When Oregon voters head to the polls this fall they’ll have 13 ballot initiatives to consider, everything from parental notification for teenage abortion to strict tax-caps. But they won’t get a chance to vote to limit interest rates on payday loans. A coalition of progressive groups called Our Oregon had hoped to gather enough petitions to put the issue on… return to article
-
subscribe to print magazine
-
email this article to a friend
-
Reader Comments (14)Page 1 of 1 pages“Who the heck can be on the side of charging 521 percent interest rates for people that are vulnerable and desperate?”
I am, as someone who wants that vulnerable and desperate person to be able to get money he obviously needs very badly and immediately. If 521 percent is the best deal he can get (and if he could get better then why wouldn’t he?) for money he needs badly and immediately, then all this legislation does is stop him from getting the money he needs.
Don’t kid yourself into believing this bill protects people from “predatory” lenders (ya know, those lenders that are actually stepping up to the plate and offering these needy people an option). At best, it protects a desperate borrower from himself (if he doesn’t really need the money, it helps him avoid a potentially painful financial transaction), and, at worst, it takes away his best option to get money he deperately needs now.
The borrowers that use “payday” lenders aren’t the kind of people that maintain a line of credit at a bank. These people live paycheck to paycheck. No cash, no food...no cash, no medicine...no “payday” lender, NO CASH.
Look at this example:
You need $200 now. The lender will give it to you for a fee of $20 if you pay back the $200 in one week (with a post-dated check).
Sounds like a pretty good deal for someone who really needs $200 now, huh? Little or no paperwork, no collateral, and walk away with the $200 cash now. All for $20.
I bet there’s plenty of people who, in a pinch, would consider that pretty good terms and would gladly pay it.
What’s the annual interest rate? 520%.
This legislation stops such borrrowers and lenders from entering this mutually beneficial transaction, all so that the masses who don’t need such services can feel like they are helping the people who do need such services. Feel good liberalism once again hurts those it purports to help.
Posted by jeffc on Aug 7, 2006 at 1:26 PM “But if the service is so popular, why did lawmakers nearly fall over themselves to pass the interest cap?”
Duh. Because the service is popular with the small segment of society that needs the service. Obviously, it’s not used by most of the electorate that has, for example, credit card availability, and as such doesn’t need the service.
The legislators are accountable to the electorate as a whole, which is comprised mostly of people that don’t use the service. To the broader electorate, this valuable service can be made to seem like a crime, and they don’t understand the benefits of such a service, so they are against this “punitive” service (an oxymoron if I ever heard one). What does it hurt them to take away this transaction that they have no part in and that is obviously considered mutually beneficial by those parties that do have a part in the transaction? It helps them sleep at night, even as they harm those they think they are helping.
Posted by jeffc on Aug 7, 2006 at 1:42 PM “It’s been very exciting to show Democrats that when you get out there on an economic issue and show that you are on the side of everyday working folks, there’s power in that nexus.”
That should be amended to, “It’s been very exciting to show Democrats that when you get out there on an economic issue and show that you, on the surface anyway, appear to be on the side of everyday working folks, despite the fact that the policies you support, on balance, hurt the very people they were supposed to help, there’s power in that nexus.”
“Politics is about winning.”
Exactly. It’s not about good policy. It’s about winning. The minimum wage and “predatory” lender “victories” are irrefutable evidence of that.
Posted by jeffc on Aug 7, 2006 at 1:50 PM As a group who spends 100% of it’s resources organizing the working poor, ACORN has seen the damage done by predatory lenders. We have worked hard in over a dozen states to bring this to the public eye and help curb the new robber barons of the 21st century.
Posted by oregonacorn on Aug 7, 2006 at 3:40 PM Good comments by jeffc. And the main argument used by people who are using payday lenders as targets of their “consumer activism” - that payday loans carry outrageous triple-digit interest rates - is in fact invalid. You cannot fairly evaluate a payday loan in terms of an annual percentage rate because of the fixed costs involved in making a loan. If payday lenders were limited to a 36% APR, for example - as they are in many states which have effectively outlawed the practice thereby - then a lender could charge no more than $1.38 for two-week, $100 loan, which obviously nobody can do because the lender’s costs are way higher.
Anti-payday-loan legislation is essentially anti-freedom legislation. The government is essentially making it illegal for one person to say to another, “I will lend you $100 today if you will pay me back $101 tomorrow” (a 365% annual interest rate). Is that the “progressive” result you people want?
If payday lenders are making so much money overcharging poor people for loans and “consumer activists” want to help them, then why don’t they just offer poor people loans for smaller fees - or encourage the government to set up a program to do so? No, instead they want someone to criticize, to complain about triple-digit interest rates and to dishonestly call payday lenders loan sharks when loan sharks are people who use violence to collect on loans which payday lenders certainly do not.
Consumer activism should be about stopping dishonest advertising and practices, not dictating to a business that has not received any government assistance how much it may charge for its product or service. The free market works quite well and will take care of that if allowed to operate freely. Right now people are discouraged from entering the payday loan business because of the libel, slander, and unfair regulations that are being directed at payday lenders. That is what is curtailing the proper operation of the free market and keeping payday loan prices higher than they could be (although at some Internet sites you can get payday loans for as little as $8 or $10 per $100 loaned, which is less than the reform the Oregon group wanted to have people vote for).
Please see the article “In Defense of Payday Lending” by Tom Lehman, Assistant Professor of Economics at Indiana Wesleyan University, at http://www.mises.org/freemarket_detail.asp?control=454
Posted by injon on Aug 7, 2006 at 7:59 PM Jeffc your comments are down right ridiculous. You pick and choose statements at your convenience.
Do you really think that an industry enjoying triple and quadruple growth is simply tapping into a needed market segment?
No, their rates of growth are so extreme because they take advantage of people. And they set up shop in low-income neighborhoods and near military bases. Yes, these people need credit. But they also need people they can trust, and you cannot trust a pay day lender to have your best interests in mind. They are there for one reason - to make money. And they are going to make the money from the people they do business with.
No one (read that again) NO ONE is calling for the elimination of pay day loans, especially not in Oregon. This is an industry tatic designed to mis-state the calls for regulation. And you, Jeffc, fit that profile very nicely.
There is consensus that pay day lenders provide a necessary service. Even amongst regulation advocates. HEAR THAT? CONSENSUS. Some lenders even go so far as to say there is nothing new in proposed regulations, that they already agree to them voluntarily. Another lie. If that were the case, then what’s the big deal with making them official?
You, jeffc, obviously have little understanding of the true nature of this kind of lending. And your arguments are so similar to those used by the industry, I question where you got them.
Look, we have Libertarians in Oregon calling for regulation of these loans. LIBERTARIANS! You know there is something wrong then. Oregon has more pay day loan shops than McDonalds. And most of them appeared in the last 5 YEARS. This is not a case of an industry simply trying to get by and being maligned by liberals as you suggest. It is a premediated assult on economic opportunity under the guise of exactly that.
If you can’t see that, you need to do some research.
Posted by ericd on Aug 8, 2006 at 5:58 PM “Who the heck can be on the side of charging 521 percent interest rates for people that are vulnerable and desperate?”
I am, as someone who wants that vulnerable and desperate person to be able to get money he obviously needs very badly and immediately. If 521 percent is the best deal he can get (and if he could get better then why wouldn’t he?) for money he needs badly and immediately, then all this legislation does is stop him from getting the money he needs.
Exploitation is always the Repuglican way, Who would charge 521% when they could get a thousand, and if he could force them to give free sex in the bargain, hey!… why not. Desperate people (or just ignorant) will do amazing things for folk with a few bucks and no gag reflex.
If you make it so they lose their house to you as well, that is just business, you have expenses after all. They didn’t notice the house part in the fine print? That’s just their lookout, they should have paid more attention to reading classes in school.
After all, if they don’t pay, you don’t send Guido to break their legs, you send the local cops to arrest them for passing bad checks. All above board and legal like.
You could even let them use payday loans for Bolita .. er powerball tickets for that 100 million to one chance of escaping the need of you
Now if we could just pass special laws for specialy licenced brothels and narcotics as well, we could eliminate the specter of organized crime completely, it would just become more business as usual
Posted by FreeDem on Aug 8, 2006 at 8:12 PM Slavery never really goes away, it just changes forms. The economic one seems to be most popular in the 21st century, at least in the first world, where industries like predatory lending, with it’s addittional soak-the-working-poor components such as title loans, adjustable rate home loans, and all those happy video poker machines in every tavern. To those above who lump it all together in the free market system I would point out, respectfully to their keysian reality tunnels, that the role og gobernment is to make a society that creates the greatest good for the most. Philosophical musings about money lending invariably lead to the historical root of this human misery - a show down in late medival christendom between the franciscans (all money leading is evil) vs. the dominicans (its ok if controlled by the church.) Even revolving credit is a post ww2 phenom in america. People have lots more stuff they don’t really need. What they need is meaningful family wage work!
Posted by oregonacorn on Aug 9, 2006 at 10:10 AM Just another way to keep the poor poor,and eliminate the middleclass.These lenders are scumbags.
Posted by Kaw Valley Kid on Aug 9, 2006 at 11:18 AM ugg! get that damn flag off my posts.Being an American is nothing to be proud of these days…
Posted by Kaw Valley Kid on Aug 9, 2006 at 11:19 AM Wasn’t usury a sin against Christendom once upon a time? How do Republicans make for this distinction?
Posted by rocco on Aug 13, 2006 at 9:50 PM There were laws against usury not so long ago, till loan sharks bought enough legislators to remove the laws. It took a while longer to make it impossible to escape such usury by bankrupsy.
Posted by FreeDem on Aug 16, 2006 at 4:20 PM One of the things that the defender of Payday loans overlooked in his utter ridiculous defense post is that like all high risk loans, lower interest payday loans would necessarily be frontloaded. That is they would included all of the interest payments in the first few payments so that only by paying it off in the first or second installment could one save any interest at all. Being poor the borrower would need the entire schedualled life of the loan if not longer. This would ensure that a typical $500.00 loan carrying a 36% APR interest charge would be repaid in full at $680.00 within one month. Banks would be envious to see anyone get such business. I suppose the triple digit interest is paying for a certain number of defaults. Still it is predatory and harmful to society. It perpetuates poverty and most people that use the service use it regularly. A plethora of low wage jobs is the cause of much of the problem. The Payday industry only worsens the problem.
Posted by cabdriverinchicago on Nov 28, 2006 at 1:06 AM It is important that we all understand a balance of all of the facts, before decisions are made, that effect something of such good use to so many good people.
Read the Blog as follows:
Pay Day Loan Mis-Information
Category: News and Politics
I recently read a Reuters news article, written by Nick Carey, Mar 23rd, 8:15pm ET, titled, “Pay day loans exacerbate housing crisis”. I would like to clarify that there are some great inaccuracies and bias in this
story that really must be pointed out.I have had extensive experience with pay day loans, and, though I agree that the APR (annual percentage rate) is quite high, and people can get into trouble when they do not use these loans as they are designed to be used, this news report highly exhagerates the cost of a loan. Read from the article as follows;
“A pay day loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the Center.”
This is not accurate! And there was much more inaccuracy than this in the article.
A pay day loan from a legitimate financial retailer generally costs about $15 for every $100 up to $500. This means that for a loan of $100 for 15 days the charge will be $15, totalling the loan at $115, which must be quoted as an APR of 365%. the actual total pay off for a $300 loan is $345.
In reality it is only a fee that is being paid, not interest. However, government regulations require that it be quoted as interest, as an APR.
And, by the way, I don’t know where the “anti” pay day loan “spin masters” get their math, but the 365% quote is an APR, which means that if you were to pay off and take this amount loan out, over and over again, consecutively over 1 year, your fee would equal that of a 365% APR. It does not compound, or whatever “voodoo” the “spinmasters” would like people to believe.
So it should be clear that pay day loans are strickly meant, and offered, to be used as short term loans, and never on a long term basis.
If a borrower runs into trouble and falls short of being able to pay off the loan, legitimate financial retailers offer, for no additional fee, payment plans with CFSA, and ,in some states, state sponsored plans.
It also should be noted that these loans, and their payments or lack of payments never reflect on the borrowers credit report or history.
The only way that a short-term loan, a pay day loan, could build up to the absorbitent amount qouted in the news story, is if the loan were to be “rolled over”, which is highly illegal in nearly every state that regulates these loans, so, thus, it would be highly improbable that there would be an average of borrowers that pay such amounts.
Pay day loans are for exactly what they are named. A short term small loan to be paid off by the next pay date of the borrower.
These loans have saved many a borrower, in a temporary financial pinch, to pay some bill(s), from much harsher penalties and costs that are incurred by banks and credit institutions if checks do not clear or payments are late.
The proper use of a pay day loan actually shows a personal and professional level of responsibility when it is used properly.
Yes, people do mis-use these loans, people get into trouble, people borrow beyond their means, and there are less than savory lendors who do not do what is right in order to avoid such disasters for their borrowers.
Pay day lendors must exercise great responsibility to protect borrowers and potential borrowers from becoming victims of borrowing beyond their means. That might even mean turning down a less than able and questionably qualified customer from borrowing.
I am disturbed to also hear lawmakers and politicians who are buying into mis-information and threaten the reasonable management and existence of a very useful and helpful service to many people.
Bruce - Washington
Posted by bruceberquist on Mar 30, 2008 at 5:07 PM Page 1 of 1 pages -
register a new account »Posting Security
Also by Christopher Hayes
- The New Road to Serfdom
Over the course of 500 pages in The Shock Doctrine, Naomi Klein documents the moments of chaos and disruption that allow a small coterie of experts to swoop in and administer what's invariably called "bitter medicine," "painful reforms" or "shock therapy" - Who’s Afraid of Democracy?
Believing that "people are rational as consumers and irrational as voters," many conservatives would favor free markets without democracy - What We Learn When We Learn Economics
Is a little economics a dangerous thing? - The Abramoff Babies
Like the "Watergate Babies" of 1974, the new Democratic Congress will have to pick between sustanative or procedural reforms. - The Good War on Terror
How the Greatest Generation helped pave the road to Baghdad - Economic Populism Proves Popular
To thwart legislation that put caps on payday lending rates, Republican lawmakers in Oregon had to pass it
Popular Discussions
- The 9/11 Faith Movement
Many Americans believe 9/11 was a conspiracy by the U.S. government
1968 posts since Jul 11 06 - What’s the 411 on 9/11?
891 posts since Dec 21 05 - Democrats: It’s the War
659 posts since Nov 1 05 - Was the Presidential Election Stolen?
459 posts since Jun 19 06 - A Fundamental History Lesson
The rise of National Socialism proved politics and religion don't mix
426 posts since Oct 10 05
© 2006 In These Times | Reprint Policy | Privacy Policy | Powered by Expression Engine | RSS Feeds
