, thats another story all together...
not sure how many of you have spent time in 'the ghetto' where a huge proportion of the measured poor live, but from what ive seen theyre flossing the latest kicks and always rocking the latest gear. obviously cant generalize for the whole population but...
to further drive the point home, consider the experience of recent imigrants whether legal or illegal: they come here oftentimes with nothing and bust their asses to make enough money to not only support themselves (without becoming a societal drain) but support their relatives back home.
believe me, i sympathize with the homeless becuase sometimes shit happens that you just cant control, but i cant really sympathize wiht the urban poor.
Posted by guest , May 01, 2008 2:44PM
"Maybe I'd be more sensitive to the plight of the little guy if this particular class of little guy didn't end up where he was by huffing paint and spending his welfare money on lottery tickets."
Or CDOs.
Posted by guest , May 01, 2008 3:19PM
HAM: maybe you should have a little sympathy for the urban poor. I'm going to be provocative here: the US is essentially a nation of emigrants. I think that says something about the DNA of most of us: we or our ancestors struggled greatly to get here be it legally, or illegally. The urban poor though were generally brought in slave ships. Maybe they just don't have what it takes. Ditto for native americans - ever see the grinding poverty on a reservation?
Posted by guest , May 01, 2008 3:28PM
@3:19 I see your point. At the same time, in life I've come across a lot of people that are very ordinary, semi dim bulbs. Yet, while not able to buy beach front property in East Hampton, simply by dint of being white, they can hold a job, support a family. Makes me think theres a bit of a double standard at play here.
Posted by guest , May 01, 2008 3:32PM
@ 2:00pm
You're a moron.
Not all poor are drinking alcohol and doing drugs. Some are working hard and can't get ahead. My father lost his business and my family is now living paycheck-to-paycheck without insurance. They had to sell our childhood house, move, and both of my middle-aged parents had to get new jobs. God forbid they should get hit with some expense, they would find themselves in debt and fast. And it isn't for a lack of trying as my father works 60+ hour weeks trying to make the ends meet.
So before you lump in all of the struggling with people that are alcoholics, drug addicts, and general deadbeats.
Posted by Anal_yst , May 01, 2008 3:38PM
@ 3:32
I think you missed the sarcasm/poor humor of 2:00's comment, but given the circumstances which you describe thats understandable.
I think (and this is completely unsubstantiated or backed up by any fact) that your family and those in very similar situations do not make up more than 1/2 - absolute tops - of the market for these types of services. Yes, sometimes life gives you lemons, but with most $ industries (esp credit ones), necessity is less often the driver of growth than is desire.
Posted by guest , May 01, 2008 4:21PM
@ Anal_yst
Totally missed the humor. It's a hectic day and I'm a bit blonde today so it's possible the comment went over my head. Though given a lot of the people on here, not so sure.
You're absolutely right. I'm sure that that particular stereotype isn't completely off-base because let's face it, most stereotypes are based in some fact at SOME point. My argument was that it's unfair to just assume that everyone that is "poor" is a deadbeat.
Posted by guest , May 01, 2008 4:44PM
@11:31, that's a great article, well worth reading. I also agree with Cosby.
I am not Jewish but if you look at the jews throughout history - like during the pograms or other times when they were the downtrodden, like most of the time, they put the emphasis in their culture on studying. "The people of the book" You see this in Chinese and Japanese culture too. These cultures value knowledge and education. If somehow poorer cultures could learn that education is what would benefit them, perhaps they could pull themselves up by the boot straps. Turning off those big TVs would be a good start.
I have a friend who is a middle school math teacher in the Bronx and already at that age the kids there don't want to study or work. The parents of these kids need to get involved. Kids need to be made to work and study at home too.
There is a documentary series on MTV "True Life", a year ago it profiled poor high school students in Newark NJ. One boy lived in a terrible apartment with his grandmother, who worked 2 jobs (his mother was a long gone crack addict). And he said he wished for someone who would make him do his homework. He knew he lacked the self-will to make himself do it all the time, he could do it sometimes on his own, but he needed his grandma to be "on his butt" and unfortunately she wasn't always there, due to her two jobs. Now if his mom weren't a crack addict...and if he had a dad, maybe this kid could do alright, and maybe he will. Because at least he realizes that he needs to study.
Cosby is right, they need to change the culture, and white people can't do it for them. They need to decide like the Jews did when and where they were minorities, to become people who value education.
Posted by guest , May 01, 2008 5:07PM
We need some more great novels or films about surviving poverty, so more people can imagine the constrictions that go along with being poor.
I believe the poorest Americans are better off than the poor of Haiti, Mexico City, or Rio de Janeiro, to name just a few notorious places in our hemisphere. But being poor in America is still tough. The contrast between the haves and the have nots in the U.S. fuels envy, waste of scarce assets in vain displays, and rage.
Poverty plus mental illness is a pretty bad fate to endure. So is poverty plus other common disabilities. There are far fewer programs in place to deal with these ills than you would imagine. Someone I once knew -- a conservative Republican -- who worked long term in the underside of NYC called such problems "the pathology of the streets."
One thing about poor people and bank accounts. Many people on the low end simply cannot afford them. Maintaining a minimum balance or paying a $30 a month fee is out of the question. Social security is beginning to recognize this, and to help people avoid check-cashing fees, may offer benefits in the form of debit cards instead of paper checks.
Posted by guest , May 01, 2008 5:10PM
@4:44 Ever hear the saying shirtsleeves to shirtsleeve in three generations. I know a successful Jewish hedgie. Two children, very well educated. One is still in college, second one though graduated and wants to be a screenwriter or do something else with film. Lesson is don't generalize about drive and ambition.
Posted by guest , May 01, 2008 5:14PM
If anyone has parents who will help them out with a gift of cash when hard times strike, consider yourself lucky. Sometimes it's got to be a truly large piece of cash to carry you through. Many people don't have that kind of cash, and it just wouldn't occur to some who do have it to offer it.
Posted by guest , May 01, 2008 5:24PM
are you people dense? The point is that unlike poor people you have options. Only one of which is leaning on your parents. Among the others: friends, networks, credit cards, subletting your apartment, Starbucks. The list goes on and on. No wonder you're all loosing your jobs.
Posted by guest , May 02, 2008 12:15PM
Banks are the real predators, but you'll never admit it.
Study Finds 4,547% Interest Rates on Bounce Protection Loans
WASHINGTON, DC - The median interest rate on bounce protection loans is in excess of twenty times that of payday loans, concludes a study by Mark A. Fusaro, Department of Economics, East Carolina University.
The independent study, "Hidden Consumer Loans: An Analysis of Implicit Interest Rates on Bounced Checks," finds that "Payday lending attracts attention for its high interest rates, but bounce protection loans are much more expensive. When the amount borrowed is low and the time outstanding is short, the effective interest rate paid on this loan can be quite high."
Fusaro found that "frequent overdrafters can pay fees exceeding $3,000 per year which implies an interest rate in excess of 1,700%. The median implicit interest rate is calculated to be 4,547%.
Posted by guest , May 02, 2008 12:22PM
related issue is credit card late fees and charges for exceeding your credit line. Big source of income for big card banks. At Citi, for example, investment banking is almost a side line. It does lend some prestige to the organization, but the real profits are made from scamming lower middle income card users.
Posted by guest , May 07, 2008 6:09PM
Payday Lending Myth #1 : Government Regulation of Free Market Will Protect Consumers.
Those who support government regulation: Please think twice. What will you say when government starts regulating what food you can buy at what price (because it is too high price, or where you can go and where you should not go (because you can either afford it or not afford it). Unlike what those activists make you believe, people benefit the most when there is free market mechanism. Payday loan is a free-market mechanism for obtaining small cash loans for people who can’t get cash advance from credit card, for example, and makes perfect sense to those who use it. Of course in an ideal world people will have saved money blah blah ----. But in a real world, we meet our needs because there is a free market mechanism. Free market mechanism determines what is a fair price or fair interest rate. People exchange goods and services because it makes sense to them.
Posted by guest , May 07, 2008 6:10PM
The truth about “Center for Responsible Lending” and “Bill Faith”
(Go to the link and read how they are organizations with a specific agenda, whether you agree with them or not - I am saying that they are after something else, not truly serving consumers who are working hard to make ends meet.)
The following quote is written by Matthew Vadum, Editor of Organization Trends and Foundation Watch at the Capital Research Center.
Link: http://newsbusters.org/blogs/matthew-vadum/2008/03/26/reuters-news-flash-lenders-keep-lending-money-poor-people
(quote starts)
Carey quotes Uriah King, a policy staffer at the Durham, North Carolina-based Center for Responsible Lending. “We’re hearing from around the country that many folks are buried deep in pay day loan debts as well as struggling with their mortgage payments,” King says. This is anecdotal evidence from a group that treats market fluctuations as an excuse for government intervention in the marketplace. Not surprisingly, the Center, and other groups pushing for a crackdown on payday lending, take big grants from left-wing funders that don’t trust people to run their own lives. From 2002 to 2005, the Center accepted $100,000 from George Soros’s Open Society Institute, $100,000 from the Ford Foundation, $150,000 from the Rockefeller Foundation, and $500,000 from the John D. and Catherine T. MacArthur Foundation. (For more on the Center for Responsible Lending, see “Demonizing Subprime Lenders: Liberal Groups Oppose Consumer Choice,” by Melanie Sans and Matthew Vadum, in Organization Trends, October 2007, published by Capital Research Center.)
Carey also quotes Bill Faith, executive director of Columbus-based COHHIO, as saying payday loans “are insidious because people get trapped in a cycle of debt.” (Well, maybe they’re already trapped in a cycle of debt before they apply for payday loans.) Carey describes COHHIO in innocuous language as an “umbrella group representing some 600 nonprofit agencies in Ohio.” However, he doesn’t bother to spell out what the acronym COHHIO stands for, which is Coalition on Homelessness and Housing in Ohio. (It’s a safe bet any group that uses the word “homelessness” in its name isn’t enthusiastic about free markets.) COHHIO advocates government-funded slush funds, or “affordable housing trust funds,” that give leftist groups access to taxpayer dollars that they can then use to push their agenda.
(quote ends)
Ask Bill Faith if he (or his Catholic organization) will give out a personal loan at 100% APR (which is much higher than 28% APR proposed, and lower that $390% currently charged by lenders) to a stranger without a credit check. I call him a hyprocrite because he will not do himself but asks others to do what does not make sense. So are the politicians who voted for 28% APR. They know that they are destroying a market mechanism for subprime cash loan, but they do not want to be targeted by consumer avocates as an enemy of the poor.
Do you know why banks do not get into payday lending? They stopped doing it because even at 390% APR, it was not profitable for them. (Until payday lenders figured out how to reduce defaults of small cash loans without creit check.) Another reason is banks have a much more profitable business than payday lending. (google profitablity comparison between payday lenders and banks). It is called “overdraft protection” ($35.00 to $38.00 per pop) and NSF fees (same lucrative business, they do not even have to declare what APR is on these).
These activists including Bill Faith make it sound like the Anti-payday lending legislation is a good idea because it says it will protect the poor. Really? More regulation means less choice for consumers. Less choice for working people is a good idea? Probably COHHIO realizes that, but they will have more power, if there are more poor (non-working) people.
“Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government. “
Milton Friedman
Posted by guest , May 07, 2008 6:16PM
Myth # 2: Payday Loan Stores Are Gouging Customers
"Gouging" means overly excessive charging to customers. If so, they should be overwhelmingly profitable.
Please read Ohio Financial Commitee Report where the proponent of anti-payday lending bill are trying to legislate 33% APR cap. It states that “PDL (payday loan stores) are not overly profitable. (after analyzing financial data)” If PDL stores are not overly profitable at current APR of 390 %, how do they expect PDL stores to operate at 33% APR? Then they go ahead and pass the bill that limits rate at 28% (May1, 2008 Ohio H.B. 545) . This shows how much politicians have backbone.
The following quote is from the link:
http://www.lbo.state.oh.us/fiscal/fiscalnotes/127ga/HB0333IN.htm
(Quote start)
Current payday lender costs and profits
There is limited publicly available data in regard to payday lender operating costs and profits. An often-cited source is Flannery and Samolyk's 2005 working paper for the Federal Deposit Insurance Corporation's (FDIC) Center for Financial Research. Their study examined proprietary store-level data from two large payday lending firms to study store costs and profitability.[3] This study included data on a random sample of 600 stores operating in 22 states and found a relatively high average cost of originating payday loans. Specifically, Flannery and Samolyk found that average costs for a store open at least one year to loan $100 were between $11 to $14 depending on the age of the store; these are figures the authors contend are not that out of line with the size of advance fees (the average advance fee in the study ranged from $14.32 to $18.30 depending on store age).
Flannery and Samolyk find the average store's operating margin (the ratio of operating income to store revenue which measures how much revenue is left over after store operating costs are deducted) to be 33.2%. However, this margin does not account for shared administrative and interest expenses allocated by the payday lending firm at the corporate level, which, when accounted for, reduce true store profitability. The table below summarizes Flannery and Samolyk's findings for stores open at least one year. As the table demonstrates, the study found that older stores are more profitable due to greater loan activity. In sum, the study's authors concluded that fixed operating costs and high loan loss rates account for a large part of the high APR charged on payday advance loans.
Another source of information concerning the profitability of payday lenders comes from the quarterly Securities and Exchange Commission (SEC) filings of seven publicly traded payday lending companies (some of these companies also engage in pawn business). An August 2006 study in the Fordham Journal of Corporate and Financial Law reviewed these documents (which includes data from nearly 8,000 payday lending stores) and came to a similar conclusion as Flannery and Samolyk: that payday loan firms are not "overly profitable."[4] While average store operating margins were comparable to those reported by Flannery and Samolyk (24.64%), the average profit margin (the percentage of gross revenue that remains after subtracting out all associated costs for the period) was 7.63% when including companies that, while pawn is their primary business, also make payday loans. This study also noted that the average profit margin was less than Starbucks (a little over 9%), a company with a similar business model as firms in the payday lending industry.
Also among the findings was a contention that the industry's average profit margin is attributable to high operating costs, which are driven by longer business hours (leading to higher wage costs) and a large number of stores (leading to high occupancy or rent costs) that are needed to drive loan volume and thus profitability.[5] The high cost of loan losses also contribute heavily to a store's operating costs, further reducing profitability (around 25% of store operating costs in both studies); however, the Fordham study indicated that loan losses for payday lenders are not unusual in comparison to commercial lenders.
(Quote End)
Posted by guest , May 07, 2008 7:25PM
This is what will happen when the so-called activists and govenment steps in to help the working poor (or poor and struggling to survive).
An article written by a journalist regarding his experience of Payday Lending.
http://www.walletpop.com/2008/04/30/payday-lending-part-iii-will-loan-caps-bring-the-return-of-the/
Posted by guest , May 07, 2008 8:50PM
Sorry. I don't consider George Soros’s Open Society Institute, the Ford Foundation, the Rockefeller Foundation, and the John D. and Catherine T. MacArthur Foundation to be "left-wing funders that don’t trust people to run their own lives."
Posted by guest , May 08, 2008 2:04PM
See who benefits by these so-called self appointed activists:
Truth about "Center for Responsible Lending" (from Forbes http://www.forbes.com/forbes/2008/0310/042b.html )
(quote)
The 53-year-old Yale-educated attorney runs Self-Help Credit Union, a nonprofit in Durham, N.C. that caters to low-income borrowers. But much of Eakes' energy goes into his advocacy outfit, the Center for Responsible Lending, and his efforts to eliminate predatory loans. He's to mortgage lenders what Ralph Nader was to the auto industry.
Eakes has persuaded North Carolina lawmakers to ban high-interest "payday" loans and mortgage prepayment penalties and to restrict mortgage-broker fees. He's helped export similar laws to two dozen other states. Now he's marching on Congress.
In November the House passed a bill Eakes fought for that would ban mortgage prepayment penalties nationwide. It would also require lenders to demand documents proving your income and make a reasonable determination that you really can service your mortgage. Another bill Eakes wants, giving bankruptcy judges the power to rewrite the terms of mortgages on a borrower's primary residence, has been approved by a House committee. Versions of both bills have been introduced in the Senate.
"Half the people I know say they'd take a bullet for me, and half say they'd be happy to provide the bullet," he says.
So far his enemies' weapons are limited to pointed remarks about his claims. But they are telling. An economist for the Federal Reserve Bank of New York (nyse: BK - news - people ), Donald Morgan, challenges Eakes' claim that payday borrowers are paying out $4.2 billion a year in harmful fees.
In his November report Morgan shows the Center for Responsible Lending has overstated the number of problem borrowers and argues that bans lead to more people bouncing checks, filing for bankruptcy and fighting with collectors. After payday loans in Georgia were banned in 2004, Morgan found, bounced checks in the Fed processing center in Atlanta jumped by 1.2 million, a 13% increase. But in Hawaii, where payday loan limits were eased in 2003, from $300 to $600, borrowers' problems with lenders declined, getting resolved in a month instead of over several months. Hawaii's rate of bankruptcy filings declined markedly.
Who, then, really benefits from payday loan bans? Credit unions, for one, notes Morgan. He says that interest rates on overdrafts charged by credit unions and banks can exceed 2,000%, dwarfing the high interest rates on payday loans. Credit unions, he adds, have been especially hurt by payday lenders cutting into their overdraft fees--bounced-check revenue at the typical credit union can amount to 60% of net operating income. (It's just 18% for banks.)
In payday-loan-free North Carolina Self-Help has thrived. Its assets have jumped from $114 million in 2003 to $292 million last September. Its return on average assets is 1.4%, reports snl Financial, versus the industry average of 1.1%. Terry L. Kibbe, a former think tank fundraiser who last year started a libertarian consumer advocacy outfit, Consumers Rights League, notes that Self-Help's high delinquency rate--it's seven times that of the typical credit union--proves that Eakes is as bad at judging borrowers' ability to pay back loans as anybody else. Self-Help says less than 1% of its loans ultimately default.
Eakes' spokesperson insists that bans on payday lending don't hurt consumers, citing a survey in North Carolina. She denies that Eakes' lobbying is aimed at benefiting Self-Help's lending business and chalks up its high growth to strong demand for its fixed-rate mortgages, 90% of which go to first-time home buyers. She says the credit union's overdraft fees are lower than those at most banks.
Eakes certainly hasn't gotten rich off his efforts. His annual salary is under $70,000. Self-Help pours profits into do-good-type investments. It paid $23 million for a building on 17th Street, NW in Washington, D.C. in 2003 that serves as a headquarters for the Center for Responsible Lending and other unaffiliated nonprofits.
"He's not in it for himself financially," says an adversary, William Bost, general counsel for the North Carolina Association of Mortgage Professionals. "He just absolutely believes that every loan should be made by a traditional bank or credit union like his."
(quote end)
Posted by guest , May 21, 2008 9:29PM
I was a manager at Rent A Center's Payday loan store called Cash AdvantEdge. I think payday loans are good for those people who are in need and don't plan on abusing the system. I wouldn't recommend anyone to Cash AdvantEdge. They don't know how to treat their employees and employees are constantly threatened if they don't collect enough money and if they don't get enough loans. In order to collect this money you are required to go to people's jobs and homes and ask for money. Their expectations and morals are completely in the wrong place. They're all about money. They couldn't care less if you're being harassed by the men at Rent A Center either. You should be so busy marketing 4 hours each day and out collecting money that you shouldn't notice it. They want you to market in other payday loan competitors parking lots as well. From a business stand point that's completely ridiculous.
Posted by guest , Oct 08, 2008 6:03AM
If you buy into the wrong information about payday loans then you are in for an unfortunate situation. Especially when you proceed down a path based on that misinformation. The pluses and minuses of payday loans and the unknown future of the industry often can fall victim to this. Some politicians from all parties are attempting to pass legislation that would restrict or take away your right to get a payday loan. In this growing battle, some politicians have already succeeded in passing their legislation. Some politicians have already outlawed the whole industry in their states. Many of these laws are based on the misinformation that the payday loan industry is exactly the same as loans sharks. Please don’t jump to conclusions, and educate yourself, family, and friends on the right to financial independence.
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Posted by guest , Oct 14, 2008 4:32AM
With the market in shambles recently, it is becoming tougher and tougher to get a loan. The standards for getting a loan are getting harsh, and limits on credit cards are going down. The worst part is that this might only be the beginning of an already bad situation. Some fear that consumer and businesses will stop borrowing money all together. Most people with good credit can still get a loan if they have a steady job and are not currently in debt. But not all people meet these qualifications and can be accepted for a standard loan. But thankfully for them, payday loans are still readily available to consumers to provide extra cash when they are in need. If something unexpectedly goes wrong and you need money to fix it, but are currently facing financial difficulty, you can still apply for a payday loan with a very high chance of being accepted, much higher than a standard bank loan. All you need to be accepted for a payday loan is a steady income, so that you will be able to pay your loan back. You usually don’t even have your credit checked. The best part is that in most situations you will likely pay only about 15% interest on your loan.
Posted by guest , Oct 24, 2008 1:48AM
Alaska Governor Sarah Palin, who is currently a Vice Presidential Candidate, has been getting more negative responses from the mainstream media than she has in praises. For example, last weekend she made her late-night entertainment debut on NBC’s well-liked pop culture mainstay, Saturday Night Live. Instead of praising her for being the good sport she was, she was criticized by the press for her appearance. For several weeks now, jabs left and right have been taken at Palin, attempting to knock her out on everything. They question her performance as Governor of Alaska and her possible position as the Vice President of the United States. They had even extensively utilized the story of her seventeen-year old daughter who got pregnant out of wedlock to spread a horrendous tale to further condemn the VP candidate. Some in the media, including moderate experts, have stooped so low as to insinuate that our country will fall if something should happen to Republican Presidential Candidate John McCain, forcing Palin to take over the office of Presidency. These attacks are low-blows packed with half-truth or outright lies. Conversely, a large number of people admire Palin for her hard work and efforts that brought better things to her home state of Alaska. Many come to her defense, pointing to her unwavering support for the disabled, her work in the interest of children and people with special needs. People have put their faith in Sarah Palin, considering her support for personal responsibility and financial freedom. Much of this includes her fight against the destruction of cash advances, which is a legitimate and invaluable resource that many responsible, hard-working citizens have come to rely on in times of unexpected financial situations.
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Posted by diablo , Oct 24, 2008 1:55AM
Hey you cheap Republican usurers:
Dealbreaker is a commercial enterprise. They need ad money. Don't spambot your ads here, pay if you want to advertize.
Posted by guest , Nov 04, 2008 12:13AM
Payday Loans can be very helpful in many ways when you need it most...especially when an emergency arises or just in case you need it for your personal finances.
Every single one of us, or someone we know, is facing some health challenges. It seems like everywhere you turn, there’s a story about how unhealthy most Americans have become. Obesity and diabetes are some of the major health issues we see. Both are, no doubt, on the rise among both adults and children. In a recent report from the New York Times, kidney stones are becoming more and more common in children as young as 5 or 6. Back in the ‘70s and ‘80s, a child with kidney stones was a rare case; nothing compared to what it is today. Two of the biggest risk factors are children (and adults) not drinking enough water and eating too much salt. It is hard, however, for parents to regulate their children’s intake 24-7 especially when parents are at work and while the children are at school. There’s really nothing more to do than to educate your children about the issue and healthy eating and most importantly, set a good example as well. Kidney stones are harmful to your children. In addition to that, it can also leave a major strain on your budget. If you are unable to cover those unexpected doctor bills, payday installment loans can get you the immediate cash you need to accommodate you or your child’s journey to recovery.
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Posted by guest , Nov 05, 2008 12:07AM
The Philadelphia Phillies have won their first World Series in 28 years. The last time they climbed to the top of the mountain (1980), Mike Schmidt, Pete Rose and Steve Carlton showed the American League the meaning of spirited, winning baseball. Today, as emotions run high and the city of Philadelphia gears up for celebration of their boys bringing home the Commissioner’s Trophy, pillars of the community like Temple University are preparing for mass rioting. According to Dean of Students Ainsley Carry, “Students involved in vandalism, refusal to disperse, destruction of property, etc. will face both criminal and University disciplinary action. Sanctions may range from fines up to and including immediate suspension. Surveillance – including videotaping – is heightened during the Series on campus and throughout the city.”
I’m all for personal responsibility, which includes showing respect for others and their property. But is the feel of a police state crackdown necessary? Wait, this is Philadelphia, the “City of Brotherly Love.” Of course it’s necessary.
If you do happen to be ready to riot, take it down about 10 notches first. Be happy, but be respectful. If you find your windshield smashed by someone less respectful of property than you are – and you need some help to take care of that before you’re paid again, affordable personal loans are available at the click of a mouse. That is, if it still works after wild sprayings of liquid refreshments.
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