[dajohnson89]

The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation.

When I had my first real job out of college, I didn't manage my money well and ran out of cash well before my next payday. I went to a check-cashing type of place to try and get a payday loan, but the state had outlawed them a couple of years prior. Had I been granted a payday loan, there's a good chance I'd still be in a cycle of debt stemming from that.

[jdietrich]

>The people using paydays loans usually aren't entrepreneurs, so your example -- while an interesting case -- doesn't apply to the spirit of the regulation.

If you have no access to better credit, payday loans are often the least-worst option. If your car breaks down and you have no other means of getting to work, borrowing a few hundred bucks at usurious rates is probably better than losing your job. If you've received a parking ticket and don't have the cash, paying $18 to borrow $80 for two weeks might be better than going to court and paying a $160 fine plus costs.

The situation is analogous to drug prohibition - banning payday loans just pushes people towards criminal lenders, who charge even higher interest rates and enforce payment with baseball bats. The only credible solution is to improve access to credit for the poor, whether that's through the expansion and promotion of credit unions or some kind of state-subsidised emergency lending facility.

[towelr34dy]

When you deal with people who want to ban those who suffer, you have to remember that 65% of people in the Milgram experiment will pull the lever until the end.

Some people just don't listen to those who suffer: they only have an ear for authority.

[hoaw]

> If you have no access to better credit, payday loans are often the least-worst option.

Just isn't a very relevant argument. The reason you regulate things are because they provide, often strong, value to one or multiple parties but overall negative effects. Either eventually to the parties themselves or society at large. It is essentially a way to control externalities. So you would have to argue that these benefits are greater than the negatives.

> The only credible solution is to improve access to credit for the poor [...]

If payday loans are legitimate there is unlikely to be a need for such a solution.

[jdietrich]

>If payday loans are legitimate there is unlikely to be a need for such a solution.

Payday loans are often the least-worst option, but that doesn't prevent us from creating a better option. The best available option is not the same as the best possible option.

I'm not opposed to regulation if it is sensible and proportionate, but there is a huge knee-jerk reaction against payday lending that strikes me as paternalistic and mean-spirited. Assuming that poor people are being suckered by exploitative lenders is not a helpful starting point for what is a relatively complex social issue. I made my position clear in my original post - if you want to help poor people, then you should offer them more affordable credit rather than simply further restricting their ability to access what little credit is available to them.

If payday lenders really are ripping off the poor, then it shouldn't be difficult to outcompete them with a more affordable product; if it turns out that it's just expensive in percentage terms to lend small amounts of money for short periods of time to people who might not pay you back, then it may be necessary to provide subsidized loans.

[hoaw2]

> Payday loans are often the least-worst option, but that doesn't prevent us from creating a better option.

It does. It isn't a realistic assumption that you as a society aren't going to regulate payday loans and at the same time be concerned about the well-being of those in need of them. Nations who care about peoples well being, also restrict access to things that hurt them. Because anything else would be working against that interest.

You do realize that there are any number of ways to have a bad time in the US. Payday loans aren't unique in any regard. It isn't therefor likely that this would be fixed sooner than anything else. The people who need payday loans already suffer from injustice. That payday loans themselves would also be unjust wouldn't be surprising, at all.

Why do you think people who can get fired, evicted, don't have health care or even die giving birth would suddenly be cared for when it comes to affordable credit, especially after legalizing unaffordable credit? Is the government is going to come in an fix this one issue in competition of the companies operating in the market?

[mrhappyunhappy]

Except in your example the actual situation would play out like this: person borrows $80, thinks his payment is $20, makes a payment. Next paycheck he sees a withdrawal for $45. Wondering why he brushes it asides figuring only $53 left to pay. Another $45 comes out - ok $8 left all is good. Then sees another $45 come out and panic sets in. Borrower makes a phone call to see what’s going on and why he is overcharged. The asshole on the other end of the line rudely explains that ZERO payments have been made in the principle of the balance. The fees were loan renewal fees. And the $80 balance remains. If borrower is lucky he can pay it off in full plus the $18. Of course the borrower could have the full some but not likely seeing how they had to borrow $80. So you get this vicious cycle of loan renewal fees which we might as well call them what they are - a scam. How anyone can support this practice is beyond me. I can only conclude the person who thinks this is ok works in a morally ambiguous industry and has to justify their own behavior.

[hoaw]

It is supported because it is accepted, especially in places like hacker news, to not be scientifically literate. In fact it is so obviously problematic that you would to a large degree have to be obnoxious to support it without reserve. Which is why you see all these rhetorical arguments, sarcasm and hostile engagements in this thread. Of course from a reasoned perspective this would indicate that you were wrong. But if you have already realized that they aren't going to win with arguments, it is instead seen a good thing that the discussion isn't about that.

[towelr34dy]

Scientific literacy = using a grossly disproportionate made up example?

Got it. Or do you mean spelling out what a debt trap is? Is that 'scientific literacy'.

The arrogance of those who want to restrict others is so obvious: You think people are incapable of taking care of themselves. Then you think yourself capable of knowing whats best for them. While simultaneously talking about science. And disregarding people who actually were poor and went through those things. And ignoring the points being made, without giving counter points.

You didn't answer what happens when you remove this lender of last resort? I thought a 'scientifically' minded person such as yourself would be interested in digging for the truth.

[towelr34dy]

If you really ever needed money, you'd have gotten it.

I grew up poor in the 3rd world. Loan sharks, prostitutes, druggies... that's part of life there.

Honestly, your judging something from a certain position that's pretty obviously removed from ever really being needing money (in poor areas there are a options to get money, restricting those would be blessing to the illegal loan sharks that already operate in most desperate places)

I have to say, if you really ever were in such a situation, you'd be advocating not for restrictions, but for options.

Saying we should restrict it because it can be bad... well you should be arguing about restricting alcohol then... there are plenty of alcoholics. Maybe also restrict driving. And fatty foods. And salt. Maybe sugar? Keep at it.

The critics are 100% right. Sorry to say, but it seems you are annoyed at the sneezing, not REALLY caring about the sick.

[bilbo0s]

>Loan sharks, prostitutes, druggies... that's part of life there...

Just saying as someone who grew up poor here in the (???) "first world" (I guess?), those things are part of life here. And our police are generally very aggressive in reminding us that all of them are illegal.

Payday loans are like the drug dealers. There really is no difference. They happily give you access to their product as long as you pay them, and then when you can't pay them, you're left in a worse situation than you were at the start. And worse, a lot of people start committing their own crimes to be able to afford those things again. Because they are hooked.

(Actually, nowadays I guess with the drug of choice being opioids a lot of the people just overdose eventually and die so they never get to that point of committing other crimes to get the drugs. So maybe the loan sharking is not quite as bad as the drugs? But it's still pretty bad.)

[towelr34dy]

You are literally touting the war on drugs as an example of what to do with payday lending.

OMG. Ok. Personally I'm happy my payday lender wouldn't murder me like a drug dealer would. But.. I guess that's preferable? I'm at such a loss.

BTW, Don Vitto says thank you from the deepest part of his heart.

[noodlenotes]

This brings up an interesting ethical question. Let's say for every entrepreneur who stays afloat because of a payday loan, there are two people who don't manage money well and the payday loan sends them spiraling into debt. Do you prevent all three from taking the payday loan option because it has negative consequences for two of them? What if the ratio of people that benefit from payday loans is more like one in ten? One in a hundred? I don't feel justified in legally preventing the entrepreneur from taking an action that helps them just because two or nine or ninety-nine people have the same freedom and make a bad decision. (That doesn't mean I blanket oppose all regulation however.)

[towelr34dy]

How about this. Even IF it was 9/10 that get hurt and 1/10 that get helped.

Even IF that is true.

What do you get by regulating out of existence?

It stops?

Or it goes underground.

Think marijuana. What happened when legal? What happened when illegal?

I'm not saying don't regulate. I'm saying don't regulate it to death where only 3-4 big companies can operate in the space and then play oligopoly games.

Paying $200 in fees and stuff over 12 months on a $50 loan IS 400%. Just like an overdraft fee of $50 on a $10 charge could be touted in the papers as 500% interest.

Is there stuff to be cleaned up? Absolutely. Did this bill do it? No. It was restrictive.

I actually think this is something better suited for states to decide. And that is what is happening now.

[robertAngst]

I had to use it because tuition for school + new apartment rent was crazy, and I had just started my new salary job(1/mo payment).

Fees arent bad if you have your shit together. But I did the math ahead of time.