Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 12:33 pm  

Cronus wrote:

I don't disagree, but perhaps those APR rates exist as a threat, and as a reflection of the risk these lenders are taking.

I'm sure they do, I just think there should be a limit as to the level of that threat. The punishment has to fit the crime, so to speak.

Cronus wrote:

If Charlie the Chav has blown his wage on City vs Arsenal and needs £100 to get through the month, he can go to a payday lender and borrow £100 for 7 days with a £25 charge. He knows he probably won't be able to pay it back and 50% APR on such a small amount is peanuts. He doesn't care. However, the threat of that small amount exploding massively in no time is the whip to ensure repayment in most cases - and of course it makes the lender a tidy sum if Charlie doesn't repay in time.

Whilst 50% APR might be peanuts on a one-off basis, it might focus Charlie's attention for the next time he takes out such a loan. If he has two or three loans all accruing that rate of interest, it might not seem like peanuts. And from the lender's point of view, it won't be peanuts when added up over their entire customer base - particularly if they charge a one-off fee for the initial lending. There's also a case for saying that they're more likely to eventually receive payment if the APR is a little more reasonable. If the debt spirals too quickly, it becomes unmanageable almost immediately, giving them less chance of a positive outcome.

Cronus wrote:

At least if someone finds themselves owing thousands to a payday lender due to horrible mismanagement of their money, or just plain fricking stupidity, there are debt management schemes around. A street lender wouldn't be so sympathetic.

There is that option, but I don't think it's the case that everybody who finds themselves in financial difficulties falls into the category you've described.

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 12:35 pm  

Rock God X wrote:

But, using your example, if you don't buy your mate a pint the following week, he won't start adding pints until it reaches the stage where you have to keep him in beer for the rest of his life.

Wait a minute. What if you said, you owe me a pint a week until you pay it back? Or something? Why - if you don't pay him back - should your mate be out of pocket for a prolonged period at no cost to you?

Rock God X wrote:

...And sometimes people are just desperate - is it morally right that companies should add to that desperation for the sake of a quick buck?

I understand the point you're trying to make, but the loan company is not adding to desperation, it is lending £200 for a week on your agreement to repay £250. To imply that in fact they are knowingly "adding to desperation" would be silly. Why would a business lend to someone who it knows or strongly suspects can't repay?

I agree that the APR calculations are irrelevant. In the example, I would presume the loan company has an accurate model of how mnay borrowers are likely to default, even if it can't predict which ones, and the idea would be to make sure that the £50 "takes" you DO get back come to enough to cover the cost of the loans you have to write off, plus whatever profit margin. The £50 is, to me, more of an insurance against the risk of defaults than true "interest". It is, on any view, high risk and totally unsecured lending.

i don't like it, but so popular are these sort of lenders that it must be plain wrong to assume that all the thousands who clearly use them are across the board all desperate people.

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 12:36 pm  

Companies like Wonga or Charlie the money lender?

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 12:59 pm  

Ferocious Aardvark wrote:

Wait a minute. What if you said, you owe me a pint a week until you pay it back? Or something? Why - if you don't pay him back - should your mate be out of pocket for a prolonged period at no cost to you?

He shouldn't. But equally, I don't believe he would/should add to the debt as significantly as these companies do.

Ferocious Aardvark wrote:

I understand the point you're trying to make, but the loan company is not adding to desperation, it is lending £200 for a week on your agreement to repay £250. To imply that in fact they are knowingly "adding to desperation" would be silly. Why would a business lend to someone who it knows or strongly suspects can't repay?

They know that a percentage won't be able to repay within the agreed time scales, and it's what happens then that bothers me - not the £50 charge for the initial loan.

Ferocious Aardvark wrote:

I agree that the APR calculations are irrelevant. In the example, I would presume the loan company has an accurate model of how mnay borrowers are likely to default, even if it can't predict which ones, and the idea would be to make sure that the £50 "takes" you DO get back come to enough to cover the cost of the loans you have to write off, plus whatever profit margin. The £50 is, to me, more of an insurance against the risk of defaults than true "interest". It is, on any view, high risk and totally unsecured lending.

As I said, it's not the £50 that they make initially that bothers me - it's if the customer can't make the payment for whatever reason, the 4000% APR keeps accruing until they do. It then becomes very relevant.

Ferocious Aardvark wrote:

i don't like it, but so popular are these sort of lenders that it must be plain wrong to assume that all the thousands who clearly use them are across the board all desperate people.

I agree. Which is why I never made such an assumption. Some will inevitably be though, and probably a greater percentage than any other lender's customers.

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:00 pm  

Big Graeme wrote:

Companies like Wonga or Charlie the money lender?

Kick in the bollocks or poke in the eye?

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:04 pm  

Rock God X wrote:

Kick in the bollocks or poke in the eye?

More like a CCJ or two broken kneecaps.

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:10 pm  

I'm amazed that people seem to ignore the good old-fashioned pawn broker, their rates are usually far and away better than any payday loan, advancing money on a credit card or even going overdrawn

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:12 pm  

Andy Gilder wrote:

More like a CCJ or two broken kneecaps.

Yeah, perhaps they weren't the best examples. I suppose the point I was making was, just because there are worse people to borrowing money from, doesn't make the working practices of Wonga and their like acceptable (to me).

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:17 pm  

Rock God X wrote:

What Dally says about individual responsibility is fine to some extent, but individuals having too much personal credit is nowhere near the primary cause of the global financial meltdown. Bringing the banks and the likes of Tesco into line would make a big difference to our financial future.

Personal debt IS the PRIME cause of the financial crisis.

Re: UK unemployment rises to 2.68m : Fri Jan 20, 2012 1:20 pm  

LeighGionaire wrote:

The only irony I see on this thread is so called lefties bemoaning the fact that Damo won't voluntarily become a wage slave. If he genuinely does volunteer work what makes that work less valuable to society then stacking shelves in a supermarket?

I agree.

The bullying of Damo on this site is out of order.

As for Sal Paradise "I offered him a job" I would be sceptical about a job offer made through an internet forum. If Damo had a legitimate job offered that he didn't take then its up to the benefits office to apply sanctions.

It's an easy argument for those in employment to say that the unemployed should be forced to do some crappy wage slave labour job that has no prospects and is probably time limited, as punishment for being unemployed, but I wonder how many of them would actually do the same if they were in those circumstances. It's easy to say but another thing to do, as the middle class ex finance/law professionals in their 30s/40s/50s that got made redundant in the recession (or aftermath) found out.