Illegals use them instead of banks to uhhh cut the red tape. I'm sure that's a good buffer for the delinquents.
If your really interested in some advice hit me up via the board email. I've been in the online side industry for about 5 years.
Let me ask you a question about the online side industry. As there is nothing immoral or unethical that you are doing, is there an address where your grateful customers can visit you and thank you for providing these usurious loans? The reason I ask is that for the most part online payday lenders are not licensed to do business in the states where they lend and are not using the CSO loophole to get around usury laws that brick and mortar payday lenders are using to kill communities in Texas. Thus they are violating a slew of consumer protection laws and are what we consumer attorneys call low hanging fruit. Unfortunately, they are hidden behind a web of p.o. boxes in multiple states and islands so even though they are low hanging fruit, the private consumer attorney and the federal trade commission often cannot find the trees. So please, since there is nothing wrong with what you are doing, let me and your customers know if your business has a physical address. K, thanks.
Lack of school education or lack of education about the potential financial risks of using a payday loan service? Fear? Please explain. I am truly curious. What "fear" causes someone to walk into a payday loan company on a Monday to get some quick cash in anticipation of their Friday paycheck? Adults who do not know the risk of heroin or cocaine have only themselves to blame.
After reading these responses OP, do you really want this kind of Karma? If you ever start a family, is this what you want to tell your kids puts food on the table?
The kind of people who go to advance loan places aren't the kind of people who have been educated about the risks. I know people who used to work at those places. They went out of their way to be ambiguous about the lending practices to people who asked specific questions. (Sadly not a lot.) It's always easier to sit up on your high horse and say people should know better. For whatever reason, they don't. Your average payday loan recipient probably knows more about the risks of heroin or cocaine than the interest on a 2 week loan. Some of the people don't even know what interest is.
The fear I am talking about is the fear of getting arrested. Typically, once the consumer realizes their mistake, they call the payday lender. I do not have enough money to repay this loan and pay my rent so I need to pay my rent they say. Can I work out a payment plan? The payday lender says you wrote a hot check and I will have you arrested for theft if you do not either repay the loan in full or refinance it. These are both lies. It is a lie that the consumer has committed a crime. It is not a hot check because both the consumer and the lender knew there was no money in the account when the check was written or the permission to have it drafted was given. Thus the elements are not met for theft by check. (Theft by check is more like when someone bounces a check to the grocery store. The grocer, unlike the payday lender, has no reason to think there is no money in the account). Second, it is a lie that the payday lender will have the consumer arrested. The lender knows it is not a crime and knows that most DAs would not prosecute for the reasons given above. But they continue to tell consumers that they will have them arrested, have their kids taken away from them, get them fired from their job, if they do not either repay the loan in full or refinance it. Thus, the uneducated consumer has plenty to be fearful of when it comes to the payday lender. So, they fall behind in their secured debt (mortgage, car payments) or they skimp on food, utilities, medicine. All so they can stay out of jail so the OP and those like him can collect 1,000% indefinitely. The consumer has not committed a crime but they have breached a contract. In our world, if you breach a contract, you get sued in civil court. But payday lenders do not sue people in civil court because they do not want to have to explain the 1,000% interest to a judge or jury. Plus, it is easier and far more profitable to lie and scare the consumer into paying. The third lie is that they need the high interest to make up for the consumers that do not repay the loan. The payday lending industry would collapse if people actually repaid the loans per the terms of the loan. They want and need people to not be able to repay them. The real profit comes in by the hundreds of dollars each consumer pays a month that does not go towards principal.
You can say the same thing about banks, credit card companies, car dealerships, and other businesses. I walk into a car dealership and I will probably get a much better deal than an "uneducated" car buyer, because I will learn about my purchase, interest rate, comparable deals, etc. before walking in. Is it unfair to an uneducated car buyer that they pay more (sometimes substantially) in price and interest? Banks thrive on customers writing bad checks and charging $35 for someone going $2.00 over their balance. I would never own a payday loan company, but I wouldn't mind owning a bank or car dealership.
I'm not sure. Everyone has their own definition of what's "fair" and what's not. I can say that on a personal level I strongly dislike the deceptive practices that go into buying cars and getting loans. While negotiating is an important part of business, I make a clear distinction between business to business transactions and business to consumer transactions. Consumers will almost always be at a disadvantage.
Serious black's doing a fine job on the legitimacy of the industry. But, I wanted to address this equivocation between a payday loan place and more legitimate moneylending institutions ("more" qualifier added because even they engage in some shady practices, such as the aforementioned $35 overcharge fee). I think usury makes them fundamentally different entities. When you take a loan from a bank, you generally have some intentions with that capital that justifies the transaction -- you will invest and get a return, or buy a house and own equity, buy a car and enable employment and salary, and so on. There is risk things won't work out and you're paying the bank to take on that risk for you. All these borrowers, hypothetically, are rational actors and the risk is one of failure or misfortune that can be fairly assigned to each borrower. The bank does what it can to mitigate risk by securing the loan with assets. With a credit card, the lender is providing working capital to borrowers just to make daily transactions simpler. Borrowers aren't doing anything in particular with the money that justifies the advisability of the loan, but it's not large, has a cap and is regulated to avoid usury. And again, borrowers are mostly rational actors who will pay their loans, and the risk is again one of misfortune (like job-loss) that can be measured and fairly assigned to all borrowers. Irrational actors who take but don't repay exist but are soon shut out by poor credit, and are not a significant burden to the whole population of borrowers, which is huge. People without sufficient credit can't borrow and therefore must handle their own working capital. Which is where the payday loans come in. They provide working capital like a credit card, but at such usurous rates that most customers are irrational actors -- people who think paying such a rate is preferable to not having the cash at all (which, with an adequate social net, should not be the case). But, in a reverse from other borrowing profiles, it is now the rational actors who will choose not to repay the loan since it is more beneficial to take the money and sacrifice your credit (which already sucks) than it is to pay predatory rates. The irrational actors make a good faith effort to repay the principal plus the high rates and penalties -- rates and penalties that the industry must apply to cover the high bad debt loss of the rational actors who do not pay. So, this population of borrowers -- instead of paying a socialized cost of risk of failure or misfortune that could befall anyone in their group -- are paying a socialized cost of a refusal to pay by another population of borrowers looking after their own self-interest. In other words, they aren't paying for their own risk, they are paying for someone else. The whole model is flipped by usury.
