Comments on: The Dangers of the Payday Loan Trap http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/ personal finance that makes cents Sun, 20 Jul 2008 23:04:23 +0000 http://wordpress.org/?v=2.5.1 By: Keep Your Tax Refund For Yourself | TheJobBored http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-112634 Keep Your Tax Refund For Yourself | TheJobBored Thu, 17 Jan 2008 19:20:59 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-112634 [...] So, basically, you’re paying Pay Day Loan-like fees to get your money in… oh… about the same amount of time you’d have gotten it anyway. And if you don’t already know that Pay Day Loans are bad deals, well… now you know. [...] [...] So, basically, you’re paying Pay Day Loan-like fees to get your money in… oh… about the same amount of time you’d have gotten it anyway. And if you don’t already know that Pay Day Loans are bad deals, well… now you know. [...]

]]> By: The Poverty Business ? Get Rich Slowly http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-86604 The Poverty Business ? Get Rich Slowly Wed, 16 May 2007 12:00:37 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-86604 [...] is similar to pieces I’ve featured before, including Marc Hedlund’s guest-post on the dangers of the payday loan trap and my own review of Maxed Out, a film about the credit industry. In this new article, authors [...] [...] is similar to pieces I’ve featured before, including Marc Hedlund’s guest-post on the dangers of the payday loan trap and my own review of Maxed Out, a film about the credit industry. In this new article, authors [...]

]]> By: Mapgirl’s Fiscal Challenge / History of Usury and Some Thoughts on PayDay Loan Stuff http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-80127 Mapgirl’s Fiscal Challenge / History of Usury and Some Thoughts on PayDay Loan Stuff Tue, 27 Feb 2007 15:20:13 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-80127 [...] I commented at Get Rich Slowly, I recently noticed that these places are in the suburbs and they are no longer the ghetto [...] [...] I commented at Get Rich Slowly, I recently noticed that these places are in the suburbs and they are no longer the ghetto [...]

]]> By: Ask the Readers: Credit Emergency! ? Get Rich Slowly http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-80003 Ask the Readers: Credit Emergency! ? Get Rich Slowly Mon, 26 Feb 2007 13:00:34 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-80003 [...] at a loss, but I REALLY don’t want to see her go to one of those skeezeball loan places.  Any thoughts at all would be extremely appreciated, and thanks so much for [...] [...] at a loss, but I REALLY don’t want to see her go to one of those skeezeball loan places.  Any thoughts at all would be extremely appreciated, and thanks so much for [...]

]]> By: mapgirl http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-79989 mapgirl Mon, 26 Feb 2007 02:14:08 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-79989 The crazy thing is that I associate these with the ghetto and urban blighted areas. Nope! I saw one in the posh suburb of Fairfax County, VA last Friday night! The crazy thing is that I associate these with the ghetto and urban blighted areas. Nope! I saw one in the posh suburb of Fairfax County, VA last Friday night!

]]> By: The Simple Dollar » The Simple Dollar Morning Roundup: Payday Loan Edition http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-75455 The Simple Dollar » The Simple Dollar Morning Roundup: Payday Loan Edition Wed, 14 Feb 2007 13:31:01 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-75455 [...] The Dangers of the Payday Loan Trap A pretty standard description of the bad aspects of payday loans. (@ get rich slowly) [...] [...] The Dangers of the Payday Loan Trap A pretty standard description of the bad aspects of payday loans. (@ get rich slowly) [...]

]]> By: joshuat http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-36492 joshuat Sat, 30 Dec 2006 21:17:30 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-36492 To paraphrase Dave Ramsey, have you noticed that these types of stores aren't in rich neighborhoods? Not because rich people don't need it, but because rich people wouldn't BUY it, THAT* is what made them rich. "That" being a behaviour model that means acting like a responsible grown up, having some patience and not trying to microwave a money problem. I'm willing to bet that the immature instant gratification behaviour model in this country is the leading cause for people's money problems and ultimately leads to their bankruptcy. In fact, I know it is, because if people didn't *have* to have something *right now*, they wouldn't pay 90 days same as cash, put it on mastercard, or use payday loans to cover their bills because they didn't plan how they were going to spend their money (ie, budget!). To paraphrase Dave Ramsey, have you noticed that these types of stores aren’t in rich neighborhoods? Not because rich people don’t need it, but because rich people wouldn’t BUY it, THAT* is what made them rich.

“That” being a behaviour model that means acting like a responsible grown up, having some patience and not trying to microwave a money problem.

I’m willing to bet that the immature instant gratification behaviour model in this country is the leading cause for people’s money problems and ultimately leads to their bankruptcy. In fact, I know it is, because if people didn’t *have* to have something *right now*, they wouldn’t pay 90 days same as cash, put it on mastercard, or use payday loans to cover their bills because they didn’t plan how they were going to spend their money (ie, budget!).

]]> By: Cheng-Jih Chen http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35953 Cheng-Jih Chen Fri, 29 Dec 2006 10:59:22 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35953 Here's an interesting Slate.com article comparing loan sharking to payday loans: http://www.slate.com/id/2059386/ The loan shark comes up looking better than the payday loan companies: lower interest rates, reputation for violence exaggerated. The author argues that this is because the payday loan companies have an effective government monopoly on certain niche loans. One proposal to deal with this is to push loan sharking aboveground -- bring it into the legal universe -- to provide sharper competition to the payday loan guys. Here’s an interesting Slate.com article comparing loan sharking to payday loans:

http://www.slate.com/id/2059386/

The loan shark comes up looking better than the payday loan companies: lower interest rates, reputation for violence exaggerated. The author argues that this is because the payday loan companies have an effective government monopoly on certain niche loans. One proposal to deal with this is to push loan sharking aboveground — bring it into the legal universe — to provide sharper competition to the payday loan guys.

]]> By: Nickey Robo http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35894 Nickey Robo Fri, 29 Dec 2006 07:46:14 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35894 The Oregon Food Bank released something a few months ago stating that an awful lot of people in Oregon getting payday loans were doing so just to buy food for their family. Certainly, payday loans are indicative of a larger societal problem if folks are getting caught in cycles of debt just so they can eat. I definitely agree that they should be made illegal, however. The Oregon Food Bank released something a few months ago stating that an awful lot of people in Oregon getting payday loans were doing so just to buy food for their family. Certainly, payday loans are indicative of a larger societal problem if folks are getting caught in cycles of debt just so they can eat. I definitely agree that they should be made illegal, however.

]]> By: Ralthor http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35715 Ralthor Thu, 28 Dec 2006 22:26:44 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35715 As Matt said these places are all over New Mexico. A New Mexican Libertarian blog picked up this story and presents <a href="http://www.riograndefoundation.org/weblog/2006/12/the_seductive_snowballing_of_g.html" rel="nofollow">a slightly different point of view</a>. Outlawing these places is not the solution, telling people to not get stuck in the cycle and helping people out is. As Matt said these places are all over New Mexico. A New Mexican Libertarian blog picked up this story and presents a slightly different point of view.

Outlawing these places is not the solution, telling people to not get stuck in the cycle and helping people out is.

]]> By: threadbndr(karla) http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35688 threadbndr(karla) Thu, 28 Dec 2006 21:01:03 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35688 I hate these places. They prey on our young service people a LOT. My son knows to stay away, but a lot of his Marine buddies have been suckered in. And these are kids that at least had a few financial management classes in boot camp! So I'm not sure that education alone is enough. I hate these places. They prey on our young service people a LOT. My son knows to stay away, but a lot of his Marine buddies have been suckered in. And these are kids that at least had a few financial management classes in boot camp! So I’m not sure that education alone is enough.

]]> By: rebecca http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35666 rebecca Thu, 28 Dec 2006 19:11:58 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35666 Marc and JD - thanks for a good piece! For a variety of reasons, I'm solidly in the "these things should be outlawed" camp. In general, I think the deregulation of credit card companies and high-risk loan organizations have been damaging - and should be reversed. Question is, how does one push for this? It's not something that comes up much in political campaigns... does there even exist a lobby group lobbying for restoring the regulation of high-risk lending? Marc and JD - thanks for a good piece!

For a variety of reasons, I’m solidly in the “these things should be outlawed” camp. In general, I think the deregulation of credit card companies and high-risk loan organizations have been damaging - and should be reversed.

Question is, how does one push for this? It’s not something that comes up much in political campaigns… does there even exist a lobby group lobbying for restoring the regulation of high-risk lending?

]]> By: Matt Grommes http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35650 Matt Grommes Thu, 28 Dec 2006 17:38:27 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35650 I'm not surprised the example given is in New Mexico. Here in Albuquerque we must have more payday loan places here than anything else. There's literally one every other block. The other thing we have a lot of here is poor people, which I would imagine is not a coincidence. I've heard multiple people here tell me they used a payday loan place to "build their credit" as well, which boggles the mind even further. I’m not surprised the example given is in New Mexico. Here in Albuquerque we must have more payday loan places here than anything else. There’s literally one every other block. The other thing we have a lot of here is poor people, which I would imagine is not a coincidence. I’ve heard multiple people here tell me they used a payday loan place to “build their credit” as well, which boggles the mind even further.

]]> By: DC Portland http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35646 DC Portland Thu, 28 Dec 2006 17:27:12 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35646 Thanks J.D. for inserting this piece in your blog. The fact that these predatory practices are allowed in our communities is beyond comprehension. The greed upon which these businesses are built is so blatant, it's almost surreal. Everyone should think about their guilt by association (as part of the human community) every time they drive by one of these neoned establishments. Those who care about financial security for all should do what they can to make these high-interest, short term loans illegal. What is particularly hopeful for me is that it is not just "those down and out" that fall victim to these modern-day loan sharks. Many of your readers seem to have been affected as well. This will make it easier for our society to rid itself of this scum. Thanks J.D. for inserting this piece in your blog. The fact that these predatory practices are allowed in our communities is beyond comprehension. The greed upon which these businesses are built is so blatant, it’s almost surreal. Everyone should think about their guilt by association (as part of the human community) every time they drive by one of these neoned establishments. Those who care about financial security for all should do what they can to make these high-interest, short term loans illegal. What is particularly hopeful for me is that it is not just “those down and out” that fall victim to these modern-day loan sharks. Many of your readers seem to have been affected as well. This will make it easier for our society to rid itself of this scum.

]]> By: John http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35638 John Thu, 28 Dec 2006 16:49:27 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35638 I used Payday loans a few times back in grad school when I needed money for to get to the next paycheck. Obviously, I wasn't too responsible to have gotten myself into such a situation, but given that I was in that situation nonetheless, I think I handled it reasonable well. I didn't get huge advances--just the bare minimum to get my by. I did this just a few times until I got my expenses in a little better order. Yeah, the interest sucks, but the PayDay loan places are not to blame. I was. And every other person who uses them is responsible for their own actions. If you want pass a new law, pass a law against financial stupidity. I used Payday loans a few times back in grad school when I needed money for to get to the next paycheck. Obviously, I wasn’t too responsible to have gotten myself into such a situation, but given that I was in that situation nonetheless, I think I handled it reasonable well. I didn’t get huge advances–just the bare minimum to get my by. I did this just a few times until I got my expenses in a little better order. Yeah, the interest sucks, but the PayDay loan places are not to blame. I was. And every other person who uses them is responsible for their own actions. If you want pass a new law, pass a law against financial stupidity.

]]> By: Dave http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35633 Dave Thu, 28 Dec 2006 16:35:08 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35633 Oh how I remember the Wells Fargo direct deposit advance. I found myself using it quite a bit about 6 years ago. I quickly found myself having to use it again and again to cover the previous usage. It took time and some restraint, but I got out of it. I'll second that our schools need to teach classes on personal finance. Oh how I remember the Wells Fargo direct deposit advance. I found myself using it quite a bit about 6 years ago. I quickly found myself having to use it again and again to cover the previous usage. It took time and some restraint, but I got out of it. I’ll second that our schools need to teach classes on personal finance.

]]> By: majeest http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35623 majeest Thu, 28 Dec 2006 15:57:21 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35623 My only concern with outlawing payday loan places is the alternative: loan sharks. People go to payday loan stores because they need money they don't have, and they can't get a loan elsewhere. Even taking a cash advance on a credit card is cheaper, so the customer base is probably one step removed from selling their own blood for cash. If these people <em>really</em> need money (or at least convince themselves they do), they'll find a way to get it. That gives loan sharks a foot in the door, and their collection tactics make wage garnishment look like a walk in the park. My only concern with outlawing payday loan places is the alternative: loan sharks.

People go to payday loan stores because they need money they don’t have, and they can’t get a loan elsewhere. Even taking a cash advance on a credit card is cheaper, so the customer base is probably one step removed from selling their own blood for cash.

If these people really need money (or at least convince themselves they do), they’ll find a way to get it. That gives loan sharks a foot in the door, and their collection tactics make wage garnishment look like a walk in the park.

]]> By: Schizohedron http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35620 Schizohedron Thu, 28 Dec 2006 15:27:34 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35620 Payday loans are just another reason why personal finance and asset management ought to be taught in schools, especially before college (and the attendant tide of credit card offers). Wise kids up early, and they'll never see these predatory loans as a viable option. Payday loans are just another reason why personal finance and asset management ought to be taught in schools, especially before college (and the attendant tide of credit card offers). Wise kids up early, and they’ll never see these predatory loans as a viable option.

]]> By: Enough Wealth http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35615 Enough Wealth Thu, 28 Dec 2006 14:53:27 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35615 While I agree that you'll never get ahead using Pay Day loans, I'm think everyone is having way too much fun picking on them as a great scourge on society. If you look at it rationally, a large chunk of the $20 fee on a $200 cash advance is actually going to be consumed in admin costs for issuing the loan (just recording all the required details to lend to $200 would easily consume $10 worth of time). And the "interest rate" on such loans also has to be high enough to compensate for the bad risk of most of these borrowers. If there was as much "fat" in the margins as bloggers and journalists seem to believe, they'd be even more of these lenders starting up than is the case. Just as an aside - work out the "APR" lots of people are paying just for the privilege of withdrawing their OWN cash from an ATM. Lots of people think nothing of taking out $10, $20 or $50 at a time, when they will be charged a fee of $1.50 for the privilege. Even here in Oz where most banks and credit unions charge no ATM fee for withdrawals, many customers are so lazy that they use "other" bank's ATMs for a cash withdrawal, and pay an unnecessary fee. While I agree that you’ll never get ahead using Pay Day loans, I’m think everyone is having way too much fun picking on them as a great scourge on society. If you look at it rationally, a large chunk of the $20 fee on a $200 cash advance is actually going to be consumed in admin costs for issuing the loan (just recording all the required details to lend to $200 would easily consume $10 worth of time). And the “interest rate” on such loans also has to be high enough to compensate for the bad risk of most of these borrowers. If there was as much “fat” in the margins as bloggers and journalists seem to believe, they’d be even more of these lenders starting up than is the case.

Just as an aside - work out the “APR” lots of people are paying just for the privilege of withdrawing their OWN cash from an ATM. Lots of people think nothing of taking out $10, $20 or $50 at a time, when they will be charged a fee of $1.50 for the privilege. Even here in Oz where most banks and credit unions charge no ATM fee for withdrawals, many customers are so lazy that they use “other” bank’s ATMs for a cash withdrawal, and pay an unnecessary fee.

]]> By: Brian http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35610 Brian Thu, 28 Dec 2006 13:52:51 +0000 http://www.getrichslowly.org/blog/2006/12/28/the-dangers-of-the-payday-loan-trap/#comment-35610 Agreed on the predatory nature of these places. The key is to STAY AWAY. And tell everyone you know to stay away. If you calculate out interest on these things it ends up being something like 800 percent. No one can get ahead paying fees like that. Agreed on the predatory nature of these places. The key is to STAY AWAY. And tell everyone you know to stay away. If you calculate out interest on these things it ends up being something like 800 percent. No one can get ahead paying fees like that.

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