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But you don't take advantage of them with 400% APR or higher
No way should $900 equal 4k in 12 months. If they needed $900 in desperation, how would they afford to pay back 4k?
A loan business can't survive if it doesn't have any customers. If these customers were smart, they would all refuse to take on a loan with an unreasonable interest rate. The loan businesses would then be forced to offer interest rates that were reasonable for their customers...
It's actually pretty simple. If someone has good credit, then they can go to a bank and get a loan at a reasonable interest rate. If they do not have good credit, then they must use places where the interest rate is not so reasonable. I am sure that many of these payday loans default and the lender loses the money in a bankruptcy proceeding. The high rate of interest is compensation for the high default rate. Again, ECON 101: the higher the risk on a debt instrument, the higher the return needs to be to persuade a lender to make the loan.
Sure, government can limit interest rates on such loans. Government can make laws, but it cannot repeal the laws of economics. If the limit on interest rates for payday loans is made too low, then payday lenders will no longer offer such loans to people without collateral and/or good credit to back such loans. What good is a 50% APR loan to someone who is desperate for cash if that 50% APR loan is unavailable to that person?
In my younger days when i had horrendous credit and needed to borrow money, thanks to my bad credit, I had to just do without, it was tough, but it taught me a lesson, and now that Im older, Ive learned how important credit is.
If I could have kept getting loans while I had bad credit, I would have never learned.
A loan business can't survive if it doesn't have any customers. If these customers were smart, they would all refuse to take on a loan with an unreasonable interest rate. The loan businesses would then be forced to offer interest rates that were reasonable for their customers...
That's how the free market system works.
A loan business like that shouldn’t even be in business, period
They are taking advantage of susceptible, uneducated, low income people, just because they can
I know many people don’t care about shady business practices, however this is no different from what the banks did before the housing crash. America is a loan driven society, that needs to change because it has an adverse effect on the whole population. Rising cost and inflation, economic crashes, etc
No, Ponzi schemes don't tell you up front that they are schemes. These loans tell you up front what the interest is. You take one that's you're own damn fault. Why do Leftists want the government to protect people from themselves? What is it about you people that you need a nanny as an adult? I know the reason, just seeing if you will admit as much.
And if that's the only option for them, or they get booted from their apartment or starve, then what?
I get there is a need for payday loans. I also understand that those taking payday loans are often high risk for repayment, thus the higher interest rates.
At the same time, there's a number of Sub-prime credit cards that also allow for cash advances offering 30-40% APR, but I'm guessing the average consumer in that situation doesn't know about them, nor is savvy enough to sign up in advance, thus payday loans.
The issue with the 400% APR loans is that the users essentially become enslaved to the loan providers. Unless you're talking about a few hundred dollar cash advance that you'll be able to pay back in a week or two, it becomes an endless cycle with more and more interest piling up, making it near impossible for the borrower to ever pay back the principle + interest.
Personally, no, I don't think financial enslavement should be legal. You either have a max cap on the amount of interest you can collect on a principle amount or you limit the APR to something reasonable.
It doesn't take a genius to figure out that a 950% interest rate is bad.
Come on now...
You think person went into the loan office and they advertised 950% APR? You think they had it plastered all over the front page of their website or office? Or it was in the fine print, many people don’t read.
Why regulate anything for consumers? The free market will regulate it for us.
If a baby food producer wants to employ unhygienic or dangerous practices and hundreds, if not thousands of babies get seriously ill or die, then eventually people will stop buying their products and the producer will go out of business. Simple. Well, except for the illnesses and death that could have been easily avoided with reasonable regulation. But at least the government didn't tell me how to live my life within the confines of a collaborative, civilized, First-World society.
This is why I'm really excited to move to Western Mongolia or Afghanistan. No governmental power. No bureaucrat writing enforceable "laws" (aka slavery). No regulated commerce or judicial system to hold me down. No taxes to pay for social nets, schools, police protection, or someone to pick up the trash. That's real freedom and I'm excited to see all of my anarcho-capitalist friends give up all of the advantages that Western society has to offer (like infrastructure or governmental services) and join me on this exciting quest.
You think person went into the loan office and they advertised 950% APR? You think they had it plastered all over the front page of their website or office? Or it was in the fine print, many people don’t read.
There's the problem. Read the fine print. If you are signing a legally binding document, it is your responsibility to understand what it is you are signing.
There's the problem. Read the fine print. If you are signing a legally binding document, it is your responsibility to understand what it is you are signing.
And we should leave that to the free market without consumer protection and let the chips fall where they may? In theory, everyone reads all of the fine print, understands everything and all of its ramification, and has the power to bargain instead of executing an adhesion contract. In practice, we get predatory subprime mortgage lending.
I have a feeling this whole story is sexed up. Everyone wants to be first with a story to grab as much click-bait revenue as they can. Eventually we'll find out. The CFPB has nothing on their website about this. Golden Valley is owned by the Habematolel Pomo Tribe, I wonder if that's part of the story.
The federal regulator sued four online lenders affiliated with a Native American tribe in Northern California, alleging they violated federal consumer protection laws by making and collecting on loans with annual interest rates starting at 440% in at least 17 states.
Maybe they can get Elizabeth Warren to support their wampum cause?
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