Author Topic: Holy crap about payday loans  (Read 10462 times)

daverobev

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Re: Holy crap about payday loans
« Reply #50 on: May 23, 2017, 04:08:25 PM »
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The statistic that real wages have been in decline for 40 years is astounding. SO MANY Americans make SO MUCH money (Silicon Valley, or finance, or whatever in Washington) but the average is going down? Depressing. I mean, really.

I've been thinking about this a bit and my (totally not based in any research) sense is that 30 to 50 years ago, large corporations were more likely to employ people from the full range of socio-economic statuses in society at large. In boom times, this was great, because it meant everyone reaped the benefits of profit. In modern companies that are highly specialized, particularly the tech and finance sectors, the majority of workers are highly-skilled and highly paid. In boom times (like now) there is no place to push down profits to lower-paid, low-skill workers, there just aren't enough of these people employed by these companies to do that. So what happens is that the already high incomes of the high-skilled workers grow out of proportion to the work they're actually doing (perhaps, maybe...) and people in those sectors develop a false and inflated sense of the health of the economy overall. Low-skill workers, however, are left no entree into these sectors and no way to partake in the gold rush.

Not sure how to address this problem, but I do think this is unhealthy and unsustainable and will need to be addressed.

I honestly believe we are moving to a 'post-work' world, and we can do one of two things - some kind of universal income, allowing people to 'do what they want' (and where the important stuff will command high salaries and people who are driven in one way or another will work on things they want to work on), or... well, budgets cutting food stamps by 30% because 'we need you to work'.

The world of work is just so different. Maybe my perspective is also different, but realising just how many people are in the 'gig economy' (ie self employed, like I am, and hence - in North America at least - with no 'benefits' - which are taken for granted in the UK, such as dental and vision not costing a fortune... now, I'm in Canada, so 'healthcare' is 'free' but it really isn't.. not even in the 'free at point of use' sense) is quite scary. I thought most people worked, in somewhat stable, somewhat decent jobs.

But so so many people work in retail, for basically minimum wage. There's nothing *wrong* with that, if that is enough money to live a decent life on, while affording savings (or having that taken care of by an ironclad social safety net).

Canada makes me shake my head... I can't imagine how I'd feel living in the US, knowing just *how poor* many of the people around me were. And with all the current rhetoric anti-poor. And yet, those same poor people vehemently republican. "I can't even".

I want... yeah I get it, communism doesn't work. I want people not to live their *single only get one* life around shitty retail jobs. Ahhhh I don't know, we're still so much better off than royalty a few hundred years ago, perspective, perspective. Look at the stars. Breathe.

Hargrove

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Re: Holy crap about payday loans
« Reply #51 on: May 23, 2017, 05:15:05 PM »
It's a statement that is true for the most part, although there are a few specific contradictory cases. Please don't fall prey to the popular liberal tripe about poor people being stupid, helpless, or unaware of their options. They live in a very different kind of economy and the decisions they make frequently make a lot of sense given the context.

Your argument about the poor not being universally stupid or uninformed is a red herring. You started by saying they were aware of their options, I said not universally, and now you're telling me they're not universally stupid, which is not even something that was being discussed. Put words, or your foot, in your own mouth.  It would be ridiculous to say that the poor are stupid, helpless, or necessarily aware or unaware of their options. However, it would also be ridiculous to suggest they tend to be aware of all of them. There is a correlation between lack of education and poverty. Not "no options," but obviously fewer. We disagree, to about the maximum possible extent, about the ratio of successful people (who, for whatever reason, can't borrow a few hundred dollars from their networks) to the unsuccessful people who take payday loans.

In Nickel & Dimed, Ehrenreich respected the tenacity of the poor for handling their situations and advocated against the widespread, predatory practices directed against them by a long list of more powerful entities. Quoting Ehrenreich to justify payday lending is like quoting Paul Ryan for expanding Social Security and reducing the retirement age. I have no idea how you take the author as even slightly supportive of payday lending.

For years now, we've had a solution, or at least a substitute, for low wages and unreliable jobs: easy credit. Payday loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May cover story on "The Poverty Business," BusinessWeek documented the stampede to lend money to the people who could least afford to pay the interest on it: Buy your dream home! Refinance your house! Financiamos a todos! It wasn't just the bottom-feeders that joined the unseemly frenzy to lend to the poor; big companies, such as Wells Fargo and Countrywide Financial, plunged right in. But somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were borrowing.
-Barbara Ehrenreich, Washington Post Feb 2008, "The Boom Was a Bust for Ordinary People"
« Last Edit: May 23, 2017, 05:50:56 PM by Hargrove »

TheGrimSqueaker

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Re: Holy crap about payday loans
« Reply #52 on: May 23, 2017, 07:56:16 PM »
Your argument about the poor not being universally stupid or uninformed is a red herring. You started by saying they were aware of their options, I said not universally, and now you're telling me they're not universally stupid, which is not even something that was being discussed. Put words, or your foot, in your own mouth.  It would be ridiculous to say that the poor are stupid, helpless, or necessarily aware or unaware of their options. However, it would also be ridiculous to suggest they tend to be aware of all of them. There is a correlation between lack of education and poverty. Not "no options," but obviously fewer. We disagree, to about the maximum possible extent, about the ratio of successful people (who, for whatever reason, can't borrow a few hundred dollars from their networks) to the unsuccessful people who take payday loans.
I stated that poor people are not universally stupid or uninformed; it was in response to your assertion that they were unaware of their other options. We appear to be converging on an agreement that they have seen the same advertising and have the basic information along with the brainpower to make sense of it. That makes them aware of the options. There's an extreme tail of the bell curve but-- as someone else mentioned further up the thread-- they don't get paychecks.

Your note that poorer people have fewer financial options than wealthier ones is a masterful statement of the obvious. It reflects a basic inequality of resources that won't be changed by the presence or absence of payday lenders.

You suggest that "more successful" people can borrow a few hundred dollars here or there from their networks, but it seems to me that a "successful" independent person from the middle class or working class is under enormous pressure to look independent. Although the money might be there in theory, it might not be so easy to obtain in practice.

Among the largest users of payday and title loan credit are members of the enlisted US military: able-bodied people, free from drug use and single parenthood at the time of enlistment, and something like 90% of them have graduated from high school. This isn't the underclass. They don't make piles of money, but those who live on base generally aren't in immediate danger of eviction either.

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In Nickel & Dimed, Ehrenreich respected the tenacity of the poor for handling their situations and advocated against the widespread, predatory practices directed against them by a long list of more powerful entities. Quoting Ehrenreich to justify payday lending is like quoting Paul Ryan for expanding Social Security and reducing the retirement age. I have no idea how you take the author as even slightly supportive of payday lending.

Please re-read my post and go for comprehension this time. I was referencing B.E. as describing, in detail, the socioeconomic conditions under which unskilled laborers live. She had a great deal of difficulty scaling her consumption to match her income because all her basic assumptions about where to get clothing were wrong for that sub-economy. That's the point I'm trying to make: it's not the economy most of the people on this board live in or even occasionally visit, and there are social and cultural pressures that simply don't exist at other income levels. Within that context, high-interest short-term loans *do* make sense for many of the people getting them. There's a need for the service, and there's enough economic pressure coming from the consumer side to make the business worthwhile for someone to provide it.

If you took a giant eraser and got rid of all the pawn shops, payday lenders and title lenders, do you believe that conventional banks or credit unions would have the slightest interest in meeting the need of the high-risk borrower market they serve? I'd find it unlikely, unless there was a big federal mandate or subsidy like the conditions that got them interested in the subprime market last time around. Even something as simple as extended operating hours would strain their existing business model.

No, the underground economy is the one that tends to expand whenever people need money fast and are willing to pay for it. Payday lenders can be regulated and punished if necessary in a way that loan sharks can't.

I was in Moscow and Astrakhan during the last part of the Gorbachev administration and you wouldn't believe the way the underground economy was clicking right along: untaxed, unregulated, and you never saw a more opportunistic and vicious group of cockroaches. All nations have an underground economy of sorts, but that one was so well established the police didn't really stand a chance against the organized criminals, and the corruption spread all the way to the top. I'd really, really prefer to not invite that kind or corruption or organized crime in. It's bad enough that we've got drug cartels; we don't need more organized crime in the lending domain.

The only way to get rid of payday lending without strengthening the black market, in my opinion, is to address the problem on the demand side. That would require serious cultural and economic change.

We'd need the kind of situation where consumers like a good deal but don't demand their goods so cheaply that the people who provide them have to starve or be subsidized by the government. Significant numbers of people would have to be satisfied with fewer clothes, toys, and consumer doodads while simultaneously being willing to pay more for what they use. Similarly, most of the population would have to accept even higher levels of taxation in order to increase the services available to the poor. The opportunity for charities to meet this need has existed for hundreds of years, and frankly relying on people's personal initiative to get that done isn't working. To get that kind of cultural value shift... well, I don't see it coming in the United States anytime soon.

Financial education right across the board also wouldn't hurt. But it's not just poor people who need that, it's pretty much everybody.

Quote
For years now, we've had a solution, or at least a substitute, for low wages and unreliable jobs: easy credit. Payday loans, rent-to-buy furniture and exorbitant credit card interest rates for the poor were just the beginning. In its May cover story on "The Poverty Business," BusinessWeek documented the stampede to lend money to the people who could least afford to pay the interest on it: Buy your dream home! Refinance your house! Financiamos a todos! It wasn't just the bottom-feeders that joined the unseemly frenzy to lend to the poor; big companies, such as Wells Fargo and Countrywide Financial, plunged right in. But somehow, no one bothered to figure out where the poor were going to get the money to pay for all the money they were borrowing.
-Barbara Ehrenreich, Washington Post Feb 2008, "The Boom Was a Bust for Ordinary People"

I do get a kick out of how B.E. described Wells Fargo as something besides a bottom feeder; then again your quote was written in 2008 before most of their shady activities came to light.

What I want to point out is that the dramatic majority of those subprime lenders DID find or get the money to repay their debts. The subprime foreclosure rate was about 20%, which means that 80% of those buyers did not foreclose. Yes, 20% is a high foreclosure rate. But it's also characteristic of high risk lending, and the fact property values tanked at the same time could not possibly have helped.

The Money Monk

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Re: Holy crap about payday loans
« Reply #53 on: May 28, 2017, 12:19:49 AM »
I remember when I was young for the longest time I'd see these payday loan places everywhere and could never figure out what they were for. Even after it was finally explained to me, I still couldn't get the logic. I mean, if you didn't have enough in this month's paycheck to pay all your expenses, how could you possibly have enough in next month's paycheck to both pay your loan and interest and your next month's expenses?

It's called time preference. Many humans' is hopelessly warped.