LITTLE ROCK — Opponents of payday lending in Arkansas announced Tuesday that the last such business charging high interest for short-term loans has left the state.Payday lenders prey upon the financially backwards members of society, lending them money against future paychecks and charging hundreds of percent interest. I was in one recently, just trying to see if I could use a copier for something I needed quickly and I saw that the posted interest rates on their loans were around 230%. There was a couple in there, clearly not the most alert people in the world, getting money. It made me sick.
The demise of the payday lending industry comes eight months after the Arkansas Supreme Court ruled that a 1999 law that authorized the practice violated the state constitution, and 16 months after Attorney General Dustin McDaniel issued cease-and-desist letters to payday outlets, accusing them of violating Arkansas’ usury limit set by the constitution.
In March, 2008, there were 237 payday lending operations in the state.
Today, Arkansas. Tomorrow, hopefully, the rest of the US!
I occasionally visit them to do Western Union wires. I've seen the posted annual rate over 500% (Wisconsin). I agree they should be banned - but not because they are not fair. Take a look around when you enter one. As a business proposition, I wouldn't loan any of their customers one red cent. I think they should be banned on paternalistic grounds - their customers are too dumb to know better and should be protected from their own idiocy. I have a vested interest in indigent people being more responsible - they are semi- wards of the state anyway (if they aren't on welfare they are in section 8 housing, foodstamps, Medicaid, etc.). Lotteries should be illegal on the same principle.
ReplyDeleteAmen, brother!
ReplyDeleteThose amazing rates are annualized numbers... on a two-week loan. I could say that parking downtown costs $4,380 on an annualized basis, or I could note that it costs a buck an hour during the day.
ReplyDeleteI agree more with Jeff; the loans are not evil in principal (if you lend me a buck for a soda, and I give you two in return out of gratitude, are you some evil lender?), but the people who use these loans just to get by need to scrape the Obama stickers off their cars and seek help.
A proper educational system would let people understand these things, and a proper social system would let us say them out loud in public.
(scraz. Where's the hamster when you need help?)
The interest rates are rather misleading; if someone is dumb enough to get a $200 dollar loan, and agree to pay back $250 off their next pay check...well, they're exactly like the guys my dad gave loans to when he was in the Army during Vietnam.
ReplyDeleteCan't protect people from "stupid"-- and every time we try it just makes things worse.
I disagree with some of you. We have all kinds of laws protecting people from stupid. Not everyone has an IQ over 80 and some of our citizens will either need protection from these sharks or we'll end up subsidizing them in other ways, effectively subsidizing the loan sharks. For me, this is analogous to the anti-drug laws.
ReplyDeleteSo, when do we get rid of lottos?
ReplyDeleteThe sooner the better.
ReplyDeleteHow about motorcycles, BINGO!, sky diving for fun and eating puffer fish?
ReplyDeleteAlso bathtubs-- since that's a major source of injuries.
ReplyDeleteThere's a line to be drawn wherein you protect people from themselves. Heroin and cocaine are illegal, but beer is not. Payday loans, to me, are simply predatory, stomping on people when they're broke and stupid.
ReplyDeleteIt's not preying on someone when they come in and are told "I will loan you $200, but you will have to pay me $50 on top of that."
ReplyDeleteSame way it's not preying on someone to sell them a horse for more than you paid for it, or to sell most anything for more than you paid for it (and support options).
The economic equivalent of legalizing crack would be legalizing selling a kidney-- this stuff is mad, mad bad. It takes *effort* to hurt yourself with beer.
Without a similar level of damage, I can't see outlawing something people like "for their own good."
Promiscuous sex has a might higher cost/damage association-- and that's leaving aside paternity claims-- but no way in heck I'd approve making it illegal. (no matter how much I disagree with it, for that matter....)
Would you also outlaw those coins-to-cash machines? They often take 10% off the top-- that's more than exchanging foreign currency!
KT,
ReplyDeleteI am in violent disagreement with you. Although these rates seem high to you, given the risks they may be reasonable. You have berated the banks for not assessing risk properly in the mortgage debacle, I believe pay day loan operators are properly assessing risk and charging accordingly. Further, these people are often frankly under-served by their banks. My bank provides me with overdraft protection of up to $1000 at a credit card like rate. In effect this is a kind of pay day loan. I don't think these customers have access to banking that provides like service, but it is still a service they need.