Pay Day Loans = Legallised Loan Sharks...?
Discussion
dickymint said:
otolith said:
Why would we want the government to do it when the private sector is already providing? What would be the advantage?
A service for the needy, a profit for the coffers and no costly court fees for recovery of unpaid debts (legal aid etc,).dickymint said:
A service for the needy, a profit for the coffers and no costly court fees for recovery of unpaid debts (legal aid etc,).
Can you imagine the headlines though over the govt charging 3000% interest rates?There is no easy solution if any solution at all.
I sometimes think that removing access to debt back to it being only available to those who don't need it would be beneficial as it would give the first honest picture of the state of this country that we've had for decades and show very clearly what exactly needs to be fixed.
I sometimes feel that deregulation at the bottom end was done to absolve govt from dealing with deep seated issues at source.
Overall I think we would all benefit from a little less debt at all levels.
We had a chap who needed £200 immediately. He'd been offered some very cheap household goods by a relative of someone who'd died who just really wanted stuff removed from a dwelling which was to be sold. The deal was he'd to take the stuff right away, or they'd be phoning a local second hand shop.
He was very easy to take reference on as he works locally as a storeman and we knew him from seeing him around the area so the loan was granted right away. Usual story. 10% per week. His salary at the end of the month could comfortably absorb the loan. But. Next DAY he came back to return the loan plus the week's interest (no early redemption penalty....we DO have SOME scruples
). Apparently he'd very quickly sold a couple of the items he'd bought. He seemed quite grateful for our service.
A good number of our loan users are people who used to use the local unregulated moneylender. They use us very simply because we're cheaper. We get these, one by one, by referral. I doubt the local moneylender's too pleased, but that's not really our problem. They really ARE 'payday' loans.....small amounts between £50 and £150 which people need to either tide them over or for unplanned contingencies until their next wage/salary comes in.
Obviously (and somewhat against the, dare I say it, naive understanding of many posters here) it makes absolutely no sense whatsoever for a small loans lender to overstretch the repayment ability of someone who's borrowed unsecured money. Do I really have to explain why? And, just as obviously, some people functionally use a system of rolling credit in their financial planning. Once upon a time, a housewife would take Jimmy's suit into the pawn on Monday, and redeem it (often so he could use it for church) on Friday. Then come Monday, back in it would go. Week in week out. Nowadays SOME people do the same with these short term loans. There's a HUGE spectrum of usage. Mostly it's what it says....stopgap money till payday. You meet a nice girl. You want to take her out for a meal. It's 10 days till payday and you need £100! Or an amazing deal for (any of a zillion things) comes up and you're skint. So it's a short term loan or it passes you by.
No it's not all starving destitute families being forced into an unmanageable quagmire of debt. It's almost entirely middle age range (25-45 year old) working people needing some money till payday without the MASSIVE hassle, not to mention expense, of going to institutional lenders who take weeks to come to unpredictable conclusions based on, for example, 'credit checks' which are OFTEN nonsensical never mind inaccurate.
The profits are an actuarial calculation. If the charges etc were exploitative, a competitive vacuum would emerge. And there is nothing to stop anyone here or elsewhere starting up such a business and charging far lower rates of interest, so why don't the people who believe it's exploitative give that a try?
The motivation for cheque cashing's more interesting. It MOSTLY relates to (financial) institutional failure. If you walk into a bank with a government or local authority or law firm or utility supplier's cheque, the bank's not going to say 'o that's cast iron, here's your cash'. They'll make you wait 3 or 5 or whatever working(?) days. Why not, is not for me to say. But we KNOW those cheques won't bounce so we'll pay out on them, less the %age. But again, that's not really OUR problem. One financial institution's service provision failure is another cheque-casher's profit. Again, if you think it's evil, do it better cheaper. Start a chain of them. Why NOT?
He was very easy to take reference on as he works locally as a storeman and we knew him from seeing him around the area so the loan was granted right away. Usual story. 10% per week. His salary at the end of the month could comfortably absorb the loan. But. Next DAY he came back to return the loan plus the week's interest (no early redemption penalty....we DO have SOME scruples
). Apparently he'd very quickly sold a couple of the items he'd bought. He seemed quite grateful for our service. A good number of our loan users are people who used to use the local unregulated moneylender. They use us very simply because we're cheaper. We get these, one by one, by referral. I doubt the local moneylender's too pleased, but that's not really our problem. They really ARE 'payday' loans.....small amounts between £50 and £150 which people need to either tide them over or for unplanned contingencies until their next wage/salary comes in.
Obviously (and somewhat against the, dare I say it, naive understanding of many posters here) it makes absolutely no sense whatsoever for a small loans lender to overstretch the repayment ability of someone who's borrowed unsecured money. Do I really have to explain why? And, just as obviously, some people functionally use a system of rolling credit in their financial planning. Once upon a time, a housewife would take Jimmy's suit into the pawn on Monday, and redeem it (often so he could use it for church) on Friday. Then come Monday, back in it would go. Week in week out. Nowadays SOME people do the same with these short term loans. There's a HUGE spectrum of usage. Mostly it's what it says....stopgap money till payday. You meet a nice girl. You want to take her out for a meal. It's 10 days till payday and you need £100! Or an amazing deal for (any of a zillion things) comes up and you're skint. So it's a short term loan or it passes you by.
No it's not all starving destitute families being forced into an unmanageable quagmire of debt. It's almost entirely middle age range (25-45 year old) working people needing some money till payday without the MASSIVE hassle, not to mention expense, of going to institutional lenders who take weeks to come to unpredictable conclusions based on, for example, 'credit checks' which are OFTEN nonsensical never mind inaccurate.
The profits are an actuarial calculation. If the charges etc were exploitative, a competitive vacuum would emerge. And there is nothing to stop anyone here or elsewhere starting up such a business and charging far lower rates of interest, so why don't the people who believe it's exploitative give that a try?
The motivation for cheque cashing's more interesting. It MOSTLY relates to (financial) institutional failure. If you walk into a bank with a government or local authority or law firm or utility supplier's cheque, the bank's not going to say 'o that's cast iron, here's your cash'. They'll make you wait 3 or 5 or whatever working(?) days. Why not, is not for me to say. But we KNOW those cheques won't bounce so we'll pay out on them, less the %age. But again, that's not really OUR problem. One financial institution's service provision failure is another cheque-casher's profit. Again, if you think it's evil, do it better cheaper. Start a chain of them. Why NOT?
dickymint said:
Ah well it was just a thought - let's just carry on skanking the needy in the name of good old capitalism. After all money goes to money.
I fear that they'd be in for the same skanking, it's just that the profit would be spent on inefficient administration. The rates would be just as high and I bet the service would be poorer.groak said:
A good number of our loan users are people who used to use the local unregulated moneylender.
Apart from "general consumer credit legislation." (which is fairly easy to obtain). You/re company is NOT regulated is it?Don't get me wrong, there is a place for this service but IMHO anybody that cannot definitively prove the ability to repay within the agreed time should not be lent to. Also anybody out of work and claiming Job Seekers Allowance should NOT be lent to.
dickymint said:
Apart from "general consumer credit legislation." (which is fairly easy to obtain). You/r company is NOT regulated is it?
Don't get me wrong, there is a place for this service but IMHO anybody that cannot definitively prove the ability to repay within the agreed time should not be lent to. Also anybody out of work and claiming Job Seekers Allowance should NOT be lent to.
Yes you're right. We use a CCL which involves some checks, I believe, prior to issue, and is obtained for £1225. The moneylender I was comparing to is a backstreet/pub tallyman without CCL, and therefore illegal. Don't get me wrong, there is a place for this service but IMHO anybody that cannot definitively prove the ability to repay within the agreed time should not be lent to. Also anybody out of work and claiming Job Seekers Allowance should NOT be lent to.
As to your 'IMHO', you're probably right. Again, it's pointless, foolish, and unprofitable to lend rashly to individuals you're not confident can repay by dint of lack of projected income. That's like letting a property to a tenant you're fairly sure can't afford the rent. And whilst there are individuals who receive a fairly high level of income benefits, the level of loan you could confidently advance to someone on basic JSA would be so low (a fiver, or tenner, say) that it wouldn't be practical or, probably, feasible to do it. I've only had one person (one of my tenants) who missed the PO and was stuck with an uncashable giro and asked for a sub, giving me the giro to hold as security. So I did. And when she came back for it we went to the PO and she cashed it. I didn't take any interest from her, but I did get a hug and a 'you're a gent', which, of course, I am.
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