A hundred and fifty per cent interest in Britain.

a reply to: enlightenedservant

Well, they do have that baby Alfie situation going on. One could argue that Alfie is unique. But it is still happening and it shouldn't. Its a state sanctioned murder and no less.

The rich will always get the best of everything including healthcare. That will mean the rich will live longer. The average working class guy will have a choice between three options, all virtually identical save for the letterhead. And the poor will always get the scraps and the modest "gift" the wealthy have siphoned off the working class guy and given to the poor, minus a small transaction fee of course...

originally posted by: Wide-Eyes

originally posted by: Fermy
a reply to: Wide-Eyes


Then organise an authorised overdraft facility with your bank, they should be happy to do that and you won't be encouraging the usurers. Sure, the banks are not the real answer but the lesser of two evils in this case.

Are you sure about that? I don't want to owe my bank a penny.

Some banks have overdraft protection. You can spend more than you have in your account and when your next deposit is made that amount is automatically deducted with no penalties. Ask your bank if they offer it. They may charge a small monthly fee. I'm not sure. Even if they charge a fee for it, it will be far less than any interest or penalties you are paying.

big problem for a long time in the states with young military folks being targeted... (or that brand new camero for a low low interest rate of 30%) Lot of states started passing laws against it, and at least on the military side I saw the jag office reading the contract and saying this is garbage don't pay them a dime.

Payday loans are SHORT TERM loans. In other words, you are supposed to pay it back almost immediately, hence the term payday loan... you pay them back as soon as you get paid. If you don't the loan turns over and interest is charged again.

You also have to realize that these are UNSECURED loans meaning that nothing is guaranteeing the loan so if the person doesn't pay them back, the bank can't really do anything about it.

The interest rates charged reflect the risk of non-payment which is fairly high.

You will notice for all the accusations of these banks charging egregious interest rates, I don't see any of these non-profits, community groups, or anyone complaining opening up their own personal lending company to undercut the payday loan companies. The reason is because they will lose their shirts trying to loan money to folks with poor credit unless they charge the same rates that they accuse the banks of being predatory do.

The real issue is we have a large percentage of the population that does not make wise financial decisions.

originally posted by: Oldtimer2

Anyone for socialism should be watching the UK,look how screwed up the people and country are socialized medicine,let old and sick die,only the rich can live,taxation upon taxation,I know quite a few from UK,they say it's a cesspool,and regulated up the keister

It doesn't matter how RICH a person is if they have a terminal desease

they die!!!

Money can't buy you life.

a reply to: ScepticScot

Not even confined to the UK so amend the OP's Britain bashing title?

www.usatoday.com...

150% interest, pah. If you look closely behind the first guys shoulder you'll see that the company he is lending from charges 2115.69% per annum.

a reply to: anonentity

We've had these (or something similar) in the US for a long time called payday loans. In the US it is EXTREMELY prevalent. What the model here is, is that you go into one of these places to get a short term loan, say $500 and you repay that loan in 2 weeks at say 10% interest. Then, when the two weeks are up, if you can't repay it, they give you a new $500 loan to pay off the old one plus some interest and fees.

Then the debt continues to grow.

My stepdad secretly had one of these that none of us knew about. He died about 2 years ago and at the time of his death, he had had a single loan which he took out for $500 and over the 5 years he had it (he was never able to pay it off) it had grown to $33,000 and he had made $15,000 in payments on it. That's $48,000 over 5 years from an initial $500 loan.

In the US these places are all over. In fact, in the town I live in, we have one right next door to our largest grocery store, because people get desperate when they need to buy food.

These institutions all need to be shut down, they do not operate in the public interest. But, they won't be shut down, at least in the US because they're one of the largest lobbying groups in the country and many members of our Congress and state legislatures are invested in these companies (if not outright own them).

a reply to: anonentity

There are US states where 500%+ interest rates apply to payday loans. They are massively predatory but, in fairness, there seems to be no shortage of stupid people lining up to pay those rates in exchange for instant $$$.

originally posted by: Wide-Eyes
Alternatively, I get a payday loan with a fixed agreement to pay back in a few weeks when I've had time to reorganise my budget and cram in some overtime at work.

I borrow £200, three weeks later I pay them 230 back. I know what I'm getting into and I make plans to settle the debt.

It works for me and if I thought there was ever a chance I wouldn't be able to pay it back then I would just be a moron who deserves everything I get.

Bank overdrafts are also exploitative, but I don't think you understand the time value of money, or what borrowing should cost, with statements like this. You're paying 15% over 3 weeks. That's an APR of 259.95%. Even the worst credit cards will charge you a max of 34.99% and you can probably qualify for 24.99% with any credit history at all. And, you even get 2-4 weeks grace period to pay off the debt before it accrues interest.

There is zero reason anyone should ever use a payday loan or take a bank overdraft other than ignorance.

originally posted by: burdman30ott6
a reply to: anonentity

There are US states where 500%+ interest rates apply to payday loans. They are massively predatory but, in fairness, there seems to be no shortage of stupid people lining up to pay those rates in exchange for instant $$$.

The interest rates are accumulated. The interest rate calculates that high IF PEOPLE DON"T PAY THE MONEY BACK. The initial loan may have a two week term at say 20%. So you borrow $1000. The interest is $200, so you owe $1200. However, if you don't pay it back, now the balance is $1200 + an additional $200 in interest for the extra two week term.

These places aren't predatory, they are serving high risk customers who don't have any other banking options.

Again, if the rates are too high relative to the risk, then it would be easy for churches, non-profits, and other groups to undercut the payday loan companies and offer personal loans to the needy. The reality though is that they won't do it because there is little to no chance they will get the money back and thus would wind up going out of business.

These businesses thrive in poorer neighborhoods because the residents are usually "unbanked" meaning they often don't have checking accounts or access to credit cards. Go by any of these places on a Friday and you will see people lined up getting their paychecks cashed.

Without these places, people would go to loan sharks. I rather have XYZ Payday loans than people hitting up Tony Soprano for $1000.

People make stupid financial decisions. My mother got one of these stupid title loans (you put your car title up to secure the loan) for like $5k. Fortunately, I found out about it and paid it off. All she had to do was ask for help, but she had too much pride and dug herself in a hole needlessly.

originally posted by: Aazadan

originally posted by: Wide-Eyes
Alternatively, I get a payday loan with a fixed agreement to pay back in a few weeks when I've had time to reorganise my budget and cram in some overtime at work.

I borrow £200, three weeks later I pay them 230 back. I know what I'm getting into and I make plans to settle the debt.

It works for me and if I thought there was ever a chance I wouldn't be able to pay it back then I would just be a moron who deserves everything I get.

Bank overdrafts are also exploitative, but I don't think you understand the time value of money, or what borrowing should cost, with statements like this. You're paying 15% over 3 weeks. That's an APR of 259.95%. Even the worst credit cards will charge you a max of 34.99% and you can probably qualify for 24.99% with any credit history at all. And, you even get 2-4 weeks grace period to pay off the debt before it accrues interest.

There is zero reason anyone should ever use a payday loan or take a bank overdraft other than ignorance.

In the UK a bank overdraft is often one of the cheapest ways to borrow for small amounts.

a reply to: Wide-Eyes
What difference does it make to you if you owe the bank or the usurer money lender?

originally posted by: Edumakated
These places aren't predatory, they are serving high risk customers who don't have any other banking options.

We agree on a lot of financial logic but we disagree here. These places are very predatory. Sure, they're taking risk by offering loans with no collateral and no credit check, but how much risk are they really taking? Subprime auto lenders already make these deals. Credit card companies make similar deals too and manage far lower interest rates. Then there's the fact that assuming the person doesn't just disappear, you can always sue them for the loan value if they don't pay.

The only need payday lenders fill is offering loans to people that are too ignorant to get a credit card. And I find it a hard sell to justify that we should turn a blind eye to that, rather than getting more people into a banking system that offers far better financing options.

Without these places, people would go to loan sharks. I rather have XYZ Payday loans than people hitting up Tony Soprano for $1000.

I was under the impression that the mafia typically offered similar loans at 3% a week. That's quite a bit less than what these companies are offering, and the mafia never had the ability to sue for damages if the borrower didn't repay.

originally posted by: Oldtimer2
a reply to: anonentity

Anyone for socialism should be watching the UK,look how screwed up the people and country are socialized medicine,let old and sick die,only the rich can live,taxation upon taxation,I know quite a few from UK,they say it's a cesspool,and regulated up the keister

Types a guy from California ? how many abortions, ? how many vet deaths waiting for medical aid ? how many on food stamps ? How many street gangs ?

originally posted by: ScepticScot
In the UK a bank overdraft is often one of the cheapest ways to borrow for small amounts.

I read the poster who mentioned overdrafts as referring to the US system because they mentioned overdraft fees.

Overdrafts work a bit different in the EU and essentially function as a line of credit rather than being punitive like they are in the US. They fill the same sort of role that an emergency credit card fills in the US.

originally posted by: anonentity
a reply to: Oldtimer2


To avoid socialism, people have to have the resources to fend for themselves, even a small garden or an allotment to grow stuff. But a whole generation have been brought up to be dependent and lack the basic skills of survival...its going to be a mess.

The irony is that in the UK, having the space to have an allotment would make that home middle class. "Affordable housing" estates just don't offer the space. Nor do high street flats and apartments. In many areas, the yoofs would vandalize or steal everything. And with many constituencies, they have sold off the land for allotments to the supermarkets, so there is a ten year waiting list to get an allotment.

All of this seems deliberate. By having "austerity measures" to keep inflation and wage demands down, they are also forcing people into debt in order to keep bank profits up.

originally posted by: Aazadan

originally posted by: Edumakated
These places aren't predatory, they are serving high risk customers who don't have any other banking options.

We agree on a lot of financial logic but we disagree here. These places are very predatory. Sure, they're taking risk by offering loans with no collateral and no credit check, but how much risk are they really taking? Subprime auto lenders already make these deals. Credit card companies make similar deals too and manage far lower interest rates. Then there's the fact that assuming the person doesn't just disappear, you can always sue them for the loan value if they don't pay.

The only need payday lenders fill is offering loans to people that are too ignorant to get a credit card. And I find it a hard sell to justify that we should turn a blind eye to that, rather than getting more people into a banking system that offers far better financing options.

Without these places, people would go to loan sharks. I rather have XYZ Payday loans than people hitting up Tony Soprano for $1000.

I was under the impression that the mafia typically offered similar loans at 3% a week. That's quite a bit less than what these companies are offering, and the mafia never had the ability to sue for damages if the borrower didn't repay.

Subprime auto loans are SECURED. They can take the car back. They will send the repo man to get the car. These people have probably already burned their credit card options with non-payment so the only thing left for them is payday loans.

For the third time, if the rates are so predatory and the risk low, then simply get some investors together and start lending out money in the hood unsecured at rates you feel are fair. It wouldn't take much to do it.

A good example of this was SOFI with student loans. Company was started by a Stanford MBA. The rates on private student loans were too high relative to the risk, particularly for Stanford MBA grads. So he got some investors together and offered lower rates to Stanford and other top tier MBA grads who have very low default rates compared to the general population. Now the are doing billions in loans.

a reply to: Vroomfondel

But what does any of that have to do with socialism?

a reply to: Edumakated

If you've already trashed your credit, allowing a system that puts people even further in debt, so that they cannot ever rebuild that credit isn't a benefit to society.

Also, they can always repo what people spend the cash on, in a civil suit one could get a court order to garnish wages too.

The risk is not that high, certainly not high enough that it requires 300% APR or more just to have a sustainable business model.

The reason the industry charges what they do, has nothing to do with risk and everything to do with volume. The margin on the loan is typically around 15%, but the total value is low. When someone borrows $250, the company gets back $37.50 every 2 weeks.

Lets say your business has 3 employees making $12/hour, and you the owner making $20/hour. In just payroll your company needs to generate about $140,000 in revenue. Throw in rent, insurance, advertising, and so on, and you're probably looking at needing around $350,000 in revenue per year.

That means you need to make 9,350 of those short term loans in order to keep the business going. Broken down that's 780 loans per month, 180 loans per week, 36 loans per day, 3 loans per hour (assuming you're open 12 hours/day), 1 loan per 20 minutes. If the interest rates were cut in half, the companies business would need to double just to break even.

That is the problem, it's not an issue of risk where the lenders vanish with the money and don't repay it. The issue is that it's a high volume low margin business.

That doesn't mean the rates aren't predatory, because those who get trapped in this debt cycle have a very hard time escaping it. If anything, it means the business itself is inherently bad because the lenders are doing large amounts of harm with their business model, but that same model doesn't allow for the company to do any better. It's not greed at work, it's just a bad system.