Why aren't there honest payday loan organizations?

[nancylebov]

Description of loan scams-- not just extremely high interest, but extorting money from people who either repaid loans, or who only applied for loans.

I've been wondering for a while why there aren't decent check-cashing and payday loan companies-- charging higher than average interest, but not outrageously so, and making the terms clear. This should especially be the case for check-cashing companies, because it seems like they're unlikely to lose money on the checks they cash.

This seems like something a non-profit or a not-for-profit could get into even if there are no for-profit corporations who want to do it (and why not?), and be a really valuable service.

What am I missing?

Comments

[firecat]

Because it wouldn't be as lucrative as the existing institutions, which are major corporations in their own right. Loans that are more reasonable for consumers would be less profitable.

See chapter 8:
"'Respectable' banks and financiers have always tried to distance themselves from the taint of loan-sharking and other fringe financial services. For many people, non-bank lending has traditionally conjured up images of dilapidated storefronts on the edge of town, surrounded by vice and petty criminality. But if you’re one of the twelve million Americans who took out a payday loan in the past year, it’s more likely that you did it in a suburban strip mall or cyberspace. It’s even possible that you got it from a bank—five large banks, including Wells Fargo, have begun to offer payday loans. (They call them 'direct deposit loans,' but don’t be fooled; they’re just as bad.) Although they seem to be worlds apart, in reality these banks and fringe finance are interconnected and overlapping; the biggest players in all segments of fringe finance are publicly traded, national corporations. Around 20% of all users of 'alternative' financial services (AFS) also use traditional banks. And even fringe financial services earn profits for wealthy investors—via the very 'asset-backed securities' that brought down the financial system not too long ago. Whether sourced in prime credit or subprime, student loans or pawn loans, the profits of our indebtedness flow to the wheelers and dealers on Wall Street."

and (emphasis mine)

"Today, fifteen large corporations, which together operate roughly half of all loan stores, dominate the industry. Of these fifteen, six are publicly traded companies...Many of these companies also operate payday loan sites on the internet."

and this was linked from the same page:
http://www.nytimes.com/2013/02/24/business/major-banks-aid-in-payday-loans-banned-by-states.html?pagewanted=all&_r=0

And Chapter 7: "Companies like Walmart, Kmart, and Best Buy have also tapped into this market by offering check cashing at their stores."