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

[thnidu]

credit unions?

[madfilkentist]

Is it true that there aren't any? I haven't researched it.

It's possible that the field has such a bad reputation that only people with poor judgment even try to get payday loans, so honest lenders just stay clear of the field. It might be like trying to start a reputable Internet-based lost-money recovery business in Nigeria.

[chickenfeet]

It used to be quite common for grocery stores to cash pay cheques from reputable local employers.

[firecat]

This gets into some reasons, and is an excellent read in general.

http://strikedebt.org/drom/

[schemingreader]

How could there be a pay-day loan scheme that was not exploitative? I thought the whole point was that they were high interest, short-term loans. If they are high interest and short-term, then for sure some people are going to default, and those people are going to get ripped off big time. As opposed to the people who do not default, who will still get ripped off.

There are non-profit organizations that provide short-term loans at low interest. There's a kind of Jewish organization that in the US is called the Hebrew Free Loan. They charge so little interest that they don't make a profit. These loans used to be only for Jews at one time, but that hasn't been true for decades. There's also this concept of micro-loans.

But all of those are for people who are using the money for things like education or a small business. Most of the people who use payday loans, according to research by the Pew Center, are young adult women, mainly white, tend to be recently separated or divorced, and mainly, used for paying regular bills, like rent.