One of the contributors to this site is Mrs. C8j, and last week she handed me an article from the Globe and Mail that absolutely flabbergasted her (admittedly Mrs. C8j can actually rant better than I can), written by Sean Silcoff with the title, “Expensive but not excessive: why Pay Day Lenders Aren’t a Rip Off”. Most of my readers know my opinions on these modern-day Loan Sharks, however, if you want to know my opinion read Pay Day Loans the Crack Cocaine of Personal Finances.
After reading the title I figured this was a misdirection story, where if you read the actual article the writer is actually saying the opposite and is attempting to suck you in with an inflammatory title, but I was dismayed to see that this really was not the case. I’d include a link to the article, however it is behind the Globe’s pay wall, and you have to be a Globe Subscriber to read it (click here if you are a Globe Subscriber).
The article is actually quite hum drum (not written in my style of ranting like a lunatic in every paragraph), and I kept wondering what tripped Mrs. C8j’s Rant-Fest, and then I read the second to last paragraph, and I must admit my flashing red-light rant-o-meter went off as well.
Given the fact the Globe protects this content with their Pay Wall, I will paraphrase what is said:
BCM thinks it says, “… this is a regulated business that doesn’t make a lot of money because they deal with bad borrowers and thus shouldn’t be viewed with scorn…”
The phrase that really caused me to almost choke on my coffee was, “… quick and convenient source of moderate amounts of cash…”. That reads like something out of a Pay Day Loans store’s brochure, “… quick and convenient …”?
Those are actually two criteria I always use when choosing a lender, also what kind of hot chicks they have in their ads (since everyone knows that hot chicks dig dudes who use Pay Day Loan services) (for those sarcastically impaired my apologies for me not marking this paragraph as a sarcastic opinion on my part).
Pay Day Loans or Loan Sharks?
The gist of the argument put forward in the article seems to be that because Pay Day Loan companies don’t make a lot of money, thus we shouldn’t view them as a modern-day Shylock (I use that as the vernacular for Loan Shark, not as a derogatory antisemitic term). My opinion is that Pay Day Loan Store Fronts aren’t making a lot of money mostly because there are so damn many of them (in downtown Ottawa, in the core, there is pretty much a pay day loan store front on every block).
Yes their customers are folks who may not pay them back, but my guess is they are not making a fortune on their 500% per annum loans due to a glut in the market. There are more pay day loan shops than banks these days, and now with competitors getting rid of their store fronts and running solely as Internet Web Sites, this industry could be ready to make even more money off their customers (following the lead of the Banks and other service industries).
The final paragraph seems to be borrowed from Dr. Henry Morgentaler, in that it is preferable for Pay Day Loan customers to use this legal service as opposed to a more dire choice (i.e. loan sharks). My view of that is: maybe it would be better if we had credit counselling services on every street corner instead? I am not making any statement about Abortions or Gun Control either (let’s deal with one controversial topic at a time).
MER : A Worm in the RESP Money TreeI honestly don’t understand why the Globe would publish this story, or why it was written, any ideas good reader? What’s next, articles defending the High MERs in Canadian Mutual Funds?
Dang! Forgot why I was going to comment!
Ok. The thing about education is that nothing is taught in school about money right from kinder-garden through to high school! Start teaching kids why mommy and daddy can’t buy that expensive toy cause they want to buy food and shelter first. By high school kids should be able to balance a chequebook, and do a complex budget including what they will need to know when they move out on their own so that they understand about financial priorities like food / rent / utilities being more important than partying in college.
Got some students in my classes who are so tight financially that they were worried about how much print credits for printing out assignments were going to cost, then others are out partying all the time.
If we had an education plan right from kindergarden, there would be a lot less financial issues such as bankruptcy, and widows buying cans of Alpo beef stew dog food as it is half the price of a can of Campbells Beef Stew. You know they don’t have a dog, so why buy dog food? Because they can’t afford to feed themselves as they don’t have a retirement income!
We need the education to start now!!!
I will continue to hate on Payday loan places, even though they were the only ones who helped me get a credit card after my bankruptcy. Yes, I went thru the doors willingly as they were the only ones who would issue a credit card to me. Once I was able to get a regular card I dumped them like the bag of garbage they were. The fees were excessive, and if I would have put $300 onto the “pay as you go” card the continual fees would erode the $300 to the point where the principal would be gone without using the card. Fees to put money on the card, fees to remove it, and monthly fees, it was just ridiculous.
Eventually there were places who would refuse to take it as there was too much fraud, and so I got a real credit card and dumped them.
I have never had a payday loan though, but one place I went to (for research) had young women working there, they were beautiful, busty, eye candy, and were very good at distracting men with their feminine wiles while signing men up for the loans. Heck I almost forgot why I was there! lol
Thing about that place is that they would put in their demand for payment to the bank so that it got to the bank the day before the welfare and disability cheques went in, and so they got paid their overdue loans before the rent and utilities, and so the cycle continued. Scummy thing to do but they were owed the money, and they were gonna get paid first!
I found it very interesting that Payday Loans are illegal in Quebec. I can’t decide if that is commentary on the loan places themselves or the people of Quebec.
Mrs. C8j
I am not a fan of payday loans, but I think the issue is the borrowers that use the service. They are uneducated and have no idea what they are really getting into. There are many reasons why people might use theses services that we might not understand.
Agreed, I’d be really interested in seeing the Demographics on who uses the service and the reasons why. As I said, I suspect that this isn’t solely folks on Government Assistance programs, as we saw on Million Dollar Neighborhood, “normal” folks use them too.
Multiple comments on multiple articles … sorry!
Part of the issue is the banks themselves. I ran a construction company many years ago and some of the guys used these places to cash their cheques because they couldn’t get a bank account or didn’t want one because they owed money to someone (the bank / government etc.).
The other side of the equation is that I used to get many requests for pay advances. Frankly, I wouldn’t do it because once you advance the pay, often times they take the money and run.
I hear the same story from many of my clients who run construction businesses as well (not to pick on that industry).
Interesting that the Provincial Government made noises about the same problems with folks who get Welfare cheques (and the banks not cashing the cheque because the recipient didn’t have an account there). I suppose you could pay cash, but that opens up a whole different problem.
Well, you got me reading this one in full. I had a hard time believing the title, and now I realize why you have a question mark at the end of it. Sure. Credit counseling on every corner. But something tells me that there will never be as many messages to exercise discipline as there will be messages to spend, spend, spend!
Agreed, so yes I did the “bait and switch” trick of the title not matching the content, Guilty as charged.
It’s a free market, as it should be. Shutting them down because people find their business model distasteful makes for a bad society. Besides, the businesses are a symptom. The illness is the people who use these services routinely.
And that’s what needs to be ‘fixed’ – the people who use the services. Canadian society has little in the way of financial education being handed down. And it’s not just low income earners. I believe even many of the people living in wealthier neighbourhoods are living on borrowed time as well – spending every penny they make and more.
What we need is education. We need to figure out how to educate Canadians at a basic level so that for the most part they never delve down the slippery slope of living paycheque to paycheque. We need to learn basic budgeting and financial skills at a young age and get them ingrained before we enter the workforce. That’s the fix to payday loan companies, not tilitng at the business themselves.
I don’t actually think it is “low income earners” who use these services, since they are FAR too big a risk, and may actually be screened out, I think this service is aimed at the Middle Class. Agreed on the education side of things, if we can have sex education in schools, we should have Financial Education too (BOTH are important).
I can vilify the business, and will continue to do so, but yes they wouldn’t exist if they didn’t make money either.
I may be a bit touchy because I perceive the business I’m in to be vilified frequently, for similiar reasons. And my recourse is, as I noted for payday loans, to educate. That’s what I do in my business..educate educate educate.
You said: “I am not making any statement about Abortions or Gun Control either (let’s deal with one controversial topic at a time).”
You and me are going to get into it in at least one of those :). Perhaps we should do a point counterpoint.
Maybe for an OFF TOPIC SUNDAY maybe…
Maybe over coffee sometime would be best :).