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July 28, 2005
Payday Loans, Now Online
Posted by Dana Blankenhorn
I believe that one of the cruelest businesses of our time are the so-called "payday loan" folks.
You see these shops in every ghetto. Victims write checks that are due to be made good when they get paid. The interest rates on these things can be as high as 100%.
Banks think that, at this rate, it's good business.
Now the business has come online through a San Diego outfit called Spotya.
Spotya borrowers complete a form and fax a bank statement. The money can go into a bank account or a prepaid debt card. The card can then be used online or at Spotya's own online mall, from which it gets referral fees.
Please don't complain to Spotya about this. The whole business is legal and above-board. In fact, it takes advantage of a lending program Master Card itself put in place last year. And the interest rates on that program, while high, are nothing like what the payday shops say when you write a check to them. They're as much as two-thirds less.
But consider. Anyone with a regular credit card is going to have nearly a month of float. I bought a bed today I won't have to pay cash for until the middle of next month. This is aimed at people with bad credit, the same people targeted by the new bankruptcy law.
The financial industry and political establishment are united in what they wish to do to those who are vulnerable. Push 'em down and hold their heads under. If we're going to treat people like dogs when they go bust, the least we can do is keep the doggie treats locked up.
Comments (4)
+ TrackBacks (0) | Category: Business Models | Digital Divide | Internet | Investment | e-commerce
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Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
1. Nick W on July 28, 2005 06:02 PM writes...
Actually Dana, these things have been online for quite a while. I remember seeing affiliate programs for such services more than 2yrs ago.
Permalink to Comment2. Jesse Kopelman on July 29, 2005 06:05 PM writes...
Funny how the party that stays in power thanks to Christian extremists is pro-usury, something once condemned by their religion.
Permalink to Comment3. bank man on August 1, 2005 04:43 PM writes...
Bank fee's are higher than payday loans. If I write a check for ten dollars and have five in my account, the bank sticks me for 35.00. I can borrow 200 at the payday loan shop for 30.00
Permalink to Comment4. Nick on August 4, 2005 04:22 PM writes...
What are we really talking about here? Letting people off the hook for a debt they promised to pay. Federal Truth and Lending laws require companies to state the APR in big bold letters whenever you borrow money. That being said, if I sign on the dotted line to pay company XYZ $200 I borrowed plus another $60 in two weeks, I have two choices: sign, take the money and pay it back or don't sign, don't borrow the money and figure out why no on will lend me money at less than 35% annually. The laws that curb these types of practices are only making these already (for lack of a better word) dumb borrowers even dumber. Letting these people off the hook, just keeps them poor. These people aren't poor b/c they don't have any money. They're poor b/c they make bad decisions, like taking out loans they can't pay back, in addition to, spending more than they make. For the record, these companies do not target "ghetto" or run down areas. There is no proof to substantiate this. Essentially, they go where there is a high concentration of people just like anyone else that's in business.
I think people that bash this industry have good intentions, but they don't want to look at all the facts. If you want to help the people that take out payday loans, educate them to spend less money than they make. You're not helping them by telling them, it's not their fault, and keep borrowing money from anyone that will give it to you.
One area in this business that I think needs to be changed is the amount of damages that a lender can collect. I think it's perfectly acceptable to collect what's on the contract and some collection fees, but some lenders continue to accrue interst and that's wrong. Sometimes $200 loans become $1000+ b/c they lose touch w/ the borrow and keep accruing interest at the daily rate of up to $5/day and more. If they could some how standardise this practice, I think it would create a level playing field.
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