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I’ll continue to demonize the payday lending industry, thanks

Lawrence Meyers, a shill for the payday lending industry, has a sad.

[Loren] Steffy claims in his blog post (“Will lawmakers finally rein in paydayl lenders,” chron.com) that PDLs are “inherently predatory,” yet a loan cannot be predatory if choices exist, and a person enters into a transaction via free will, with terms and pricing disclosed. Steffy’s inference that borrowers do not “understand the consequences of the terms to which they’re agreeing” indicates he has never taken out such a loan nor visited a store that offers such loans. It is too common for people like him to make unfair pronouncements without the experience to draw upon.

Here’s Steffy’s blog post. If you think it’s unfair because Steffy hasn’t taken out a payday loan himself, then go read Forrest Wilder’s account of taking out a payday loan. Be sure to read carefully the bits in which Wilder describes the obfuscatory language used to describe the loan’s terms, despite the laws that Meyers touts that are supposed to provide borrowers with accurate information. What do you have to say about that experience?

Regarding allegations of very high average percentage rates, borrowers don’t care about APR because loans are not taken out for a year. Customers care about the loan’s flat fee, just like any other product. When you get dinged for a $2 automatic teller machine fee for a $200 withdrawal, do you scream about the APR? No, you scream about the two bucks.

Meyers is counting on people’s innumeracy here in waving off concerns about APR. We use APR to provide a consistent basis for comparison, since payday loans by their nature are short term, as noted. You can say that the rate for a loan that’s due in a week and for which you owe $20 on top of $100 in principal is twenty percent, but the APR for a loan if 20% interest accrued weekly would be 1040%. It’s not a trivial difference, and it’s not at all a mystery why people like Meyers would like to gloss it over.

Consumers have choices, and in the first half of this year, the Office of Consumer Credit Commissioner reported that 800,000 consumers freely chose PDLs over the following loans (the cost for $100 for 2 weeks):

Borrow from a friend or an employer ($0)

Credit card advance ($1)

Installment loan ($3 to $8)

Pawnbroker ($9)

Title loan ($10 to $12)

PDL ($15 to $23)

Online PDL ($25 to $30)

Bank overdraft fees ($40)

Loan shark (no maximum)

While I question how freely some of these choices were made, I do agree with Meyers on one point: Bank fees are too high, and have been for a long time. I have great hope that the Consumer Financial Protection Bureau will take steps to deal with that. Of course, the CFPB is also taking a look at payday lenders, so perhaps that isn’t what Meyers was looking for here.

Simply put, it costs a lot more to get a payday loan in Texas than it does in other states, where there is regulation of the industry. Given that it’s highly unlikely that Texas payday lenders have significantly higher costs of doing business than their counterparts elsewhere, the obvious conclusion is that they’re charging too much. If all goes well, the Lege will deal with that next spring.

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4 Comments

  1. nonsequiteuse says:

    It never ceases to disappoint me that the multitudes of people who parade around trying to impose their capital-c Christian morals when it comes to who we love and how we control our fertility are not occupying the sidewalks in front of payday lenders.

  2. Lawrence Meyers says:

    Charles, it is very easy to opine from behind a computer. Regrettably, you have never spent significant amounts of time at a payday loan store. Consequently, you literally have no idea what you are talking about.

    First, Charles, I am not a “shill”. A ‘shill” is a person who publicly helps a person or organization without disclosing that he has a close relationship with that person or organization. The Houston Chronicle op-ed discloses that I have an association with the industry and have for many years. A simple search of the internet will find other such disclosures.

    So I would appreciate an apology on your mischaracterization of me.

    Now, let’s examine your post.

    You reference an article by ONE individual visiting ONE store on ONE occasion. You ask what I have to say about that experience? I would say that you are committing an inferred Fallacy of The Hasty Generalization, by suggesting this person’s experience is widespread. Basic high school logic, Charles. I suggest you bone up on it.

    http://www.nizkor.org/features/fallacies/hasty-generalization.html

    Your first point has been destroyed.

    Next, you claim that I count of people’s “innumeracy” to “wave off concerns regarding APR”. This is false for several reasons.

    1) Customers do not care about APR. Period. You claim they do yet you have not spent weeks in stores as I have. You have never been to a store. You have never asked customers if they use APR when comparing loans. I have. I challenge you to go to a store and ask every customer there how much they are paying in APR. Nobody will know, and furthermore, nobody cares. They care about the flat price.

    But you have never done this, so you do not know what actually happens.

    Innumeracy cannot be “waived off” when the consumers themselves do not care about it.
    2) You own innumeracy and lack of experience in real-world payday loan transactions is achingly evident. You claim “You can say that the rate for a loan that’s due in a week and for which you owe $20 on top of $100 in principal is twenty percent, but the APR for a loan if 20% interest accrued weekly would be 1040%.”

    The average loan period in the state of Texas is 19 days, consistent with the term of other companies in the US. Nobody takes a loan out for a week.

    So your second point has now been destroyed.

    Next, you say, “While I question how freely some of these choices were made…” Do you? So let’s see, somebody is forcing people to take out payday loans. Very interesting. Let me know if you can get any of these instances on film.

    No, Charles, these choices are made freely. Nobody forces anyone into a store. Nobody forces to them to take out a loan. You yourself listed all the choices that are available! 12 million Americans make the free choice to take out payday loans over all those other choices every year.

    But again, your own lack of real world experience tells the tale. If you took a scientific sampling of customers, you would find these were all free choices.

    Third point: destroyed.

    And finally, the most illogical, anti-free-market point of all. You say, “it costs a lot more to get a payday loan in Texas than it does in other states… the obvious conclusion is that they’re charging too much.”

    Charles, it is called supply and demand. If demand for loans were decreased, then prices would fall. That’s basic economics. Indeed, so they charge more than in other states? So what? California gasoline costs more than it does in Texas. Indeed, some Houston gas stations sell gas for more than competitors across the street! Gasp! The Lege better stop that now! And cigarettes cost more in NY than Nevada!

    That’s another logical fallacy, Charles. I’ll leave it to you to figure out which one it is.

    Fourth point: destroyed.

    Charles, you show an utter lack of knowledge about real world payday lending and its customers. You have no knowledge of logical argumentation. And you have no knowledge of basic economics.

    I suggest you opine on other matters.

  3. Mr. Meyers, I stand behind everything I said, including and especially my characterization of you. Thanks for the feedback, and have a nice day.

  4. Lawrence Meyers says:

    Mr. Kuffner,

    Of course you stand behind everything you say. That’s what fools do.

    You have characterized me in a fashion that is false. That makes you a liar, and worthy of a good deal of scorn.

    In addition, as you have been unable to rebut my post point by point, as I did yours, it is a tacit admission that you have been schooled. You have proven to me that, in fact:

    You have never been to a payday loan store.
    You have never used a payday loan.
    You have never interviewed customers.
    You do not know the psychology of customers.
    You have never interviewed lenders.
    You argue using logical fallacies.
    You are ignorant in the ways of economics.
    You are ignorant in the ways of the free market.

    In summary, you argue from a standpoint of ignorance and dishonesty, casting aspersions on people you disagree with.

    Thank you for your kind attention.

    I’m sure your readers have been educated even if you have not.

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