The risks and benefits of so-called payday lending are certainly worthwhile of media coverage, and genuine instances of fraud or exploitation are and should be fodder for criticism in the print media. But it helps when your highlighted victim actually has good credit to start with and/or isn't consistently turning to Internet loans to supplement income.
No matter to Chicago Tribune's Stephen Franklin who presents readers of the May 11 Chicago Tribune with the tale of woe of one Rochelle Parker.
Parker, we're informed in Franklin's lead paragraph, only wanted to borrow $300 for Christmas gifts and medicine, so she took out an online loan only to get slammed with 842 percent interest.
Yet in the very next paragraph, we learn this is hardly Ms. Parker's first experience with online loans, and certainly not with abusing credit as a supplement to income:
The recently retired fingerprint technician for the Chicago Police Department had several other online loans that drained her financially and forced her to move in with her daughter. But getting another loan was so easy on the Internet.
Yet rather than painting Parker as the victim of her own addiction to borrowing, Franklin saw her as "falling through one of the newest trapdoors in the cash-strapped economy."
It's there that Franklin turned to looking at laws and regulation, or lack thereof, governing payday lending both online and in the traditional storefront setting. Only later, deep in the article, does he return to Parker's poor financial management (emphasis mine).:
Rochelle Parker said she rarely notices the loan's interest rates even when they are posted.
What matters, she said, is getting the money when she needs it and finding out how long it takes to pay it off. And with bad credit and no savings, she has turned more often to the loans in the last year.
Now she has at least five loans to pay off but not enough money to cover them, putting her in a fix. She hopes to resolve the problem when her pension checks start arriving soon.
Of course, even if Parker starts to climb out of the debt hole with fresh pension income, she'll only dig herself back into it if she doesn't rein in unnecessary spending. But why focus on that when it's so much easier to beat up on "unregulated" businessmen? Indeed, Franklin closed the article with Parker's daughter, Angelina, who lamented the stress payday loans can cause delinquent borrowers:
"If you are worried that they are going to turn off the lights, or you don't have enough to feed your children, you are going to do it," Angelina Parker said.
"You take the loan. And then pretty soon you look and five, six companies are taking money out of your checking account and you have no money."
—Ken Shepherd is Managing Editor of NewsBusters
Editor at Large
Comments Policy
Dirt simple.
May 11, 2008 - 05:33 ET by babooYou know, every once in a while the entertainment industry will put out something that makes actual sense:
http://consumerist.c...
I love SNL for this bit.
They do hit the nail on the
May 11, 2008 - 06:03 ET by motherbeltThey do hit the nail on the head, don't they? LOL
I love it when Steve Martin says "We even took out a loan to make the payments!"
One thing I don't understand: the article says she was paying 842% interest! At the very least, aren't there laws against usury?
Most of these payday loan
May 11, 2008 - 07:08 ET by CortillaenMost of these payday loan organizations, both on the web and the various brick and mortar types, are pure scum. They offer loans at much smaller interest rates in hopes that people will borrow too much and have to ask for more time to pay it back, at which point the huge interest rates are brought into play as fees or penalties. How they get away with some of it's beyond me. While the people taking the loans should know better, that in no way excuses the predatory nature of these placed.
www.rhjunior.com Great comics with a hefty dose of Christian and anti-nutjob goodness.
"With your mind as high as Mt. Fuji you can see all things clearly. And you can see all the forces that shape events; not just the things near to you." -Miyamoto Musashi
"Predatory"???
May 11, 2008 - 07:18 ET by sarcasmoWhat's "predatory" about providing a service that's risky to provide for poor people and charging more for that increased risk? If anything, the only problem is when one of the citizen-units, as in this case, emulates Uncle Sam. If this loan business is "predatory," then casinos are "predatory" because some idiots gamble too much and Budweiser is "predatory" because some idiots drink too much beer. Is individual responsibility a totally forgotten idea in "the land of the free"? I guess so.
JMR
The tax & spend drug war looks racist in the real world.
Providing a "service" you
May 11, 2008 - 09:00 ET by CortillaenProviding a "service" you know full well is likely to harm the patron in order to profit from that situation sounds quite predatory to me, though maybe you disagree. They operate much the same way drug dealers do, offering lower, more reasonable rates (though higher than most credit agencies') as an enticement, then raising the costs immensely once the target is "hooked" (though in this case the hook is too much debt to get away). I doubt anyone here has objections to the idea of loaning money, but do you think 800%+ interest is reasonable?
The people who get in over their heads are at fault for doing so, just as a drug addict is at fault for their condition, but intentionally targeting people with the purpose of profiting when they end up in those situations is absolutely predatory. As you mentioned, casinos also fall into this category, as they fully expect to profit by providing in-house loans to those who get caught up in gambling. Alcohol manufacturers are more diverse in intent: Certainly, there are some that seek to profit by providing a cheap way to get drunk, but there are also many that are simply trying to sell a decent product to get a piece of the market, and there are some that seek to make products of the highest quality. Judging their intentions is more difficult than seeing that casinos and loan sharks actively encourage people to get into negative situations. That intent to profit from getting the client into a bad situation is the difference between simply providing a bad or unneeded product or service and being predatory.
Now, lest you continue to decry my supposed disregard for personal responsibility while ignoring my comments to the contrary, I will say again, the people who get themselves into these bad situations are at fault for their poor choices. However, I reject the idea that all fault lies with them. Poor choices on their part do not absolve the predators who encourage those choices with intent to profit thereby. Walking blindly into an obvious trap does not make he who laid the trap any less guilty.
www.rhjunior.com Great comics with a hefty dose of Christian and anti-nutjob goodness.
"With your mind as high as Mt. Fuji you can see all things clearly. And you can see all the forces that shape events; not just the things near to you." -Miyamoto Musashi
The service doesn't harm every patron, though.
May 11, 2008 - 09:25 ET by sarcasmoSome are helped quite a lot, and the media won't report that. I'm sure 800% interest sounds unreasonable absent HUGE risk, but I'm not sure that the majority's standards of "reasonable" enacted as law will result in a better situation considering the high risk inherent in making these loans. The person in this story is likely to be in financial trouble for a lifetime, no matter what businesses get outlawed. The problem is that the same government people somehow expect to make effective rules about this is setting a terrible example fiscally in its own house, while obligating future generations in ways this deadbeat would consider a pleasant fantasy.
JMR
The tax & spend drug war looks racist in the real world.
Unreasonable
May 11, 2008 - 11:32 ET by allanfI do believe in buyer beware. I also see no reason to rely on the accuracy of Bill Weir.
However, an 800% interest is just unreasonable. In fact it violates usury laws in almost every state but South Dakota. Conincidentally, that state is where many of these entities are formed.
800% interest is not a simple business transaction. It is a rate guaranteed to make a debtor insolvent.
"800% interest is not a
May 11, 2008 - 16:11 ET by ckc1227"800% interest is not a simple business transaction. It is a rate guaranteed to make a debtor insolvent."
Which is why you don't borrow money from them.
Nether a borrower, nor a lender be
May 11, 2008 - 11:05 ET by CobraMan"However, I reject the idea that all fault lies with them. Poor
choices on their part do not absolve the predators who encourage those
choices with intent to profit thereby."
Wrong, ALL the fault lies with the person who takes out a loan they can't pay back, excluding those who are the victom of some unforeseen catastrophe like a disaster that wipes out your income or savings. For situations like that, that there are alternatives available like bankruptcy. No one is being forced to take out a loan, that’s a voluntary choice on the part of the borrower.
It’s a lot like shopping. If people spend more that they can afford, I don't blame the stores that sold them the products. I blame the person who bought the products. The same is true of loans, if someone borrows more than the can pay back, that's not the fault of the lender, but is solely the fault of the borrower. People better learn to use a little math and figure out how they're going to make the payments they are CONTRACTED to make or else forgo the loan altogether.
Absolute
May 11, 2008 - 11:43 ET by allanfI agree that people should be resposible with credit. But there are other kinds of disasters which may force someone to borrow. I've known cancer victims who ran up $100,000 bills on credit cards to cover their treatment. It is hard for me to be anything but sympathetic when the other alternative was quick death.
MD Anderson Cancer Center was recently slammed in the Wall Street Journal for demanding cash up front before treatment. The full story is in the Wall Street Journal.
"No one is being forced to
May 11, 2008 - 16:09 ET by ckc1227"No one is being forced to take out a loan, that’s a voluntary choice on the part of the borrower."
Which is why calling it "predatory" is a misnomer. I know of no predator-prey relationship where the predator gives his target a choice. Though, to be fair, I don't speak lion, so maybe lions do ask the zebra if they want to be eaten before they deliver the killing bite.
If the haters of these "predatory lenders" had their way, the lenders would be outlawed. And guess where the poor borrowers would go then? To a different type of lender who also charges high interest rates. With these lenders though, it's not your credit rating you have to worry about when the payment is late.
So, to use your logic,
May 11, 2008 - 22:42 ET by CortillaenSo, to use your logic, spiders do not prey on insects because those insects choose to fly into the web, or have you never heard of spiders? Not everyone gets caught in this web, thank goodness, and some who do effect quick escape. However, the stupidity of those who get caught and consumed does not make spiders any less predatory.
Putting words in my mouth is also a poor choice on your part. I have never said that I want these businesses outlawed. In fact, I acknowledge the need for their existence. Many people find themselves needing a moderate amount of money faster than traditional lending agencies are willing to offer it or with prohibitive credit. That does not mean these business practices are ethical or moral. I just checked five payday loan sites and noticed that two did not disclose their rates anywhere without first applying for the loan. Only one of them disclosed how they handle the borrower being unable to repay on time. Doing the math is one thing, but doing so without the numbers would be miraculous.
In short, I consider many payday loan businesses to be manipulative and predatory, negative attributes, certainly. I also consider them to be a necessary evil in many situations. As for those who get into bad situations with these loans, they are generally fools, but manipulated fools. Being a conservative, though, I am against government intervention to deal with the problem. Preferably, organizations in each community should ensure the populace is aware of all the details with such loans, especially the details of failing to pay on time, to such an extent that only such businesses with the most reasonable, open terms would be able to survive.
www.rhjunior.com Great comics with a hefty dose of Christian and anti-nutjob goodness.
"With your mind as high as Mt. Fuji you can see all things clearly. And you can see all the forces that shape events; not just the things near to you." -Miyamoto Musashi
"Borrow too much?"
May 11, 2008 - 10:51 ET by CobraMan"They offer loans at much smaller interest rates in hopes that people
will borrow too much and have to ask for more time to pay it back, at
which point the huge interest rates are brought into play as fees or
penalties."
So you think it's the lender's fault if someone borrows "too much" money and then has to pay it back? I don’t. People need to be held responsible for their own stupidity. If someone take out a loan that he knows is "too much" and they can't pay it back in the agreed time frame, that's a misfortune of their own creation. I would hardly fault the lender for someone else‘s stupidity.
Kindly read what I actually
May 11, 2008 - 22:42 ET by CortillaenKindly read what I actually said. I only fault those lenders who encourage borrowers to take out too much. You should also note, again, that it is not an "all fault lies with..." situation to me. Both parties are at fault, one for making bad choices, the other for encouraging bad choices.
www.rhjunior.com Great comics with a hefty dose of Christian and anti-nutjob goodness.
"With your mind as high as Mt. Fuji you can see all things clearly. And you can see all the forces that shape events; not just the things near to you." -Miyamoto Musashi
Live Within Your means
May 11, 2008 - 06:19 ET by Pete WilsonHere's a thought! How about living within your means? I have credit cards, and I use them. I also pay the entire balance each and every month. Do I worry about interest rates? No. Because I pay the balance every month. Credit cards are, for me, a simple way to use credit.
That is the problem with this kind of story. Too many people want what they want right now, and use their credit to get whatever that is. They do not concern themselves with how they will be able to pay their creditor. I worry about the amount of credit card and other debt the people of this country carry. Why else would we hear the commercial ads all the time about settling personal debt for "pennies on the dollar"? That is scary, to me.
Why live within your means
May 11, 2008 - 06:40 ET by sublight68Why live within your means when you can have it all now? When all those credit card bills and subprime loans come due, don't worry. A symapthetic media will portray you as the victim and the government will fall all over itself in a rush to bail you out.
Personal responsibility and dealing with the consequences of your decisions are evidently for suckers.
Sounds like she's emulating
May 11, 2008 - 06:29 ET by sarcasmoThe Federal Government.
JMR
The tax & spend drug war looks racist in the real world.
If you completely wiped out
May 11, 2008 - 07:03 ET by motherbeltIf you completely wiped out this lady's debt, I would bet that in a year, she would be in debt again.
Anyone who takes out a loan on the internet, without even looking at the interest rate is completely irresponsible. Not gullible: irresponsible. And she will do it again.
Anyone who takes out a loan
May 11, 2008 - 09:50 ET by NewsbusterbrownAnyone who takes out a loan on the internet, without even looking at the interest rate is completely irresponsible. Not gullible: irresponsible. And she will do it again.
...and cry about it again, too.
“There are no easy answers' but there are simple answers. We must have the courage to do what we know is morally right.” - Ronald Reagan (1964 Republican Convention)
»→ Washington lending scandal
May 11, 2008 - 11:52 ET by Cool ArrowPeople should be responsible for their credit.
But I think it was also irresponsible that the MSM failed to report sufficiently when the law changed allowing ALL of a person's plastic creditors to progress to the highest allowable interest rate if even one payment on one card is missed (currently 30%).
This was not good faith, it was financial booby-trapping.
♣ a seal
Don't Worry obama has the answer!
May 11, 2008 - 10:29 ET by ChasvsSaint Obama will make this all right for this poor victim!
He'll just tax the offending lenders so this poor unfortunate victim can pay her bills! Not to worry that the lenders will need to charge even higher interest to make up for the added expense!
I think he's go the answer to the high gas prices that run along similar lines!
Just vote for Saint Obama - you're a racist if you don't (and an idiot if you do)
We are So Screwed!