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I usually have ESPN on as "background noise" when I am grading, writing, etc. Lately they have been frequently airing commercials for Western Sky, which is a private company that offers unsecured loans of up to $10,000. It was pretty clear from the commercials who their target audience is (people with very limited means who possibly have payday loans to pay off), but I was curious about them and went to the web site. Their lowest published interest rate is about 90% per year. With their smallest loan, $850, you actually get $500 (there's a $350 fee) but pay back $1,800 over 12 months (paying $150 a month), making the interest rate more than 300%.
I am a middle-aged woman with a great, secure job that pays well, and I own my own home and a rental property and have little debt besides those mortgages, so I am NOT the target for such loans. But they bother me, because they seem to me to be one more case of those who have the least, being asked to pay the most. OTOH, I am all for personal responsibility, and I know that interest rates are high because these kinds of loans (like payday loans) are risky to the lender. But some states have even banned them because they find the practice of making such loans too much like outright thievery. So anyway, I am torn.
And that brings me to the question for this thread: what do you think of these kinds of loans, and why? Should they be allowed with no regulations (e.g. no interest rate caps)? allowed but regulated? not allowed?
People should be able to enter into any contract they choose, and suffer the consequences if they breach it. The only regulation I could approve of would be regarding clarity in the language of the contract. As long as the borrower's obligations are clear, they should not be barred from entering into a contract simply because some legislator in a faraway city doesn't think some anonymous constituent should be allowed.
BTW, I've used one of those crazy-high interest lenders when consolidating credit card debt many years ago, and they made good money from me. I spent a lot more than I would have liked, but it was my choice, and I knew the terms before agreeing to them. The problem today is that PEOPLE DON'T READ WHAT THEY SIGN. We've become a "click to agree" culture, and there's nobody to blame for that but the people who can't be bothered to read the legally binding contract they're about to sign.
There used to be a law that loans with more than 10% interest were illegal. Traders rid of it. Usury (/ˈjuːʒəri/[1][2]) is defined either as the practice of making loans with excessive or abusive interest rates, or simply the practice of loaning money with interest. [3][4][5] The term may be used in a moral sense — condemning taking advantage of others' misfortunes — or in a legal sense where interest rates may be regulated by law. Historically, some cultures (e.g. Muslims) have regarded charging any interest for loans as sinful and most still do today. Some of the earliest known condemnations of usury come from the Vedic texts of India. Similar condemnations are found in religious texts from Buddhism, Judaism, Christianity, and Islam (the term is riba in Arabic and ribbit in Hebrew).[6] At times many nations from ancient China to ancient Greece to ancient Rome have outlawed loans with any interest. Though the Roman Empire eventually allowed loans with carefully restricted interest rates, in medieval Europe, the Christian church banned the charging of interest at any rate (as well as charging a fee for the use of money, such as at a bureau de change). The pivotal change in the English-speaking world seems to have come with the permission to charge interest on lent money[7]: particularly the 1545 act "An Act Against Usurie" (37 H.viii 9) of King Henry VIII of England (see book references).
And there after, you may simply read old man Ford's editorial.It is traders civilization anyway, and is expected course of action. YOU should be only concerned with YOUR deeds, as YOU will be liable for YOURS, and THEY will be liable for THEIRS.
Allowed by who? Because your laws do not apply to Western Sky. They operate under the fiction that Indian tribes are sovereign nations. From their website:
"WESTERN SKY FINANCIAL is owned wholly by an individual Tribal Member of the Cheyenne River Sioux Tribe and is not owned or operated by the Cheyenne River Sioux Tribe or any of its political subdivisions. WESTERN SKY FINANCIAL is a Native American business operating within the exterior boundaries of the Cheyenne River Sioux Reservation, a sovereign nation located within the United States of America. Western Sky loans are not available to consumers in California, Colorado, Maryland, South Dakota and West Virginia."
Allowed by who? Because your laws do not apply to Western Sky. They operate under the fiction that Indian tribes are sovereign nations. From their website:
"WESTERN SKY FINANCIAL is owned wholly by an individual Tribal Member of the Cheyenne River Sioux Tribe and is not owned or operated by the Cheyenne River Sioux Tribe or any of its political subdivisions. WESTERN SKY FINANCIAL is a Native American business operating within the exterior boundaries of the Cheyenne River Sioux Reservation, a sovereign nation located within the United States of America. Western Sky loans are not available to consumers in California, Colorado, Maryland, South Dakota and West Virginia."
Yes, I know. My question was more a philosophical one, about whether interest rates like this should be permitted (by anyone), or are some things -- like interest rates of 90%-300%+ -- so egregious that they should be prohibited.
Yes, I know. My question was more a philosophical one, about whether interest rates like this should be permitted (by anyone), or are some things -- like interest rates of 90%-300%+ -- so egregious that they should be prohibited.
"Western Sky loans are not available to consumers in California, Colorado, Maryland, South Dakota and West Virginia."
I think these rates are egregious. They clearly intend to prey on the poor. Does anyone know what these states have done to protect their citizens that others have not?
Yes, I know. My question was more a philosophical one, about whether interest rates like this should be permitted (by anyone), or are some things -- like interest rates of 90%-300%+ -- so egregious that they should be prohibited.
Quote:
Originally Posted by Glenfield
I think these rates are egregious. They clearly intend to prey on the poor.
*shrug*
While I don't think payday lending is particularly right (points to a bigger issue with cash flow) we have to keep in mind that these loans are targeted, as mentioned in the OP by poor and more than likely very uncredit worthy folks. I doubt they are sporing 800+ credit scores and have alternative means to pursue funding, but for whatever reason they need the funds NOW. The possibility that these folks would skirt their obligation is also a factor and that whole $10,000 loaned could easily be turned into junk debt for pennies on the dollar, so the fee covers the cost of the others who participated but shirked their responsibility.
Again do I think it's RIGHT? No. But it's not my right to tell someone what kind of business contracts they can willingly agree to.
While I don't think payday lending is particularly right (points to a bigger issue with cash flow) we have to keep in mind that these loans are targeted, as mentioned in the OP by poor and more than likely very uncredit worthy folks. I doubt they are sporing 800+ credit scores and have alternative means to pursue funding, but for whatever reason they need the funds NOW. The possibility that these folks would skirt their obligation is also a factor and that whole $10,000 loaned could easily be turned into junk debt for pennies on the dollar, so the fee covers the cost of the others who participated but shirked their responsibility.
Again do I think it's RIGHT? No. But it's not my right to tell someone what kind of business contracts they can willingly agree to.
That's a good point. I suppose people should be free to make their own bad decisions.
I think its funny how we've changed so much regarding interest, loans, tax deductions.
Before the 1986 tax reform, credit card interest was deductible. Can you imagine that? These predatory loans just perpetuate the gap between the rich and the poor.
If politicans are so worried about the poor and the income gap (between top americans), why is pay day lending allowed? You aren't going to get ahead paying 90 or 300% interest.
They should not be allowed. At some point, you can't escape the debt. And the intent is to keep you in debt.
It'd be like a bar tender that keeps serving you drinks, even when you've had enough.
-It's funny how banking is so highly regulated. I.e. your typical Chase or Wells Fargo branch. They can't just sell you anything you want. Yet in the "poor" neighborhoods, these pay day lenders are pretty much the exact opposite.
Pay day lending is akin to giving someone a book (supposedly to teach them to read), yet some of the letters are missing. You're not going to master reading.
-Why are other industries so highly regulated, yet pay day lending seems to skirt the lines of banking and commerce? I.e., lemon laws with cars. Consumer products? Household cleaners.
Yes they should be allowed but no one should be forced to sign the contract.
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