Banks have noticed that payday lenders make bucket of money and want in on it.
In yet another example of finance double-speak, major financial players have moved into that netherworld of the functional equivalent of loansharking known as payday lending.While in theory short-term loans can be a boon to cash-strapped individuals, in practice, the usurious interest of payday loans result in many borrowers falling into a debt treadmill. The Pentagon was so concerned about the way that payday lending could wreak havoc with the lives of combat personnel that it restricted the rates that could be charged to military personnel to 36%. The industry howled that rules would drive payday lenders out of the business of serving the armed forces (they had previously been targeting bases). I suspect that result was a feature, not a bug....
Read the rest of what Yves Smith has to say about it at Naked Capitalism, Payday Loans Are Dead! Long Live Payday Loans! It's a jaw dropper.
Sounds like a sub-prime overdraft account! How much longer are we going to stand for this?
ReplyDeleteI had the opportunity to talk extensively with a guy who is setting up a payday loan operation.
ReplyDeleteIt is by far the most profitable business I've ever seen. By far. So much so that I am shocked someone hasn't come in and cut fees by 60% and take all of the market share.
We're talking 10-20% a month in returns on money allocated. I was shocked at how much they make.
20% a MONTH? Wow! And they haven't even been pooled yet! With profits like that on the horizon it's suddenly no wonder to me why B of A is the apple of Warren Buffet's eye.
ReplyDeleteYou might enjoy this. At one point, I confront the rep with the concept of usury.
ReplyDeleteI made a video protest recently for my blog. It is quite funny even if you are pro-megabank. I called my credit card's customer service line to do some negotiating. Having a bit of leverage, I thought it presented a great opportunity to mess with them a little and make a few points about the unfairness of the credit card lending system. Since it's a protest at home, I called it my kitchen counterstrike against Bank of America. http://www.ragingwisdom.com/?p=508