The idea that selling products and services to poor people is “taking advantage of them” in the terms reality demands is bonkers.
It’s one of the most predatory types of lending that exists. They often provide loans with intentionally confusing and borderline disingenuous lending terms with the explicit goal of taking advantage of people.
> The result is denying poor people access to credit.
Lol, I mean, if being practically tricked into loans you can never pay off to the point that it drives entire cycles of poverty is your idea of credit, yeah, then sure, you’re right.
I think it sort of boils down to rayinier's wrong, or at least hopelessly unsophisticated, understanding of credit.
When you don't pay your landlord on time, you definitely enter a debt relationship with your landlord. That's credit in every sense but financial.
Payday loan companies securitized a form of credit that had low effective "interest" (e.g., late payment penalties) and converted it into something with high interest.
Yes, nobody wants to be evicted. But surely, in a strictly rational economic sense, landlords don't want vacant properties either. It's not so obvious what is the "efficient rate," as rayinier says, because based on eviction rates for late payments of rents, it's probably not that high.
Foreclosing on people's homes, of course, was a huge disaster and the source of an incredible amount of national economic and emotional misery. So again, just within an economic positivist framework, it's not at all as simple to arrive at "efficient" rates as rayinier assumes.
I'm not sure if payday loan companies, which charge a higher interest rate to essentially victimize the same population at an industrial scale, is an economic positive, you know? I wish he would just admit that while some human beings will sometimes be landlords, and therefore deserve some protections, no normal person will literally ever be a payday loan lender, so it seems fit that we ought to use a credit system (late rental payments) that people can imagine justice inside of rather than an usurious credit system nobody will ever be on the right side of.
Edit: I would also like to state that extending credit also increases demand, pushing up prices in the rest of the market, increasing the demand for credit for all players. This is exactly how housing bubble flames are fanned, and it applies at any level of the economy. If people at the bottom are unable to afford necessities, providing them more credit doesn't actually increase their capacity to afford necessities, it is simply a time shift. If that is the scenario that is coming up, a different solution must be found, otherwise you just end up with more interest going to people who already have the money. Classic Gamblers ruin.
Entire business models have been created to take advantage of and even maximize this type of information asymmetry. Legislation exists to curb the most egregious offenders.
You can argue whether or not this specific case is egregious enough to warrant regulation. But implying we’re all fully rational actors who can make perfect (or even good) decisions in times of great distress and who don’t ever need sort of safety rail to protect us from our own ignorance, urgency, or rashness is just arguing in bad faith.
Neither point is obvious.
Quite silly; that people in general are well modelled by the assumption of rationality is one of the most thoroughly disproven offer in the social sciences, and that the people who end up at the bottom end of the economic distribution disproportionately includes those who are particularly poorly modelled by the assumption of perfect utility maximization as if with full knowledge of the costs and utilities of all available should be fairly obvious.
There is only one universal freedom, the freedom of chioce. I think this is more important than any 21st century pay day lending problem. We need to preserve free choice not just for our generation/set of problems, but for all time.
Edit: Don't confuse living a long, healthy, happy life with freedom. They could not be more different.
Ultimately people would prefer to know that things are going to get better, but perhaps they don't have the tools and know-how to do it. Much like telling a depressed person they have a choice to not be depressed, someone desperately poor doesn't have the simple choice to not be poor.
Financial freedom can be thought of at many levels, some all the way up to super rich and able to subvert laws at their whim. In this context, I am meaning freedom from the emotional distress caused from being incapable of being secure in the knowledge that there is a high probability they will have a roof over their head and food to eat for at least a couple of months. In turn, this allows for forward planning, and forward planning is the manifestation of being capable of exercising choice with regards to that persons/family's future development.
So, considering that people are constrained by their environment, our "generation/set of problems" is absolutely relevant, suggesting there is some universal otherwise which can be preserved with impunity is akin to suggesting there exists/can exist a form of universal justice.
Edit:
What if I want to live my life paycheck to paycheck? What if none of what you just described about freedom from the emotional stress of finances matters to me? What right do you have to force me to make the "right" choices and be financially responsible? Why shouldn't I be allowed to hurt myself?
As for your statement about differing perspectives, I would argue that I'm talking about solutions for present problems, ie the practical side, whereas you talk about what should be, which may require a very large transition period, and thus is not useful at this point in time.
I think we also would disagree on the needs of the many outweighing the needs of the few.
> for present problems, ie the practical side
I see your point here, but we can't lose sight of the big picture. Compromising in the short term, no matter how many people it might help, seems like a bad idea to me.
The answer is yes! Fentanyl has a market. Student loans for a degree in Modern Studies have a market. Impossible health supplements have a market.
Selling products can certainly take advantage of a person.
Are you saying that a cancer patient ought not to use Fentanyl when Oxycontin no longer is enough and go directly to morphine? This is not obviously a "poor choice" from my perspective.
The parent comment had a parallel construction where the drug was the odd one out, having legitimate value in some contexts. One implication of that might be that the commenter was unaware of the legitimate value, because if they were aware, they could have avoided the unsatisfactory parallel.
However, I don't think that just because an APR sounds extremely large, that makes the loan predatory or otherwise unnecessary. Just like with housing and everything else, when you rent something for a short period of time, there is a fixed overhead, and if you annualize it you can clutch your pearls over how high it is. But that doesn't in itself mean it's not a useful or even vital service at a fair price.
If people need money for a few days to avoid being evicted, jailed, losing their job, whatever, and the APR includes, say, a $20 service charge, it seems disingenuous to attack it solely on the annualized interest rate.
You might as well say that we should eliminate $100/night hotels because that equates to a $3,000/month price which is clearly outrageous.
On an unrelated note, I wonder if the payday loan places are the same as the check cashing places where you take your paycheck if you don't have a bank account. Should public policy consider that attacking one side of the business might affect another?