{"id":5474,"date":"2016-10-11T08:27:52","date_gmt":"2016-10-11T14:27:52","guid":{"rendered":"http:\/\/admin.patheos.com\/blogs\/janetheactuary\/?p=5474"},"modified":"2016-10-11T08:27:52","modified_gmt":"2016-10-11T14:27:52","slug":"what-if-payday-lenders-didnt-exist","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/janetheactuary\/2016\/10\/what-if-payday-lenders-didnt-exist.html","title":{"rendered":"What if payday lenders didn’t exist?"},"content":{"rendered":"\n<\/head>

\"https:\/\/commons.wikimedia.org\/wiki\/File%3AGuaranteed_Payday_Loans-Cash_Money_Store.jpg;<\/p>\n

According to today\u2019s Tribune<\/a>, the Consumer Financial Protection Bureau is proposing to crack down on payday lenders.<\/p>\n

Broadly, the bureau proposes that lenders must find out upfront if a borrower can pay back a loan (using check stubs, financial statements or other measures), limit the number of times a payday loan can be rolled over and give borrowers more time and protection before lenders can debit money owed them from customer checking accounts.<\/p><\/blockquote>\n

Other activists have called for an outright cap on interest (whether stated as such or built into the fees) of 36% per year.<\/p>\n

Is this the right thing to do?<\/p>\n

The first question is, do payday lenders make obscene profits off the backs of the poor? \u00a0Or, rather, do the poor \u201ccomparison shop\u201d for the best deal in payday loans? \u00a0I have no evidence one way or the other except a sign at a payday loan place we used to pass by that advertised \u201cwe will beat anyone\u2019s rates.\u201d \u00a0If they comparison shop, and if there\u2019s no collusion among lenders to keep fees up, then it\u2019d be credible to say that the fees\/implied interest rates are simply the best those lenders can offer, considering the risk that nothing will be paid back. \u00a0The fact that users can\u2019t calculate an APR based on fees doesn\u2019t really matter so much as whether there is an active market with multiple lenders seeking out business with \u201cwe offer the best deal.\u201d<\/p>\n

What\u2019s more, the payday lenders say that, if they didn\u2019t exist, then the poor would face situations of even greater hardship \u2014 paying overdraft fees for bounced checks, having electricity cut off, losing a job because you can\u2019t get the car repaired, whatever it might be.<\/p>\n

But here are a couple observations:<\/p>\n

First, as I pointed out yesterday<\/a>, 7% of Americans don\u2019t have a bank account at all, and without it, they can\u2019t even get a loan from a payday lender. \u00a0What\u2019s more, according to Wikipedia<\/a>, 14 states and D.C. already ban payday loans. \u00a0Are the people in those states financially worse off due to their inability to get these sorts of easy-approval short-term loans? \u00a0Are they more likely to overdraw their bank accounts, get electricity shut off, face other consequences of not being able to get these loans?<\/p>\n

Second, I read somewhere (and, eh, it\u2019s probably typed up in some prior post) that the poor, despite this romanticized idea of \u201cwe didn\u2019t have much, but we had each other,\u201d actually are woefully lacking in the sort of social networks that support each other in hard times, whether it\u2019s through church or through extended families or neighborhoods. \u00a0In fact, it seems to me that a long time ago I read that one of the reasons why young women have babies they can\u2019t financially care for is that they are missing these networks, and the prospect of a baby brings the prospect of someone to love and care for and who will, in turn, love and care for them, and that this is all the more important to them when they\u2019re lacking this. \u00a0What this means is that, if you\u2019re poor, you really don\u2019t have the ability to borrow informally.<\/p>\n

So, I\u2019ll be honest. \u00a0There\u2019s probably tons of data out there, and I don\u2019t have the time to dig into it. \u00a0But, readers, what do you think?<\/p>\n

\u00a0<\/p>\n

https:\/\/commons.wikimedia.org\/wiki\/File%3AGuaranteed_Payday_Loans-Cash_Money_Store.jpg; By Vinceesq [CC BY-SA 3.0 (http:\/\/creativecommons.org\/licenses\/by-sa\/3.0) or GFDL (http:\/\/www.gnu.org\/copyleft\/fdl.html)], via Wikimedia Commons<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

According to today\u2019s Tribune, the Consumer Financial Protection Bureau is proposing to crack down on payday lenders. Broadly, the bureau proposes that lenders must find out upfront if a borrower can pay back a loan (using check stubs, financial statements or other measures), limit the number of times a payday loan can be rolled over […]<\/p>\n","protected":false},"author":2209,"featured_media":5476,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[476,350],"class_list":["post-5474","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-payday-lenders","tag-poverty"],"yoast_head":"\nWhat if payday lenders didn't exist?<\/title>\n<meta name=\"description\" content=\"According to today's Tribune, the Consumer Financial Protection Bureau is proposing to crack down on payday lenders. 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