Usury in America.
by Michael Robin Cooke on Apr.13, 2009, under e-commerce
I’ve been getting many ‘spam’ relies to comments linking back to online p@yday loan programs.
The business paradigm of the p@yday loan is no less than usury. Yes, you may be desperate enough to need such a loan, but the problem is that if you’re that desperate, you’re desperate enough to not repay the loan on time and dig yourself deeper and deeper in debt that can cost you many times the amount you were loaned
http://www.consumersunion.org/finance/p@ydayfact.htm
How does this relate to magic or e-commerce? Well, on one hand, this is a thriving way some people are making money online. They did some things right, they found a hungry crowd, people desperate for money to pay a bill or a mortgage – and are selling a solution. That’s an important thing, that technique works! But where the p@yday loan fails – is they offer a poor value. The paradigm makes money because the desperation in the equation balances the poor value. But the poor value has problems, like my post here, the link I’m pointing to and popular outcry.
Some of you interested in e-commerce and have the idea that it takes money to make money. And, to be honest, money does speed things up. So if you have access to credit cards and the like, it’s a measured risk to take on debt to grow an online business. If the P@yday loan tempts you, understand it’s not a solution for you. They will want their money back too soon, their ‘fees’ constitute unreasonable interest.
The p@yday loan business is an unwelcome advertiser, which is why many marketers of such businesses are hoping to use my blog to get back links to their corrupt business websites. I’m not allowing it.
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April 20th, 2009 on 4:29 am
A p@yday loan (also called a p@ycheck advance or p@yday advance) is a small, short-term loan that is intended to cover a borrower’s expenses until his or her next p@yday. The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card (see cash advance). Legislation regarding p@yday loans varies widely between different countries and, within the USA, between different states.
April 20th, 2009 on 4:49 am
Yes, but what you’re not saying, is that almost no one is prepared to forego the next pay-day’s entire pay check to make good on the loan (assuming said pay check would even cover the loan) – and that the fees and charges associated with late payments can in some instances be the equivalent of 400% interest.
Some important banks are backing p@yday loan businesses and constitute a powerful lobby to legalize what I call Usury. It’s wrong, and voters need to pressure their elected representatives to prohibit usury by these ‘legal’ operations.
April 20th, 2009 on 5:02 am
Some jurisdictions impose strict usury limits, limiting the nominal annual percentage rate (APR) that any lender, including p@yday lenders, can charge; some outlaw p@yday lending entirely; and some have very few restrictions on p@yday lenders. Due to the extremely short-term nature of p@yday loans, the difference between APR and effective annual rate (EAR) can be substantial, because EAR takes compounding into account. For a $15 charge on a $100 2-week payday loan, the APR is 26 × 15% = 390% but the EAR is 1.1526 – 1 × 100% = 3686%. Careful reporting of whether EAR or APR is quoted is necessary to make meaningful comparisons.
April 24th, 2009 on 4:39 am
Okay, but look at those numbers. If legal, is it right? I don't think it's right at all, people are having a hard time in this economy and its just wrong to exploit the situation.
May 13th, 2009 on 10:46 am
I really liked this post. Can I copy it to my site? Thank you in advance.
May 13th, 2009 on 7:02 pm
Thanks, I regretted this post almost immediately as it caused Google to believe adwords advertising related to payday loans would be just the thing to post to my website. I was able to fix google adword preferences to block those ads, but damn!
So if you wanna risk it, go ahead – just give me credit and a followable referring link.
September 25th, 2009 on 4:52 pm
Wow! what an idea ! What a concept ! Beautiful .. Amazing ?
February 15th, 2010 on 6:52 pm
Discipline is a vital tool when it comes to debt. Many credit card companies and banks rely on the fact that people are not disciplined and can get irresponsible so easily. Thats how they make their money.
Learning discipline and applying it to your debts and not falling for the hype will go a long way to not incurring more and more debt.
July 10th, 2010 on 4:25 pm
What’s most disturbing about the new CARD act and legislation designed to curb these practices by credit card issuers and lenders is that payday lending legislation was left out. Pretty unbelievable considering the predatory nature of these lenders.