Measure 21 passage (credit card, student loans, home)

[sholomar]

I've got people at work who get stuck in this cycle of getting payday loans where they end up paying $100 in interest every 2 weeks and end up being in perpetual debt to these places where it becomes a habit to them to have about $1000 loan from places like this and think it's great this bill passed that will shut down these places. They take advantage of people's weaknesses and ignorance to rake in money.

I try to explain to them why they should work a bit of overtime, pay these loans off, and have the discipline to not use them and it doesn't click with them. They don't want to live at work and want to enjoy life, yet I explain that $100 every 2 weeks equals such and such hours worth of work and it doesn't click. 330% interest? Really?

One could argue that nobody forced these people to take these loans, and I can't believe I'm saying this as a libertarian, but some people just need to have things done for them for their own good, and besides it was a measure passed by the voters in the state.. the people have spoken.

Of course, all the people I know with payday loans also gamble, but at least with gambling they don't go into debt at 330% interest, they merely blow the money they have.

What thinks you? I don't mind if you disagree, voice your opinion.

[uncleharley]

I agree. Unregulated capitalism can breed predatory practices.

uh

[artillery77]

I've known people in that cycle. What really is sickening are situations like the ones I knew where they had kids.

South Dakota has gained by having lax banking laws. They've gained the giant call centers and places like First Premier Bank...and their $300 credit cards with $270 in fees to give cardholders an "opportunity" to show they can pay their bills.

The reality is this all is a sponge on the poor. Call centers develop very few people as an industry for bigger things. Sky high interest rates on payday loans should have a cap for revolving loans. With unemployment levels so very low, I'd agree with the OP that while I don't like government regulation, perhaps this area could use a little attention. It seems quite doubtful that whatever was purchased with that loan was worthwhile in the long run. If the worker in question was too lazy to work a bit of OT, taking away this option may not be a horrible governance issue.

[sholomar]

This law will have the effect of making it so that only large financial institutions can afford to practically give out loans.. before it's passage I was going to take over my co-worker's payday loans and charge only half the interest, or about .35% per day instead of .7%.. would have been an easy $50 every 2 weeks but that's alright, I'd rather see him forced to get out of the payday loan thing for his own good.

Hopefully this doesn't drive out the big boys like citibank, wells fargo, etc.. but I don't think I've ever seen big companies charge much more than 30% interest anyways. They make a lot of their money from late fees, overdrafts fees, etc. anyways.

Nobody is going to miss having the "Dollar Loan Center" gone though. Put something useful in those buildings... maybe the King's Wok here in town can expand into that space, lol.

[artillery77]

I'm not familiar with the bill, but each state can set its own statutory interest rate. I do recall people in that cycle however.

Once concern of overregulation of loans is that the assets that qualify for loans will increase in price. The government is a large final buyer of student loans and home loans, and we've had significant inflation in those areas.

Conversely, payday loans are just too risky. As an asset class, these loans will be small and will have to be priced at a rate that includes the high cost of collection and delinquency by others as well as covering the overhead of retail space and employee from a small actual capital base. Taking the option off the table will in the long run help those who can't see that it is not a good financial move.