Current Events > Restricting interest rate that payday loans can provide

(+) Yeah! (+)

Saw some people trying to get signatures so that a measure to limit payday loans interest rate to 36%(I think) could be put on the upcoming ballot here in Denver.

While it's an issue I've heard about many times, part of me is not sure this is the answer... Like, maybe someone can help me out here.

Payday loans aren't something I would use. I'm just not in the financial situation to need one. I also have family and friend resources that would keep me from having to use a payday loan. But I know that isn't true for everyone. There is obviously a market for payday loans. There are obviously people who don't have access to other forms of quick money, be it credit cards, loans, family, etc.

So If a cap on that interest rate was enough to pretty much kill the payday loan business, what happens to those customers? I guess that's my worry.
But this is assuming this cap in interest rate would even be enough to kill the payday loan companies.
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One time I looked into payday loans here just for shits and giggles.

200% or more interest lol.

I'd literally rather turn to prostitution or drug sales than do that
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Yeah, many payday loan and title loan places are essentially loan sharks.
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I know a guy in Denver. He's a shitty person.

Then he went and started a major item on the elections last cycle and now everyone has gardens on their roofs.
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pres_madagascar posted...

One time I looked into payday loans here just for shits and giggles.

200% or more interest lol.

I'd literally rather turn to prostitution or drug sales than do that

But like that's the thing. Would we rather have people turn to an extreme like that and actual loans sharks rather than payday loans?
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WrkHrdPlayHrdr posted...

I know a guy in Denver. He's a shitty person.

Then he went and started a major item on the elections last cycle and now everyone has gardens on their roofs.

Fuck that guy.

I wasn't able to vote on that measure last year but if I could I totally would have voted against it.
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emblem boy posted...

WrkHrdPlayHrdr posted...

I know a guy in Denver. He's a shitty person.

Then he went and started a major item on the elections last cycle and now everyone has gardens on their roofs.

Fuck that guy.

I wasn't able to vote on that measure last year but if I could I totally would have voted against it.

Yeah, I live on the East coast and worked with him here for a few years. Not a fan of him.

But yeah, I have no idea how that shit passed.
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36% is still pretty high and I don't think it will kill that industry. These types of laws are made to cut down on predatory lending, which is something that can completely destroy the types of people you're concerned about here.
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eston posted...

36% is still pretty high and I don't think it will kill that industry. These types of laws are made to cut down on predatory lending, which is something that can completely destroy the types of people you're concerned about here.

Ya, if the 36% isn't enough to kill the industry and have some worse unintended consequence, then I'm all for limiting it. I just don't know the financials of companies like that.
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adults should be responsible enough and knowledgeable enough to know what interest is
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From what I understand people getting payday loans often end up finding alternative methods to pay off the loan that they could have accessed instead of getting the loan in the first place (ie boring from friends and family, pawning off possessions) so I imagine that is putting a cap on the interest rate like this kills the industry it probably just shows how in-viable it is as a real business model in the first place. Otherwise they are just complaining and will remain perfectly profitable with the cap.
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http://freakonomics.com/podcast/payday-loans/
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Most payday loans are unsecured.

What that means is you don't really have to pay them back. They'll bully you into thinking you do and forward you to various collection agencies but the truth is unsecured loans can't be used to put out hits on your credit score.

There's also a statute of limitations that isn't very long but they don't want you to know about that either.
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Some arbitrary multiplier tied to the Federal Funds Rate would seem a reasonable proposal for a maximum interest rate.
https://www.global-rates.com/interest-rates/central-banks/central-bank-america/fed-interest-rate.aspx

But, keep in mind that interest rate is tied to the expectation of not being paid back. That's why people or entities in the worst financial shape get "screwed" buy userious interest rates.

I think the point is that by killing this business that seems less terrible than it is, we socially engineer people towards better alternatives, not worse ones.

Questionmarktarius posted...

But, keep in mind that interest rate is tied to the expectation of not being paid back. That's why people or entities in the worst financial shape get "screwed" buy userious interest rates.

Yep, absolutely true, however the scale-up rate is very nonlinear.
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Darkman124 posted...

I think the point is that by killing this business that seems less terrible than it is, we socially engineer people towards better alternatives, not worse ones.

Too bad the actual end result is no alternative.
...apart from pawnshops and kneecap-breaking loansharks, I guess.

where i live the cap is 15% and they still exist.
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Questionmarktarius posted...

Too bad the actual end result is no alternative.
...apart from pawnshops and kneecap-breaking loansharks, I guess.

pawnshops are very much an alternative, and much better than payday loans. net cost to someone selling their shit and buying it back later at a higher price is way less than a payday loan, ironically.

loansharks would be several steps down the line, after things like borrowing from family, working odd jobs, straight-up disconnecting from the existing financial landscape (bank accounts, etc).

the thing is payday loans typically force people into that disconnect themselves, often people who wouldn't need to do so otherwise.
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Darkman124 posted...

Questionmarktarius posted...

Too bad the actual end result is no alternative.
...apart from pawnshops and kneecap-breaking loansharks, I guess.

pawnshops are very much an alternative, and much better than payday loans. net cost to someone selling their shit and buying it back later at a higher price is way less than a payday loan, ironically.

loansharks would be several steps down the line, after things like borrowing from family, working odd jobs, straight-up disconnecting from the existing financial landscape (bank accounts, etc).

the thing is payday loans typically force people into that disconnect themselves, often people who wouldn't need to do so otherwise.

I guess I would assume people would go to those steps before going to pay day loan places. But maybe not
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emblem boy posted...

I guess I would assume people would go to those steps before going to pay day loan places. But maybe not

It's a hell of a lot easier to get a payday loan than to deal with a pawnshop.

Questionmarktarius posted...

It's a hell of a lot easier to get a payday loan than to deal with a pawnshop.

yep. not better, though.

people struggle to comprehend financial realities- the price you get for your shit at the pawnshop is what it's worth, and to buy it back you face around 2-3x markup. it feels wrong because you bought it for 5-10x what you get at the pawn shop, but the value loss has already occurred there.

it's nothing compared to the interest you'll rack up on a payday loan.
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hey eb did you get laid yet
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AK22 posted...

hey eb did you get laid yet

AK22 posted...

hey eb did you get laid yet

Lol is this what I think it is?

And ya man
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what else could it be

do u have a gf now
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