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Pastimes : Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: DMaA who wrote (1859)	9/15/2008 10:29:45 AM
From: c.hinton	Read Replies (1) \| Respond to of 3816

???????Dmaa what sort of reply is that? It answers no question concerning the general crisis going on. now please tell me how AIG is asking the fed for money because Obama is running for president.(sarcasm)

To: DMaA who wrote (1859)	9/15/2008 4:45:46 PM
From: TimF	Respond to of 3816

Just say no to usury laws ... By lending to people who are better credit risks. If you have a credit card or a bank willing to lend you money, you don't take out a payday loan (except for an economist of my acquaintance who is researching payday loans). The people who get them are the most financially marginal members of society--i.e., the people least likely to pay them off. Nonprofits have tried to enter the market in order to offer the loans at lower interest rates. People without other access to credit say they need them to cover emergencies. What those non-profits have found is that in order to cover their default risk, and the transaction costs of manking a lot of small-denomination loans, they need to charge shockingly high interest rates--291% annual, at one non-profit covered by the New York Times. If that's the interest rate at which payday loans break even, it's pretty obvious that capping the interest rates at 28% will put an end to the industry. Hurrah! Say the credit nannies. Not so fast. If people really need the money, and don't have anywhere else to get it, you've just put them in a nasty fix. Ban payday loans and you'll drive them to even worse alternatives: pawnbrokers, loan sharks, or losing their job because they can't afford to fix the car. Loan sharks didn't used to be just for gambling debts and illegal finance; they used to be staples of poor neighborhoods. And you can't declare bankruptcy against an illegal debt. Especially not with your kneecaps broken. meganmcardle.theatlantic.com Let's be clear. Usury laws are not about protecting consumers from unscrupulous lenders. Usury laws are about deciding, as a society, that some people are just to irresponsible to have credit. To pretend otherwise is disingenuous. Posted by quadrupole \| September 14, 2008 1:31 AM meganmcardle.theatlantic.com ...At a 28% APR, your revenues on a two-week, $400 loan are about $3.80. If one loan in 100 isn't repaid, that eats up all your revenues and then some. Let's say one loan in 200 isn't repaid. You now have $1.80 per two-week, $400 loan with which to pay for rent, utilities, employees, and taxes, and after that make enough profit to make it worth your time. It can't be done. Posted by Brandon Berg \| September 14, 2008 2:34 PM meganmcardle.theatlantic.com The Federal Reserve Bank of New York Staff did a study and concluded that compared with households in states where payday lending is permitted, households in states where payday loans are prohibited have bounced more checks, complained more to the Federal Trade Commission about approved lenders and debt collectors, and filed for Chapter 7 bankruptcy protection at a higher rate. FRBNY focused on quality of life issues and not simplistic APR explanations. People suffer when the credit nannies determine what is best for them. Posted by Peter Boston \| September 14, 2008 8:35 AM meganmcardle.theatlantic.com ...So again, we go back to the real argument. What is the role of government in telling people how to live their lives? Those who wish to ban payday lenders are saying, as others have put it it here, that there are some people who are not capable of making the decision to take out a loan like this. I find this sort of thinking a little bit scary. There's a ton of things that we could find out there that some part of society seems to have a problem with, but we don't ban it across the board. Lots of people can't handle booze; we certainly shouldn't ban its sale. There are a lot of people that take rap lyrics a little too literally, but we don't ban DMX. And there are a _ton_ of people who are not capable of being parents, but we don't force them into abortions or adoptions. Are we really going to ban Coca-Cola? One of the things that makes society here great is that we assume that people will act in their best interest, but we accept that sometimes people do dumb things. Trying to anticipate the dumb things that they will do is a recipe for massive government intrusion... Posted by Sandman \| September 14, 2008 10:05 PM meganmcardle.theatlantic.com ...It also happens that these people are all adults, and I'm sick and tired of a government that feels the need to tell adults "you can't do that, because you might hurt yourself" That's not for the government to decide. I don't want a government that feels like we're all a bunch of dumb children that need to be protected from ourselves... Posted by JordanT \| September 15, 2008 1:26 AM meganmcardle.theatlantic.com