That's a nice theory, but it's totally ignoring the reality of payday loan companies. There's a fair few of them in the UK too and they are all, with no exception that I'm aware of, basically usury shops. They pressure their customers into taking up new high-interest loans when their old ones run out, by sending out hapless representatives to talk them into it (note: the reps are themselves pressured into using every trick in the book to try and make a sale, with all the company bullying and brainwashing techniques you can imagine.. I consider them victims too). They'll send out those reps when holidays approach too... "Wouldn't you like £200 cash right now so you can buy your kids a Christmas present?"..

All in all, they're really the bottom of the barrel in terms of business ethics. Worse than crooks. I find it hard to believe that a payday loan company could be competitive without using all the shady tactics in the book, unless they did something radically different. There's no indication in the article that this one did something different, so it's fair to assume that this payday loan company was much like all the others.

If someone walked up to me and said "Wouldn't you like $292 cash right now so you can buy your kids a Christmas present?", I'd say "No". A lot of other people would say "Yes", though.

I have some distant acquaintances that are horrible with money. In the last year they have been behind on their car and mortgage payments, the woman has been steadily employed but the man doesn't work any more than he absolutely has to. That said, on payday they buy PS2/PS3s and games, and are at the pawn shop on a monthly basis hocking them again (this cycle has happened 2-3x that I'm aware of, and I hear things third-hand). It's cultural for them to not trust banks, so they "keep" cash. These people place no value whatsoever on their credit score, and they seem totally unconcerned about using the tools at their disposal, despite the financial implications.

The husband went out of town a while back with a shady family member "to work". The shady family member had been in recent trouble (kept within the neighborhood -- they don't call the police) for home burglary and assault/robbery. There wasn't any hard evidence but there was the unstated concern that the "work" might not have been on the up-and-up.

Is it wrong to offer a paycheck loan service to people like this? There's certainly no way to draw causation here, but there's non-zero correlation. For people that choose to live this way how is it even ethically wrong? It's what they want and they're not concerned about the downside (living a little tighter next week), and they'd blow right past the boarded up paycheck loan shop to get to the neighborhood loan shark if that was the next best option.

Personally I'm of the mind that safe, legal, regulated access to loans for people who otherwise could not get them are a valuable service. Even if they're as unpleasant as needle programs for druggies.

That's an interesting view. Thanks for posting it.

I would agree with this, if it wasn't for the aforementioned shady tactics...

Taking your needle program analogy, it would be extremely unethical if the needle program was paid for by the dealers and they used that opportunity to sell you more drugs, chat with you to find out if you're thinking of quitting, and offer you some free heroin if you are.

Similarly, short-term loan shops often employ strong-arm tactics to ensure they do receive payment. I.e., if you don't pay back, they'll send a couple of burly men to stand in your doorway until you do (as far as I know there's no evidence of them actually using violence, but the message is fairly clear).

So, to me, it seems payday loan shops are closer to the mafia/drug dealer side of things than to the needle program side.

I understand that to mean "increase regulation of payday loan companies" rather than "outlaw payday loan companies", on the grounds that unregulated outlaws are still a worse option.

However, regulating these companies to death puts you right back at the start again...

Yep, that's what I meant.

And yes, from the sound of it, it is a complex, multi-faceted problem.

So why is a payday loan your best option? Because the power company will turn off your electricity if you don't pay today. So you go get a loan which is payable in a week for high interest+fees, and you then go pay the power company.

Did you really need an entire industry that charges high interest to solve that problem?

If such companies did not exist, what would happen? Electricity would get cut off right? Then what? It would happen to enough people in your community and together they would go to their local leaders and find solutions. Solutions that would not involve the creation of payday companies.

Apply this set set of thinking to other scenarios: car payment (car gets repo'd if you don't pay today), your out of weed (gotta get high man), need to pay the babysitter so I can go to my minimum pay job. Try being poor for a while, its quite stressful.

Every problem you can think of, by providing high interest loans to briefly avoid it, only causes these problems to get worse.

I would rather not rely on "local leaders" (aka government) to do anything that private enterprise stands ready and willing to do.

I'm sure people do use payday loans to go score weed to be happy and temporarily reduce the stress of their situation. IMO, they are better off for having that choice than not, and it's not my place or yours to force them to choose in way that we think is "more wise."

Many Americans have this idea that "all forms of commerce are allowed". They aren't and never have been in any society.

It is government's (society's) place to put limits on people's behavior. That is the primary purpose of such systems.

If you're asking government to act as your agent to put limits on behavior for your own benefit, that seems rational.

If you're asking government to act as your agent to put limits on behavior for my benefit, why not mind your own affairs and let me mind mine?

I don't claim that all commerce is allowed. I do claim that government ideally gets its power from the people's consent, rather than the other way around.