Payday Lenders

[Messenger]

I have not, but I know others who have also done this. If everyone did that then the lenders would make no money. They only make money out of people who don't meet repayments within the interest free period (plus their interest rates are very high - which is sort of expected for unsecured finance on cash advace/purchase of depreciating assets) which is what makes people call them predatory, scum etc. but as I've already said how is that markedly different to a Visa or MasterCard?

Spot on.

The only difference is a conventional credit card is that interest kicks in after 30 days, so if you can do you sums properly and not over commit these sort of cards they are better value for money on large purchase (of rapidly depreciating assets).

I'd like to know how a financial system can work without interest.

 

[Scotland]

Spot on.

The only difference is a conventional credit card is that interest kicks in after 30 days, so if you can do you sums properly and not over commit these sort of cards they are better value for money on large purchase (of rapidly depreciating assets).

I'd like to know how a financial system can work without interest.

Bolded is key.

You borrow for a home loan, the bank makes you jump through all sorts of hoops. A 20-30 year customer is hundreds of thousands in potential interest. A defaulter is just a pain in the arse.

Credit cards, payday lenders, interest free deals etc. are all about the carrot of money for nothing. If no one paid interest they'd make no money. If everyone had to pay 20%+ interest then the take up would be so low it wouldn't be worthwhile. The ideal customers are those who borrow/spend just a bit more/less than they can afford. Carrot of coruse is always accompanied by stick. Mountain out of a molehill, IMO.

Ask Smiling Buddha, he has the answers for a utopian society without the evils of usury.

 

[Norwegian Blue]

Chrisco also target the stupid. I don't see how this is any worse.

Oh? I'm unfamiliar with their business model then. I just thought they were a supermarket that you had to join and who only sold in bulk.

How do Chrisco target the stupid and/or worse off? Genuine question, I've never gone near the place.

Edit: Oops! Confusing them with Costco. Chrisco sell hampers, how do they rip people off?

 

[Scotland]

http://www.chrisco.com.au/Products/26-beers-of-the-world.aspx

Half a carton each of Asahi, Peroni, Heineken and Corona. 48 bees. $158.60.

You could probably walk in to a bottle shop, buy 8 different individual six packs and get change - let alone just buying beer in a carton like a normal person.

 

[Norwegian Blue]

http://www.chrisco.com.au/Products/26-beers-of-the-world.aspx

Half a carton each of Asahi, Peroni, Heineken and Corona. 48 bees. $158.60.

You could probably walk in to a bottle shop, buy 8 different individual six packs and get change - let alone just buying beer in a carton like a normal person.

Yeah, I know the costs of the hamper are more than the sum of its parts. Someone suggested earlier in the thread that Chrisco target the vulnerable and I'm just not seeing it.

 

[Smiling Buddha]

Ask Smiling Buddha, he has the answers for a utopian society without the evils of usury.

Nah let's do it your way and let people sell themselves into debt bondage and servitude.

In fact why not drop the facade and let people officially sell themselves into slavery.

If people are dumb enough to sign the bottom line, who are we to stop them?

It is not like we live in a society or anything like that. What could possibly go wrong?

Who knows, a well-heeled man like you might even be able to pick up a slave or two.

If China stop buying our minerals and there is a severe downturn in our economy US/Euro style, you might even be able to pick them up on the cheap.

Amirite?

 

[Scotland]

Yeah, I know the costs of the hamper are more than the sum of its parts. Someone suggested earlier in the thread that Chrisco target the vulnerable and I'm just not seeing it.

They "target" the "vulnerable" in the sense that they appeal to people who can't find $80 to buy cartons of beer for Christmas but are enticed by the 'only $3 a week' payment plan which has them ending up paying double in the long run. Each to their own, it's all there to potential customers in black and white.

 

[Norwegian Blue]

They "target" the "vulnerable" in the sense that they appeal to people who can't find $80 to buy cartons of beer for Christmas but are enticed by the 'only $3 a week' payment plan which has them ending up paying double in the long run. Each to their own, it's all there to potential customers in black and white.

Ah, OK. Thanks.

 

[Scotland]

Nah let's do it your way and let people sell themselves into debt bondage and servitude.

What's "your" way, Smiling Buddha? We've (you've) established (made-up) mine, so what's yours?

Or are you waiting for someone else to come along and post an alternative "way" that you like so you can say that was your way all along but you just wanted to give everyone else a chance to contribute?

 

[Illinois Nazi]

Nah let's do it your way and let people sell themselves into debt bondage and servitude.

In fact why not drop the facade and let people officially sell themselves into slavery.

If people are dumb enough to sign the bottom line, who are we to stop them?

It is not like we live in a society or anything like that. What could possibly go wrong?

Who knows, a well-heeled man like you might even be able to pick up a slave or two.

If China stop buying our minerals and there is a severe downturn in our economy US/Euro style, you might even be able to pick them up on the cheap.

Amirite?

So you have no alternative solution? there's no need to be ashamed, it's a complex issue.

 

[Flash of power]

One apple or potato or onion or whatever does not cost $1.50. Even shopping at Coles or Woollies $210 would buy you a ridiculous amount of fruit and veges.

I'm a SINK which is 2nd on the disposable income scale behind a DINK but is a few levels up from single average income family (SIAF?) but I struggle to sympathise with people who complain about the cost of living that think an orange costs $1.50...

I know a family with 3 teenage sons and their grocery bill alone is $500 per week, sure they probably could cut it down a bit here and there, but geez it is expensive to raise a family, especially if you do want to eat well with meat and fruit and veg in your diet and that's before you even start on other expenses, so to sit and judge is a bit unfair when as you say, you are a SINK with plenty of disposable income - and no responsiblity for anyone else.

 

[Flash of power]

Its all very well to say that people should know what they're signing, its up to them to take responsibility, if they are stupid enough to take out a loan like this then its their problem etc etc

But the one thing about these loans that I believe is the real issue, and I don't think it has been addressed on this forum, is the lack of regulation around them. Governments have not regulated them, and as a result there is not a level playing field, a registered deposit taking institution eg Bank, has to comply with so much regulation and codes of conduct to be able to lend someone $5, there are limits to the interest rates that can be legally recovered through traditional loans, and their are "plain english" disclosure obligations to reduce the risk to borrowers, even the stupid ones, from getting into real trouble from a mainstream lender.

Payday lenders do not have to comply with the same requirements as they do not charge interest ( all the costs are fees btw) allowing them to get around existing regulations, making it easier for them to have dodgier practices, especially when dealing with the vulnerable.

I used to work in these circles and was quite familiar with a lot of case studies and the number of people with obvious intellectual disabilities that they lend to is appalling, and there really is no recourse ie: independent arbitrator / ombudsman to address this type of conduct.

They should be regulated, but governments don't seem to have the guts / care factor for some reason - it has been on the agenda for years but nothing has happened.

 

[Flash of power]

They "target" the "vulnerable" in the sense that they appeal to people who can't find $80 to buy cartons of beer for Christmas but are enticed by the 'only $3 a week' payment plan which has them ending up paying double in the long run. Each to their own, it's all there to potential customers in black and white.

At least with Chrisco you might lose what you have already paid but you can stop making payments at any time if you really can't afford to continue. can't do that with a payday loan.

I think people in this thread's lack of first-hand experience with them has created a lot of misconceptions.

Because of they way they are structured, the average pay day loan ends up costing the borrower between 1200% and 2000%, they don't tell you that, but I guess that's ok?

 

[Scotland]

I just googled Nimble for the sake of it.

20% loan establishment fee + 4% of loan amount per month. Maximum loan term 50 days.

Other fees: $35 payment dishonour fee, $7 per day default fee.

So if you borrow $500 for 50 days, you pay back $640. You get a little schedule that breaks the $640 down into however many payments you need to make on given dates.

Let's say you make 4 (roughly) fortnightly payments over a 50 day period, $160 per payment. You miss one, they charge you $35, plus $7 per day until you make it. As I see it if you get to the end of the 50 days having paid back zero you will owe $1130.

Not exactly a great deal but if you walk into the bank and ask for an unsecured $500 within the hour they're not exactly going to turn around and give it to you at home loan rates - or at all!

 

[Flash of power]

I just googled Nimble for the sake of it.

20% loan establishment fee + 4% of loan amount per month. Maximum loan term 50 days.

Other fees: $35 payment dishonour fee, $7 per day default fee.

So if you borrow $500 for 50 days, you pay back $640. You get a little schedule that breaks the $640 down into however many payments you need to make on given dates.

Let's say you make 4 (roughly) fortnightly payments over a 50 day period, $160 per payment. You miss one, they charge you $35, plus $7 per day until you make it. As I see it if you get to the end of the 50 days having paid back zero you will owe $1130.

Not exactly a great deal but if you walk into the bank and ask for an unsecured $500 within the hour they're not exactly going to turn around and give it to you at home loan rates - or at all!

The point is that if someone needs to borrow $500, chances are, $140 is going to be a lot of money to that person. There is no lending criteria to meet, eg can you actually afford to repay the loan.

The 50 days period is also key, it seems longer than it is because there are only 3 fortnightly pay periods in 50 days not 4, meaning that $640 has to be repaid at approx $213 per fortnight for 3 pays. How much of a struggle do you think that would be for a person on a low income that needs to resort to this type of lender to get access to $500 in the first place?

 

[Damon_3388]

At least with Chrisco you might lose what you have already paid but you can stop making payments at any time if you really can't afford to continue. can't do that with a payday loan.

Probably because they're not the same thing at all. Chrisco is like a laybuy, a loan is like a rental

The point is that if someone needs to borrow $500, chances are, $140 is going to be a lot of money to that person. There is no lending criteria to meet, eg can you actually afford to repay the loan.

The 50 days period is also key, it seems longer than it is because there are only 3 fortnightly pay periods in 50 days not 4, meaning that $640 has to be repaid at approx $213 per fortnight for 3 pays. How much of a struggle do you think that would be for a person on a low income that needs to resort to this type of lender to get access to $500 in the first place?

So they simply need to make the decision - can I pay that back within the required timeframe? If so, then go ahead if that's what you want to do. If not, then don't overcommit yourself. Simple.

People always have a choice. If they overcommit themselves, after being clearly shown the terms and conditions of the agreement, then they need to take some personal responsibility and blame themselves for putting themselves in a difficult situation. Nobody is "preying" on anyone, they're just providing them with options.

Because of they way they are structured, the average pay day loan ends up costing the borrower between 1200% and 2000%, they don't tell you that, but I guess that's ok?

That's an exageration (the percentage you quoted is way, way too high), and I know for a fact with Nimble (from my own experience, and what's detailed above), you're told exactly what you'll be paying, including interest and late payment fees, before you commit to anything.

 

[Taylor]

Spot on.

The only difference is a conventional credit card is that interest kicks in after 30 days, so if you can do you sums properly and not over commit these sort of cards they are better value for money on large purchase (of rapidly depreciating assets).

I'd like to know how a financial system can work without interest.

Interest means debts can never be paid. Yes, you and I can pay our debts but all debt on the planet can't be. So as far as asking how a financial system can work without interest goes, it can't. But it's also the reason why it will ultimately fail.

 

[Taylor]

There is an add on the tv at the moment that uses language like "give you up to $48,000" and doesn't show any terms of repayment anywhere.

That's predatory. Transparency isn't going to hurt anyone who wasn't hurting others through omission.

 

[kickazz]

So they simply need to make the decision - can I pay that back within the required timeframe? If so, then go ahead if that's what you want to do. If not, then don't overcommit yourself. Simple.

Nobody is "preying" on anyone, they're just providing them with options.

I would say both are true. And what is simple for some is not so simple for others. People who own these businesses know this all too well.

 

[Damon_3388]

There is an add on the tv at the moment that uses language like "give you up to $48,000" and doesn't show any terms of repayment anywhere.

That's predatory. Transparency isn't going to hurt anyone who wasn't hurting others through omission.

Do banks advertise all terms and conditions on the initial ad? You'd have a 30 minute ad otherwise.

Would be pretty easy to find out upon enquiry I'd imagine.

 

[Flash of power]

That's an exageration (the percentage you quoted is way, way too high), and I know for a fact with Nimble (from my own experience, and what's detailed above), you're told exactly what you'll be paying, including interest and late payment fees, before you commit to anything.

Nope - Fact, read what I have said carefully, THE AVERAGE PAYDAY LOAN, this is based on the way they are structured, if you can't pay off in full they are rolled over effectively to a new loan, the average payday loan is rolled over between 5 & 8 times before being paid off in full.

Work it out and remember you have to annualise the rate to get the true figure eg: borrow $500 pay back $620 in 16 days time, that is 24%, but the annual rate is 24% /16 (days you have the loan) x 365 (number of days in a year) = 547.5% annualised rate.

And that's if you only have the money for 16 days it goes up the longer you have the money. The same loan borrowed on a credit card at 20% would cost approx $22 for the same period.

The reason is that the average rate is so high is that very few people on low incomes can actually afford to repay the loan in full within the original terms. ASIC has some serious concerns and warnings about these loans.

To be fair I am not exactly sure about Nimble because they are a relatively new player and entered the market after i left this field, but my point remains correct - the average loan from an average payday lender!

 

[Messenger]

Interest means debts can never be paid. Yes, you and I can pay our debts but all debt on the planet can't be. So as far as asking how a financial system can work without interest goes, it can't. But it's also the reason why it will ultimately fail.

That debt is made up of individual decisions and while the pain of bad decisions can be felt by many debt still has a part to play in economic growth.

 

[Flash of power]

That debt is made up of individual decisions and while the pain of bad decisions can be felt by many debt still has a part to play in economic growth.

rate versus risk too - Citibank used to market to high risk customers - those that were at or had exceeded their credit limit, with high cost credit cards, because they knew that they would write a lot off, but still a profitable practice as they would have made their money from them anyway. There was a doco on this.

 

[Flash of power]

Do banks advertise all terms and conditions on the initial ad? You'd have a 30 minute ad otherwise.

Would be pretty easy to find out upon enquiry I'd imagine.

They ALWAYS say in ads "lending terms and conditions apply see the PDS for detail" or similar. They are regulated to have to do so.

 

[Damon_3388]

They ALWAYS say in ads "lending terms and conditions apply see the PDS for detail" or similar. They are regulated to have to do so.

Yeah, but they're not detailing all of those terms and conditions in the ad, are they?