[HN Gopher] Regulators Shut Down Lending Platform (YC Alum) LendUp
___________________________________________________________________
Regulators Shut Down Lending Platform (YC Alum) LendUp
Author : boeingUH60
Score : 229 points
Date : 2021-12-22 20:15 UTC (2 hours ago)
(HTM) web link (www.consumerfinance.gov)
(TXT) w3m dump (www.consumerfinance.gov)
| mhoad wrote:
| Just as a heads up the Consumer Financial Protection Bureau
| recently launched a whistleblowing program for people who work in
| tech who see sketchy stuff going on around them that is worth
| checking out if you have something to share
| https://go.usa.gov/xe66f
| [deleted]
| emodendroket wrote:
| So in the end, I suppose it was not so different from a payday
| lender after all.
| inopinatus wrote:
| TLDR: a loan shark bites the dust. Only notable because this one
| was backed by the sand hill road mob.
| vmception wrote:
| > "LendUp was backed by some of the biggest names in venture
| capital," said CFPB Director Rohit Chopra. "We are shuttering
| the lending operations of this fintech for repeatedly lying and
| illegally cheating its customers."
|
| Juicy!
| notyourday wrote:
| They should go after the board as officers and directors of
| the company do not get corporate protection.
|
| We need to have officers and directors of those companies to
| go to jail.
|
| Alas CFPB is pretty toothless.
| sokoloff wrote:
| It amuses me that the adverb "illegally" is important to
| include in that sentence.
| voiper1 wrote:
| Hah, but it was absolutely necessary. The government can't
| shut down companies merely for lying or legally cheating
| customers...
| vmception wrote:
| Exactly, and by "shutdown" they mean "shutters lending
| for now"
|
| The business is still available to do anything and is
| well capitalized.
|
| The regulator has to make it seem like a laser strike
| from orbit, using words like "LendUp _was_ backed by
| some" in the past tense as if the company is dissolved,
| but its not and still is backed by the same capital
| sources.
|
| Time to remedy the operation, challenge the CFPB in
| court, pivot etc
| aj7 wrote:
| Venture capital, Harvard, Stanford, it's all the same racket.
| Because the best deals and students come to YOU, you don't
| actually have to DO anything.
|
| So it's no wonder this scam possess the smell test.
| londons_explore wrote:
| It appears LendUp was given plenty of notice of these issues,
| which look pretty correctable, yet somehow they didn't manage to
| do that?
|
| Why? Surely simple things like "Your advertising misrepresents
| the way your service works" can be fixed by adding a few more
| weasel words to the claims?
| uniqueuid wrote:
| Can anybody enlighten me:
|
| > The order would also impose a $100,000 civil money penalty
| based on LendUp's demonstrated inability to pay.
|
| Does this mean the fine is levied against individual executives,
| rather than the company itself?
| pc86 wrote:
| No
| riedel wrote:
| I was curious about the general sentiment of HN to lendup. If
| anyone else cares: https://news.ycombinator.com/item?id=10956780
| mwnivek wrote:
| Note that LendUp spun off its credit card business (Mission
| Lane) in December 2018.
|
| https://www.pymnts.com/loans/2019/lendup-credit-card-busines...
| aw3rt34t34t wrote:
| > LendUp has been subject to multiple enforcement actions by the
| CFPB. In addition to ordering LendUp in 2016 to stop
| misrepresenting the benefits of borrowing from the company, the
| CFPB sued LendUp in 2020 for allegedly violating the Military
| Lending Act and obtained a judgment against LendUp in that
| action. In September 2021, the CFPB filed this third action
| alleging that LendUp:
|
| So YC funded a payday lender that targeted active duty military
| service members?
| dang wrote:
| YC wouldn't do that. I don't know the history here but I do
| know that both founders left the company years ago (which is
| pretty unusual). I can only assume that a lot changed since
| they started 10 years ago (they were in W12).
| emodendroket wrote:
| When did that happen? According to this piece, the first
| regulatory action against them for these practices was in
| 2016.
| _liam wrote:
| Looks to have been in 2018 or 2019
| emodendroket wrote:
| 2019 looks right based on these sources:
|
| https://debanked.com/2019/01/lendup-gets-a-shake-up/
|
| https://www.crunchbase.com/person/jacob-rosenberg (it
| would seem Rosenberg actually left in 2018)
|
| Though according to the first one Orloff stayed on the
| board even after that point.
| colechristensen wrote:
| That seems to be a fair assessment.
| newbie789 wrote:
| AlexandrB wrote:
| From a linked press release RE: violations of the Military
| Lending Act:
|
| > The MLA puts in place protections in connection with extensions
| of consumer credit for active-duty servicemembers and their
| dependents, who are defined as "covered borrowers." These
| protections include a maximum allowable annual percentage rate of
| 36%, known as a Military Annual Percentage Rate (MAPR), a
| prohibition against required arbitration, and certain mandatory
| loan disclosures.
|
| These seem like good[1], common-sense, consumer protections. Why
| aren't these extended to credit consumers in general and not just
| military personnel?
|
| [1] I think one quibble might be the 36% max APR. This might be
| too low for some high risk customers to be able to get credit at
| all. But I'm not sure if there's any research around what a
| reasonable number might be instead.
| jzwinck wrote:
| If a loan is so risky that it requires greater than 36%
| interest, it should not be made. Loans with gigantic interest
| ruin lives.
| jdavis703 wrote:
| I was in a recent emergency situation where I could've needed
| to spend thousands of dollars on the same day.
|
| I just don't have that kind of liquidity.
|
| I can turn the required savings/stock in to cash with 3-5
| days of lag. But not the same day.
|
| This is where a subprime loan would be useful as a bridge,
| and in that situation I don't think it would ruin my life.
|
| Consumers know what's best for them. As long as the APR is
| accurately advertised, I don't see why people should be
| jammed up because some people think interest is a sin.
| raverbashing wrote:
| If you have the collateral you don't need a subprime loan.
|
| >Consumers know what's best for them.
|
| Yeah that didn't work out the last time
| YuriNiyazov wrote:
| Just as an FYI: if you have stock in a regular brokerage
| account, you can take out a margin loan in cash
| immediately. It depends on the broker, but IME it's fairly
| common (e.g. Fidelity does it).
|
| Margin has a bad name as a "high risk" activity, but that's
| mostly when you have a concentrated position and are taking
| out a margin loan to double down on that concentrated
| position. Using margin as a bridge cash loan for a few days
| is a fairly low-risk proposition.
| mbesto wrote:
| > Loans with gigantic interest ruin lives.
|
| Playing the devil's advocate here...loans with interest rates
| higher than 36% are generally reserved for subprime lending -
| payday loans being the most prominent. As long as we live in
| a society (talking US here) where minimum wages don't keep up
| with inflation and benefits, then these products in some
| sense need to exist to satisfy that subprime group. Otherwise
| it's literally impossible to create a profit on payday loans
| if these rates are much lower.
|
| Note - I don't know what the "right APR" is to make them
| profitable, but I certainly can fathom why there might be a
| 1000% interest rate on a 7 day loan of $100 so someone can
| get their car out of the pound so they can drive to work. The
| administrative overhead to lend $100 and only make pennies is
| simply not worth it.
|
| Also, yes gigantic interest rates ruin lives...more
| importantly predatory sales practices to get people to buy
| them. But maybe we should focus on why so many Americans get
| to that in the first place (looking at your healthcare) -
| thats a much easier market creation.
| kbenson wrote:
| Yes, the type of loans that usually have these high APRs
| are along the lines of "we'll lend you $500 today, but we
| expect $550 or $600 on your next payday" (yielding an APR
| often well into the hundreds). The rates are high both
| because a) there's a high level of defaults and b) they
| aren't really secured by anything except for a pre-
| scheduled ACH from the bank, so collection is hard (and it
| doesn't go on regular credit reports).
|
| Some people make good use of these, as timely sources of
| money when there's not a lot of other options (not everyone
| has credit or saving or friends and family that can help).
| At the same time, it is extremely predatory, and the
| lenders are constantly trying to maximize the money they
| can get from people (such as rolling a new loan into the
| payment of the original, meaning only the interest is
| functionally required on the due date, and they get to
| skirt the laws of the loan required to be short term).
|
| It's one of those catch-22 situations where doing away with
| the market entirely hurts those you're trying to protect,
| but it's hard to regulate effectively because the benefit
| is it's quick and short, meaning too many hurdles might be
| the same effectively as doing away with them completely.
| jacquesm wrote:
| Capitalism works extremely well for those at the top,
| reasonably well for those in the middle and it can
| utterly suck for those at the bottom who effectively prop
| up the two other layers.
| aj7 wrote:
| A huge lobbying interest is devoted to protecting this
| industry. Opposition to minimum wage increases is one of
| their priorities.
| kyrra wrote:
| As other have said, that's why bankruptcy exists. Also, loans
| like this aren't a 1-year repayment, it's a much shorter
| window, so you are not paying 36% more, you will pay likely
| in a shorter time window. While 36% looks bad, these kinds of
| loans can be helpful to people.
|
| Just because it looks scary to you, people go to these kinds
| of tools because they need them. When those tools are taken
| away, they will go down riskier paths, or fail to pay bills
| (which can lead to worse outcomes). Don't treat everyone like
| they can't think for themselves and understand what they are
| getting into. Sometimes solutions like these are needed.
| cesarb wrote:
| > If a loan is so risky that it requires greater than 36%
| interest, it should not be made.
|
| Playing devil's advocate: it depends. When I was younger,
| there were times when, if you lent money at only 36% per
| _month_ interest, you 'd be losing money. You'd have to lend
| at rates higher than that, just to break even, no matter how
| low the risk was.
| rory wrote:
| You mean because your country had high inflation?
| pc86 wrote:
| Buying my friend a beer because he lent me $20 three days ago
| works out to an astronomical APR. It doesn't mean doing so
| should be illegal.
|
| There's a time and place for everything and that probably
| includes high interest loans as well.
| aj7 wrote:
| It is not true that any business model you can think of
| should be allowed.
| the_optimist wrote:
| The social negatives of difficult-to-discharge debt and
| Ponzi-rate lending (wherein debt service cannot be met by
| an underlying economic growth behavior) are horrific and
| easily preventable. Letting even one person fall into the
| pit is a social travesty.
| onion2k wrote:
| I wouldn't be surprised if paying interest on loans in the
| form of alcoholic beverages is actually illegal if you
| don't have a liquor license.
| [deleted]
| tylerfontaine wrote:
| I don't think anyone is suggesting that gratitude for good
| friendship should be regulated.
| troupe wrote:
| Assuming that everyone is acting in their own best interest,
| then a 36%+ interest rate would only be used by someone who
| is in a situation where it is better than their alternatives.
| If the option was not available, then they wouldn't have the
| alternative that is best for them.
|
| If someone is NOT acting in their own best interest, then
| there are an infinite number of things that need to be
| removed from their options.
| nostromo wrote:
| Say I live paycheck to paycheck and I need $500 to fix my car
| that I use to get to work until I get paid in a few weeks.
|
| Borrowing $500 for one month and paying $15 in interest would
| be completely worth it and beneficial to the borrower. That's
| what 36% annualized interest would look like for a single
| month.
|
| Do people get in trouble with debt? Yes. And that's why we
| have bankruptcy. But not everyone gets in trouble with debt.
| I don't think it's fair to make it unavailable to everyone to
| protect those that fall into arrears -- because, again,
| that's what bankruptcy is for.
| aseipp wrote:
| > Say I live paycheck to paycheck... would be completely
| worth it and beneficial to the borrower
|
| I mean yes, if you just make up completely fake scenarios
| that have no bearing on the real world, a lot of bad things
| can end up looking beneficial. I'm going to assume this
| little experiment sounded much better in your head than it
| did in practice?
| zozbot234 wrote:
| > Say I live paycheck to paycheck
|
| Well, that's your problem right there. Unless you have
| routine access to spending opportunities that yield more
| than 36% in yearly returns, which I'm going to assume is
| pretty unlikely.
| renewiltord wrote:
| The easiest way to yield that kind of return is aborting
| on pre-committed spending. In fact, that's the way the
| poor generate this kind of income. If they have $100 for
| food this month and a sudden expense needs $50, then that
| means they just go hungry until their budget hits $50 for
| food this month.
|
| What you do is you starve a day or two and sell your food
| bank food. Everyone is capable of generating income while
| depleting from stores.
| baq wrote:
| 'Stop being poor' is the usual advice given in that
| predicament.
| bonzini wrote:
| If you live paycheck to paycheck, which is consistent with
| your total savings being less than $500, the chance that
| you will be able to pay back $515 on your next payday are
| basically zero.
| damiankennedy wrote:
| I'm not so sure, living paycheck to paycheck doesn't mean
| you have no discretionary spending at all. Maybe you have
| $500 a month for one off expenses and you already used up
| this months on a laptop for you kid at school or
| something.
| chii wrote:
| and next month, another emergency. The root cause is low
| income, because with a higher income, such things won't
| be an emergency.
| bonzini wrote:
| One off expenses don't happen 12 times a year. If you
| haven't been able to save $100 a month for five months,
| you just won't be able to save five times as much, let's
| be realistic.
| Scarblac wrote:
| If you have $500 per month for one off expenses, you
| should have been able to build some sort of emergency
| fund.
| ianleeclark wrote:
| 500 dollars of discretionary spending is a comfortable
| position to be in. Paycheck to paycheck tends to mean
| that your entire paycheck goes to subsistence and
| (optionally) debt.
| renewiltord wrote:
| My car was towed the other day and while I was paying my
| bill for the $700 or whatever SF makes you pay, there was
| this guy at the next counter with nothing who was
| sleeping in his van who had it towed and they wanted $100
| to release it. The tow counter lady could obviously do
| nothing (his price is low because of low income etc.
| etc.) but the guy was going to have to sleep in the
| street otherwise. And there is a holding fee each day
| it's in the tow yard.
|
| Sure, we could find each of these risky situations and
| try to regulate them, but you won't even know of them
| because most people will never get towed. It's better to
| improve access to credit.
|
| The guy could get $100 the next day, but not
| $100+storage-fee/day. It's like $70/day. Any loan that
| goes between 0% per day and 70% per day simple interest
| would have been a net win for this guy.
|
| Obviously, having eavesdropped on the whole thing, I paid
| it as I was leaving but I think perhaps those of us with
| easy cash liquidity perhaps should build some intuition
| on what kinds of situations cause people to take on
| onerous credit.
| baq wrote:
| It's expensive to be poor and people who haven't ever
| been poor just can't wrap their heads around that. They
| don't understand the loss-loss choices poor folk have to
| make every day and the toll and psychological exhaustion
| it puts on them.
| UperSpaceGuru wrote:
| Props on paying it forward. It's not a systems fix, but
| we underestimate how impactful culture is & in a future
| where the wealth distribution is going to be even more
| lopsided, benevolence & sense might be a good stopgap.
| jacquesm wrote:
| In other countries there are institutions such as municipal
| banks that will borrow you the money at a reasonably low
| interest rate. The US is fairly unique in having legal
| usury where loansharks are allowed to prey on poor people.
| davedx wrote:
| UK: hold my beer...
| syki wrote:
| The question lawmakers ought to ask is what is more
| beneficial, overall, for society? Some will suffer by
| denying exorbitant interest rate loans. Some will benefit
| by restricting them. I suggest our society would be better
| by not having exorbitant rate loans be legal.
| adventured wrote:
| Why should a society be structured by majority rule /
| majority benefit for such things, even if one agrees with
| your premise that society is supposedly better off (which
| I disagree with, you're not counting all the required
| consequences that go with re-ordering the system, you're
| pretending we're only talking about one thing)?
|
| Actual democracy is an extreme negative, not a positive
| approach to organizing society.
|
| You can claim the majority would benefit from eating the
| wealth of Sergey Brin and Larry Page at this point, they
| no longer operate Google, they're just ~50 year olds
| sitting on $200 billion in Google shares, piddling around
| until the day they die. So why not let society benefit
| sooner rather than later by consuming their wealth to its
| (supposed) benefit, divvy up their wealth to the poorest
| 51%.
|
| You can invent a huge number of scenarios for doing
| things like that, where society supposedly is better off
| if we violate the property rights of some minority group.
| Why shouldn't some minority of people be allowed to lend
| at 43% interest if there are takers at that rate? Because
| you say so? Why shouldn't their property rights be
| respected - the property right to lend their money out at
| the rates they can command - and why should the majority
| get to arbitrarily restrict their property rights? It
| sets up an obvious exploitation situation, which is
| always the case in democracy, where the majority can
| endlessly torture, exploit and abuse the minority.
|
| It would very clearly be better for the top 51% (far more
| than that actually) - the majority of society - if the
| economic bottom 10% did not exist (a group that rarely
| holds a job, has vast health & drug addiction problems,
| rarely pays taxes into the system, rarely contributes
| much of anything; and in fact that's true in nearly all
| welfare states, including the US). So they should all be
| gotten rid of, is that right? Democracy in action. The
| tax paying majority is sick and tired of carrying the
| never-tax-paying economic segments at the bottom, time to
| get rid of them, for the benefit of "society" (aka the
| majority power herd).
| nikanj wrote:
| Alas, the more likely scenario is "I need $500 to fix my
| car. Damn piece of shit needs repair at least once or twice
| every year. If I had a brand-new F350, I would save so much
| money on repairs!"
|
| And they happily drive off the lot with a $80k car loan at
| 36%. People are, pardon my french, dumb as shit when it
| comes to car purchases. They are very happy to lose a
| guaranteed $10k/year in deprecation, so they won't get hit
| by a $2000 surprise bill.
| loeg wrote:
| Who finances cars at 36%?
| toomuchtodo wrote:
| https://www.moaa.org/content/publications-and-media/news-art...
| wiredfool wrote:
| The reason that this is different than what you might expect
| from a free market approach is that part of the "being in the
| military" is a host of new rules that have the force of law,
| and one of these is to not default on loans. If you do, and
| your CO gets a call, then you're in for a bad time.
| cheschire wrote:
| Well the existence of rules in itself does not justify more
| rules. That's just bureaucracy. But I think what you're
| driving at is there are rules in place for military folks
| designed to keep them from becoming targets of manipulation,
| keep them from making poor household decisions that would
| distract them from regulatory tasks, etc.
|
| I don't imagine there are many protections for active duty
| folks that are designed purely to protect the individual. I
| suspect the primary motivation to get most of these types of
| laws passed is to protect the government.
| mpyne wrote:
| > I don't imagine there are many protections for active
| duty folks that are designed purely to protect the
| individual.
|
| On the contrary, for reasons political ('everyone loves the
| troops'), administrative (Congress in many ways writes the
| 'Employee Handbook' for military personnel), and logistical
| (the military is _heavily_ made up of people straight out
| of high school), there are several protections in law
| designed to protect military on active duty.
|
| We can cancel leases with landlords with nothing more than
| valid assignment orders, at any time. We can vote in
| elections using the easiest process there is, including
| instant registration and the ability to fax the vote over.
| And, yes, there are restrictions on lending to those on
| active duty to try to keep us out of trouble.
|
| Even though active duty personnel _do_ make convenient
| targets of political affection, it 's not all done out of a
| sense to protect the individual. Active duty personnel have
| clearances, access to government facilities, and so on.
| Protecting them from getting into stupid situations is to
| the government's benefit.
|
| But that all said, we get a lot of protections that exceed
| what the government deems necessary for its benefit. Just
| look at the differential treatment provided to military and
| government civilians (who also have clearances, access, etc
| etc) if you want to see.
| wiredfool wrote:
| No, I didn't go into the multiple levels of chesterton's
| fence.
|
| I pointed out how the risk is different than the assumed
| free for all that is the free market. I will not
| potentially get thrown in the brig for defaulting on a
| payment. A private could be.
| specialp wrote:
| It is because that is the violation they can hit them with from
| a federal level. Usury laws are the domain of states.
| jlawer wrote:
| More then 36% APR for anything more then a fraction of your
| weekly / monthly salary is likely to be crippling for most
| people and predatory. I can understand higher rates for very
| short term debts (i.e. a payday loan where the entire thing
| should be paid off in 1 month, but these lenders often try and
| have people turn over the principle into new loans).
|
| IF someone's credit won't support a 20% interest rate then I
| don't think they should be leant money in the traditional
| sense. Either the purchase isn't required (in which case it
| shouldn't happen), or if its essential they should be supported
| by mechanisms to get people out of debt. Governments can make
| low value loans available to help here. In Australia, your
| entitled to a loan if your on benefits (centrelink) in which
| repayments are deducted from your welfare payments but charged
| no interest.
| _jal wrote:
| > Why aren't these extended to credit consumers in general
|
| Take your pick:
|
| - Finance companies have effective lobbyists.
|
| - Americans demand All The Freedoms. (Except for those
| freedoms.)
| hellojesus wrote:
| Of course we do! Even the military covered bit is nonsense.
|
| Americans do not take kindly to voluntary transaction
| meddling by the government because who is the government to
| say what two private parties agree on so long as it does not
| infringe on the rights of others?
| eropple wrote:
| Believe it or not, the social part of our society finds
| there to be something coercive about Hobson's choices.
| Something about people not existing purely to be grist for
| your ideological mill? Shocking, I know, but, well, it is
| what it is.
|
| That social part of our society has cottoned onto the idea
| that for the poor among us the game is rigged--and that it
| is not merely rigged but it is being played such that the
| information necessary to _know about the choices to get out
| of it_ show up far too late to be of use, or not at all.
|
| And while that is speaking of a just government, and ours
| is frequently unjust--sometimes it gets something right.
| hellojesus wrote:
| If this service existed in an extortionary way, why isn't
| there competition that undercuts the 36% rate? Perhaps
| it's because such high rates are necessary to make the
| business profitable at all.
|
| While the government _thinks_ they just saved people from
| an evil corporation, all they 've done is completely
| prohibit such customers from acquiring loans.
|
| If there is opportunity for arbitrage, you or I or anyone
| could step in and create a seemingly profitable business
| while also providing a social benefit.
|
| The moral hazard introduced by the government is the
| issue.
| Talanes wrote:
| I've never gotten a loan that wasn't from a "person" that
| only exists as a government-sanctioned construct. I'm all
| for natural rights for natural people, but corporate
| entities are creatures of law, not nature.
| hellojesus wrote:
| It's still a voluntary transaction.
|
| Would you be opposed to a sole proprietor offering loans
| at 200% apr?
| aj7 wrote:
| Backed by guns, no doubt.
| engineeringwoke wrote:
| What about meddling in USD transactions across the globe?
| Did they get that part right?
| ethanbond wrote:
| Yes I like that autocratic regimes, terrorist groups, and
| rogue states have a very hard time financing their
| operations. The meddling is certainly not perfect and not
| without collateral damage, but yeah I think most
| Americans are probably pretty okay with that.
|
| Awfully suspect that people start coming out of the
| woodwork with arguments from "principle" coincidentally
| with them having a vested economic interest in a weak
| dollar/weak state generally (or at least _thinking_ they
| have interests in those things).
| [deleted]
| vmception wrote:
| Federal government has limited purview of its citizens, but can
| more easily regulate the people in the military and
| interactions with them.
|
| As it derives its power from the delegates of the states, it
| has to appease them even if it has the power to regulate all
| facets of life. So there isn't a law for all people as not
| enough delegates can stomach that, but for the military its
| easy.
| jhgb wrote:
| > but can more easily regulate the people in the military and
| interactions with them
|
| I always found it amusing how the "patriots" worshipping the
| military are pretty much the same people who hate any kind of
| government intervention in their lives.
| ashtonkem wrote:
| I'm reminded of the common quip that the US military is the
| largest socialist organization in the United States.
| kodah wrote:
| This is actually one of the things I like to highlight to
| folks that talk a little-too-gleefully about socialism.
| The military _implements_ socialism for convenience and
| cost effectiveness. The result is atrocious. This was in
| Camp Lejeune, NC.
|
| I almost never got adequate medical care. The medical
| system was strange and winding. There were all kinds of
| approvals needed for very simple things.
|
| The food standards were absolutely terrible. I don't know
| if it was an actual thing, but I was told there was a
| threshold for the number of roaches that could be present
| on food dispensing equipment before they'd throw the food
| out.
|
| The housing was disgusting. I lived in a barracks built
| in 1945 with inadequate parking, sewage that once popped
| a goldfish into a toilet bowl, water that occasionally
| would turn totally brown or yellow and is now known to
| have made people sick. There was a door to the interior
| of the building where ducts, pipes, and internet were run
| that _all_ contained asbestos and asbestos warnings.
|
| The worst part, you had no option to say, "Give me the
| dollar amount you spend on this so I can find my own
| options" but they'll gladly tell you what they spent at
| an inflated rate.
|
| These are just the ones off the top of my head.
| aidenn0 wrote:
| I have heard similar stories from all members of my
| family that served in the military. Their experiences
| with healthcare in the military have essentially
| guaranteed they will never get behind a single-payer
| health-care system.
| jhgb wrote:
| The results you describe sound very much like pre-1989
| Czechoslovakia to me. I guess they actually _did_ achieve
| socialism! :)
| kodah wrote:
| They do achieve socialism, without a doubt.
| rjbwork wrote:
| Not really socialist. It's just a giant imperial jobs
| program that also provides cover for channeling tax
| dollars into the coffers of the donor class.
| MandieD wrote:
| A socialist meritocracy.
| kodah wrote:
| > Federal government has limited purview of its citizens, but
| can more easily regulate the people in the military and
| interactions with them.
|
| Congress passes these protections, the military just lobbies
| for them internally because they cause problems with the
| operations of the military. Some things I saw a lot:
|
| - A Private, PFC, or Lance Corporal who lives in the barracks
| (therefore has the most straight-forward pay with little
| extra incentives) [1] gets approved for a car loan on a used
| car at 20%+ APR or credit cards which revolve into 20%+ APR
| with caps well above their means. When they can't pay they
| will attempt to contact the chain of command and pressure the
| military into intervening. Eventually they'll settle, the car
| or items get returned, the Marine gets busted down, and then
| they go on to do the _same_ thing all over again with the
| _same_ car.
|
| - Lending services know that military are fixed income and
| that they are also low income, and will therefore shop
| predatory rates to them as a means of "refinancing". Really,
| it's debt consolidation because military members also have a
| high rate of divorce and debt.
|
| - Banks will attempt to repossess homes while military
| members are on deployment and cannot access internet or
| financial services. Also happens to reservists who are
| without their primary income and are deployed.
| (ServiceMembers Civil Relief Act) [2]
|
| Military just face some very unique situations, but a lot of
| it derives from the fact that we pay enlisted personnel (the
| greatest in number) dirt for their trade.
|
| [1]: Note, these are pre-tax:
| https://militarybenefits.info/2021-military-pay-charts/
|
| [2]: https://www.texasbar.com/flashdrive/materials/military_l
| aw/M...
| mschuster91 wrote:
| > This might be too low for some high risk customers to be able
| to get credit at all.
|
| We're living in near-zero interest rate land. 36% is usury,
| even 20% is that.
|
| Maybe the US should not only put a hard cap for _any_ kind of
| loan at FED interest rate + 10%, but also force through an
| actual livable minimum wage so even the poorest classes don 't
| have to choose between ridiculously expensive credit card debt
| or starving/dying because they can't afford healthcare.
| tw04 wrote:
| >A central component of LendUp's marketing and brand identity was
| the "LendUp Ladder." LendUp told consumers that by repaying loans
| on time and taking free courses offered through its website,
| consumers would move up the "LendUp Ladder" and, in turn, receive
| lower interest rates on future loans and access to larger loan
| amounts. As alleged in the complaint, in reality, as tens of
| thousands of LendUp's customers climbed the "LendUp Ladder," they
| failed to qualify for larger loan amounts and continued to be
| offered similar or higher interest rates compared to previous
| loans.
|
| While the initial founding direction seems well intentioned, it
| sounds like they were scamming customers, or unable to actually
| follow-through on the promise to consumers. Glad the regulators
| are actually enforcing some of the rules.
| polygotdomain wrote:
| While it does seem like a scam, I think the "following through"
| aspect was doomed from a business perspective. Credit, and
| therefore rates, is based on a consumer's history, not their
| knowledge. While poor financial decisions can certainly be
| chalked up to not knowing any better, knowledge of what you
| should do goes out the door when there's bills to pay and not
| enough money to cover them all.
|
| Remember, LendUp is likely just a middle man and marketer; it's
| facilitating the loan, not doing the actual underwriting (and
| therefore rate setting). Following through would mean exposing
| the business to risk that customers, in spite of climbing their
| made up ladder, still made payments. Considering the other
| shady stuff that this thread is talking about, it doesn't
| surprise me that they didn't choose to take on that risk.
|
| Of course the irony in all of this is that the very thing that
| would've prevented customers from making the right choice even
| though they were gaining financial knowledge is the loans that
| LendUp was handing out. I wonder if the pitfalls of payday
| loans was part of that knowledge track. I doubt it.
| emodendroket wrote:
| I suppose in theory, in the very long run, improving one's
| credit by paying off loans in a timely fashion could lead to
| that result eventually.
| tw04 wrote:
| > Credit, and therefore rates, is based on a consumer's
| history, not their knowledge.
|
| But their entire premise was that they weren't simply going
| to use existing credit scores.
|
| > Remember, LendUp is likely just a middle man and marketer;
| it's facilitating the loan, not doing the actual underwriting
| (and therefore rate setting).
|
| Over $350m to be a middle man for small loans seems like an
| absurd amount of funding. I assumed and hope all that cash
| was because they're actually lending directly.
| tootie wrote:
| I wouldn't be surprised if it's a scam. I also wouldn't be
| surprised if it was all wishful thinking and their attempt to
| bypass traditional risk models was just a failure.
| darkstar999 wrote:
| And they weren't even taken down for being a loan shark, where
| they can make over 600% interest in some states.
|
| https://www.cnbc.com/2021/02/16/map-shows-typical-payday-loa...
| [deleted]
| pc86 wrote:
| Is it really fair to calculate an _annual_ interest rate when
| the loan term in question 14 days (literally one payday)?
|
| I'm not defending payday loans but it seems like an
| intentionally skewed comparison when you're looking at
| installment loans of terms in the years or something revolving
| like a credit card.
| nlh wrote:
| I'm going to disagree with the sibling responses here and
| agree with your premise - I actually think in some cases it's
| not fair to calculate APR for short term, low value loans.
| Here's why: There's a transaction cost with making a loan -
| paperwork, time, etc., and in many cases that transaction
| cost doesn't scale with the loan size.
|
| Example to illustrate: Let's say I ask you for a personal
| loan. If I need $100,000 and I want to pay you back over a
| few years, let's say you charge me 5% APR. You write me a
| check and you can roughly count on the fact that I'm going to
| pay you ~$5,000 a year for the service. I get the money I
| need, you make a nice return, we're both happy.
|
| Now let's say I need $100 for a week. If you charged me the
| same 5% APR, that means I pay you back about $100.096 next
| week. Is it worth it? Pretty good deal for me - I'm happy to
| get a week's usage of $100 and it only cost me a dime. Pretty
| bad deal for you - and in fact, I expect you wouldn't want to
| even do the deal. Not worth the risk!
|
| So what do you charge me? What's it worth to hand me a $100
| and hope you'll get it back in a week? $1? Still pretty low -
| and that's 52% APR! $5? Getting closer - now you can buy a
| beer or two at the bar next week. But that's 260%! $10? Now
| we're at 520% APR.
|
| It doesn't really scale at low numbers.
| wbc wrote:
| these amounts (10, 50, 100, w/e) are being lent on a minute
| by minute basis and are paid back in a week:
|
| https://www.kucoin.com/margin/lend/USDT
|
| USD transaction cost might be too high if the technology
| doesn't exist
| AlexandrB wrote:
| APR is the financial equivalent of those labels in the
| grocery store that give price/100g (or price/oz if you
| prefer). It allows you to compare the cost of borrowing money
| across a range of products regardless of a loan's duration,
| compounding frequency, or non-interest fees. So yes, it's
| very fair.
| tzs wrote:
| A $100 loan that I have to pay back the next day for $101
| has an APR of 365%.
|
| A $100 that I don't have to pay back until one year later
| for $200 has an APR of 100%.
|
| I fail to see how APR is useful in any way whatsoever when
| comparing those two loans.
| ahmedfromtunis wrote:
| Not the OP but I always fail to see how this is useful in
| the real world (I'm sure you already guessed I'm no
| financial guru).
|
| Can someone please explain why isn't this akin to comparing
| the price of a gallon of water to that of printer ink and
| then thinking: "hmm, the water is way cheaper. I'll take a
| dozen of bottles, yet I'll be spending less."?
| AlexandrB wrote:
| I gave an example in another comment:
| https://news.ycombinator.com/item?id=29656265
|
| Because the thing you're buying is short term, unsecured
| credit, it's generally pretty fungible. Regardless of the
| credit product - payday loan, credit card, line of
| credit, or something else - what you're paying for is
| immediate access to money. And in most cases, these
| products allow you to borrow as much (or as little) as
| you want - so you're not going to "overborrow". This is
| more like comparing the cost of buying 30L of water in
| 330ml containers for $2/ea vs. in 481ml containers for
| $3/ea except the math for compound interest is harder to
| do correctly.
| Karunamon wrote:
| It is not fair, nor is it reasonable. It's about as useful a
| metric as the weather forecast being provided in degrees
| kelvin.
|
| As someone that's had their ass saved by payday loans a
| couple times, I'll gladly defend them every day of the week
| and twice Sunday. At no point was I ever unclear about
| payback schedules, the cost of the financing, penalties, any
| of it, and neither is anyone else with the financial literacy
| to have a bank account, a job, and regular
| paychecks/deposits, all of which are a requirement from your
| average lender.
| AlexandrB wrote:
| You need to borrow $200 for 60 days. Is it cheaper to do so
| for a flat $10 fee on repayment or by using a credit card
| with an APR of 20% (compounded monthly)?
|
| I can't do the math to answer this question in my head. I
| suspect you can't either. The point of normalizing the cost
| of borrowing money to an APR is so that a consumer can make
| this decision without having to solve exponential
| equations.
| dragontamer wrote:
| > Is it really fair to calculate an annual interest rate when
| the loan term in question 14 days (literally one payday)?
|
| Yes. Because annual interest rates are the standard of this
| country. That means you compare the interest rates apples-to-
| apples.
|
| My credit card is 13% annual rate, even if I only ever borrow
| money for 30-days at the max. Comparing this platform vs my
| credit card on an apples-to-apples basis (APY) is just fair.
| emodendroket wrote:
| In the case of the credit card you don't ever have to pay
| any interest if you pay within 30 days; can't say that for
| the payday loans.
| AlexandrB wrote:
| That's only true if you're using your credit card to buy
| stuff. If you withdraw cash from your credit card at an
| ATM you start accruing interest immediately; at least on
| every credit card I've ever owned.
| emodendroket wrote:
| You're right. Cash advances are generally not on very
| favorable terms.
| joe-collins wrote:
| If you shy away from defending payday loans, you may be aware
| of how easily those loans can "get away" from their
| financially-unstable borrowers and turn into longer-term cash
| sinks. In light of that, how is it _not_ fair to consider the
| interest rate over a longer period?
| [deleted]
| dkjaudyeqooe wrote:
| Yes, it's a standard measure so you can easily compare
| interest rates.
|
| Why shouldn't consumers be able to easily compare rates other
| than making it easier to mislead them? Arguably not proving
| an APR is an "intentionally skewed comparison."
| sandofsky wrote:
| They don't spell it out in the press release, but the 2016
| settlement included a $3.63 Million fine.
| https://www.consumerfinance.gov/about-us/newsroom/lendup-enf...
|
| According to Crunchbase, LendUp has $361M in funding. Maybe they
| thought that a few million here and there is a drop in the
| bucket, and they stand to lose more if reforming themselves
| impacts growth. Turns out you have more to worry about than
| escalating fines.
| vmception wrote:
| Yeah, CFPB is one of the newest, or maybe the newest, federal
| agency. The other consumer protection agencies (FTC) lack
| teeth. So it is a decent gamble to test the authority.
|
| Of course they could just stop the predatory practices, but
| lets not be _crazy_ here.
| veltas wrote:
| It seemed to me like the business is having financial trouble
| and cannot pay a fine like last time, so has to be penalized in
| another fashion, maybe I'm misreading it.
|
| > The order would also impose a $100,000 civil money penalty
| based on LendUp's demonstrated inability to pay.
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