[FormerBandmate]

These apps are literally just friendlier payday lenders. They will also go under soon because the unfriendliness of payday lenders is essential to the business model and it doesn't scale well. Dave's delinquencies are probably atrocious

[HWR_14]

Why would the unfriendlessness of payday lenders be essential to the business model?

[johngladtj]

Because the type of people who have no choice but to resort to payday lenders are the same type of people who need men with guns to visit their in their house at 2 am in order to pay back their debts.

[HWR_14]

You are confusing payday lenders (who use the courts and high interest rates to make up for defaults) and loan sharks (who use violence).

[hedora]

The FTC begs to differ:

https://www.ftc.gov/news-events/topics/consumer-finance/payd...

According to them, “abusive collection practices” and dozens of other illegal things are common in that industry.

[HWR_14]

Yes, they are common. Any industry that deals with primarily people who cannot afford to defend themselves has similar issues (e.g. slumlords). I have no doubt that they are profitable. My question was "why are they necessary to the business model".

Unless you assume "abusive collection practices" means threatening physical violence. Because I would assume it meant things such as chronic calling.

[Closi]

> Why would the unfriendlessness of payday lenders be essential to the business model?

The amount is small, the lending is short term, and customer acquisition costs can be fairly high. This means that the fees / interest must inevitably be quite high - i.e. if you are genuinely lending out $250 for 30 days and you only want to make $25 margin then the effective APR is >120%.

Then you are generally giving these loans to people who are in (at least short-term) financial difficulty, who often have other debt obligations which may be higher-priority (e.g. they need to pay their mortgage).

You can't have a business that just gives away money though, so you need your money back. And you are going to be incurring costs to recover the money at this stage. Plus at this stage the customer might have gained interest charges and is in a worse financial situation than when they started. So what's the 'friendly' option here? Ultimately you will need to send some unfriendly letters that say "You need to pay up, and if you don't then we will send in some people to recover goods from your house".

I guess it depends what you mean as unfriendly, but sending around recovery agents is never friendly.

[HWR_14]

The lending term may be short, but the average lifetime value of a customer is very high, because they usually keep coming back and churn is low.

Meanwhile, in the US (based on FTC complaints statements) "we'll send some people to recover goods" is extremely illegal.

[Closi]

> Meanwhile, in the US (based on FTC complaints statements) "we'll send some people to recover goods" is extremely illegal.

It's definitely possible in the UK (you just need a high-court order and to send in bailiffs).

I would be surprised if similar legal remedies don't exist in the USA (i.e. that if someone isn't paying something they legally owe, that you can't then organise for reposession of property via the court).

Companies obviously aren't just allowed to send heavies around, however I would assume most countries have a legal avenue to 'force' people into repaying a civil suit (which in the UK involves getting a high-court writ and then sending bailiffs who will seize property).