[HN Gopher] Regulators Shut Down Lending Platform (YC Alum) LendUp
___________________________________________________________________
Regulators Shut Down Lending Platform (YC Alum) LendUp
Author : boeingUH60
Score : 636 points
Date : 2021-12-22 20:15 UTC (1 days ago)
(HTM) web link (www.consumerfinance.gov)
(TXT) w3m dump (www.consumerfinance.gov)
| kaminar wrote:
| 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
| whimsicalism wrote:
| I feel like if we really cared about this, we would offer
| bounties or % of penalty.
|
| Oh and exempt workplace from two-party consent recording rules.
| ceejayoz wrote:
| The SEC offers that.
|
| https://www.sec.gov/whistleblower
|
| > The Commission is authorized by Congress to provide
| monetary awards to eligible individuals who come forward with
| high-quality original information that leads to a Commission
| enforcement action in which over $1,000,000 in sanctions is
| ordered. The range for awards is between 10% and 30% of the
| money collected.
|
| Someone made $114M this way.
|
| https://www.sec.gov/news/press-release/2020-266
|
| If you like the idea, there's a bill proposed to give the
| same ability to the CFBP.
|
| https://www.banking.senate.gov/newsroom/majority/cortez-
| mast...
| whimsicalism wrote:
| Yes, I've heard of this for the SEC.
|
| Where I'd really like it to be done is minimum wage law
| violations. Of course, that'll never happen.
| javajosh wrote:
| A reminder that naivete is valuable. Without it, nothing
| would ever change.
| [deleted]
| emodendroket wrote:
| So in the end, I suppose it was not so different from a payday
| lender after all.
| xivzgrev wrote:
| That's too bad. I always liked their ladder concept, but looks
| like it was at least partial bullshit
|
| As much as legal and compliance slow your work down, this is why
| they're important folks!
| gameswithgo wrote:
| I wish that our very large corporations could also be shut down
| for practices like that, but instead we bail them out. Vote
| harder I guess?
| darig wrote:
| pyrophane wrote:
| What collection tactics did LendUp use?
|
| In addition to extremely high interest rates, a lot of these
| companies rely on being pretty aggressive to get people to pay. I
| kind of assume that without that these products don't really
| work.
|
| Was the idea that the "ladder" was meant to be a carrot sub for
| the near "we'll break your legs" stick tactics that a lot of
| other lenders in that space use?
| qwertyuiop_ wrote:
| What is "fintech" about payday lending ?
| darig wrote:
| missedthecue wrote:
| putting it on a slick website instead of in a musty pawn shop
| in the bad part of town.
| mmaunder wrote:
| As an immigrant I can tell you that the USA is basically Jurassic
| Park. The monsters are mostly predatory companies. It can be a
| lot of fun but it's very easy to do worse than die - to end up a
| slave for the rest of your life to one of the predators. Along
| with bullshit like making options trading available to kids, debt
| is probably one of the velociraptors.
|
| It is a trap sprung at the very start of your adult life when
| you're most vulnerable, as a student loan.
|
| It's sprung when you've lost your job, are vulnerable and are
| about to become homeless.
|
| It's sprung when you're already in debt and vulnerable, by other
| lenders.
|
| Anyone see a pattern here? Debt preys on the vulnerable, turns
| them into something that delivers returns for decades to the
| holders, and wraps all that up into tidy looking financial
| products.
|
| The business of debt is the financial equivalent of the US pork
| industry: Everyone treats it as part of American life, but the
| details would make most people throw up.
|
| Anyone remember microfinance? That was the same play: usury with
| a fresh coat of paint.
|
| I'm seeing posts here making it sound like 36% APR is acceptable.
| Look up usury folks. This is it. Debt that is intentionally
| structured so that it can never be repaid and keeps the borrower
| harnessed to the cart.
|
| It's incredible how folks, particularly in the US, have become
| this morally uncalibrated.
| dncornholio wrote:
| Don't forget credit cards. They make you spend money you don't
| have. Bringing you in with benefits you should've had in the
| first place (extended warranty etc).
| 8ytecoder wrote:
| One can argue that it's because student loans are easy to get,
| that there are so many spurious universities preying on
| students. I wouldn't really disagree with that. Let me share a
| different perspective. I _couldn 't_ get a student loan. They
| don't make it easy to get student loans in my country. Very few
| are alloted by public banks and those go to the managers'
| favorites. Because of the lack of a collateral, private banks
| don't every try - too much risk. My parents had to sell the
| only property we had - our house - to send me to college. I
| don't know if that is a better situation to be honest. I'd have
| gladly gone into debt to let my parents keep their home.
|
| And the best part is that education wasn't even expensive for
| me - esp with the govt scholarship. But even that little money
| was a huge expense for my family. I know so many other fellow
| students who had a similar story. It's hard to imagine how many
| other families could have been lifted if they were given an
| opportunity like I had.
| IAmGraydon wrote:
| Interest is the counterbalance of risk. One only exists because
| of the other. That's all there is to it. People are free to use
| both sides of that equation to their benefit or to their peril.
| Your argument is simply that we should protect people from
| themselves, and I would strongly disagree. You're an immigrant
| - what did you come here for?
| varelse wrote:
| It's even better when talk of forgiving student loans triggers
| the sorts that were fortunate enough to pay them off on their
| own to decry that as some sort of giveaway the victims of these
| practices don't deserve.
|
| I mean it's great to pay your way out of debt but the game is
| rigged exactly as you state. And I deeply wonder about the
| hidden costs of having so much of our population saddled with
| this debt. No proof but I'll bet it outweighs the cost of
| canceling that debt not that we'll ever know.
| godot wrote:
| IMO debt is a complicated topic -- One could criticize debt as
| traps for the poor, one could also criticize that the rich can
| use debts to maximize leverages / avoid taxes. Is debt
| something you don't want to get into? If so then why are the
| rich taking advantages of them? Does that mean you should
| prevent the poor from getting in debt? Is that not even worse
| -- gating them from education, home ownership, etc.? Is the
| problem then that education and housing cost too much? Or is
| the issue really proper education for the poor on what debt and
| how much debt they can afford? More rules and regulations to
| prevent them from getting debt "too easily"? Is that more gate-
| keeping against the poor then? I don't have answers to any of
| these and I don't have a perspective. Just wondering out loud.
| emodendroket wrote:
| I don't think it's controversial to say that the kind of debt
| the rich would use has rather different terms than a payday
| loan.
| noduerme wrote:
| Coming from an immigrant family myself which stressed savings
| and frugality above all, and who even with basic literacy and
| no formal education understood that debt was a trap, and that
| under _no circumstances should you ever borrow money_ , I
| wonder what's wrong with 5th+ generation Americans who think
| they can get something for nothing.
|
| Not to say anything about predatory lenders, who all belong in
| hell right next to the people selling miracle cures for Covid,
| but come on. The only reason there are so many people who fall
| for these traps is that the economy has grown and grown thanks
| to the endless influx of immigrants who create value. Left to
| their own devices, without immigrants who work and save,
| Americans would end up an impoverished banana republic within
| one generation.
| Vadoff wrote:
| In the US, you can also declare bankruptcy and wipe out almost
| all debt (except punitive debt).
|
| In some countries, debt follows you forever and even gets
| passed to your family when you die.
| bitcharmer wrote:
| I'd rather live in a system without the institution of
| bankruptcy and enjoy life with almost zero risk of this
| happening.
|
| If you're an average American you start getting into debt
| very early in your life. This is not how young people should
| be entering adult lives. What you Americans think is normal,
| really isn't.
| vivekd wrote:
| not american, canadian, but it' hard to avoid it here, most
| people wouldn't tbe able to get a car, university education
| or home without some form of debt. It does have a very
| negative impact on our society I'll admit that
|
| It's normal for people here to enter their adult lives with
| between 20 to 80 k of debt from university
| frockington1 wrote:
| It's also what propels Americans into a higher standard of
| living than anywhere else. At a young age I bought a couple
| investment properties with an enormous amount of debt. Now
| I'm living a very nice life with little to worry about.
| Debt is a tool just like a hammer is. Don't be yourself in
| the head with it, use it to make your life better
| bitcharmer wrote:
| > higher standard of living than anywhere else.
|
| Have you by any chance heard of places like Switzerland
| or Monaco? Even Germany beats USA in terms of poverty and
| malnutrition among children.
| martin8412 wrote:
| Standard of living isn't really comparable between
| people. Most people in Western Europe live really nice
| lives without the need to buy pointless junk
| fallingknife wrote:
| I agree with most of what you are saying, except for:
|
| > to end up a slave for the rest of your life to one of the
| predators
|
| One of the best parts of the US system is that you can always
| file bankruptcy and live to fight another day
| darawk wrote:
| > It's sprung when you've lost your job, are vulnerable and are
| about to become homeless.
|
| I mean, I think you can call this a trap, or you can call it a
| life raft. If you take away the option of debt, the option that
| remains is homelessness. I'm not really sure its fair to call
| that a trap.
|
| If there is a trap there, it's the fact that the person was in
| a position to become homeless in the first place. Not that some
| lender offered them a temporary respite.
| neuronic wrote:
| If the option to debt is homelessness maybe think about that
| system for a second as opposed to what society is capable of
| providing if you let it.
|
| Predatory corporations rule America today so the Jurassic
| Park comparison is quite apt. There is very solid middle
| ground in a _social_ market economy.
|
| We built societies as a construct to support the people
| living in them, but America is all about competition and
| individuals. There is barely any sense of community left
| unless media frames it like a sports event (team blue vs.
| team red or whatever).
| mensetmanusman wrote:
| Glad you mentioned usury, a sin in every major religion, once
| illegal in the u.s. until a quirk in the law allowed it to
| flourish.
|
| https://repository.law.umich.edu/cgi/viewcontent.cgi?referer...
| janeroe wrote:
| > As an immigrant I can tell you...
|
| Being an immigrant, of course, makes you an expert.
| cromka wrote:
| Being an immigrant gives you an edge of being more critical
| towards the country you reside in, for having been raised
| differently and thus instinctively noticing things that
| natives otherwise have been normalized to ignore.
| int_19h wrote:
| One thing that I've always found interesting is that,
| historically speaking, usury is very consistently frowned upon,
| even across societies that are otherwise very different. What
| more, the interest limits were usually _far_ harsher than
| anything that we have today.
|
| One can't help but wonder if our society being so deviant from
| the historical norm is evidence of its long-term
| unsustainability.
| heartbeats wrote:
| That's true, but the usury back in the day was usually about
| loans to individuals. These days, you can bankrupt out of it.
|
| Traditionally, the Catholic Church has made a distinction
| between loans ultimately backed by an individual's ability to
| sell their labor for money (mutuum loans), and loans
| ultimately backed by assets (societas loans).
|
| For societas loans, such as a non-recourse mortgage or a
| business loan, there is no regulation whatsoever. This is
| just equivalent to moving property around.
|
| For mutuum loans, these are considered as a form of slavery.
| If a profit is being made on it, it is illicit. The reason
| it's slavery is that it allows you to sell your time before
| you have it. If that money is spent, you are now in a
| position where you are being forced to work for nothing, i.e.
| textbook slavery.
|
| There's a good FAQ at
| https://zippycatholic.wordpress.com/2014/11/10/usury-faq-
| or-..., but I would like to learn more about this topic. Any
| good books?
| thisiswater wrote:
| Ironic, seeing as it's prohibited in the (expletive for
| emphasis)'n bible.
| frockington1 wrote:
| The US has a clear separation of church and state. Christian
| Values != Christian Laws
| fourstar wrote:
| > Look up usury folks
|
| For anyone actually interested in "looking up usury", I highly
| recommend: A History of Central Banking and the Enslavement of
| Mankind
|
| Note: you can't buy it on Amazon. Surprise surprise.
|
| https://www.barnesandnoble.com/w/a-history-of-central-bankin...
| [deleted]
| Jach wrote:
| If the US is Jurassic Park, what was the place you came from?
| john_moscow wrote:
| You'd be surprised, but many Western European countries have
| a concept of being decent, sense of duty, etc. While the
| modus operandi in the U.S. seems to be "go for it, as long as
| you can get away without getting jailed or sued".
|
| On the other hand, the European culture pushes back quite
| heavily towards fitting in and against entrepreneurship, so
| neither of them is perfect.
| bitcharmer wrote:
| > On the other hand, the European culture pushes back quite
| heavily towards fitting in and against entrepreneurship, so
| neither of them is perfect.
|
| I've lived in Europe (a few different countries) over 40
| years. What your saying is simply not true.
| kortilla wrote:
| Then where are all of the innovative companies? Europe
| has a massive drain brain problem because it absolutely
| does not reward innovation in any business sense.
| john_moscow wrote:
| Lived in Western Europe for a while. Most innovative
| small businesses I've seen involved fudging the numbers
| in some way to get government grants.
| bitcharmer wrote:
| I'm guessing they are from some place where people can live
| their lives without having to worry about that as much.
|
| Europe?
| frockington1 wrote:
| Europe's national bonds are currently yielding negative
| while their inflation is soaring. Europe makes America look
| like controlled spending so probably not there. Could be a
| smaller and more sheltered nation like Monaco or
| Switzerland
| xwdv wrote:
| The Matrix.
| Jach wrote:
| In case mmaunder comes back to reply soon, what I'm getting
| at that the other replies don't seem to address is what
| metaphor do you use for where you came from? The reason is
| because the idea of immigrating to Jurassic Park seems crazy
| to me unless you're in a much crazier spot already. To me
| Jurassic Park is something you might want to visit if you
| really like dinosaurs and get a thrill from danger, but not
| live in. Technically I do live "in the park" but while I
| don't see it as such I have occasionally thought about going
| elsewhere, so it'd be nice to have another data point in
| places to avoid/why. Is it simply that there's no other place
| with dinosaurs? (Perhaps dinosaurs being a metaphor for
| entrepreneur opportunities as replies are hinting at? Though
| I don't think you're getting at that since you ride them all
| off as monsters with one of the iconic dinos being "debt"
| rather than an opportunity.)
| CTDOCodebases wrote:
| Even if you are able to circumvent all this the only way at
| them moment to protect your savings is to borrow money and
| invest it in real estate or whatever.
| leeoniya wrote:
| > debt is probably one of the velociraptors.
|
| you probably mean Utahraptor; velociraptors were rather
| smallish, contrary to what the movies would have you believe.
|
| https://upload.wikimedia.org/wikipedia/commons/f/f9/Dromie_s...
| mmaunder wrote:
| Today I learned. Thanks. :-)
| TheDong wrote:
| I think in this case velociraptor is correct. The parent
| comment is not talking about the real dinosaurs, but rather
| making an analogy to the fictional creatures in the movie,
| which means the terminology of the movie is correct since
| that's the context.
|
| The pedantic point would be "the movie meant Utahraptor" or
| such, but not that the parent commenter did.
| kortilla wrote:
| Most debt in the US can be discharged through bankruptcy.
| Student loans that are bankruptcy proof are a gift from the
| government in the last 30 years.
|
| The entire tone of your post would be different if you realized
| that it's like the game Jurassic Park, not the movie, because
| you can start over whenever you lose. The way to win in the US
| is lots of tries, not guaranteed wins.
| bombcar wrote:
| Easy fix - forbid usurious loans that people are personally
| liable for. Only allow repossession of a actual asset in the
| case of failure to pay - and suddenly all these go away.
| samstave wrote:
| If I could give you all my karma points, I would.
|
| I have made the exact comment to many over the years and I hope
| that more people such as yourself are as eloquent and succinct
| in conveying this point.
|
| XO
| ChrisMarshallNY wrote:
| You are correct.
|
| When I got married, I brought in a lot of personal credit card
| debt, and we ended up using our wedding gift money to pay it
| off. It was extremely humiliating.
|
| Since then, I have lived quite frugally, and avoided all
| personal debt; paying off credit cards in total, each month. By
| the time we were ready to purchase a house, our credit was sky-
| high, and getting a decent mortgage rate wasn't difficult. Our
| house is tiny. We live in a middle-class neighborhood. No
| Teslas on our block.
|
| I also saved between 25-40% of my income in as many ways as
| possible, including some fairly decent funds.
|
| I have habitually avoided debt, and lived quite humbly, my
| entire adult life. I have never wanted for anything, and have
| always been able to afford top-shelf equipment for my software
| development work, but I suspect that a lot of folks here, would
| sneer at my life.
|
| Good thing, too. When I left my job of almost 27 years, and
| started looking for work, I learned that no one wants to work
| with "olds." That too, was humiliating, and infuriating. In
| fairly short order, I just threw in the towel. I won't go where
| I'm not wanted.
|
| My savings allowed me to set up a small corporation to buy
| equipment and software, while I pursued my "dream job," of
| working for free. I am working with a 501(c)(3), giving them
| software that would make a lot of "big league" corporations
| green with envy. I have the skills and experience to make
| others a lot of money, but my grey hair is so terrifying, that
| no one pays attention to my qualifications. I quickly learned
| to just avoid the agita. NPOs are grateful for whatever they
| can get, and I am appreciated.
|
| I couldn't be happier.
| john_moscow wrote:
| >I have the skills and experience to make others a lot of
| money, but my grey hair is so terrifying, that no one pays
| attention to my qualifications.
|
| You need to position yourself as a consultant with a clearly
| defined area of expertise, your own site, blog, etc. A
| salaried employee these days is first and foremost a team
| monkey hired to please the boss, and only then a skilled
| professional. When you need someone with actual expertise,
| you hire them transactionally to solve the problem and keep
| them on a separate frequency from the usual chicken coup
| business.
| avereveard wrote:
| because 50+ something CxOs with million dollar wages have a
| blog, a skill based resume and a github page, right?
|
| you're proposing the same monkey dance that signal
| "skilled, but will ccept to be treated as a cog" which hr
| loves but is ultimately demeaning and dehumanizing - while
| the valuable jobs market moves on completely different
| gears
| ricardobayes wrote:
| This will be controversial, but this is why the rest of
| the population sees us as lazy or childish. I try to put
| myself into the shoes of reading this comment as an
| amazon fulfillment worker. Comes off as spoon-fed that
| 'you're too good to even set up a CV'.
| avereveard wrote:
| nothing wrong with being blu collar, but the amazon
| fulfillment worker didn't have to invest $$$ for five
| years of university and doesn't have, to land or keep his
| job, to keep training thorough his career and doesn't
| have his job landscape shift every six months as clients
| requirements and techincal fads change.
|
| we're specialized knowledge worker, which just happen to
| have had our profession born after feudal ages, otherwise
| we'd be in the lawyer/architect/doctor brackets. we're
| slowly raising up there but just because of the labor
| market growth is getting stripped by the labor demand
| growth in our sector, but take not of this, unless
| something changes fast about how we see and market our
| profession, we're going to get pushed back into blu
| collars bracket as soon as the situation stabilizes.
| luckman212 wrote:
| > chicken coup
|
| I always knew those chickens would revolt one day! (think
| you meant chicken coop...)
| jrockway wrote:
| After a chicken coup, they'll form a chicken co-op.
| mlyle wrote:
| If the chicken coup is unsuccessful, they'll end up as
| chicken soup.
| Nevermark wrote:
| There is a great limerick in all this somewhere. Coo-coo-
| ka-choo
| anticristi wrote:
| > When you need someone with actual expertise, you hire
| them transactionally to solve the problem and keep them on
| a separate frequency from the usual chicken coup business.
|
| I'm starting to see the pattern too. You hire for "team
| spirit", i.e., people that are happy to sacrifice their
| weekends and evenings for the mission of your company.
|
| Old dogs, as I'm starting to become, will rather tell you
| that you need to work harder on your strategy, work harder
| on your product, avoid feature creep and sales outflanking.
| They might also tell you that you need management more than
| engineering. But enough of inconvenient truth, back to
| hiring juniors.
|
| Just to make sure I don't offered anyone. A successful org
| needs both: fresh minds and experience.
| ricardobayes wrote:
| Looks like I'm getting old then huh.
| kwiens wrote:
| Good for you! There are so many organizations in the world
| that need top-notch skills like yours and can't afford it. I
| hope you're having a blast.
| ChrisMarshallNY wrote:
| It's extremely gratifying (for me). I understand it's not
| for everyone, but I'm weird.
| girvo wrote:
| The ageism in our industry frustrates me.
|
| The best coworkers I've learned the most from were more
| experienced older devs. Now I'm the most experienced dev
| typically, which is good for my wallet, sure, but means
| learning from others becomes more difficult
| GoodJokes wrote:
| noduerme wrote:
| This sounds a lot like me. In the 90s, in a brief foray to
| college, I racked up about $12,000 in debt. (Could have been
| worse). I was ashamed by it. I tore up my credit cards and
| repaid it over a few years. Around Y2K my brother and I each
| inherited about $40k from our grandfather. He spent his. I
| invested mine. Fifteen years later I used it to buy a modest
| house, for cash. I work every day and, without a mortgage or
| rent, I save almost all of what I make. I don't take
| extravagant vacations or buy myself fancy cars (although I
| don't have to skimp when buying people nice gifts for
| Christmas). On around $100k/yr I'm worth over $1M. I don't
| live like a monk, but I'm sure a lot of people would laugh at
| my simple lifestyle. I like cooking rice and beans, slow
| roasting cheap and delicious meats, and getting volume
| discounts on interesting wines. If my gf wants something I'll
| never say no, but I never dated women who were after me for
| money, because it's obvious to anyone that I'm not into
| spending for status. I recently bought my first new pair of
| shoes in 3 years. But there's nothing I want that I don't
| have.
|
| Working as you do for a nonprofit sounds fantastic. My setup
| is a bit similar - after years of devotion, a good small
| company basically bought my freelance time in bulk and gave
| me 5% ownership, and I get to build beautiful software and
| set my own life.
| jameshush wrote:
| The last part of your story really resonated with me. Zero
| worries, pleasant job, and dealing with just the parts of a
| company that you're interested in (e.g. not having to worry
| about sales, marketing, or payroll on your own).
|
| Great job!
| onion2k wrote:
| I don't know you, and I probably shouldn't comment, but
| this way of life stops people getting rich. For you I'm
| sure that's OK. Like you say, you have everything you need.
| Anyway...
|
| There are two things that practically every rich person
| I've met have in common (where rich is assets over about
| $100m that aren't inherited). The first is focus. They have
| the ability to see an idea through to the end. They believe
| in themselves, they believe in an idea, and they _execute_.
| By the sounds of it noduerme might have that sort of focus.
| To live frugally when you don 't need to sounds like
| someone who has an idea and is sticking with it. That's
| awesome.
|
| The second thing is _need_. Actually needing money, either
| just to start out, or to fund a lavish lifestyle, or to
| keep up status, is a powerful driving force. Setting up
| your life up in a way that removes the force stops most
| people executing on their ideas.
|
| This is advice for anyone who wants to get _rich_ - if you
| slowly grow your assets to a point where you 're very
| comfortable, you probably won't ever level up to the point
| where you can buy a Lamborghini because you just won't need
| to. If your goal is to become _rich_ most people don 't
| seem to be able do it by slowly growing their wealth and
| _then_ working on an idea. You have to use the need to be
| "%^&* you money" rich to drive your idea.
|
| (This isn't universal of course. Some people come up with
| an idea later in life after they've got a house and assets
| and still execute brilliantly. But it's much more common to
| see younger founders who _need_ success pushing an idea to
| a big exit.)
| noduerme wrote:
| I upvoted because it's spot on. Those are exactly the
| drivers to get seriously rich. And you spotted me. I
| don't need to be rich or drive a lambo. _Need_ for fuck-
| you money comes from a couple places, that I 've seen: *
| Dad was abusive, always put you down. You never felt good
| enough, you _need_ to prove you 're better than him. I
| had this. My brothers had it. One of them makes $3M a
| year and desperately tries to use it to impress our
| father. I guess watching that act made me realize that's
| a fuckin futile way to spend your time. * You had some
| other form of humiliation, maybe you're short or ugly,
| girls don't give you the time of day. (I'm short and not
| terribly attractive - girls like me well enough if we get
| talking, and I always play poor on dates, although I pay
| for things. I never, ever want someone to like me more
| because.. [edit] double edit here. At my ultra-rich
| brother's wedding, his wife stood up to give a speech and
| she said: " I always thought [brother] was short, but I
| realized he was a lot taller when he was standing on his
| wallet! " Needless to say, they got divorced and he's
| still paying for it ).
|
| Just since we're speaking very bluntly. I found that when
| I'm single, I can usually meet a girl if I stick around
| somewhere until the end of the night. But I usually don't
| do that unless I'm starving. So you're exactly right,
| having the focus and having the _need_ are two different
| things.
|
| The only place where I personally think you're wrong is
| your overall pitch - "don't be this guy [noduerme]" - to
| young fellas that think getting rich is the end-all. Like
| said, if I needed it enough, I'd spend my time trying to
| get fuck-you money and be rich by those standards. But
| proving the size of my dick just isn't something I _need_
| to do, know what I 'm sayin? And funny enough, that blase
| attitude I've developed about it _really_ fucking pisses
| off the ultra-rich people in my life.
| lordnacho wrote:
| I've always found the real thing that people don't like,
| and I don't like, is the desire for approval. That
| childlike "look at me" thing that is endearing in a child
| but off-putting in an adult. I've seen it a few times
| among quite wealthy people, eg they try to impress you
| with how much wine they drink or how many cars they have,
| and it only works superficially. It's like a child
| somehow, and you often see them spouting their mundane
| thoughts in the media as if people want to hear what they
| think, or they start writing advice for other people to
| get rich.
|
| The thing about socializing is you discover that if
| someone has one of these hangups (women, money,
| intelligence) everyone around them will let them
| demonstrate it. It's painful to watch sometimes. "Sure
| I'll try your car one more time". "Wow you're really
| smart".
|
| By contrast I know genuinely megarich people who can't be
| identified as such, because they just don't have that
| need for approval.
| noduerme wrote:
| There is no one I feel sadder for than the ultra-rich
| people I know who desperately want to just be _liked_.
| They 're stuck in that phase of pre-school where it's
| like, "Look at how many legos I have! Do you want to play
| with my toys?" This is so superficially obvious, when you
| see it, I mean... you have to feel pity, because they're
| so desperate for love. For any real connection. And they
| can't trust anyone, either, because they'll never believe
| someone actually likes them for who they are. Having more
| money than you need to live comfortably is a fucking
| curse.
| irl_chad wrote:
| You're incredibly wrong. Rich people just make friends
| with other rich people.
|
| Speaking from experience, I don't care if girls want me
| for my $. But I'm not looking for a wife right now. If I
| was, I would probably date women that I meet at higher
| social events instead of lingerie models.
|
| I have a couple friends from before I got rich, but most
| of my friends now have similar status.
| noduerme wrote:
| > Rich people just make friends with other rich people.
|
| Those aren't friends. They're friendly competition. At
| best they're good to commiserate with. They're out to
| prove the same thing; they wouldn't be friends with you
| if you weren't rich. For proof, they think they have a
| lot of friends, but those people work for them.
|
| > I don't care if girls want me for my $
|
| Recipe for disaster. I've seen so many people use their
| wealth as a tool of attracting women. You just magnetize
| the worst possible people to you. Tempting as it is - I'd
| rather front as a poor hippie and meet girls who like my
| personality. If they find out I have money, that's a
| bonus later, once I know they're solid & trustworthy
| people.
| irl_chad wrote:
| After tax I make a few hundred k/month. I spend almost
| all of it. I'm always motivated to keep growing my
| business, because if I don't, I'll go broke.
|
| I love this lifestyle.
| activitypea wrote:
| log off
| ChrisMarshallNY wrote:
| It appears that you got downvoted a bit, and I'm sorry. I
| think that your point was well-made.
|
| In my case, I have written infrastructure software that
| has, and will, change the world. It has already become a
| worldwide standard, and is used daily, by thousands of
| people around the world. It is not hyperbole to say that
| the software saves lives. That's exactly why I wrote it.
|
| I never made a dime on it. In fact, I spent thousands of
| dollars of my own money, and ten years of my life,
| shepherding it to the point where it could be taken over
| by a new team, and become ubiquitous. It was a difficult
| journey. The demographics of the users of my software are
| ... _challenging_. I often weathered torrents of abuse,
| sabotage, and opposition, during the project. The new
| team will never have to suffer those particular slings
| and arrows. I'm an ornery, stubborn old coot, and could
| take it. I knew what I was signing up for, and many folks
| would consider me insane for doing it (they may have a
| point).
|
| I'll never get an award, and I have almost no recognition
| at all. Every day, I interact with people that use my
| software, and have no idea that I was the original
| author. I also deal with folks that know what I did, but
| don't really understand what it took to get where we are.
| They seem to think that I sat down, and churned it out in
| a couple of months.
|
| Not every achievement should be measured in money, and
| that's great.
| vladvasiliu wrote:
| > The second thing is need. Actually needing money,
| either just to start out, or to fund a lavish lifestyle,
| or to keep up status, is a powerful driving force.
| Setting up your life up in a way that removes the force
| stops most people executing on their ideas.
|
| I think I see the reasoning for this, but empirically, I
| don't agree. The need may be necessary, but it's clearly
| not sufficient for many people.
|
| I would even say that it's just one of the possible means
| to get the focus going, but not the only one.
| noduerme wrote:
| No one needs more rooms or roombas. I think he's
| referring to the need for 'respect' and ego gratification
| from other people. _But rich people always find out this
| is bullshit_ - sometimes at the cost of years of being
| fake-handled by the people they trusted. Being rich can
| 't buy you trust in your relationships. It's the
| opposite. You can never trust anyone who didn't love you
| when you were poor as hell.
| ChrisMarshallNY wrote:
| _> a good small company basically bought my freelance time
| in bulk and gave me 5% ownership, and I get to build
| beautiful software and set my own life._
|
| It was pleasant to wake up, and see where this thread went.
|
| I think that happiness is alignment of wants and needs,
| coupled with the means to satisfy them.
|
| Some people _need_ to be rich, as it satisfies an internal
| metric, of some kind, so the enormous work and sacrifice
| that are required to be rich are worth it. Unless you are
| born into wealth, getting there is a great deal of work
| (and some breaks, but it's always work). I have known folks
| that got there, and were devastated to find that it did not
| make them happy.
|
| I _need_ to be a craftsman, to work "with my hands" (so to
| speak), on small-batch, artisanal creations, so my work has
| been focused on getting to the point where I can do that.
| noduerme wrote:
| > Some people need to be rich
|
| See the comment I responded to below. I have a hard time
| with that mentality, but I get it.
|
| > I need to be craftsman
|
| I relate to this so much. Most of my best friends are
| mechanics, cooks, butchers, musicians. I actually only
| have one friend who's a programmer, and he's a craftsman
| too... I know him because we drunk-coded at the same bar
| for a couple years. People look at programming and don't
| get it...(yet - they don't understand yet, in 2021, but
| they will in 2040) ...that it's a clock maker's job. One
| friend who's a mechanic builds his own engines - just
| glorious, gleaming machines, one piece at a time. One
| time I was in his shop taking a distributor apart and
| said my job is like this, and he looked at me like I'm
| nuts. No, it's like this. Taking things apart to see how
| they work, and figuring out how to put them together.
| Lines of code are just like screws and weights and this
| thing that flies around the middle, distributing spark,
| that's like a for/next loop.
|
| My Dad was a lawyer and he said, when I was a kid, "poor
| people work with their hands, rich people work with their
| minds." Well, I told him when I was 13 I would rather
| make something with my hands because it's honest.
| Programming, done right, is honest work - no better or
| worse than a creative mechanic's job. And it can be very
| artisinal in a way that satisfies your aesthetic sense
| and your sense of a job done beautifully. I don't think
| lawyers get that type of satisfaction.
| jaynetics wrote:
| Imagine if we took "onboarding" as seriously as clock
| makers used to.
|
| Working with a master for a few years to learn the craft,
| step by step, always under an experienced gaze.
|
| Or conversely, imagine what a clock would look like if it
| was cobbled together by someone who has just gone through
| a few weeks of clock-making bootcamp. I feel this is what
| some of our software looks like.
| noduerme wrote:
| My girlfriend is doing code bootcamp to try to have an
| option outside of her current job. I do know one girl who
| did it a couple years ago, who was a bartender and is now
| writing frontend React for Nike and making six figures.
| My GF's very smart, and I want to encourage her, but I
| don't think it's going to work. She's not a watch-maker.
| She's good at people. Here's my glossy view on this.
| Everyone wants this glamorous job now of being an
| engineer. But you have to be a fuckin obsessive OCD geek
| to look at a shitpile of cat output and be like _what the
| fuck went wrong here, I can 't stop, sleep or eat until I
| figure it out_. It's okay. Not everyone can or should
| make watches. How do you train them..? Put them in the
| woods with StackOverflow and give them something
| impossible.
| vidarh wrote:
| There are plenty of good jobs for people who are good
| with people and know there basics of how to code, though,
| so that may well work out well for her even if she
| doesn't end up enjoying full on development.
| ChrisMarshallNY wrote:
| I believe that the problem is that the software
| development industry is completely built around
| engineers, staying at companies for two years or less.
| There's lots of reasons for this. I think a lot of those
| reasons are cultural (SE culture, not nationality).
|
| I stayed at my last company for almost 27 years. When I
| mention that in venues like HN, it's usually mocked, and
| I'm basically called a "chump," for doing it.
| noduerme wrote:
| My only exposure to this weird, desperate, corporate
| ladder-climbing culture is via HN. It freaks me out to
| hear the lives coders are living inside these places,
| because it bears literally no resemblance to the way I
| articulate code or think about my job. I basically come
| here for the spectacle. I've been freelance since the
| first dot-com collapse in '98. I just come here to hear
| how $megacorp[$x] is abusing people. That being said, I
| always worry what if I had to go back to work for one...
|
| I get a sense that you exist like myself, and other
| coders I've known, outside the furious competition for
| status in a FAANG, doing our own thing and crafting our
| own art. It's kinda calming and peaceful to watch from
| the grandstands while the central rat race shit show goes
| on.
|
| [edit] I was also banned from here for 8 years for
| personally insulting the founder, who encourages and
| finances, uh, certain stereotypical corporate rat race
| bullshit.
| ChrisMarshallNY wrote:
| A few years ago, I went to a dinner, hosted by Facebook.
| They were recruiting devs, and had a bit of an open
| house. I was curious about their operation.
|
| The experience was fairly pleasant. I liked the people,
| but decided that the company wasn't really one that I
| wanted to join.
|
| I was talking to one of the managers, there, and he
| boasted that he had been at Facebook longer than at any
| other company in his career. Since he was fairly young, I
| was curious.
|
| "How long is that?" I asked.
|
| "Twenty-seven months!" he proudly stated.
| ChrisMarshallNY wrote:
| I like your attitude. I feel we need more of it.
| brightball wrote:
| I'm coming back from the first really expensive vacation
| that my family has ever taken (to Hawaii).
|
| Was a lot of fun but if we hadn't been able to do it with
| airline miles I don't think I could have stomached the
| cost. We could afford it, it just doesn't feel right to
| spend that type of money on a few days away.
| noduerme wrote:
| IDK how it was in Hawaii, but don't feel bad. I'd much
| rather spend money on an experience (or friends and
| family) than on buying _stuff_. If it adds to the fabric
| and experience of your life, it 's worth it. That's what
| money is for. The reason I think this is, it's the total
| opposite of sitting alone in your castle acquiring shit
| that you hope to one day show off to people.
| lelanthran wrote:
| > I'd much rather spend money on an experience (or
| friends and family) than on buying stuff. If it adds to
| the fabric and experience of your life, it's worth it.
|
| Yeah, that's what my _stuff_ is: an addition to the
| fabric and experience of my life.
|
| Spending money on pure "experiences" is, for me, wasted
| money. A memory of a vacation is worth less to me than
| some "stuff" I will use for the next 10 to 15 years[1].
|
| For me, it depends on utility. I'm willing to spend on
| things I find useful, and I'm willing to spend on things
| I enjoy. Given the option between a vacation and
| replacing my 12 year old car, I'd replace the car.
|
| I'm typing this on my main personal computer, which is a
| first generation i7, so at least ten years old at this
| point.
| brightball wrote:
| I can agree with that to a point. At the same time, I
| could probably plan 3-4 trips for the price of the Hawaii
| trip.
| noduerme wrote:
| Heheh. I know _exactly_ and that 's okay dude. Live and
| learn. I spent a totally bunk couple weeks in Surfer's
| Paradise once for the cost of a whole summer in Uruguay.
| Can't always get it right. Beaches get boring on the
| higher end, or if you spend too long, too. Nothin like a
| couple weeks in a beach town to remind you never to
| retire to one :D
| RHSeeger wrote:
| > I'd much rather spend money on an experience (or
| friends and family) than on buying stuff. [snip]... it's
| the total opposite of sitting alone in your castle
| acquiring shit that you hope to one day show off to
| people.
|
| What makes you think that everyone buying stuff is doing
| it to show off to people. I'd much rather spend money on
| stuff than experiences. Experiences are ephemeral and,
| once completed, exist only in your memory. The stuff I
| buy is generally something that going to make my life
| better in a continuous and ongoing way. A pond in the
| back yard, a nicer car (I buy used, but I buy a nice used
| car, with the bells and whistles that I think are
| important), a console system to play with my child, etc.
| I spend most of my life in or around my house... spending
| my money to make that time better seems fairly optimal
| behavior.
| ryandrake wrote:
| Another thing is you can sell your "stuff" on eBay to
| recoup the cost when you're done with them or you can
| gift them to others. You can't sell your vacation memory
| later in life. I went on vacations and did a lot of
| travel many decades ago. It was great in the moment but I
| can't even remember most of them now. Those experiences
| are totally useless to me now.
|
| That's why I consider it financial insanity to spend your
| 20s traveling the world and "finding yourself" instead of
| working and saving. A year of 401k contributions when you
| are 20 probably results in subtracting 3 years from your
| retirement age. Make hay while the sun shines.
| Mezzie wrote:
| > That's why I consider it financial insanity to spend
| your 20s traveling the world and "finding yourself"
| instead of working and saving.
|
| I spent my 20s unemployed due to MS. I'm screwed for my
| whole life now. Then again I don't get to plan when I
| retire either so I guess it works out?
| itspeat wrote:
| As a 30y/o who's took a very stable primary job with
| great benefits and who works 3 other jobs +- 1 (engineer
| during the day... mechanic, photographer, general
| contracting moonlighting) I also obsessed over retirement
| and saving for my future. I only try to buy things that
| maintain value or will be extremely useful or life
| improving to me. However, I also think that the
| experience of traveling, depending on how you do it,
| provides immeasurable value to our lives, even if they do
| live in our memories and fade over time. Keeping a
| journal helps with calling back those memories, feelings,
| and things learned. I traveled a lot in my early 20s
| while still contributing to some sort of IRA. But I
| traveled very cheaply. Hostels and splitting bills and it
| has taught me so much about people, history, and the
| world that it has shaped how I interact with people
| daily. I can relate to people of other cultures more
| easily and have something to connect with which I believe
| is the ultimate experience, once we acquire the main
| things that we need to survive day to day. I don't have
| many material goods, but the ones fondest to me I've
| taken to these trips or have inherited from others with
| stories behind their gifts. Having said all that, yes, I
| think taking vacations at all inclusive expensive resorts
| or just going somewhere to get drunk is waste, or at
| least not an ideal way to spend travel money.
|
| I think it's important to learn about the world and take
| in many experiences while we are young and capable
| because too many people don't make it to retirement or
| can't physically do the things they wanted to when they
| were 20-40
| bittercynic wrote:
| Traveling has been very valuable to me because I get to
| see that some of the unpleasant behaviors that are common
| in my area are not universal, but just peculiarities of
| the spot I happen to live in. It's somehow comforting to
| know that things are different in different places.
| moritonal wrote:
| Just an outside perspective. Your talking about how it's
| easy to be frugal when you inherited $40k, earn >$100k and
| never have to be actually frugal, you choose to be.
| Mezzie wrote:
| Yes. This advice is decent if you're upper-middle class
| or above, socio-economically speaking, but to the
| majority of people, it's just not applicable.
|
| Not to mention that we're in a society that incentivizes
| people to be irresponsible. I'm not allowed to earn six-
| figures or I'll lose healthcare. Same with
| inheriting/having more than a certain amount saved. My
| meds cost 300k/yr, so I hit OOP max the first month of
| ANY health insurance plan I have EVERY year. The wrong
| plan can cost me over 20k/yr.
| CalRobert wrote:
| That's a fair point, but the broader message of avoiding
| lifestyle inflation is valid. I used to make a lot less
| money and have very little in the bank and now that I
| have a much better paying job (and had a lucky break with
| an acquisition) it's remarkably easy to justify things to
| yourself. "Sure you can make more money, not more time" -
| "this new thing is more efficient" - "if I have X then my
| life will be better" (that last one is sometimes, but
| rarely, true - we had a ~500 square foot house and 2 kids
| and a bigger home did dramatically aid our mental health.
|
| I hate buying gas and feel guilty about it, but also
| would like to be able to seat 6 people, so suddenly a
| Model Y seems "reasonable". But sitting down and doing
| the math shows that even if my goals are environmental,
| keeping the 12 year old Honda and getting a rental car
| now and then is much better than a brand new EV (and
| vastly cheaper) - but before thinking about it carefully,
| I was tempted.
| noduerme wrote:
| I really relate to this. Aside from having watched
| "lifestyle inflation" put people I know who make 7
| figures a year into debt to their poorly chosen young ex-
| wives... I had a brief burst during the pandemic where I
| bought some wish list crazy stuff. A new guitar ($1300).
| A Roomba. A drawing tablet. A set of good wine glasses. A
| second car, one that was made after 1980 and doesn't fly
| off the road in the rain. And these things make you go,
| like - wow. This is a really well designed thing. It
| smells nice and feels solid in your hands. Shit, my life
| could be so much more enjoyable if my days and nights
| were spent touching these wonderfully designed objects,
| which I can afford to feel the pleasure of. Why do I deny
| myself the pleasure of having them? So I think the basic
| answer is that I don't want too much comfort in my life.
| Regardless of money. I think money corrupts by making you
| too comfortable, yeah, but my objection is more to the
| comfort than with the means to purchase it. Life should
| be a bit uncomfortable. Or very uncomfortable, when your
| 1980 Datsun is leaking freezing water and sliding across
| the freeway.
|
| A lot of people seem to have the idea that being a full-
| grown human is being rich. To me, it's being able to plug
| all the holes in your own roof and always bearing in mind
| that we're just here for a limited period of time, to
| gain knowledge and experience, not _things to make us
| lazy and comfortable_. But maybe that 's just like some
| weird post-religious self denial predilection I hold
| onto.
| ak217 wrote:
| I would urge you to reconsider the car thing. There's a
| difference between being able to fix your own car/house
| (which I also derive a great sense of satisfaction from)
| and routinely taking the risk of debilitating lifelong
| health problems because of an accident that a newer car
| with better tires could have easily prevented. (I once
| spun out in the rain and totaled my car because my rear
| tires were bald, narrowly avoiding serious injury. Never
| again.)
| skrtskrt wrote:
| Also crash safety is 10x better on current cars than even
| 10 years ago. You're not going to appreciate the
| simplicity of the old car when you're debilitated for
| life in a crash you would have walked away from without a
| scratch in a 2020 base model Civic. That's not to mention
| auto emergency braking, traction and stability control,
| lane keep assist and blind spot monitoring that would
| have prevented the crash in the first place
|
| I appreciate the attraction of the simplicity of older
| cars, but you are accepting that a crash could turn you
| into pink mist if you are lucky, lifetime of pain and
| disability if you are unlucky.
| noduerme wrote:
| Living on $100k means being frugal by the standards of
| the rich, anyway. I think it would be an error not to be
| frugal even if I considered myself rich, which I don't
| think I am. I'm happy that my tastes and preferences were
| set when I was in debt and waiting tables / driving taxi
| / doing three jobs. Up until I was in my mid-20s, making
| $100k/yr seemed _totally unimaginable_ , so I appreciate
| what I have now in a way that I think a lot of people I'm
| exposed to take for granted. I still pretty much shop the
| same way, cook the same way, live the same way as when I
| was a cab driver, with a few additional perks I allow
| myself. Like a new laptop or new shoes every few years.
| I'm not just frugal; I literally don't _know_ how to
| spend money, and the thought of spending it scares the
| shit out of me. I haven 't let a higher income change my
| basic outlook. Because of where I am in my career, I'm
| surrounded by a lot of people who make 10x what I do and
| are worth 30x what I am. And I'm constantly appalled at
| their decisions and the stupid things they waste their
| money on. If I had that kind of money, I wouldn't be
| going to Burning Man or partying in Tulum or buying
| Lambos or adding a waterfall pool or hiring fire dancers
| for backyard parties. I'm not sure what I'd do, but it
| wouldn't be those things. I'd probably plow it into
| whatever new startup idea got me obsessed with code all
| night.
|
| On the spectrum of all humanity, inheriting $40k in your
| twenties is on the lucky side, but it's also pretty
| basic. I wasn't born a Brahmin and I didn't exactly
| inherit Dubai. I also know a lot of people who were trust
| funders from birth and threw it all away, or blew their
| money on bad ideas. Or blew it up their noses and
| committed suicide - I knew several of those. Just from my
| own observation, most people who get money and don't know
| how to manage it are parted from it pretty quickly. This
| isn't to say I _deserved_ to inherit something, just
| that, life finds a way to equalize out stupid behavior
| pretty quickly.
|
| Reminding myself that that's the case is probably the
| only way for me not to go broke.
| xwolfi wrote:
| You know I discovered credit cards in my mid twenties when
| emigrating to HK from Europe where we had only debit.
|
| I dont pay it in full each month dude, I pay it ... EACH
| TRANSACTION :D There s no reason to defer payment even by one
| week and each time you do delay your brain is telling a
| different story than if you just extracted money out of your
| account immediately.
|
| Why do you think humans should permanently borrow to the next
| month to buy tomatoes at the super market ?
| ChrisMarshallNY wrote:
| I did that, for a while, but it's just easier to do it once
| a month, and be done with it.
|
| I believe that self-discipline is _extremely_ important for
| a life of happiness and fulfillment. Sounds like you have
| that. Good show.
| carlhjerpe wrote:
| Because the US credit system requires you to do it this
| way, also since their card safety is dogshit you want
| credit in case someone skims your card, because it's not
| your money being stolen (it's easier not to pay the CC
| company than getting your money back from someone).
|
| Another reason is that a CC usually allows higher offline
| transaction limits, which might be valuable for some.
|
| Just because your direct debit scheme makes sense to you
| doesn't mean it makes sense for EVERYONE.
|
| I have a VISA debit card and a Mastercard CC. I use debit
| the most (commonplace in Sweden) but keep the CC around as
| an extra if my bank has downtime or if I'm traveling the
| less connected parts of the world.
|
| Widen your views, things are different all over the world.
| Imagine billions of people don't have access to the
| internet and you'll find that your way isn't the only way,
| in some places they pay with sex, food, cattle, cash, CC,
| direct debit, crypto, futures or whatever convoluted (in my
| opinion) system they can come up with.
|
| If you're in an AMUSEMENT PARK or A BATHHOUSE you might
| transact with a tag and pay when you leave.
| newswasboring wrote:
| > Because the US credit system requires you to do it this
| way
|
| That is the issue though. Why? It makes no sense. You
| gave this condescending lecture about understanding other
| cultures but didn't take a sentence to even try to
| explain.
| smegger001 wrote:
| I pay in full rather at the end of the billing cycle
| because I have it set to auto-pay and then I don't have to
| worry about it. But then I barely ever use my credit card
| other than for reoccurring payments or major purchase. I'll
| just use debit if I am buying tomatoes why barrow for small
| purchases in the first place.
| ChrisMarshallNY wrote:
| I use credit cards for tomatoes. One reason is
| convenience. The other one is that I have a Apple Card,
| so I have a fairly decent Apple Cash "slush fund," from
| the rebates they do.
| marderfarker2 wrote:
| With debit card you hand the merchant your whole bank
| account and trust them to deduct an agreed amount. With
| credit card it becomes the bank's problem.
|
| Anyway it doesn't have to be like this. In China you scan
| a merchant code and enter the amount you want to pay on
| your phone, much like a bank transfer, but it happens
| instantly.
| smsm42 wrote:
| Good point on this - if some merchant cheats you, you
| have a decent chance with CC company to get the money
| back. With debit, your money is gone, good luck getting a
| refund.
| smsm42 wrote:
| If you have discipline, it's very convenient. You can
| manage your cash flow and know when and how much exactly is
| coming in and out of your account, and if you have an
| unexpected $2000 expense (say, something went wrong with
| your car), you can pay it now and have a month to fetch the
| money for it from wherever you keep the money - since
| keeping all your money on the same checking account is both
| wasteful and risky. Also, can get you a cool 2% back on
| every transaction (over the years, it comes to a non-
| trivial sum). Some can even do 5%.
|
| All that requires discipline and planning of course. If you
| don't trust yourself with being able to keep it up for
| years - get a debit.
| lotsofpulp wrote:
| I have been using credit cards in the US since I was a kid
| 15+ years ago, and my parents have been using them for 20+
| years easy. I feel like they have had the ability to
| autopay for at least that long.
| feanaro wrote:
| What's the purpose of an autopay-enabled credit card
| compared to a debit card? Is it just a convention?
|
| To me a credit card always feels "dirtier" because of the
| connotation that it produces debt and that I have to rely
| on someone else extending me credit, even if momentarily.
| It seems much cleaner to just spend your own money
| directly with as little middlemen as possible.
| matwood wrote:
| > What's the purpose of an autopay-enabled credit card
| compared to a debit card? Is it just a convention?
|
| As long as interest is avoided, rewards and protection. I
| end up with a 'free' plane ticket to Europe every year
| through my primary CC. The Apple Card gives 3% back on
| anything Apple (plus some others like TMO), and allows
| you buy almost any Apple item with 12 month, 0% payments.
| I could spend the 2k on that laptop or keep that money
| invested and just pay 166/month. The Amazon card is 5%
| back on anything Amazon (and Whole foods if that's your
| thing). I bought a 'free' TV with the rewards last year.
|
| I've had my CCs stolen many times, and the buffer means
| I've never had that money leave my bank account.
|
| I was taught early on in life that cash is king. The
| longer you can keep the cash in your control the better.
| Using CCs to provide a buffer does exactly that. And the
| rewards are a bonus for money I'm spending anyway.
| bluejay2 wrote:
| Many credits card have points/airline miles/other stuff
| you can earn with your purchases. So as long as (1) the
| bill doesn't add fees for using a credit card, and (2)
| you are paying your credit card balance in full each
| month (and thus incurring no interest charges), it can be
| more advantageous to pay with a credit card.
|
| Even if you are not earning extra points, using a credit
| card may be helpful for some who are trying to establish
| a credit history, which will be important if they wish to
| borrow larger sums (auto loans, home mortgages) in the
| future.
| feanaro wrote:
| > Even if you are not earning extra points, using a
| credit card may be helpful for some who are trying to
| establish a credit history, which will be important if
| they wish to borrow larger sums (auto loans, home
| mortgages) in the future.
|
| Ah, that explains part of it, I guess. This isn't a thing
| in my European country.
|
| What I don't understand is why simply using a credit card
| would count more towards establishing you as a good
| creditor than not even having to use a credit card at
| all. I guess that's a weird bias in the system?
| lotsofpulp wrote:
| It is not a weird bias. Paying off a revolving credit
| card balance every month is not that big of a signal
| about your future likelihood of repaying loans in a
| timely manner, but it is a signal.
|
| Not borrowing any money, and hence not having any history
| of repaying borrowed money is zero signal.
|
| If it was true that people who never borrowed money were
| more likely than repaying borrowed money on time than
| people who regularly borrowed money, then a lender would
| have already noticed this in their data and would have
| offered a more competitive financing product in the
| marketplace.
|
| Since that has not happened, it is reasonable to surmise
| that the tiny signal of maintaining a small revolving
| credit card loan with timely payments is better than the
| zero signal of not maintaining any loan balance.
|
| Note that having many tiny credit card revolving loan
| amounts is viewed negatively.
| lotsofpulp wrote:
| > To me a credit card always feels "dirtier" because of
| the connotation that it produces debt and that I have to
| rely on someone else extending me credit, even if
| momentarily. It seems much cleaner to just spend your own
| money directly with as little middlemen as possible.
|
| In the US, you lose out on 2%+ cash back rewards when you
| do not use credit card (because the price for purchasing
| with a credit card is the same as not using a credit
| card, and the minimum cash back rewards in free credit
| cards is 2%).
| feanaro wrote:
| Why does cash back exist as a concept? How does it
| benefit companies to charge me less simply for the act of
| using a credit card, even if I'm not paying interest on
| it?
| lotsofpulp wrote:
| The entities giving cash back (banks issuing credit
| cards) profit more from the interest from people who do
| not pay their monthly balance more than the loss of
| giving everyone 2% cash back.
|
| Merchants (generally large merchants) do not offer a
| discount for paying with debit cards because people spend
| more money when using credit cards.
|
| There are some notable exceptions that offer cheaper
| prices for using debit card, such as Target that offers a
| 5% discount for using a debit card to pay. Hence I pay at
| Target with a debit card.
|
| Basically, other people's cash flow problems and/or
| inability to resist temptations to spend more than what
| they have results in profit for merchants, banks, and
| people that pay their credit card balance every month.
| ChrisMarshallNY wrote:
| _> Merchants (generally large merchants) do not offer a
| discount for paying with debit cards because people spend
| more money when using credit cards._
|
| Also, I assume that most credit companies (VISA, MC,
| etc.), have rules, expressly forbidding charging
| different rates for the use of credit cards. It makes
| sense, because they don't want to be avoided as a payment
| option.
|
| I learned this, when I did my first shopping cart, and
| read the whole freakin' VISA Merchant's Manual.
|
| There was some kind of loophole that gas stations used.
| lotsofpulp wrote:
| Not as of 2010. Dodd-Frank legislation explicitly made it
| illegal for payment card networks to prevent merchants
| from offering discounts for different payment methods:
|
| https://www.ftc.gov/tips-advice/business-
| center/guidance/new...
|
| > A PCN cannot stop you from offering your customers a
| discount or another incentive for using a certain method
| of payment, as long as you offer it to all your customers
| and disclose the offer clearly and conspicuously. For
| example, you can offer your customers a discount or a
| coupon if they pay with cash or a debit card rather than
| a credit card.
|
| In Mar 2017, Supreme Court went further and said state
| laws banning credit card surcharges were a violation of
| merchants' first amendment rights:
|
| https://en.wikipedia.org/wiki/Expressions_Hair_Design_v._
| Sch...
|
| What you may be thinking about is rules prohibiting
| charging different payment card network prices for
| various credit cards (i.e. different price for Visa vs
| Amex vs Mastercard vs Discover). This was deemed
| allowable by the Supreme Court in Jun 2018:
|
| https://en.wikipedia.org/wiki/Ohio_v._American_Express_Co
| .
|
| As an aside, this Ohio v AmEx ruling was of great benefit
| to tech companies that operated market places, because
|
| > This decision was considered to have created a new type
| of rule that could make it difficult to seek antitrust
| litigation; with credit cards being a two-sided market
| serving two distinct sets of customers, a successful
| antitrust argument would have to show how both sides of
| the market were harmed.
| thunderbong wrote:
| That was very inspiring. In my opinion, ageism is currently a
| passing fad. The tech world is currently going through a big
| churn in terms of what is 'new'. There will be a few
| frameworks / technologies which will stabilize which will
| rely on the "engineering" aspects of software which has been
| evolving over so many decades. Those people who've understood
| the fundamentals intimately are the ones who are valuable.
| Now and always.
| jimnotgym wrote:
| I hope it is a passing fad. I dabble in tech and
| accountancy, and accountancy is completely different. I can
| tell you that being older gets you better jobs with higher
| pay, where younger people have to work long hours to break
| out.
| avereveard wrote:
| > In my opinion, ageism is currently a passing fad.
|
| ageism (in our field) is not about age, ageism is about
| having a family with all that entails - an higher asked
| wage, stable working conditions, stick to the contracted
| hours
|
| no amount of engineering skill gap can cover for that
| ricardobayes wrote:
| Age should be irrelevant, however it has some cultural
| aspect to it too. At my previous work we wrote software for
| self-driving cars and worked with super young people who
| sometimes didn't even graduate college. We had serious
| issues selling to Asian customers who would not take us
| seriously just because of the average age of the devs being
| low. (P.s. we had multiple respectable big-name car
| companies as clients already, was not early stage startup
| or so)
| ChrisMarshallNY wrote:
| I worked for a fairly "classic" Japanese corporation.
|
| One of the things about their HR policy (I'm not sure if
| it was written, but it may have been), is that certain
| levels of seniority required that you be a certain age.
| No matter how much of a hot shot you were, you weren't
| going to get your own team until your thirty-fifth
| birthday.
| anticristi wrote:
| Me and a friend of mine keep being surprised how often
| people seem to miss fundamentals. Sure, they might know the
| latest incarnation of the parallel for loop in Rust. But
| ask them about communication overhead -- a basic concepts
| in parallel computing -- and they're blank.
|
| Similarly, people are happy to see that networking in
| Kubernetes "just works". Once you ask them to run it on a
| provider without a Kubernetes-native load-balancer, say
| just use some BGP anycast magic, they are lost.
| ChrisMarshallNY wrote:
| I don't think today's ageism is the same as previous
| generations. Young folks have been railing against their
| parents for all of human history, but we have,
| nevertheless, always been able to come together, and form
| an amalgam of experience and enthusiasm. I suspect that
| older people, having the money and power, while younger
| folks have had the drive and creativity, have forced the
| generations to cooperate.
|
| These days, you have billionaires in their twenties. They
| don't need anything from older folks, so there are no
| constraints on them.
|
| Also, and I won't go into the reasons, there's now a lot of
| actual _hatred_ between the generations. This time, it's
| _personal_. I feel that.
|
| In my job search, I was struck by the fact that the people
| interacting with me seemed to have a need to dominate and
| humiliate me. It wasn't just a negotiation tactic. They
| _hated_ me, and I had no idea why.
| mmaunder wrote:
| The desire and pressure to consume conspicuously is something
| embedded in US culture, much like smoking was. Make it rain.
| Just don't tell me what my APR is in the morning.
|
| The amount of discipline required to save and defer
| gratification is enormous, and it is a continuous effort,
| particularly in this country. You are one of the few. One of
| the brave. Congratulations!
| Cort3z wrote:
| Not to mention "credit rating" which is capitalism's answer to
| the communist "social rating". Don't get me wrong, I much
| prefer capitalism, but it has some really dark sides.
| heavyset_go wrote:
| There's a reason many religions have a lot to say about usury.
| Abrahamic religions have debt jubilees in their religious texts
| during which slaves were freed and debts were forgiven[1].
|
| [1] https://theconversation.com/the-debt-jubilee-an-old-
| testamen...
| bennysomething wrote:
| You are free not to get into consumer debt. Maybe educating
| kids to stay the hell away from consumer debt would be a good
| idea.
|
| Not all debt is bad. It allows businesses to function and to go
| grow. We can see the effects of trying to have debt free
| societies in Islamic countries, it stunts economic growth.
|
| Student debt in America is another thing, not allowing
| bankruptcy in this situation is horrendous.
| streamofdigits wrote:
| Any argument starting with "you are free not to..."
| invariably misses the point. Yes, freedom and individual
| responsibility _are_ important. No, you cannot build a sane
| society exclusively on those.
|
| People don't have infinite time and knowledge to identify all
| the things, behaviors, products, services that "they are free
| not to choose". They can't read all the legalistic fine print
| designed by professionals to deceive and obfuscate while
| keeping them unaccountable.
|
| This is particularly problematic as the "freedom principle"
| gets applied differentially in sectoral silos: When you go to
| the supermarket, you don't have to choose what will not kill
| you. Ditto when you select a car, a medical procedure or
| drug. Why should the financial sector (or the tech sector for
| that matter, as the two increasingly merge) be any different?
|
| When people are increasingly data mined, algorithmically and
| behaviorally goaded to overconsumption patterns, instant
| gratification, addiction etc. the argument that they "are
| free to choose" is more than hollow. Until the US (and
| imitators) address this moral rot at the core of its
| socioeconomic system it will be rolling from crisis to
| crisis. This will only open the door for worse alternatives.
|
| Individual responsibility should only be invoked when the
| individuals concerned have all the required information and
| ability _and_ can be reasonably expected to excercise that
| agency given their context across the _entire_ spectrum of
| economic interactions.
| baby wrote:
| You should edit your message to include health issues and the
| lack of good healthcare. That'll make you homeless too.
| xwolfi wrote:
| I'm an immigrant from France in Hong Kong, another predatory
| capitalist jurisdiction, and even here it's still bounded by
| some logic. Payday loans are really frowned upon, I think
| there's something in Chinese societies, just like the French
| one I come from, that prevent people to fully enslave
| themselves in silly debt on the same massive scale as the US.
| And kids can trade somewhat here, at least every child has a
| stock account managed by his parents, the national sport being
| speculative trading here, so we ARE the jungle too. We're
| discussing a bankrupcy low, which I think would put the final
| nail in the predatory coffin - in the last few years I've seen
| the bank evolve from full-on anti-client predators to finally
| proposing Debit cards !!!
|
| But nobody in France, or in Hong Kong, would take a 30-year
| student loan. It seems nearly possible in the U.S., at the
| start of your life. How can they do that to each other, ofc
| kids are stupid and think college is about "the college
| experience" that the loan makers pushed via financing movies
| about it and won't choose the local one with good enough
| teachers that cost nothing and move on.
|
| I think they should really close the ivy league schools, opt
| out of Shanghai ranking, forbid foreigners - just like France
| does involuntarily (no top school, Shanghai snubs us,
| foreigners don't care about education in the French language)
| which ends up with cheap colleges for local kids with good
| enough teachers. But admittedly poorer research funding, but I
| never understood why we need to learn corporate finance or java
| enterprise deployment or heart surgery from researchers writing
| theoretical papers ONLY.
| dirk_novitzki wrote:
| Now ask yourself if it is okay that so much of the discussion
| of the tech world goes on a YC property.
| largbae wrote:
| It seems like this particular negative discussion is being
| allowed through. Are you saying HN is censored in YC's favor?
| codeddesign wrote:
| I wouldn't say that, but the mods do certainly pick and
| choose - similar to Twitter.
| sokoloff wrote:
| I've seen the mods take a pretty hands-off stance when YC
| (or its companies) are being criticized. I think it's a
| stated policy and I've generally felt they live by it.
| (If they didn't, I suppose I couldn't necessarily tell
| for sure, but based on what I see them "let stand", I
| think they do.) They're human and imperfect, but they
| don't seem to do much "home cooking" from what I can
| tell.
|
| https://news.ycombinator.com/item?id=27438258
|
| https://news.ycombinator.com/item?id=27400556
| abernard1 wrote:
| If I get banned/downvoted for this, so be it. But I
| cannot image a more naive or less aware position.
|
| This site is incredibly censored. Their mod system is
| very gamed with people who know how to build up credit
| and downvote en masse.
|
| Whether or not the founders support this behavior, it
| exists. There is a nasty, nasty f-in power culture that
| censors people along a political power axis these days.
| You cannot understand YC/HN without understanding this
| puritanical (left-wing) culture that has burrowed its way
| into VC backed companies.
| themitigating wrote:
| And yet here is your comment for all the world to see.
| abernard1 wrote:
| And here is my comment, downvoted to 0 and hidden to
| grey, and people who dislike me and go to my thread and
| downvote all my past posts by 1.
|
| Ignore me, dismiss me, whatever. But the censorious
| culture of the Bay Area is the very opposite of the
| (pretty neat and good) hippy dippy free culture of the
| 60s. It's the reason people are leaving, because their
| free-wheeling ideas are encouraged elsewhere.
| cmrdporcupine wrote:
| Myself... I'm actually going to go up-vote you, just so
| people can for sure absolutely see your bitter ad-hominem
| attack.
|
| You clearly don't know what "left-wing" means if you
| think that a bunch of upper middle class highly
| compensated engineers are that... Actual "left-wing"
| comments on HN are generally downvoted quite intensely.
|
| EDIT: I just want to add how ... odd... it is to slap a
| "left wing" accusation about YC-backed companies as we
| sit here on a thread talking about a YC-backed company
| that was basically a loan-shark pay-day lender. WTF?
| That's left-wing? Ok then.
| kortilla wrote:
| That payday lender was founded with a left-wing banner of
| disrupting the status quo of lending. YC wouldn't have
| funded someone if they were just like, "yeah, we want to
| start a payday lender."
| cmrdporcupine wrote:
| Yeah that for sure sounds _just_ like seizing the means
| of production and workers of the world unite.
| duped wrote:
| HN is a microcosm, very little of the discussion of the "tech
| world" is happening here.
|
| There is a lot of open disdain for it outside of the SFBA
| startup bubble.
| orangepurple wrote:
| > Along with bullshit like making options trading available to
| kids
|
| Have you tried to open an options trading account? There are
| usually multiple levels of authorization and LOTS of
| e-paperwork to fill out explaining your age, financial
| situation, and financial education.
| mmaunder wrote:
| Have you any idea what options are intended for? Yes I've
| opened an account and it's a series of checkboxes. There's no
| "LOTS of e-paperwork". You clearly have not opened an
| account, or you're being disingenuous. It's literally you
| promising that you're an experienced trader and done.
|
| Think Alex Kearns, the 20 year old RobinHood trader who was
| trading options, and said in his suicide note that he didn't
| know what he was doing, was fully vetted?
|
| Options are unbelievably complex. 99.9% of traders don't even
| know what Black Scholes is and can't read financials. They're
| exotic instruments used as a hedging strategy against black
| swan events as part of a much larger portfolio, and the
| hedging strategy is designed to lose continuously for a
| decade if needed.
|
| It's become a casino that lets kids make cheap short term
| bets against a stock making big moves, for a price far lower
| than the underlying asset.
|
| But the trouble with options is this: With stock you're
| betting on one thing: Stock goes up. That's it. With options
| you have to predict direction, timing, magnitude, and a wrong
| bet is guaranteed to lose 100% of your investment immediately
| on expiry. No riding it out.
|
| We've had a huge bull market. When the market turns, and it
| always does, and the suicides start, and the stories of
| ruined families emerge, then the post-mortem will begin and
| we'll all heal together and, in time, we'll forget about the
| victims, as we always do. But their lives will remain in
| ruin. And the predatory cycle will repeat. As it always has.
| pishpash wrote:
| Heard a human-interest story on local radio praising the
| pandemic child tax credit. Most said they paid their
| mortgage, bought food, etc., but one said they spent it on
| stocks and cryptocurrency. Yeah that's not going to end
| well.
| hindsightbias wrote:
| There are subreddits and yt channels dedicated to people
| buying Glocks and ARs with their Biden bailout money.
|
| That said, when do 20 year olds have agency but should
| still be infantalized? I'm good with shades of gray, but
| the HNaleriat seems filled with absolutists.
| vageli wrote:
| So where do you draw the line? Is there no sense of
| personal accountability? If someone screams doctor in a
| restaurant, I don't hold myself out as one. It's hard to
| feel sorry for people signing their names to attestations
| they know to be false.
|
| Not to mention that in the current climate, limiting access
| to these markets would be interpreted as some conspiracy by
| the elite hedge funds or something. Look at how many call
| to remove qualifications to be come qualified investors.
| folli wrote:
| The problem is that you're only seeing half of the
| picture. On the one hand you ask for personal
| accountability (where I totally agree with you), but you
| don't expect any accountability from the company that
| makes the profit (in this case Robin Hood).
|
| Robin Hood grants access to option trading to just about
| anyone and if the client fails and rides himself into
| deep sh*t, they just throw up their hands and claim
| "personal accountability", in the end meaning that the
| social system in some way has to bail out the person so
| that Robin Hood doesn't suffer any significant losses.
|
| That doesn't seem fair.
| frockington1 wrote:
| Too be fair the person has to check a box saying they are
| knowledgeable about investment product. If they lie and
| then screw themselves over who cares, let them learn a
| lesson
| brightball wrote:
| I helped a kid at my church get out of his title loan. I knew
| it was bad but when I saw the actual amount I wanted to hit
| something.
|
| 212%!!!!
|
| Vultures.
| jarek83 wrote:
| I visited US once and been reading a lot about the country, I
| also have a friend living there and some family. I live in a
| half-developed European country. We have a free higher level
| education, free healthcare if you work or someone in your
| family works, some very financial regulations and very strict
| hygiene regulations (for restaurants etc.). Guns not allowed to
| broad public.
|
| Visiting The States, gave me an impression that the country
| does not really like their residents. If you trip once in your
| life path, you have quite big chance that it's all done for
| you, and in one of the best scenarios you will end up with huge
| loans. Many people prefer not to go to a doctor, or not to go
| to study, people are not guaranteed any paid holidays etc. How
| this is making anyone confident? How an uncertain public can be
| productive?
|
| Plus super expensive plasterboard houses everywhere (however
| that's not unique for the US), guns to anyone and quite dirty
| (compared to what I'm used to see) food places. I really didn't
| like what I saw and I became more glad that I live in my
| country. Of course there no only bad things that I noticed, I
| do like the military effort that protects the status-quo (I
| wouldn't risk going to army in my country), or ease of opening
| a business etc. but overall balance for me was not in favour
| for the US.
| luckydata wrote:
| the credit score is pretty much an enforcement system to ensure
| you're constantly in debt and most people I speak to think it's
| a good thing it exists. Americans have been thoroughly
| brainwashed and can't really think clearly about how screwed up
| their society is.
|
| note: I'm also an immigrant, now citizen. I get the right to
| complain cause I pay taxes.
| xwdv wrote:
| What exactly is the alternative to a credit score? Just
| taking peoples word they'll pay you back? No thanks.
| PragmaticPulp wrote:
| > the credit score is pretty much an enforcement system to
| ensure you're constantly in debt
|
| No debt here and my credit score is great. You don't have to
| be in debt to have a good credit score.
| iskander wrote:
| My wife tried to buy a new car with an extremely high
| credit score. They wouldn't give her the auto loan because
| of insufficient credit history, which acts as a second
| undisclosed factor in loan approval. I had to co-sign with
| my worse (~700) credit score because I had a history with
| student loans, credit card consolidation loans, &c
| PragmaticPulp wrote:
| Yes, that's how credit history works. You can't expect to
| get a $30,000 loan at a reasonable interest rate without
| having at least some history of repaying smaller credit
| lines first.
|
| But you don't need to go into debt to have a credit
| history. Anyone with a credit card who pays it off
| monthly is building a strong credit history despite never
| paying any interest.
|
| It's standard practice to use credit cards for this
| reason. Credit cards also have a lot of buyer protections
| that debit cards and checks generally don't.
| iskander wrote:
| You said: "No debt here and my credit score is great. You
| don't have to be in debt to have a good credit score."
|
| Technically that's true but it leaves out the very major
| caveat that your credit score is not usable without
| accompanying credit history. What is credit history?
| Debt. It seems like you think it's OK for the system to
| force people to go into debt every month as long as they
| pay it off. What happens when one month they can't? They
| are then blamed for moral failing when probably they
| would have preferred to never use debt for regular
| payment in the first place.
| michaelt wrote:
| Being in debt for 30 days without paying any interest is
| still being in debt.
|
| If I owe someone $100 then I have a debt of $100, even if
| I've also got $100,000 in my bank account.
| gammarator wrote:
| Not if you have cash already in hand to pay off the debt.
|
| (Then you can siphon back a fraction of the card
| interchange fees already baked into the price of goods
| sold via rewards/cash back. Just another regressive
| aspect of our financial system.)
| function_seven wrote:
| Not in the sense we're discussing here. Pedantically,
| yes. Practically-speaking, no. If you pay your monthly
| statement in full each month, you're no worse off than
| paying cash for those same things.
|
| Or look at it this way, are you in debt to your electric
| company, cell phone provider, or water utility? You use
| those services but don't pay for them until a month or
| more later. Technically you are, but I doubt you'd feel
| the need to prepay for those services just to make sure
| you have no debt.
|
| In this context of this thread, someone made the claim
| that credit scores are "an enforcement system to ensure
| you're constantly in debt." That's an overly-cynical look
| at it. I see them as a simple risk indicator.
|
| A lot of people have this mistaken beleif that paying
| more interest on loans will "buy" a higher score. It's
| just not true.
| emodendroket wrote:
| Yeah, there is actually plenty of reason to criticize
| credit scores (do we really think it's good that if you
| struggle to pay off some debt you should also start
| getting shut out of job opportunities or housing?), but
| that's not a real issue with them.
| emerongi wrote:
| In Europe I got approved for up to a 180k mortgage at
| 1.9% with no history (as is common here). Same goes for
| auto loans and leases. Nobody asks you to build and pay
| debt on a credit card.
| frockington1 wrote:
| Considering bonds are negative you're getting absolutely
| fleeced by the banks there
| PragmaticPulp wrote:
| > In Europe I got approved for up to a 180k mortgage
|
| Mortgages are different because your house isn't going
| anywhere. The bank can come get it if you stop paying.
| hef19898 wrote:
| > Same goes for auto loans and leases. Nobody asks you to
| build and pay debt on a credit card.
|
| See, over here, banks treat it as a good thing that you
| never had debt on your name. Throw in a stable and
| reasonably high income and you can get loans basically on
| a whim. Because why wouldn't you, being as low risk as a
| person as you can be.
|
| EDIT: Now that I remember. We have _very_ fucked up quirk
| in the way credit scores are calculated in Germany.
| _Asking_ for a credit has an impact on it already,
| because it is assumed that you _need_ money which makes
| you a risky person because you obviously don 't _have_
| enough of it. With the very "funny" side effect that
| shopping around for a mortgage can have a negative impact
| on the interest rate you can get, up to the point that it
| can be difficult to get one at all. The trick is to go
| through a broker that is not sharing his clients, your,
| name with lenders.
| kgwgk wrote:
| Funny (Matt Levine) piece about credit building:
|
| https://www.bloomberg.com/opinion/articles/2021-12-16/the
| -se...
|
| Credit building
|
| This one is not a new SEC proposal, this one is just fun.
|
| If you are a young person with no credit history, or a
| person with bad credit history, you will want to "build
| your credit." This consists basically of creating a long
| record of reliably repaying your debts, so that credit
| reporting bureaus think you are a good credit, so that
| banks will happily lend you money, so that you can buy
| stuff on credit cards and get leases and mortgages and
| car loans. If you have no or bad credit this is hard,
| though, since no one will advance you any credit, so you
| won't have any debts to pay, so you won't build credit.
|
| There are canonical approaches. Banks will give you
| credit cards with low credit limits so you can start
| small and build from there. Or they will give you secured
| credit cards: You put $1,000 in a bank account, you get a
| linked credit card with a $1,000 limit, the credit
| advanced to you is secured by the money in your account,
| the bank takes no credit risk but reports repayments to
| the credit bureaus, etc.
|
| What if there was a simpler way? Yesterday reader Sark
| Asadourian sent me a link to a Credit Building product
| from Canadian fintech Koho, and I haven't stopped
| laughing about it since. Here is the "How it works"
| section of the website:
|
| 1 Start by subscribing to Credit Building for $7/month
| in-app
|
| 2 Sit back. We'll report your progress to a major credit
| bureau and help you grow your credit score in just 6
| months -- without having to lift a finger
|
| 3 Ensure there's $7 in your Spendable account each month
| to cover the subscription fee. That's it!
|
| They will demonstrate to a credit bureau that you pay
| your bills, by sending you a $7 bill each month, which
| you will pay. What is the bill for? For demonstrating
| that you pay your bills. They'll charge you $7 a month
| for charging you $7 a month. What you get for the $7 is a
| record that you paid $7. Which could conceivably be worth
| $7 to you! Possibly this is good for the customers! I
| cannot stop laughing. This is maybe the best financial
| product I have ever seen.[13] "For the low cost of $7 a
| month, you can pay us $7 a month." Everything else is so
| dull and overelaborated. Imagine being the person who
| came up with this. Imagine the bright wild gleam in your
| eye, coming in to work that day to tell your colleagues.
|
| Also though imagine messing this up. You're a young
| person, money is tight, you sign up for Credit Building,
| you pay them $7 a month for a few months but then life
| gets complicated, your account balance gets below $7 and
| you miss a payment. Do they report that to a credit
| bureau? Does it hurt your credit? Oh you'd better believe
| it:
|
| Just as making your payments on time will positively
| impact your credit score, the inverse is true. Not making
| your payments on time will hurt your credit score.
|
| To keep it simple: We advise you to let KOHO do all the
| work after you register. Just ensure there is $7 in your
| Spendable balance for the subscription fee each month and
| you won't miss a payment!
|
| Seems harsh!
|
| [13] Exercise for the reader: What do you think are the
| margins on this product? My guess is "surprisingly low,
| depending on how you count."
| hef19898 wrote:
| When "services" like this become somewhat reasonable
| business ideas, you _know_ a system is fucked up.
| ErikVandeWater wrote:
| I would say the cultural issue is more that the employer
| doesn't pay you immediately for your work. I understand there
| are regulatory reasons behind this, but still, this is what
| creates the dependency on credit.
|
| There's nothing wrong with a credit card company giving out
| free 30 day loans with reasonable interest if they are not
| repaid on time.
| bobthepanda wrote:
| when you say pay immediately, do people really get paid end
| of day in other countries?
| j16sdiz wrote:
| Most of the countries do that Monthly or Weekly , afaik
| Dma54rhs wrote:
| What is it that Americans do in that case?
| int_19h wrote:
| Monthly or biweekly seems to be the most common.
| emodendroket wrote:
| If you're in a position where you find yourself needing
| payday loans, I think that shifting around the pay schedule
| is not going to help; you just have too little buffer for
| your expenses.
| PragmaticPulp wrote:
| > It can be a lot of fun but it's very easy to do worse than
| die - to end up a slave for the rest of your life to one of the
| predators.
|
| The US has relatively generous bankruptcy laws. Many people go
| through bankruptcy and rebuild their credit over several years.
|
| It's not true that you're a "slave for the rest of your life".
| Student loans (which are much lower interest rate and nothing
| like these loans) can't be discharged in bankruptcy but even
| those are open to modification or discharge in the event of
| hardship.
|
| > I'm seeing posts here making it sound like 36% APR is
| acceptable.
|
| These are exactly the type of loans dischargeable in
| bankruptcy. The people requesting these loans had almost
| certainly been denied lower interest rate loans because they
| were likely to go bankrupt.
|
| The alternative isn't that these people get lower interest
| rates. The alternative is that they don't get approved for any
| loans at all. Frankly I think that's the best option for most
| of them, but that's not really my choice to make. It's theirs.
|
| > It's incredible how folks, particularly in the US, have
| become this morally uncalibrated.
|
| The US gives people a lot of freedom to make their own choices.
| Still, we _do_ have a lot of protections, but even those are
| delegated to individual states. In fact, many states _do_ have
| laws that limit interest rates to as low as 4-5% (bank
| installment loans). That doesn 't mean people in those states
| are all entitled to cheap loans, but it does mean that anyone
| with poor credit can't willingly enter into high-APR loans even
| if they need a short float until their next payday.
| EdwardDiego wrote:
| On US laws, is it only some states where you can walk away
| from a foreclosed home, taking a loss on the asset, but not
| being forced to repay the mortgage remaining after the bank
| sells the house?
|
| Because I've always thought that was a very generous law
| indeed.
| ahallock wrote:
| My friend has gone through bankruptcy twice. It was a breeze
| both times. Paid a court fee and had to go through a simple
| online course. I wish there weren't such a stigma because
| companies do this all the time.
| codeddesign wrote:
| Are you referring to company bankruptcy or personal?
| Company is easy, personal is extreme.
| ahallock wrote:
| Personal. What's extreme? My friend (or me if you think
| I'm doing that joke) is rebuilding their credit now. They
| discharged a bunch of medical and credit card debt.
| toomuchtodo wrote:
| Absolutely. You'll be issued credit right away (at higher
| rates), since you can't go BK again for a number of years
| [1] and you're eligible for an FHA mortgage 1-2 years
| after filing BK. It's not great, but it's not a financial
| death sentence either. It's arguably one of the reasons
| for financial dynamism in the US, where failure is less
| risky (compared to other OECD countries without such debt
| forgiveness mechanisms).
|
| [1] https://upsolve.org/learn/how-often-can-you-file-
| bankruptcy/ (Control-F "Time Limits")
| heavyset_go wrote:
| Depends on if you can afford bankruptcy. I have a friend
| from high school who went through bankruptcy for medical
| debt. All it took was their landlord not renewing their
| lease for them to be homeless afterwards, because no one
| else would rent to them with a recent bankruptcy on their
| credit report. They don't make enough money for that
| bankruptcy to not have ruined their life.
| the_only_law wrote:
| Yeah this is my concern with every having to file
| bankruptcy. I can live without credit, loans, etc. I
| cannot live without a place to live.
| ahallock wrote:
| That's a good point. You definitely need family or a
| significant other to provide a safety net while you
| rebuild.
| parkingrift wrote:
| > Student loans (which are much lower interest rate and
| nothing like these loans) can't be discharged in bankruptcy
| but even those are open to modification or discharge in the
| event of hardship.
|
| This is a common misconception. Student loans are commonly
| discharged in bankruptcy. Enough people believe this that
| they don't even try. The only additional rule for student
| loans is "undue hardship" which is not difficult to prove or
| argue for in bankruptcy.
|
| https://www.npr.org/2020/01/22/797330613/myth-busted-
| turns-o...
| justapassenger wrote:
| > The US has relatively generous bankruptcy laws. Many people
| go through bankruptcy and rebuild their credit over several
| years.
|
| It's like saying that you don't need seatbelts in the car,
| because you have good medical insurance.
|
| USA obsession with credit is the root cause of the issue, and
| relatively generous bankruptcy laws are a smoke gun to keep
| the show going and make people comfortable with a system
| rigged against them.
|
| Credit makes a lot of money for a lot of companies, and risk
| of customers bankruptcy is just a cost of business for them,
| designed carefully to ensure they still end up making money.
| ljm wrote:
| > The US has relatively generous bankruptcy laws. Many people
| go through bankruptcy and rebuild their credit over several
| years.
|
| Are you happy to say this with a straight face?
| PragmaticPulp wrote:
| Yes, of course!
|
| Honestly, what would you prefer? That people are forced to
| repay loans they can't afford? Or that nobody is allowed to
| take out a loan unless they have enough capital in the bank
| to repay the loan anyway (e.g. loans are only for rich
| people)?
| ljm wrote:
| You probably shouldn't be given credit if you can't
| afford to repay it or it seems like you'd struggle to
| repay it.
| hluska wrote:
| People qualify for credit when times are good and they
| can afford to pay it back. Then something bad happens and
| they can't. Banks are usually in the business of getting
| paid back. Often when they're not, it's because of a
| regulatory failure.
| squeaky-clean wrote:
| Banks aren't in the business of getting paid back,
| they're in the business of getting paid back more than
| they gave you. The ideal customer are irresponsible
| enough to accumulate interest, but not so irresponsible
| that they completely default.
| rdtwo wrote:
| Banks don't hold the products they securitize. This isn't
| the olden days most products at large banks get bundled
| and sold off
| hluska wrote:
| So regulatory failure?
| dataflow wrote:
| This logic works when people can live decent lives
| without loans. It breaks down when that ceases to be the
| case.
| pishpash wrote:
| Then that's the problem. Unsustainable loans distort the
| clearing prices for goods and services. College tuition
| is a great example.
| dataflow wrote:
| Sure, that's the problem. The question is how do you
| solve it. Ideally you implement a different solution
| before removing the existing workaround.
| pishpash wrote:
| If there is an existing workaround no one will look for a
| different solution.
| emodendroket wrote:
| On this theory, they shut down mental health
| institutions. Now what happens is mostly that jails serve
| as ill-suited, ad-hoc mental health institutions. Turns
| out making things worse without having a plan doesn't
| always have salutary results.
| dataflow wrote:
| I don't think that's true. And I don't think wrecking
| some people's lives just as an incentive for others to
| look for solutions is easy to justify.
| obstacle1 wrote:
| Pretty much every first-world country other than the USA
| has at least partially solved it. Social safety nets,
| regulation of utilities/public goods (education for
| example), and a guaranteed standard of living.
| coliveira wrote:
| But then, how predatory bankers will survive? Some
| country needs to protect them...
| tiahura wrote:
| "loans distort the clearing prices for ...College
| tuition"
|
| Does it though? I thought the same thing until I started
| paying tuition for my kids private elementary schools.
| It's almost as much as college and no loans around to
| distort prices.
| fallingknife wrote:
| Bad example. There's a free option in the market, so the
| paid option is for rich people only.
| emodendroket wrote:
| Daycare might be a more compelling one.
| pyrophane wrote:
| > "and no loans around to distort prices."
|
| As a result, private school remains kind of a luxury
| product for people who don't like the free public
| offering and can afford to pay to send their kids
| somewhere else.
|
| I can only imagine that if we extended some version of
| our school loan program to primary/secondary education we
| would have a lot of highly indebted parents or, god
| forbid, children, and an explosion of private schools.
|
| Ultimately, it would also drive prices up. The high end
| would need to be more exclusive (expensive) and everyone
| else would compete on perceived quality more than price.
| rdtwo wrote:
| Yeah I think that is exactly what would happen. Private
| school is like 3x more expensive than college probably 5x
| when you adjust for time value of money
| ashtonkem wrote:
| If you can't live a "decent" life without loans, loans
| will almost certainly make the situation worse.
| ljm wrote:
| There are surely some fundamental problems in a society
| if an average person can't enjoy a decent life without
| being in debt.
|
| Just pay off the money and then you're out, right?
| dataflow wrote:
| I think people are aware of that. The hard part is the
| question of how to solve it.
| kortilla wrote:
| Sounds like you're arguing against the non-wealthy owning
| homes, which is pretty shitty.
| coliveira wrote:
| That's why the US elites are adamant about not giving any
| social benefits to its population: they want the largest
| number of people depending on loans to survive, and working
| hard to make banks rich! People who depend on loans are
| forced to work hard, both for the benefit of their
| employers and the banks. It is like a cassino, where the
| banks have the house edge: banks will end up making more in
| interest over the lifetime of the loans (and the people).
| codeddesign wrote:
| While not a slave, for many bankruptcy will ruin any chance
| of the ownership of assets for 7-10 years. While not slavery,
| bankruptcy will put you into the peasant category. Tobacco
| advertising is essentially banned, since it has long term
| affects. Credit should be no different. If used wisely it can
| be a good thing, but at the same time it's marketed to the
| easiest and most vulnerable. Credit advertising itself should
| be banned with tax incentives given to companies that require
| everyone to go through a financial course.
|
| In my personal opinion a free financial course should be
| required before you first get your SSN and then no higher
| than a $500 credit limit for 6 months after.
| wombatpm wrote:
| >In my personal opinion a free financial course should be
| required before you first get your SSN and then no higher
| than a $500 credit limit for 6 months after.
|
| While I appreciate the sentiment, SSN is required for
| anyone to be claimed as a dependent. My Children had theirs
| issued shortly after birth. I rather see something alonog a
| required class before you can open your first credit card.
| I got mine in college and had a $25k credit limit by the
| time I graduated. It was very easy for classmates of mine
| to get into serious debt.
| pishpash wrote:
| You always have human capital. Always. (Unless you're in a
| coma or some such.)
| PragmaticPulp wrote:
| > While not a slave, for many bankruptcy will ruin any
| chance of the ownership of assets for 7-10 years.
|
| People declaring bankruptcy aren't in a position to have
| good credit scores or acquire more assets anyway. If you
| can't service your debts, you're not going to be securing
| more loans and buying more assets.
|
| Bankruptcy is a chance to reset the debt to $0 and start
| over. The bankruptcy even drops off your credit score
| entirely after several years, making it a complete reset.
|
| Bankruptcy is better in every way than forcing people to
| service those debts forever.
| cyberlurker wrote:
| I have no debt, but I hold this opinion:
|
| Student loan debt should be able to be discharged in
| bankruptcy. If an institution gives someone a $200k
| education and that person can't pay the debt back with
| their career, it was overpriced and should have never
| been give a loan.
|
| I've seen people flee the country and live in Australia
| or Germany so as just to escape their student loans. Bad
| on them for making the poor financial choice but good for
| them sticking it to the industry that gives out these
| loans.
| sokoloff wrote:
| If you make student loans easier to discharge, you make
| them harder to get. That might be part of your plan, but
| it does make it harder for the less wealthy to afford
| college, so there's a trade-off here, not a straight
| victory.
| landemva wrote:
| After a year or two, college costs would drop
| dramatically. The breadth of degree programs, some of
| which lead to careers serving coffee, would also shrink.
| sokoloff wrote:
| Harvard and Stanford admit about 1 in 20 applicants. MIT
| around 1 in 15. I doubt you'd see those schools get
| cheaper as the demand _far exceeds_ the supply. I think
| you would see a lot more legacy admissions and an overall
| wealthier student body in the top-tier colleges if poor
| people couldn't easily borrow to attend. (As one of those
| people 35 years ago, I think that's a _way worse_ outcome
| than today.)
|
| State schools and schools with high admission percentages
| might get cheaper in tuition, but it's still going to be
| expensive to live and eat for 4 years with no income
| coming in for most of the year.
| landemva wrote:
| High school students apply to many colleges, and each
| student rarely goes on to attend multiple colleges
| concurrently. That ratio about applications is
| misleading, and is generally understood to be intended to
| be social signaling of exclusivity.
|
| Why would a student not want to work part time to have a
| little income? I found it beneficial.
| kortilla wrote:
| If people had to pay $200k to attend Harvard, the price
| will absolutely collapse.
|
| 1 in 20 applicants is only the top 5%. Being in the top
| 5% income earners in the country is not a high enough bar
| to shell out $50k a year extra post tax to pay a child's
| tuition.
| sokoloff wrote:
| That 20:1 is the depth of applicant pool and almost
| entirely unconnected with the 95th percentile current
| income of one country.
|
| Harvard draws from all over the world and many US upper-
| middle class parents/grandparents are willing to save for
| 20 years or use HELOCs; they don't have to pay out of
| current income. Upper class can just pay for it (there
| are well over 1M households in the US alone with a net
| worth over $10M; those people would barely notice putting
| little Chris through Harvard).
|
| If student loans were entirely outlawed, Harvard wouldn't
| need to lower its prices; it would just end up not having
| poor people attending.
| PragmaticPulp wrote:
| I somewhat agree, but it turns out the details are
| extremely tricky.
|
| For example, how do you prevent people from finishing
| college, immediately declaring bankruptcy, and then
| getting a high-paying job with their degree? Unlike a
| house or car, the education can't be repossessed so the
| holder retains all of the upside.
|
| It would be the ultimate financial hack to get a medical
| degree, declare bankruptcy, and then immediately start
| practicing once the bankruptcy went through.
|
| So obviously there would need to be a lot of protections
| against abuse. Perhaps a provision that the student loan
| could only be discharged after a protracted period (many
| years) of too-low income.
|
| Ironically, there's a huge resistance to this idea from
| within humanities departments. They fear (rightly so)
| that such provisions would make it harder to get loans
| for humanities degrees because they pay significantly
| less. I don't think that's really a bad thing, but you'll
| find some outspoken arguments against this from people in
| the academic world.
| heartbeats wrote:
| You can't. What you're describing is textbook indentured
| servitude, which is a form of slavery.
|
| If you're suggesting that some things are only possible
| to fund through slavery, may I humbly submit that slavery
| is still wrong, and things which cannot be funded except
| through slavery have no right to existence?
| Dylan16807 wrote:
| Not absolutely every form of indentured servitude is
| wrong.
|
| It is entirely possible to have fair deals where you get
| an education in exchange for X percent of the income you
| have over Y minimum, for Z years.
| hooande wrote:
| Currently only about 10% of student loans come from
| private institutions. I'm not sure if I want the
| government saying "You can't have a loan to study X
| because you won't make enough money". I'm not sure it's
| even possible to say that, except for using average life
| time earnings that could vary wildly over time.
|
| Teenagers applying for college usually don't have
| personal credit histories to be evaluated. Either we give
| out lots of student loans, or we don't.
| ajross wrote:
| > People declaring bankruptcy aren't in a position to
| have good credit scores or acquire more assets anyway.
|
| That's... kinda ridiculous. My twitter feed[1] is
| absolutely filled with flush 20-somethings who _clearly_
| aren 't seven years into their careers showing off their
| NFTs and cars and condos and whatnot.
|
| People right out of college with zero assets are getting
| loans. People right out of bankruptcy can't. So it's not
| the same.
|
| [1] Seeded, it seems, from my following of a few Tesla-
| related accounts. There's... a somewhat distressing level
| of overlap.
| nobody9999 wrote:
| >In my personal opinion a free financial course should be
| required before you first get your SSN and then no higher
| than a $500 credit limit for 6 months after.
|
| And when you have a lawsuit filed against you in a
| comparative negligence[0] jurisdiction, even if you have
| _no_ debt at all, bankruptcy may be your only choice --
| when the lawyer 's fees will bankrupt you even if you _win_
| the lawsuit (let alone having to pay even a small
| percentage of a seven or eight-figure judgement).
|
| What financial advice (free or otherwise) can you give to
| someone in that situation? I _was_ in that situation and
| faced either bankruptcy after trial (even if I won) or
| bankruptcy _before_ trial and still lose access to
| favorable credit terms.
|
| Bankruptcy guaranteed. With no bad financial decisions or
| lack of financial education needed.
|
| If your scenario (ignorant people making bad financial
| decision) were the only issue, I _might_ agree with you.
| But there are a whole bunch of other scenarios that don 't
| include bad decisions.
|
| All you need is someone to sue you for some large amount of
| money (even if there's no merit to the suit, the lawyer's
| fees for going to trial will do the job) or incur large
| medical bills for injuries/illnesses that have nothing to
| do with poor choices.
|
| [0] https://www.law.cornell.edu/wex/comparative_negligence
|
| Edit: Added the _missing link_.
| jimnotgym wrote:
| > Student loans (which are much lower interest rate and
| nothing like these loans) can't be discharged in bankruptcy
|
| I am in the UK
|
| This astounded me. Bankruptcy in the UK would wipe out
| student loans. However it is fair to say that bankruptcy also
| carries a stigma in the UK. It also restricts you from
| certain professions
| bko wrote:
| > Many people go through bankruptcy and rebuild their credit
| over several years.
|
| Chapter 13 bankruptcy is deleted from your credit report
| seven years from the filing date.
|
| Chapter 7 bankruptcy is deleted 10 years from the filing
| date.
|
| This means no one can even tell you were bankrupt after 7-10
| years, which is pretty incredible feature for borrowers.
| cconstantine wrote:
| > This means no one can even tell you were bankrupt after
| 7-10 years, which is pretty incredible feature for
| borrowers.
|
| This is absolutely not true. The record of your bankruptcy
| lives in the public records of the bankruptcy court
| forever.
| BobbyH wrote:
| I work in the bankruptcy niche, and I wanted to tweak your
| statements...
|
| Chapter 13 bankruptcy is deleted from your credit report
| seven years from the _discharge_ date, which comes 3 to 5
| years after you file (because there 's a 3 to 5 year
| payment plan). So if you measure from the filing date,
| Chapter 13 takes 7 + 3-to-5 years to come off your credit
| report, which is 10 to 12 years from the filing date.
|
| Similarly, Chapter 7 bankruptcy is deleted 10 years from
| the _discharge_ date. In a typical Chapter 7 bankruptcy,
| the debtor receives a discharge 4 months after filing. So
| your statement is actually quite close, but to be pedantic,
| it 's 10.33 years from the filing date.
|
| In my experience, most Chapter 7 filers can fully recover
| after about 2 years, provided they are able to make their
| payments on-time after the bankruptcy.
| cconstantine wrote:
| This is a lie that needs to die. Bankruptcy might get
| removed from your credit report, but the public court
| records never do. Anyone who does a credit check can (and
| will) search those public records.
|
| Bankruptcy stays with you forever.
| throw__away7391 wrote:
| Some friends of mine declared bankruptcy a few years
| after the financial crisis due to their business failing.
| They eventually lost their home, but were able to save up
| some money by not paying their mortgage while their case
| was in processing). They rented a place for a few years,
| but after some time, like 2 or 3 years they were able to
| qualify for a new mortgage with apparently a decent
| enough rate and bought a house. They were also somehow
| able to decide which loans to declare bankruptcy on, so
| they kept their car loan for example.
|
| I mean, I don't know that it is perfect, but I think the
| bankruptcy laws in the US are pretty decent at least.
| cconstantine wrote:
| I'm not saying bankruptcy is bad. It's a necessary escape
| hatch for the credit industry, and shouldn't have the
| stigma it does. maunder is absolutely right; the consumer
| credit industry in the US is nothing but predatory. Good
| for you if you haven't been bit yet, but their goal is to
| eat everyone. Whenever I see someone brag about their
| credit score all I see is a mouse begging for the cat's
| approval.
|
| More and more you can't even opt out of consumer credit.
| I have attempted to opt out of it by not holding any
| credit, except I apparently need good credit to live
| somewhere, or a credit card to rent a car or do some
| kinds of money transfers.
|
| Telling people they can file bankruptcy, "reset to 0",
| and have another chance to redeem themselves is bullshit.
| The only place it disappears from is your credit report,
| and implying that covers it is a brazen lie. It really
| doesn't. Fuck credit scores. What about the ability to
| get a job, or not live on the street? Having a bankruptcy
| from 30 years ago can negatively impact your ability to
| do either of those things.
|
| The credit industry is so deluded that they think your
| credit report is all that matters, and that's how they
| want you to think. In reality, it's all that matters to
| them and they can't wait to get you back in the game.
| ethbr0 wrote:
| > _but their goal is to eat everyone_
|
| Their goal is to make money.
|
| If you go them and say "I want to make a very unfavorable
| to myself deal, that will make you lots of money" then
| they'll say "Yes."
|
| Caveat emptor by default, with specific exclusions for
| some worse cases, generally governs financial contracts
| in the US.
|
| In other words, you have the right to agree to whatever
| you want to agree to. If you choose to use that power to
| blow your foot off... well, that can happen.
| hkt wrote:
| The contrary view is that the state has at least two
| jobs: to create an environment where you're in a position
| to turn down bad deals, and to prevent the very worst
| deals from being offered in the first place.
|
| Really it is about whether the government's job is to
| forcibly not govern, or to get involved.
| ethbr0 wrote:
| The former I'd agree with, the latter I'd question.
|
| Because "very worst" (or even just "bad") deals is a
| loaded term. Why? For whom? When?
|
| As discussed in this topic, a high-interest rate loan is
| a bad deal, unless it's the best option you have. Would
| no loan be better than that loan? Maybe. Should we take
| away someone's ability to make that decision? I'm not
| convinced.
|
| At some point, the cost of freedom is freedom to fail. So
| it's always a balancing act between not making that
| failure hurt too much or too easy to inadvertently
| stumble into... and giving people autonomy.
|
| You'd think engineers would understand that you can't
| optimize for everything at once.
| rootusrootus wrote:
| > no one can even tell you were bankrupt
|
| For loans over a certain size (definitely anything mortgage
| size) there is no limit on the length of the credit report
| given to them. They may not _care_ when it 's been so long,
| but they can see it all.
| actually_a_dog wrote:
| I'm going to say I don't believe this is true. However, I
| don't know for sure, and I also don't know the magic
| words to google to verify or disprove this. Can anybody
| point me to info on the web, or some of those magic
| words?
| ajross wrote:
| > This means no one can even tell you were bankrupt
|
| Except the banks who loaned you money! There aren't that
| many banks, and credit reports aren't their only source of
| intelligence.
|
| I'm always amazed at the number of people who recommend
| bankruptcy as, like, an investment or risk management
| tactic. It's a huge mess, and seven years is a long time.
| rdtwo wrote:
| Most of the time banks don't care. They just securitize
| the product package it into a bunch of complex
| instruments and sell them off to "investors"
| alisonkisk wrote:
| bko wrote:
| > Except the banks who loaned you money! There aren't
| that many banks, and credit reports aren't their only
| source of intelligence.
|
| I don't think they have that info. It's not like you go
| take a walk down to your local bank and talk to a loan
| officer that grew up with you. It's a faceless nameless
| corporation that does very standard checks. They often
| don't even hold the debt. Trust me, they want to give you
| a loan and don't have their shit together enough to get
| unofficial credit history that they're not legally
| allowed to use.
| [deleted]
| tedyoung wrote:
| American Express never forgets. 20+ years after declaring
| bankruptcy and I'm still not able to get an AmEx card,
| because they have their own records. (I have an 820+ FICO
| score.)
| nobody9999 wrote:
| >American Express never forgets. 20+ years after
| declaring bankruptcy and I'm still not able to get an
| AmEx card, because they have their own records. (I have
| an 820+ FICO score.)
|
| I can confirm this.
|
| I'm 30+ years out from getting a couple thousand written
| off by Amex and 20+ years out from bankruptcy (a single
| "debtor" who was the plaintiff in a lawsuit against me,
| and during which no loans or credit cards were defaulted
| on) and American Express _still_ won 't do business with
| me, even after being their employee (and having to pay
| back every penny that was written off before they'd issue
| me a corporate card) for several years.
|
| I'd also note that American Express does _not_ report
| payment histories on their charge products to the credit
| bureaus. But they do have a _very_ long memory.
|
| Edit: I'd note that I _still_ had a 700+ credit score
| within the 10 year window after bankruptcy, and my score
| is in the mid 800s.
| nine_k wrote:
| I suspect Visa, MasterCard, and a number of other banks
| and credit unions would be keen to offer good loan
| conditions to a person with a demonstrated income and
| 800+ FICO score.
| hkt wrote:
| I'm not from the US so could you explain how credit
| unions deal with these things? Are they more sympathetic
| than banks or do they operate as banks-except-in-name?
| ryathal wrote:
| For average needs a credit union is a bank with another
| name. They occasionally have better rates, because there
| isn't a profit motive for the credit union since it's
| member owned. If you have special needs beyond
| checking/savings and home/car loans a credit union may
| not be able to offer the same level of support as a bank.
| The quality of credit unions varies wildly, especially on
| the tech side.
| conductr wrote:
| It's all relative. Seven years of not being able to
| utilize debt is better than 70 years payoff schedule
| where every cent of your disposable income is going to
| service a debt that you're unable to really put a dent in
| and making real sacrifices along the way.
| cconstantine wrote:
| Creditors love people who have recently filled for
| bankruptcy. They're vulnerable, known to be bad with
| money, and can't file again for a number of years.
| [deleted]
| alex_young wrote:
| > Student loans (which are much lower interest rate and
| nothing like these loans)
|
| Private student loans currently can be as high as 12.99%
| fixed: https://www.bankrate.com/loans/student-loans/current-
| interes...
| throw_nbvc1234 wrote:
| So have a combination of the federal and state government
| guarantee student an amount of public loans for the student
| to attend a public in-state school. The student also
| shouldn't be forced to take on private loans because their
| parents refused to pay their share; that's a problem for
| the government and parents to figure out, not for the
| student to be punished for.
|
| The estimated 2021 cost of attendance at the public school
| i graduated from are low enough that you should still be
| able to graduate with less then "6 figures debt" scenario
| that's tossed around, especially if you're working a part-
| time job throughout your education. If in-state schools are
| too expensive for federal govt to fund, then that's the
| state's problem to solve since that seems like a broken
| public college system.
|
| Kids should have a right to education, but if someone
| doesn't have the money or is getting a degree without
| prospect of sustainable financial return then they should
| be prevented from making the bad decision of going to a
| more expensive private university.
| PragmaticPulp wrote:
| In which case, the person should refinance immediately and
| lower that rate significantly.
| alex_young wrote:
| Just out of curiosity, do you known anyone with
| significant private student loan debt? I do, and from my
| experience their debts are not only extremely burdensome,
| but impossible to renegotiate.
| PragmaticPulp wrote:
| I've helped several people through it, yes.
|
| Renegotiating isn't the same as refinancing. You can see
| the refinance rates lower down on the page you linked
| above. The rates are significantly lower.
|
| Refinancing student loan debt is an extremely common
| scenario. It's not an impossible edge case. It would be
| difficult to do if the person had worked themselves into
| a situation where they have unreasonably high debt
| burdens (e.g. $200K+) but no career to speak of, so it's
| not a magic bullet.
| jointpdf wrote:
| > _It would be difficult to do if the person had worked
| themselves into a situation where they have unreasonably
| high debt burdens (e.g. $200K+) but no career to speak
| of, so it 's not a magic bullet._
|
| There is a way: income-driven repayment plans. There are
| several flavors, but you pay ~10% of ( _your_income_ -
| 1.5 x _federal_poverty_wage_ ). The poverty guideline
| depends on household size (info here:
| https://aspe.hhs.gov/topics/poverty-economic-
| mobility/povert...). Most loans are eligible.
|
| Any balance that is left after 20 years is forgiven. It's
| a lot harder to default on these loans, and it's the best
| way out for people with an insurmountable amount of debt.
| Actually, it's probably the best repayment plan for most
| people, and there has been talk about making them the
| default plan.
|
| However, you may have to pay taxes in the forgiven
| amount. There are some edge cases where you could pay
| more over the life of the loan if your income increases
| dramatically, but it's unlikely.
|
| More info: https://studentaid.gov/manage-
| loans/repayment/plans/income-d...
| rdtwo wrote:
| Forgiven can be a real problem because the balance
| balloons and it could easily triple resulting in a huge
| tax burden. Once forgiven it becomes income and you get
| to pay taxes on the whole "gain"
| ARandomerDude wrote:
| When I went through it about 10 years ago, I took out an
| unsecured personal loan for 2.5% and used the cash to
| "pay off" my student loans. Then I just had a $500/mo
| payment until I was done with it.
|
| I was making about $35K per year but was careful to have
| excellent credit. It can be done.
| lhorie wrote:
| One could argue that US' cultural focus on its flavor of
| freedom is partly at fault for why GP characterizes it as
| Jurassic Park. In the movie, the characters had ample freedom
| to go wherever they wanted (even jumping over electric
| fences), but at the same time, that same freedom made it easy
| for them to run into predators. The ease with which a loose
| predator could find a person in the movie can be likened to
| the ease of getting into financial trouble in the US. Student
| debt is notoriously unforgiving, both in terms of raw dollar
| amount and bankruptcy rules, and the way the US healthcare is
| structured means there's an unusually high rate of medical
| bankruptcies compared to other rich countries. The US also
| leads the charts in average credit card debt. The US also
| doesn't have as strong social nets for unemployment and
| parental leave among other things (and for better or worse,
| there's an undeniable strong relationship between the
| american notion of freedom and the comparative lack of
| government-run social net programs).
|
| To continue with the dinosaur park analogy, you could then
| look at a country like Canada as an alternative zoological
| park, where you must sacrifice a bit of freedom by staying
| within designated lanes, but in return you don't run into
| situations where medical debt beasts can bite your head off
| in the first place.
| heavyset_go wrote:
| The flavor of freedom the US embodies is the freedom to
| crash and burn. I'd prefer the freedom to flourish, even if
| that means limiting the freedom to prey upon the vulnerable
| and desperate.
| actually_a_dog wrote:
| It's a very classic "freedom to" versus "freedom from"
| dichotomy. You and I would rather have more "freedom
| from," even if it limits our "freedom to." The US system
| as a whole tends to tilt the other way, however.
| 3np wrote:
| The problem with this reasoning is that in so many ways,
| the USA is very non-free and just a cultural meme.
|
| You can get thrown in jail for: holding the wrong kind of
| plant; associating/trading with/helping a persona-non-grata
| or a person from the "wrong" country; speaking up about
| military misconduct; sharing a copy of music you bought
| with friends...
|
| And that's just what's imposed by by federal law. "The land
| of the free" is a mirage and hasn't been reality for
| decades, maybe centuries.
| lhorie wrote:
| Pointing out that you can get be thrown in jail for
| breaking the law isn't really a good argument. The
| alternative to rule of law is anarchy. Just because you
| don't agree with specific laws doesn't mean freedom is a
| lie.
|
| Besides, the point wasn't about platonic freedom, but
| instead about a specific flavor of "freedom" that exists
| in US culture. In the dinosaur park analogy, the electric
| fences can be likened to government safety net programs.
| As you may be familiar with, there is a political faction
| in the US that dislikes the idea of being "forced" to pay
| taxes to fund programs to help the less fortunate, and a
| lot of the issues related to various forms of crushing
| debt stem from that ideology that a rich person should be
| "free" to be selfish.
| profile53 wrote:
| However, when the laws greatly restrict one's ability to
| do things, are they really free? Whether or not you agree
| with a law, laws are nearly always aimed at restricting
| people.
| lhorie wrote:
| Of course there are laws that exist to restrict people.
| The rationale is the protection of the commons. You
| wouldn't want to allow willy nilly murder and arson in
| the name of freedom, that'd obviously be ridiculous.
|
| Let's avoid the faux intellectualism of "if [cherrypicked
| example], is the whole invalid?" Freedom isn't a black-
| or-white matter, you can simultaneously be prohibited
| from killing and free to speak your mind while jaywalking
| on a quiet street. But IMHO, one ought to consider topics
| like maslow's hierarchy of needs and human rights
| conventions before bringing things like music piracy into
| the topic of freedom.
| [deleted]
| ethbr0 wrote:
| Paying higher tax rates to fund social safety nets is a
| law that impacts freedom too.
|
| The US' top federal marginal rate of 37% is pretty low.
|
| In countries with more expansivo safety nets, it looks
| like it's up around 50%.
| actually_a_dog wrote:
| Yes, and the impact on freedom is positive for those who
| need to take advantage of social safety nets, and
| essentially zero for those who are paying that top
| marginal rate.
| ethbr0 wrote:
| We see numbers differently if 13% = essentially zero.
| actually_a_dog wrote:
| For anybody who's got enough income post-deductions to
| land in the 37% bracket, they're _well_ into the 99th
| percentile in income. Even if someone at the very bottom
| of the 37% bracket actually had to pay 37% on all their
| income (yes, I know that 's not how it works), they'd
| still be in at least the 98th percentile of income. So,
| yes, I call that essentially zero impact.
| ethbr0 wrote:
| I'd agree with you on the marginal utility of that
| wealth, and (unrelatedly) on the moral righteousness of
| redistributing that excess wealth.
|
| But that doesn't change the fact that we're talking about
| the government taking an asset (the 13%) from an
| individual.
|
| It's hard to bill that as a zero-impact action with
| regards to freedom.
|
| One might say "I think net freedom is increased by
| redistributing money from the extraordinarily wealthy to
| the broader population." But it seems illogical to say
| "We can create more freedom by taxing the wealthy,
| because that creates more freedom for everyone not
| wealthy, and has no impact on the wealthy."
| actually_a_dog wrote:
| Why is that illogical? What impact do you think it would
| have on them?
| ethbr0 wrote:
| Is there anything they could do with +13% of their
| income, that they wouldn't be able to do without it?
|
| I'm hard pressed to come up with a justified "No" to
| answer that question.
| actually_a_dog wrote:
| It's a tautology that if someone makes more money, they
| will literally do _something_ with it. The question is:
| who cares? In other words, would it be something
| meaningful, or no? Is anybody at that income level less
| "free" in any substantial sense because they have to pay
| a bit more in taxes? Again, I claim that for most people
| actually _paying_ those tax rates, the answer is no,
| mostly because marginal propensity to consume decreases
| with increasing income. And, at that level of income, not
| having a few more bucks to invest just doesn 't seem
| meaningful, either.
|
| Let's hear some specifics. Name one specific thing
| someone at this level of income might do that extra
| income that meaningfully impacts their life. Your
| inability or refusal to do so so far seems to support my
| point here.
|
| Here's _my_ concrete example: if we added +13% to Jeff
| Bezos 's accounts, do you _really_ think that would
| change his life even a tiny bit? Would it change
| meaningfully even if we subtracted 13%? I 'm just gonna
| say that's a no either way.
| ethbr0 wrote:
| Presumably Bezos would spend more money on space travel.
| And Warren Buffett or Bill Gates would spend more on
| charity. And Larry Ellison would buy another and bigger
| yatch. Or Elon Musk would just keep it in a bank account.
|
| Which one can feel on way or the other about, but it's
| disingenuous to claim that's nothing. It's not nothing.
|
| So make the full claim you want ("I support laws that tax
| the rich and decrease their freedom, so that poorer
| people can have a stronger social safety net and more
| freedom."), being honest about all sides, instead of the
| edited version ("I support laws that increase freedom for
| everyone {because money doesn't have value to rich
| people}.").
|
| And recognize that if it's moral umbrage you're taking,
| the same reasoning extends down the income scale. (Making
| the assumption that you're not making minimum wage, and
| I'm not) Presumably someone who is making minimum wage
| would believe many of the things we do with our
| additional income, but would not do without it, are "not
| meaningful."
| profile53 wrote:
| I think the impact is near zero but not zero.
|
| For example, it might mean someone has to work a year
| longer before accumulating wealth and retiring. The
| benefit far outweighs the cost, but the cost is still
| there.
|
| Taxes are inherently a restriction on what one can do
| with their money. That said, without them we wouldn't
| have roads, police, healthcare, social security,
| etc...which does add freedom to many peoples lives. I
| think another comment said it best, laws can increase
| overall freedom in a society, but they do still restrict
| individuals.
| actually_a_dog wrote:
| I don't understand whether you're agreeing or disagreeing
| with me.
| profile53 wrote:
| Sorry, that was poorly explained. I'm agreeing that the
| overall benefit to society is positive. But, I disagree
| that the impact to the individual is essentially zero.
| [deleted]
| 3np wrote:
| I mean, if you change the meaning of "freedom" to only
| mean "having to pay taxes but not for funding wellfare
| (and being allowed to own and carry firearms, but not
| information or drugs the government disagrees with)" then
| the word loses its meaning.
|
| With the same kind reasoning you could argue that the
| DPRK is the freeest country in the world, for "their
| flavor of freedom".
| lhorie wrote:
| To clarify, I'm not disagreeing with you, nor am I the
| one changing the meaning of "freedom". I'm merely
| relaying the ideology that is commonly associated with
| the word nowadays in the US, in order to make an
| association between it and the topic of why debt is
| seemingly so prevalent in the US. If you have a better
| word than "freedom" in air quotes to describe the
| ideology I'm describing, by all means do share.
| feanaro wrote:
| Laws outlawing victimless crimes have a distinct and
| inherent flavour of anti-freedom associated with them,
| though. This is the way the US is lacking in freedom. It
| often feels as primarily freedom of the rich to oppress
| the poor.
| chrisweekly wrote:
| Medical debt, consumer credit card debt, and student loans,
| are three radically different beasts, on every meaningful
| axis.
| nine_k wrote:
| The founding fathers gave a very fair warning: "The price
| of liberty is eternal vigilance". That is, a constant
| expectation of a threat from the environment, even if it's
| benign most of the time.
|
| So the park's elements are here by design.
| cowpig wrote:
| 1. That is a spurious quotation[1]
|
| 2. Your interpretation of its meaning is, frankly,
| bizarre
|
| [1] https://www.monticello.org/site/research-and-
| collections/ete...
| zepto wrote:
| The idea that financial predators are by design, is
| indeed bizarre.
|
| However the idea that they are one of the kinds of threat
| that a democracy needs to be vigilant against doesn't
| seem bizarre in the least.
| reaperducer wrote:
| _The US has relatively generous bankruptcy laws_
|
| Or we could just fix the system so that people don't need to
| use bankruptcy in the first place.
|
| The only people who benefit from the "there's always
| bankruptcy" attitude is lawyers.
| ouid wrote:
| >Student loans (which are much lower interest rate and
| nothing like these loans)
|
| Yo, student loan rates are like 7%. It's not a payday loan,
| but it is still essentially unfinanceable.
| PragmaticPulp wrote:
| Federal loans are actually sitting under 4% and private
| rates range all the way down to about 3%
|
| Source: https://www.bankrate.com/loans/student-
| loans/current-interes...
|
| Of course it's always possible to go find higher rates
| depending on the situation, but the averages are closer to
| 3-4% than 7%.
| matthewdgreen wrote:
| There is an upper limit on the amount you can take in
| these loans and it's depressingly low, well below the
| tuition of many private (and some public) colleges. To
| finance the rest you're looking at much higher rates.
| dragonwriter wrote:
| > Yo, student loan rates are like 7%.
|
| Yo, only parent and graduate loans are close to that, of
| federal loans (private loans are another issue, and also
| probably involve an unaccredited institution that doesn't
| qualify for federal loans):
|
| https://studentaid.gov/understand-
| aid/types/loans/interest-r...
| criley2 wrote:
| Yo, just because a new student getting loans right now
| can get 4% doesn't mean that 7% wasn't absolutely the
| norm for many people over the past decades. Anyone in
| their 30s has 6 or 7% or more on their loans, before ZIRP
| took over.
|
| And since raising rates is the way they're going to stop
| inflation, like it or not, that 4% is going to end real
| soon and kids will be back to 5-7% in the next few years.
| dragonwriter wrote:
| > Yo, just because a new student getting loans right now
| can get 4% doesn't mean that 7% wasn't absolutely the
| norm for many people over the past decades
|
| Subsidized loans were at 6.80% for the first two years
| they used fixed interest (the academic years 2006-2007
| and 2007-2008); this is the highest they have ever been
| under the fixed interest regime; there are three
| additional years they were at 5% or higher.
|
| Under the variable interest regime before that, they
| spent some time at 7% or above in the 1990s, but those
| would have fallen with general interest rates.
| colordrops wrote:
| Am I the only one that thinks it's backwards that student
| loans can't be discharged? It should be one of the only kinds
| of loans you can discharge. Why would you as a nation want to
| saddle your youngest most ambitious and most valuable people?
| 300bps wrote:
| Because if you allow bankruptcy to discharge them that
| would make the interest rate 3-4x what it is today and
| people couldn't afford it.
| rdtwo wrote:
| This is a good thing not a bad one. Colleges would have
| to trim down prices significantly
| dragonwriter wrote:
| > Why would you as a nation want to saddle your youngest
| most ambitious and most valuable people?
|
| That's why student loans _shouldn 't exist_; if the federal
| government is going to subsidize higher education, it
| should be by grants, student out-of-pocket cost limits tied
| to accepting federal research and other funding, and other
| non-loan mechanisms, not forcing students into debt.
|
| (Private student loans, OTOH, should be dischargeable the
| same as other unsecured debt, and if lenders don't like it
| they don't have to issue loans.)
| nicoffeine wrote:
| Because people in debt are easier to control. It's the same
| reason we are the only nation that does not provide
| healthcare as a right. Millions of people would quit
| tomorrow if they were sure their kids would have access to
| healthcare.
|
| For reference, visit any nation with these rights. You will
| find more small businesses, fewer franchised chains, and
| happier people.
| sjg007 wrote:
| People might be happier but there are not more small
| businesses. But I do agree that health insurance is a big
| part of it. Less since the ACA passed though since you
| can get health insurance at any income level now.
| TigeriusKirk wrote:
| If they're that ambitious and that valuable, they should
| have no problem paying back the loans.
|
| That's the whole thesis behind making the loans in the
| first place.
| colordrops wrote:
| They are ambitious and valuable as a class of people. Not
| every single person succeeds financially, and not
| everyone takes up work that makes a ton of money.
| alisonkisk wrote:
| landemva wrote:
| If you look at the ramp in college costs, prices started
| climbing immediately after Clinton signed this into law. It
| was a gift to the bankers who get to make loans on a higher
| priced product and the loans are difficult to not repay
| because they typically get parents to co-sign.
| sjg007 wrote:
| I think you mean Bush. It was GW who did this.
| mdorazio wrote:
| Nope. 1998 - it was Clinton [1].
|
| [1] https://thehill.com/blogs/congress-blog/economy-
| budget/28362...
| coliveira wrote:
| Student loans are a gold mine for banks. There is no other
| kind of loan that cannot be discharged on bankruptcy. Think
| about business loans: every business loan can be discharged
| on bankruptcy by definition.
| mandevil wrote:
| The ACA (Obamcare) revamped student loans such that banks
| no longer got government guarantees for loans they
| originated. (The GOP unanimously opposed this "Government
| Takeover" of the student loan system.) This has created a
| system where the Department of Education makes the vast
| majority of loans, and offers other companies a small fee
| for servicing the loans, but they don't originate or
| profit from them directly- that's all the USG.
|
| Private lenders do try and cherry-pick the very best
| borrowers out of the federal system; my wife graduated 5
| years ago with a doctorate in Pharmacy and >100,000 in
| debt, and she got many advertisements to refinance her
| education loans because she was a pharmacist who was
| paying enough to finish off her loans in 5 years- she was
| a great bet to pay off her loans in total, so SoFi,
| Navient and a whole bunch of their competitors wanted her
| to refinance through them, but only the DoE was
| interested in paying for her at the beginning of grad
| school.
| coliveira wrote:
| But even without this guarantee, this doesn't change the
| fact that the loan cannot be discharged during bankruptcy
| (at least not easily). This make such loans much more
| draconic than business loans.
| hooande wrote:
| It's because the debt is owed directly to the US Treasury,
| just like debts to the IRS. You can't discharge any debt
| you owe to the federal government, to my knowledge.
|
| Same reason they can collect the debt using wage
| garnishments and property liens, methods that aren't
| available to most creditors.
|
| This is only explained to some students (it was to me). But
| no one plans on not having money in the far future,
| regardless of what warnings they receive
| dragonwriter wrote:
| > It's because the debt is owed directly to the US
| Treasury,
|
| No, it's not; it predates direct loans existing, much
| less being the only form of federal student loan, and
| applies to private, non-government-guaranteed student
| loans, as well.
|
| > Same reason they can collect the debt using wage
| garnishments and property liens, methods that aren't
| available to most creditors.
|
| Property liens and garnishment are available to most
| creditors after securing a judgement against a debtor.
|
| > This is only explained to some students (it was to me).
|
| It's good that only _some_ students are subject to that
| complete fabrication, though it would be better if none
| were.
| hooande wrote:
| Such pedantry. The Treasury is still accountable for
| federally backed loans. And you still can't discharge
| them like you can other loans. Private loans were
| included in this later, for market purposes as I
| understand.
|
| The government does not need a court judgement against a
| debtor before garnishing wages, withholding returns, etc.
| This is why the majority of these actions are for child
| support and student debt, not for consumer debt.
|
| The rules for student debt repayment started with the
| premise that a different process was in use for money
| owed to (or backed by) the federal government
| Panzer04 wrote:
| Because then they simply wouldn't exist. If they did,
| interest rates would be stratospheric, with most of the
| money coming from the successful borrowers subsidising
| everyone else.
| sjg007 wrote:
| This is not true.
| kiklion wrote:
| What's the difference between a student loan that can be
| discharged in bankruptcy and a personal loan?
|
| Sure, the student loan can only go to a school but
| neither has any collateral which makes them the most
| similar loan products. So go get any 18 year old to try
| to get a $20,000 personal loan without any credit and see
| what the rates are and if lenders would even give it to
| them.
| sjg007 wrote:
| There are plenty of alternative solutions.
| mandevil wrote:
| In the 1970's a couple of doctors declared bankruptcy while
| they were residents (and thus getting paid peanuts) because
| of how large their school debts were and how small their
| income were _at that moment_. Since the law didn 't include
| "most likely in the future you will be making a lot of
| money" as one of the factors they then got very good cram-
| downs of their debts and voila, soon were very wealthy
| doctors. The handful of people who did this attracted media
| coverage, and the Government stepped in.
|
| There was an immediate patch to this, and then longer term
| solutions as well. The basic, Econ101 level thought behind
| this is that if you go into debt to buy a car or a house or
| anything tangible and the debt proves too much the bank can
| take those assets back if you declare bankruptcy.[1] But
| how does that work for a degree or the knowledge in your
| head? What can they take from that?
|
| Another issue is fairness. If student loans paid attention
| to how likely they were to be paid back then, as a first
| approximation, they would only be offered to people with
| above average income attending elite schools and poor
| people would be cut out of college more completely than
| they currently are- and they would pay much more attention
| to your degree, school etc. Everyone who goes to a Ivy
| would get loans, many people who go to regional schools
| wouldn't, because they aren't good bets to pay off the
| loans (people who graduate, as a first approximation, pay
| off loans; people who drop out don't, and community
| colleges and regional schools which focus on non-
| traditional students who have real lives already have much
| higher drop-out rates than Harvard- this is different in
| practice because of Pell Grants but that's a different
| issue). The reason that they are offered student loans is
| because the government guarantees them, so they have lower
| interest rates (yes its higher than a mortgage, but its
| much lower than a credit card or payday loan, which are the
| other unsecured loans the average person has access to),
| ignore your school, major, etc. and are available to every
| US citizen.
|
| But if the government guarantees the loan, then isn't
| someone who defaults on this unsecured debt ripping off the
| American taxpayer? Easy to see how this can be gamed and
| the student portrayed as the bad guy, because of how the
| system works. Even those doctors at the beginning deserve a
| better system, but Americans first instinct wasn't 'let's
| fix this so that the doctors don't go into such debt' it
| was "lets make sure those cheaters don't profit off of
| ripping off the taxpayer." And that instinct is how we
| ended up here.
|
| [1]: Obviously if you buy a new car the debt will be
| greater than the value of the car (because the car loses so
| much value when you drive it off the lot) but they have
| fancy economic models to account for that, and the house
| has an appraisal to prove that it can be sold for more than
| they are loaning out.
| heartbeats wrote:
| Why can't you just seize the degree? If I go to college
| and default on my loan, the elegant solution is to just
| strip me of my degree. If I want it back, I would have to
| go to college for another five years.
| mandevil wrote:
| Is the value of the degree the knowledge and experience
| (and connections) you made along the way, or is it just
| the signalling that this institution vouches for your
| ability to clear a bar? Interesting philosophical
| discussion point. If the value of the degree is the
| former, there is literally no way that a bankruptcy judge
| could force you to stop talking to friends or forget the
| things you learned. If the latter, well, could the court
| possibly enforce 'not talk about your experience at
| college' on your resume or in all your job interviews?
| Even if you had your degree taken away because of
| bankruptcy, it still would be something that you could
| mention in some way, right?
| NikolaeVarius wrote:
| A degree is a piece of paper. You can't seize the real
| value which is in the head
| hef19898 wrote:
| Or come up with a solution that doesn't result in
| thousands of dollars of debts after graduation. Something
| like tuition free universities...
| zepto wrote:
| Because unless you are an academic what good would that
| do? Employers would still know you had obtained the
| degree and at worst there might he a small discount on
| your starting salary. You wouldn't be fired for losing
| it.
| istjohn wrote:
| > Student loans (which are much lower interest rate and
| nothing like these loans) can't be discharged in bankruptcy
| but even those are open to modification or discharge in the
| event of hardship.
|
| Student loans are not so easily discharged. Yes, in theory
| they can be written off in cases of "undue hardship." But in
| practice, good luck finding an attorney willing to take your
| case.
| sjg007 wrote:
| Student loans are going to be cancelled in 2022-2023 or
| significantly written down. Also the enterprising student
| is trying to pay off their loans now at 0%. It's too bad
| though that Navient restructured itself to mitigate these
| principal payments. I would say illegal too.
| rblatz wrote:
| This would increase the already high rate of inflation.
| So I don't think it's exactly likely. Plus there isn't
| the political will to give either party this win with
| voters.
| bitcharmer wrote:
| > Student loans are going to be cancelled in 2022-2023
|
| Any evidence to support that?
| anonymouse008 wrote:
| Student loans have been pushed back consistently and
| routinely during the pandemic. The aim of kicking the
| payment down the road is that the economy needs the
| monthly payment as stimulus -- and to boot we're already
| writing multi trillions in stimulus to get us conditioned
| for the big release.
|
| The only thing that thwarts this is sky high inflation,
| which is not foreseeable... this is because they have the
| biggest inflation enhancement on full bore (these literal
| monthly rent payments or better in student loan
| deference) and it's only caused 7% cpi or whatever...
| that's anemic
| bitcharmer wrote:
| Thank you for your reply but it doesn't contain answer to
| my question.
| EmpirePhoenix wrote:
| Get a lot of credit cards, pay of loan that cannot
| bankrupt, then go bankrupt with all those credits
| [deleted]
| vineyardmike wrote:
| So obviously bad advice, but the reason is that to
| declare bankruptcy you have to convince a judge to do it.
| You might have trouble with that using this terrible
| plan.
| jimnotgym wrote:
| I was offering debt advice to a young person recently in
| the UK.
|
| They had gone to a UK debt management company that seeks
| to compound your debt by asking your creditors to accept
| an Individual Voluntary Agreement where you agree to pay
| back a certain amount per month for a fixed period and
| then get it written off. In practice it affects your
| credit rating like bankruptcy. They were advised by that
| company to do exactly what the person above said, max
| their credit cards first. Cash advance if possible.
|
| Not the first time I have heard this
| bredren wrote:
| They are also may not be payday-loan high interest, but the
| interest is not necessarily low either.
|
| Federal Plus loans were 8.5% until that program was shut
| down in 2010. [0][1]
|
| Graduate Direct Subsidized and Subsidized Federal loan
| rates were 7.9% from 2006-2013 and have not dropped below
| 6.3% since. [1]
|
| [0] https://en.wikipedia.org/wiki/Federal_Family_Education_
| Loan_... [1] https://www.finder.com/federal-student-loan-
| interest-rates-b...
| gambiting wrote:
| Yeah, that's insane level of interest. My own student
| debt here in UK has the interest rate of 1.1%. I've just
| remortgaged our house at 1.29%, and our car is on 4%
| finance. All standard deals, nothing crazy. 7.9 or even
| 6.3% interest on the student loans that Americans get
| would be ruinous.
| dragonwriter wrote:
| > Federal Plus loans were 8.5% until that program was
| shut down in 2010.
|
| Federal PLUS loans were never shut down, are still
| available [0]; what was shut down was non-Direct federal
| loans, including the non-Direct PLUS loans, which had a
| higher interest rate than Direct PLUS loans. [1]
|
| [0] https://studentaid.gov/understand-
| aid/types/loans/plus
|
| [1] scroll down to "Interest Rates on Federal PLUS loans"
| which shows historical direct and non-Direct (FFEL)
| rates:
| https://www.savingforcollege.com/article/historical-
| federal-...
| rocqua wrote:
| Dang those rates are crazy.
|
| In the Netherlands, students loans are guven by the
| state. The interest rate is legally set to a mix of
| government bond interest (10 and 5 years). They included
| a clause that the interest never goes negative.
| callmeal wrote:
| >The US has relatively generous bankruptcy laws. Many people
| go through bankruptcy and rebuild their credit over several
| years.
|
| Not for student loans.
|
| https://bostonstudentloanlawyer.com/the-death-and-
| bankruptcy... Like federal student loans,
| private student loans typically cannot be discharged in
| bankruptcy (although it is not impossible). ...
| Many (although not all) private student loans have this tiny
| little clause, often hidden away in the obscure depths of the
| promissory note (the loan contract that you signed, but
| probably didn't read, when you first got the loan). The
| clause basically says the following (and I'm paraphrasing
| here): If the co-signer or the borrower dies or declares
| bankruptcy, the entire balance of the loan will be come due
| immediately.
| actually_a_dog wrote:
| You mean the very same bankruptcy laws that more or less
| prevent you from borrowing money for years to come, should
| you decide to use them?
| dnautics wrote:
| > The US has relatively generous bankruptcy laws
|
| We absolutely need to destigmatize bankruptcy, too. And also
| do things like make medical and student debt dischargeable.
| Debt is and always should be a risk -- for the lender, who is
| _literally getting free money_ out of the contract.
| coding123 wrote:
| It is a country that has given only a voice to those in power
| too. I wonder if that plays into it. We pretend that everyone
| has access to it but the truth is far from that.
| florin_g wrote:
| As an immigrant (of 27 years) I can tell you that the USA is
| not Jurassic Park enough (Is that a good metaphor?). The
| monsters keep me on the edge. It is my job to watch for the
| traps. I am being lied left and right, in many ways, including
| companies your kind empower. Everyone wants my money. I fell
| and got back on my feet. I am ordinary and I am thankful. I am
| a parent to my own children - as for me, a big daddy is the
| worst that can happen to me.
| oa335 wrote:
| I highly recommend "Debt: The First 5000 Years" by late
| anthropologist David Graeber. He does a good job of
| highlighting the oddities of our existing financial system by
| comparing it to others throughout human history.
| halayli wrote:
| Agreed with your sentiment. It's scary easy to fall down and go
| from ok living style to becoming homeless.
|
| But on the other hand, healthy debt is what grows the economy
| and it's a necessity. There should be more regulation / laws
| toward loan grants and far more regulation toward APR.
|
| One thing for sure is that the system cannot favor lenders over
| borrowers or vice versa because failure on either side results
| in collapsing the system.
| abernard1 wrote:
| > I'm seeing posts here making it sound like 36% APR is
| acceptable. Look up usury folks. This is it. Debt that is
| intentionally structured so that it can never be repaid and
| keeps the borrower harnessed to the cart.
|
| This is Brazil or Mexico. Or payday loans. It's emphatically
| not America at large unless you live in SF.
|
| Please leave your bubble.
| callmeal wrote:
| >This is Brazil or Mexico. Or payday loans. It's emphatically
| not America at large unless you live in SF.
|
| Payday loans are America at large. And don't forget Credit
| Cards rates.
| [deleted]
| abernard1 wrote:
| > And don't forget Credit Cards rates.
|
| You mean those 18 month 0% APR rates for credit balance
| transfers? The US has huge rates for long term debt, but
| this is silly.
| mytailorisrich wrote:
| High APR is quite reasonable for very short term loans. E.g.
| 36% APR must be around 3% a month, which does not sound
| unreasonable for a one month loan. Here in the UK credit cards
| are very commonly at circa 20% APR.
|
| What's important is to mandate detailed and clear information
| so that consumers understand what the rate exactly means and
| what the consequences or not repaying quickly are before they
| sign up. Then it's a personal choice and responsibility.
| smorgusofborg wrote:
| 3% a month is not reasonable by past metrics. Utility
| companies like heating oil that didn't want to loan money
| used to charge 0.5-1.5% per month after the grace period back
| when normal mortgage rates were ~7% (APY) and car loans more
| like 11%(APY).
|
| This is simply being in the business of gouging people who
| will end up needing to carry loans over and are better off
| having bad credit but never really have a point of change
| where they realize they need to declare bankruptcy or take
| other financial advice.
| [deleted]
| bitcharmer wrote:
| You hit the nail on the head.
|
| It's terrifying how many Americans on this thread defend this
| despicable system as something normal and expected.
| ransom1538 wrote:
| This isn't America. Here is _season_ 6 ep01 of an ENTIRE
| reality show series in England collecting money from people
| not paying debts [many of them payday loans]. In England they
| just walk into your home and start taking things. In Dubai
| they put debtors in prison. Isreal is covered in payday
| loans.
|
| https://www.youtube.com/watch?v=n6yBiasqMnM
|
| https://www.detainedindubai.org/post/the-truth-about-
| leaving...
|
| https://www.jpost.com/special-content/the-fall-of-payday-
| loa...
| bitcharmer wrote:
| Crippling student loans or medical bankruptcy does not
| exist in UK or any other European country, so that's a
| pretty bad comparison.
|
| I was not referring to just payday loans.
| kortilla wrote:
| It's terrifying how many Europeans come out and defend
| payday loans and pretend their system where it's more
| difficult to declare bankruptcy is somehow better than
| the US debt system.
| bitcharmer wrote:
| Where did you see Europeans defending payday loans?
| refurb wrote:
| Disagree strongly. I've lived in places that ban payday loans
| and it just goes underground.
|
| What you're approach is, is to just han things because "people
| are too dumb to make good choices". I'd prefer not to live in a
| society like that.
|
| And I'm kinda surprised you left out mortgages. The US has _far
| less_ mortgage debt than other Western countries. Sure they
| don't take on student loans, but they seem happy to take on
| massive mortgages.
| heartbeats wrote:
| Illegal loans are harder to collect on. Sure, you have mob
| tactics, but there's a limit on how far it can go.
| refurb wrote:
| You'd be surprised. Singapore has a _massive_ problem with
| illegal loans. And that's a country with a pretty strict
| police force.
| entangledqubit wrote:
| Also, to make sure there's enough prey, let's not make
| financial education a requirement, in general, so people can
| make well reasoned choices...
| bequanna wrote:
| What kind of additional financial education would you
| recommend? I think we are already doing a decent putting this
| info in front of our young.
|
| I grew up very rural and solidly lower middle class. We
| learned to balance checkbooks in 8th grade, had an accounting
| class in 11th, and a "life skills" required course that
| taught about budgets, loans, interest rates, credit cards,
| apartment leases, and so on.
|
| I am in my late 30s and everyone Ive ever mentioned this to
| was exposed to pretty much the same set of things before they
| left high school.
| kirse wrote:
| There's a happy medium with debt. Dave Ramsey takes a
| conservative approach in that he prefers saving your entire
| stack before buying something, I personally like to keep (total
| debt < net worth), with some consideration for liquidity risk
| thrown in. If I lost my job could I be a free man or am I
| buried and sweating? Others take that multiplier even further
| and sometimes luck out.
|
| On one hand debt causes issues for those who lack knowledge,
| but on the other hand it allows a great degree of near-term
| accelerated growth and societal load-balancing. The fact that
| society enables folks to collectively trust others to pay their
| debts is why we're not still stuck with a barter economy and
| the inherent inefficiencies of a "trust-less" economic
| approach.
|
| So much of present growth and fruitfulness is rooted in the
| future faith that others will make good on their promises
| (debt). Debt is a great thing in moderation.
| emodendroket wrote:
| The case for debt is clear enough with a home, a car, or a
| business investment. Hard to imagine feeling anything but
| embarrassment or frustration at paying off a television years
| after you got it.
| alkot89 wrote:
| What is the difference other than a psychological one?
| Especially when you use car as an example. A car will
| probably depreciate just like a TV. It comes down to
| whether the terms are good. I have purchased TVs and
| computers on for 0 or very low APR because I had better
| things to do with the cash. I have no problem paying $4000
| 2 or 3 years in the future for a TV I have had the whole
| time - it beat the alternative.
| emodendroket wrote:
| A car has obvious practical utility if you live in a
| country where a car is the only way to get around. In
| many places it's basically essential to having a basic
| life where you get to your job, and so on. A television
| has comparatively little such practical utility, and the
| downsides to setting your sights on a cheaper one are
| much easier to live with.
|
| The value of a car is also substantially greater (making
| a cash purchase less practical) and your odds of
| recovering a substantial portion of the purchase price
| through resale are much better (indeed with a TV you'll
| likely pay to get rid of it).
| abustamam wrote:
| Same here. I always make sure I have the cash on hand to
| pay for debt if I'm somehow out of income, but if I can
| get a 0% interest rate on a TV (or, more practically, the
| $4000 bed I bought a few years ago since I don't quite
| understand what the difference between my $500 TV and a
| $5000 TV is other than marketing)... I can put that money
| into an index fund and have it grow instead.
|
| I think this kind of highlights the issues that GP was
| pointing out though. I have stellar credit so I qualify
| for amazing rates. Folks who are perpetually in debt and
| don't have great credit will always have the worst rates.
| Being poor is expensive.
| emodendroket wrote:
| I just buy things with cash. How much interest is $1000
| realistically going to be worth stretched out over a
| year? Not enough to be worth playing shell games.
| hef19898 wrote:
| Both are true. Personally, I don't have the energy to
| optimize my personal cash flow like this, even when it is
| a reasonable thing to do. But then I am employed again,
| with a steady income. I would use those 0% credits, and
| manage cash flow accordingly, if I were still self-
| employed so.
|
| For reasons other then cash-flow, I wouldn't take a
| credit for things other then a house or true business
| investments (as: my company needs a credit as a way of
| financing).
| maddynator wrote:
| Can someone share how is then any different from another company
| like Affirm? They are a public company and this seems very
| similar to them at high-level
| hardwaresofton wrote:
| Seemingly little known fact, the boom in credit card and
| essentially usury law skirting was enabled by a Supreme Court
| decision, the "Marquette Decision".
|
| The Marquette decision allowed companies to export their interest
| rates, such that they could use usury laws in the state where the
| card is issued, NOT where the bank is headquartered. This is what
| made credit cards profitable.
|
| https://youtube.com/watch?v=2mHsTKvAuZc&t=393
|
| It's rarely mentioned in "history of credit cards" pop history.
| Somehow all the "Jurassic park" aspects of America seem to start
| with a little sprinkle of deregulation.
| hn_throwaway_99 wrote:
| Thanks for the info, very interesting and not something I was
| aware of. Although I'd disagree with the idea that generic
| "deregulation" is the problem here, at least in this case. In
| my mind it's just a good example of all the inevitable "race to
| the bottom" dynamic that happen where the laws of the _sales
| location_ can be skirted by instead only applying the laws of
| the _production location_.
|
| Basically, locales realize they can get a huge economic boon to
| themselves that is only possible because they are essentially
| exporting their shitty policy outside their borders.
|
| Tax havens are perhaps the best example. No country could
| survive as a tax shelter if businesses could only do business
| within their borders. But instead, you have small countries
| that offer no/low taxes because they can pull in tons of
| business from gigantic markets outside their borders.
|
| It happens all over the place:
|
| 1. In the Marquette example, states try to pull in lots of
| banking business by having easy usury laws, but the vast
| majority of those banks's customers are from other states.
|
| 2. A couple states have gotten rid of "the rule against
| perpetuities" to attract perpetual trusts, even though most of
| the trust business occurs elsewhere.
|
| 3. Businesses can extract huge tax concessions from states by
| offering to set up headquarters in a state, even if most of the
| business is done outside that state.
| hardwaresofton wrote:
| I agree that the generic idea of "deregulation" is sometimes
| not to blame but I do want to point out that the Marquette
| decision is basically _the lynchpin_ in this particular case
| AFAIK -- usury laws AKA consumer protection regulation (which
| is the regulation that was bypassed /minimized in this sense)
| already differed from state to state, but that wasn't enough
| incentive for banks to move their headquarters.
|
| Intranational competition/racing to the bottom is fine
| _within_ the bounds of regulation -- capitalism is a powerful
| force but in my opinion the job of the government is to set
| the guard rails.
|
| The EU problem is an international problem which is why it's
| so much harder to solve. You can't force another nation to
| charge certain % for taxes but there are other things you can
| do. Unfortunately most of the actions you can take to
| disincentivize that behavior aren't quite so friendly, so the
| politics intensifies and countries go for what they can get
| away with. The control dynamic is different compared to
| intranational regulation.
|
| There's certainly competition between states and companies
| but it's always when the guard rails bend/break that we see
| explosions in a certain kind of activity and then the
| repercussions 5-10 years later. It happens over and over
| again in history -- regulations that reduce corporate tax
| rates, roll back environmental protections, etc -- it happens
| across party lines, and there's usually a happy/boom period
| for a while for some market participants... Then the chickens
| come home to roost.
|
| The addition of regulation can do it too, of course, and some
| of the time the ambitions are noble, but to me the _removal_
| of regulation that was well established (for a good reason)
| and the subsequent ill effects always feels the most
| avoidable.
| 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
| hardwaresofton wrote:
| This is possibly the quickest I've seen something not age well:
|
| https://youtu.be/uvw-u99yj8w?t=1077
|
| Great advice from Jared but the example is unfortunate with this
| news. Would love to hear/see writeups/talks on how YC and the
| founders handle this unique situation in the future -- what
| happens when regulators this deep in your fondue as a startup? Is
| it a reconsider-pivot-and-proceed or a burn-it-all-down moment?
| 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?
| throwaway1901az wrote:
| jollybean wrote:
| Google investing in payday lenders, doing God's Work there.
|
| Like they couldn't find something else for that money to do?
|
| Like even just giving it away.
| jimnotgym wrote:
| So what happens now?
|
| Directors go to jail?
|
| Directors get banned from being Directors?
|
| Or they just walk away with their bonuses intact?
| 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?
| istjohn wrote:
| YC should take steps to ensure the businesses they invest in
| operate ethically. Of course, the first step would be to
| acknowledge that something went terribly wrong here.
| 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.
| ddtaylor wrote:
| This may not have been YC's intent, but it does appear that's
| what's effectively happened in the end. I have to assume that
| YC has some method of exit strategy to separate itself from
| companies that deviate so strongly. Maybe YC was just asleep
| at the wheel, I don't know, but in either case they are
| attached to the failure here.
| isx726552 wrote:
| Did YC divest itself once the problems started?
| coderintherye wrote:
| DanG, do you have any comments regarding the replies you
| received to your comment here? You seem to have made a
| blanket statement that YC wouldn't do that, but the evidence
| points to the fact that YC did do that, as it funded the
| founders who made these decisions that led to enforcement
| actions in 2016 against them.
|
| It's not like this is esoteric finance law either, I've
| worked in fintech lending during this whole time period and
| some of these violations are lending regulation 101. Military
| Lending Act compliance at the very least is dead simple to
| comply with and is the very first thing most lenders ensure
| compliance with (due to it being federal, whereas some more
| esoteric state level stuff can often get missed).
| dang wrote:
| I'm sorry, but I don't. I don't have any information about
| the specifics and I don't know anything about the startup
| or the domain. All I know is that YC would only have
| invested in such a startup if they believed it could truly
| be of benefit to people.
| coderintherye wrote:
| That's a fairer statement and one I would agree with.
|
| I hope you know your words hold a ton of moral and social
| weight in this community.
|
| To say "YC wouldn't do that" is strong language,
| especially given the facts.
|
| To say, "YC would only have invested in such a startup if
| they believed it could truly be of benefit to people" is
| better, because it acknowledges that while YC had the
| best of intentions, it could have made a mistake in
| funding these founders rather than give an idea that YC
| can do no wrong.
|
| The founders, the ones funded by YC, created a company
| that committed financial crimes before they left the
| company. Those founders should be seen in that light,
| regardless of their intentions.
| tomhoward wrote:
| Dang doesn't represent YC's accelerator/investments arm
| (i.e., he's an employee engaged to run HN, not a YC partner
| who makes investment decisions or official YC
| announcements).
|
| But here's an article from 2016 about what LendUp was
| trying to do back then:
| https://techcrunch.com/2016/01/22/the-loan-
| dolphin/#.4sfbucn...
|
| I don't know much about LendUp at all, but I do remember
| the surprise - and feeling it myself - when it was
| announced that YC was funding a payday lending company.
| Then I remember the thinking behind it being explained
| (perhaps on HN, perhaps elsewhere) and seeing that the
| founders seemed to be making a sincere effort to offer
| something that was at least just less-terrible than the
| existing payday lending options around (many of which
| involve dealing with crime gangs), which made me think "OK,
| I guess it's worth a try". I presume YC thought the same
| thing when they invested almost ten years ago.
|
| If it turns out that there's no possible way of making a
| sustainable business in this space that's less-terrible
| than that was there before, I still don't think it's
| reprehensible that YC thought it was worth backing founders
| that seemed to be making a sincere effort to try.
| coderintherye wrote:
| >If it turns out that there's no possible way of making a
| sustainable business in this space that's less-terrible
| than that was there before
|
| This is a disingenuous response because this space is
| highly competitive and most of the big names in it have
| _not_ gone out of business due to flagrantly breaking the
| law. Just because LendUp broke the law and went out of
| business does not mean there are no sustainable, legal
| entities operating in it.
| tomhoward wrote:
| You could have added your perspective without describing
| my response as "disingenuous", i.e., dishonest.
|
| I said very clearly I have no specific knowledge on
| LendUp. I also know little about the space (apart from
| that it's a nightmare). The only specific insight I have
| here is on YC's history and ethical track record.
|
| That said, can you educate me and other readers by
| linking to examples of companies that are doing well in
| this space (specifically, offering a better lending
| option than payday loans in the U.S.)?
| coderintherye wrote:
| Ok, we first have to start with acknowledging there are
| two different things under discussion:
|
| * Sustainable, legal lending businesses operating in the
| payday loan space * Better lending options than payday
| loans
|
| I am not an expert in either of these [though I have
| worked with numerous people who are experts in these] so
| will not make blanket statements (which is why your
| statement was disingenuous, rather than saying look I
| don't know anything about this you instead chose to make
| an authoritative statement indicating sustainable
| business was not possible in this industry which is
| untrue) about them, rather only indicate some of the
| information available:
|
| In the first group you have companies like: * Enova
| [CashNet USA] - Had CFPB enforcement * Avant - Also from
| a YC founder, had FTC enforcement action * OneMain - Caps
| interest at 36%, actually has a carve-out in California
| lending law
|
| These companies have been operating sustainably for years
| and looks like business is booming for them. Note how
| despite receiving enforcement action they were not shut
| down nor called "cheaters" by the CFPB like LendUp was?
| This is indicative that one can commit predatory actions
| in this industry and still be sustainable.
|
| Now for the second group of better lending options than
| PayDay loans, that's a very wide field but let's assume
| we want to specifically discuss people who would
| otherwise be going for a PayDay loan. I'm going to link
| here to NerdWallet which actually has great overview of
| options:
| https://www.nerdwallet.com/article/loans/personal-
| loans/alte... Specifically, I would call out local credit
| unions as being a "good" option that is often overlooked
| despite providing a ton of loan capital in the U.S.
|
| There are also a number of non-profits working to try to
| help people fall into the Pay Day loan space, in which I
| would specifically call out SaverLife
| https://about.saverlife.org/
|
| Arguing whether or not PayDay loans are good (ethical) or
| not is subjective, as others have noted a high-interest
| loan can often be better than no loan, but what I would
| personally argue is that continued and improved
| government support for credit union payday lending (e.g.
| https://www.ncua.gov/support-services/access/advancing-
| commu... ) as well as more available physical lending
| options (e.g. Go to the Post Office for a loan) are very
| much worth exploring and supporting.
| tomhoward wrote:
| You've written a whole lot of words that bypass my point
| and double down on the accusation that I was dishonest.
|
| You've only cited companies/orgs that are operating
| legally, not ones that are demonstrated to be highly
| ethical and substantially better for borrowers to deal
| with than the payday lending companies that existed when
| LendUp was conceived around 10 years ago.
|
| Clearly, LendUp was talking about trying to build
| something much better for borrowers than what existed
| then, and that's what was compelling to YC (as I said in
| an earlier comment, I vaguely remember discussions about
| this being had at the time, and thinking it would be
| interesting to see how their plans would play out).
|
| Exactly what went wrong along the way, I don't know, and
| I haven't seen any comments here explaining it - only
| indignant comments leaping to the conclusion that
| everyone involved must have had malicious intentions from
| the start but not offering any evidence for this.
| coderintherye wrote:
| This is why your comments are disingenuous. Both the
| comments here and the article itself discuss what went
| wrong _legally_ with LendUp. You are willfully ignoring
| those.
|
| If you want to weigh in with your "hot take" you should
| at least read the article, rather than coming in claiming
| LendUp did nothing wrong and then when presented with
| evidence fall back on well "I don't know" and "know
| little about the space".
|
| This is exactly why your comment is disingenuous, because
| you specifically stated "turns out that there's no
| possible way of making a sustainable business in this
| space that's less-terrible than that was there before" as
| a defense of LendUp's actions, when as I have pointed out
| to you, there are plenty of sustainable businesses
| operating in this sector. If you want to quibble around
| "sustainable" vs. "good" then at the very least you
| should acknowledge there are companies that are operating
| legally vs. ones shut down (e.g. LendUp) after committing
| multiple violations.
|
| I mean seriously, are you just going to ignore this
| statement:
|
| "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."
|
| The Director of the CFPB doesn't just come out and call
| everyone liars and cheaters.
|
| This is very much worth harping on, because you are
| perpetuating and defending the idea that YC can do no
| wrong, instead of accepting that it is possible it made a
| mistake in funding and supporting these founders.
| emodendroket wrote:
| I don't think it's true that the only alternative is loan
| sharks. It's mostly "traditional" payday lenders, many of
| which are owned by the big banks (through a couple layers
| of obfuscation to cover up the stench).
| tomhoward wrote:
| I edited my comment to tone down the implication that
| it's _only_ loan sharks.
|
| That said, the "traditional" payday lenders all turn out
| to be quite predatory, don't they? (I understand that's
| what the original founding premise of LendUp was intended
| to address, even if they couldn't make it work.)
|
| But aside from that, will the traditional payday lenders
| lend to everyone and anyone, no matter their
| circumstances? If not, what are the options for people
| who they won't deal with?
| emodendroket wrote:
| Sure, I would agree with that characterization. But
| apparently LendUp was even more predatory, to the point
| that regulators shut it down. So in retrospect, I think
| we need to take the claim that they wanted to create a
| kinder, gentler kind of lending with a grain of salt.
| tomhoward wrote:
| The claim we're addressing in this subthread is that in
| 2012 YC knowingly invested in a company that intended to
| be predatory towards military personnel, such that it
| would end up being shut down by regulators, implying that
| YC was both deeply unethical and deeply stupid. Are we
| really to believe that YC was being as unethical and
| stupid as this claim requires us to?
| emodendroket wrote:
| "Knowing," "intended [at the time]", "would end up being
| shut down by regulators" are all your embellishments. The
| claim is "YC funded a payday lender that targeted active
| duty military service members." As far as I can tell,
| that is true, regardless of how pure anyone's intentions
| were at the time. The defense on offer is that the
| founders left the company between funding and now, but it
| is not very compelling given the timelines.
| tomhoward wrote:
| The last part of that comment is quite obtuse. Can you
| state simply and clearly, what, if anything, YC did that
| was unethical?
| emodendroket wrote:
| "Unethical" again another embellishment. Perhaps this was
| simply a case of poor judgment, which isn't unethical to
| have.
| tomhoward wrote:
| OK then. You weren't the root commenter, but it's pretty
| clear the root comment and the reply to dang were
| attempting to pin an accusation of unethical conduct on
| YC. But never mind.
|
| There of course is another possibility: the founding team
| in 2011 was proposing a concept that seemed ethical and
| an improvement over payday lending options that existed
| at the time, but over time the company's idea or
| execution changed for some reason, in which case, there
| was neither poor ethics nor poor judgement on YC's part.
|
| Occam's razor would require us to accept this explanation
| unless there was substantive evidence for another
| scenario.
| emodendroket wrote:
| I don't see the Occam's razor requires us to accept that
| over someone simply misrepresenting what their plans
| were.
| tomhoward wrote:
| By definition, Occam's razor requires us to believe that
| founders sincerely intended to do what they said they
| planned to do, unless there is evidence to the contrary.
| emodendroket wrote:
| It is not self evident to me that someone sincerely
| intending to do kinder, gentler lending and ending up
| through some confluence of circumstances doing something
| else is a "simpler" explanation than the same person just
| lying about their intent.
| garmaine wrote:
| Yes, but they won't literally break your legs over an
| unpaid debt anymore. These aren't run by crime syndicates
| AFAIK.
| colechristensen wrote:
| That seems to be a fair assessment.
| hn_throwaway_99 wrote:
| Somebody commented in another thread, but basing it on the
| Military Lending Act seems like the most straightforward thing
| to give federal jurisdiction, as most usury laws are at the
| state level.
|
| Tax evasion wasn't Al Capone's primary crime either.
| newbie789 wrote:
| ransom1538 wrote:
| Is this the same as "self.com" ?
| sucrose wrote:
| You mean self.inc? No, they don't lend money.
| 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.
| hchasestevens wrote:
| This is an easy statement to make, but I think, empirically
| speaking, it just doesn't line up with reality. For payday
| loans, where the terms have historically been in excess of
| 36%, the vast majority of borrowers:
|
| 1. Pay the loan on-time (more than 90%; Community Financial
| Services Association of America, "About the Payday Industry:
| Myth vs. Reality.")
|
| 2. Do not roll over the loan (same source)
|
| 3. Are able, in advance, to accurately predict when they will
| be able to pay off the loan ( https://scholarship.law.columbi
| a.edu/faculty_scholarship/594... )
|
| 4. Report having been satisfied with the experience as a
| whole ( http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.
| 1.1.554... )
|
| Furthermore, evidence shows that, on the whole, loans of this
| nature prevent bankruptcy, foreclosure, bounced checks, and
| other outcomes ranging from extremely devastating to merely
| disruptive ( https://www.researchgate.net/publication/5051409
| _Payday_Holi... ;
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1344397 ;
| https://digitalcommons.chapman.edu/economics_articles/104/ ).
|
| I think fortunately/unfortunately, most HN readers won't be
| familiar with the benefits quick, easy access to capital can
| have for a person, especially those living on the margins of
| poverty, where missing one e.g. auto or phone payment can
| have cascading, long-lasting effects, such as losing a job.
| The nice thing about our distributed, relatively free-market
| economy though is that every person can act as an independent
| agent, analyze their own risk tolerance and ability to make
| responsible use of the financial products available to them,
| and make choices leveraging personal information that no
| centralized authority (or blanket rule, such as "loans with
| interest above 36% should not be permissible in any
| circumstance") could possibly have access to.
| Grimburger wrote:
| My parents had nearly 20% interest rates on their homeloan at
| one point. This isn't Valenzuela or Zimbabwe either, it's in
| Australia.
| 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.
| pyrale wrote:
| > Consumers know what's best for them.
|
| The rest of the world would prefer you not to crash the
| world economy like it happened in 2008, for the sake of a
| clueless aphorism.
| jdavis703 wrote:
| Except in 2008 many people did not understand what their
| actual monthly bill would be with an ARM in a worst case
| scenario, and banks were more than happy to handwave away
| any concerns.
| 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
| freeone3000 wrote:
| Consumer credit cards aren't subprime lending; you're given
| an entire month of float before interest, and usually have
| sub-20% APRs. This is entirely different from a payday
| loan. Even a personal finance line of credit is much lower
| interest.
| 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.
| the_optimist wrote:
| This has nothing to do with capitalism. Capitalism is
| merely private ownership of stuff. When people use the
| word "capitalism" like this, it inevitably sounds like a
| naive Marxist classism throwback. Anything bad is merely
| attributed to capitalism, and set aside the generations
| of economic nuance we have developed since the gestation
| of that dysfunctional construct.
| jacquesm wrote:
| > Capitalism is merely private ownership of stuff.
|
| That's a very narrow definition of capitalism. It's not
| just 'stuff' that is privately held, it is also the means
| to generate profit and a very large chunk of the
| available capital. The effects of that go way beyond just
| 'stuff', and can make it next to impossible for someone
| born at the bottom of the stack to work their way up. Of
| course, some inevitably succeed at this and they are held
| up with great fanfare to prove that 'the system works'
| but on average, if you are born at the bottom your life
| will likely continue to at that level of society without
| much chance of upward mobility because the system is
| stacked against you.
|
| And payday loans at exorbitant rates are a mechanism that
| keeps people down.
| the_optimist wrote:
| I agree with your punchline, but all the hypothetical
| before it is strictly unrelated to capitalism. As if
| peons in the European middle ages living under non-
| capitalism, Cambodia, Venezuela, or various theocracies
| have this remarkable social mobility. This type of
| analysis is inferior to pointing to correlates with moon
| cycles or fluorinated water; it directly ignores history.
| admax88qqq wrote:
| You're basically defining capitalism as "some people have
| lots of money"
| yunohn wrote:
| Yes, well, "capitalism" is built around "capital" aka
| money, assets, real estate, etc etc.
| jessaustin wrote:
| Capitalism means rich people decide what happens. This is
| easily observed in e.g. USA. [0] "Democracy" would be
| something else.
|
| [0] https://www.cambridge.org/core/journals/perspectives-
| on-poli...
| yata69420 wrote:
| Rich people decide what happens in every system of trade
| and governance.
|
| "Communist" China is a lot better if you're rich. So is
| "socialist" Europe. So is "capitalist" America.
|
| The -isms have never really mattered.
|
| The golden rule truly is "whoever has the gold makes the
| rules".
| kbenson wrote:
| > Capitalism is merely private ownership of stuff.
|
| No, it's private ownership _and trade_ of stuff. That
| seems nitpicky, until you contrast it with other economic
| systems, in which case trade is strictly regulated, and
| it becomes obvious that 's a large part of it.
|
| > the generations of economic nuance we have developed
|
| You mean the nuance that takes us further from a pure
| capitalistic and free market system into a hybrid system
| where there are regulations and communal (government)
| efforts to counteract the portions of capitalism and free
| markets that are not palatable for a modern society
| because they fail to lead to outcomes we want?
|
| There are reasons why the poor of today are better off of
| the poor of a century ago, and many of those reasons are
| not much in line with capitalism and the free market,
| while others are. Minimum wage, regulations on predatory
| practices, etc account for a lot of that, while
| advancements in technology and medicine much of the rest.
|
| Without regulations, which are a restriction on private
| trade, we'd still be dealing with the things Upton
| Sinclair chronicled so long ago (whether embellished or
| not).
| the_optimist wrote:
| I'm not sure what you're arguing here aside from
| capitalism is also free trade. I think definitionally no,
| but semantically or practically maybe. Free trade is also
| a thing, sure. I'd like to examine the mechanism you've
| identified to attribute the sources of betterment, if you
| are not merely making it up as you go.
| stevesimmons wrote:
| > I don't know what the "right APR" is
|
| In the UK, the consumer finance regulator the FCA did an in
| depth analysis of subprime lending and concluded that
| "fair" maximum charges were interest rates of 0.8% per day
| and total costs (interest, fees and penalties) no more than
| the amount of the loan principal borrowed.
| gruez wrote:
| >In the UK, the consumer finance regulator the FCA did an
| in depth analysis of subprime lending
|
| source?
|
| >and concluded that "fair" maximum charges were interest
| rates of 0.8% per day
|
| "fair" in this case being what? The interest rate being
| enough to offset defaults? Or enough to offset defaults +
| overhead + profit?
|
| >and total costs (interest, fees and penalties) no more
| than the amount of the loan principal borrowed.
|
| I find this baffling. 0.8% per day compounded for a year
| is 18.3%, but they say that total costs can be equal to
| the principal? That means the effective APR can be up to
| 100% (if borrowing for a year), more than 5x the "fair"
| APR from before. Speaking of which, why isn't the length
| of the loan factored in? Surely a 1 week loan should have
| a lower "total cost" than a one year loan?
| elijaht wrote:
| 0.8% compounded for a year is ~1830% APR
| gruez wrote:
| You're right. I must have forgotten to convert the result
| back to percentage.
| sokoloff wrote:
| ~1730% (1.0 out of the 18.3 on the calculator is the
| principal).
| stevesimmons wrote:
| Source: https://www.fca.org.uk/news/press-releases/fca-
| confirms-pric...
|
| From this post:
|
| Martin Wheatley, the FCA's chief executive officer, said:
|
| 'I am confident that the new rules strike the right
| balance for firms and consumers. If the price cap was any
| lower, then we risk not having a viable market, any
| higher and there would not be adequate protection for
| borrowers.
|
| 'For people who struggle to repay, we believe the new
| rules will put an end to spiralling payday debts. For
| most of the borrowers who do pay back their loans on
| time, the cap on fees and charges represents substantial
| protections.'
| 8note wrote:
| I'm not convinced that payday loans should be able to
| produce a profit? The subprime group seems like people who
| should be serviced by the government, rather than pushed
| into a worse place to extract what little value they have.
| mbesto wrote:
| > I'm not convinced that payday loans should be able to
| produce a profit?
|
| So who in their right mind would provide such a service
| if there was no path to a profit? /headscratch
| aj7 wrote:
| A huge lobbying interest is devoted to protecting this
| industry. Opposition to minimum wage increases is one of
| their priorities.
| wpietri wrote:
| How much help do you think the devil really needs here?
| 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.
| SilasX wrote:
| Ehhh I agree in general but if you want to say that
| universally, then you're painting with too broad a brush.
| Like, wasn't Google started with servers bought by maxing out
| a credit card at similar interest rates?
| TheDong wrote:
| > wasn't Google started with servers bought by maxing out a
| credit card at similar interest rates?
|
| This is some sort of fallacy, but I don't know the name of
| it.
|
| Anyway, as a counter point, I'm here from an alternative
| reality where we instead instituted this law limiting APR a
| year before google started. Google still managed to buy
| servers despite the law (I think that story's apocryphal,
| but even if it's true, they just got them at lower interest
| rates or got like 2 fewer servers and google was slower for
| a few months).
|
| However, in this alternate future, there's also another
| company that did a lot of really good things founded by
| someone who in _this_ reality ended up the victim of a
| payday loan, penniless, and is still struggling with the
| after effects of declaring personal bankruptcy. His even-
| better-company didn 't happen.
|
| Do you sorta see what I'm trying to say here?
|
| Maybe the fallacy is just a bias towards some specific
| vaguely related anecdotes over data? The sorta "I agree in
| general drunk driving is bad, but doesn't Steve Ballmer
| actually drives better while drunk so maybe it's too broad
| of a brush to outlaw it?"
| SilasX wrote:
| It would be more like, "Drunk driving is absolutely never
| acceptable" including taking your critical-condition
| friend one mile to a hospital on empty roads while you're
| .08.
|
| Edit: also it seems like the fallacy would be in the
| other direction. Up through the Middle Ages, charging any
| interest at all was "usury", because no one saw the
| difference between "non-exploitive business loans" vs
| preying on the desperate; the former was the bizarre
| special case, until the exception became the rule.
| 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.
| baq wrote:
| Standard humans routinely fail to correctly asses options.
| They can't even if they're aware they can't. Economists are
| still coming to terms with how badly the rational choice
| theory predicts human behavior.
| 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:
| cowuser666 wrote:
| Which part is completely fake? Living paycheck to
| paycheck? A $500 cost? Or being able to come up with $15
| within a month?
|
| Are you under the impression that nobody ever uses credit
| facilities with high interest without spiraling into
| bankruptcy?
| heartbeats wrote:
| You're assuming that credit is only available at that
| price. If he has a car and a credible case to make that
| he'll be able to give them the money next month, surely he
| could get it cheaper than that?
| 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.
| dools wrote:
| Don't lean weird
| 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.
| TheOtherHobbes wrote:
| Poor people find that one off expenses happen
| surprisingly often. Between car breakdowns (far more
| likely for those who can only afford a clunker), sudden
| health crises, domestic maintenance, wear and tear on
| clothes, unexpected inflationary price rises on
| essentials like energy and food, and a host of other
| issues, the poor have no slack at all in their budgets.
|
| Of course the real problem is many jobs don't pay enough.
|
| In fact not getting paid enough - and therefore being
| unable to budget - is considered evidence of poor
| character, while not paying enough is considered evidence
| of enlightened and mature rationality.
|
| It's quite a strange view of the world.
| emodendroket wrote:
| How one-off are they really, at that point? Either way,
| the other guy's point -- that paying it off is not all
| that likely -- still stands.
| gruez wrote:
| >One off expenses don't happen 12 times a year.
|
| so you'd be in favor of payday loans if they were limited
| to n times per 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.
|
| what about people who have the free cash flow, but can't
| save for various reasons? eg. friends/family asking for
| money, poor self control, etc.?
| bonzini wrote:
| For example, in Italy there's a special kind of payday
| loan that is limited by law to 1/5th of the net paycheck.
| It is taken off the paycheck by agreement between your
| bank and the lender's. The combination of these two rules
| makes them more likely to be paid successfully, and gives
| them a better APR than e.g. credit cards despite being
| essentially used for the same purpose as subprime payday
| loans in America. There's also a maximum legal APR of
| ~18% for these loans (it varies every quarter), which is
| better than e.g. the ~24% maximum legal APR of credit
| cards
|
| Unbounded APR and "letting the market figure it out" is
| not the solution.
| frockington1 wrote:
| Isn't Italy topping the charts of countries in financial
| ruin? If it weren't for Greece being worse Italy would be
| in the headlines. If America is to change laws, it'd help
| to use a successful nation as an example
| bonzini wrote:
| Interesting spin on the ad hominem, but I just mentioned
| what I know about since I live here. Anyway, we're
| talking about private debt; and while Italy has a huge
| public debt, its private debt is quite low.
|
| BTW, right now US treasury bonds have a higher 10y yield
| than Italy.
| Scarblac wrote:
| If you have $500 per month for one off expenses, you
| should have been able to build some sort of emergency
| fund.
| [deleted]
| 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 should perhaps build some intuition
| on what kinds of situations cause people to take on
| onerous credit.
|
| EDIT: Oh, I recalled a detail I'd forgotten when first
| relating the tale. He wanted to go get his phone from the
| van so he could call for help but they wouldn't let you
| in the yard without paying to release. I imagine he was
| going to have a damned hard time asking for help without
| the phone.
| jacquesm wrote:
| Good man. Too few like you.
| DevKoala wrote:
| It is $700 now? SF is ridiculous. They towed my car once
| and it was $400 back in 2017.
| renewiltord wrote:
| Strictly, it's $100 for the citation you pay online, then
| there's the city fees for ~$300 or something and the tow
| fees for $250 or something. They will take $50 off one of
| those things if it's your first-time. No one was amused
| by my request for a subscription plan.
| 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.
| dstick wrote:
| I will never let a chance slide to quote one of my
| favourite passages from my favourite author and fantasy
| series: the Discworld, Terry Pratchett (GNU!):
|
| "The reason that the rich were so rich, Vimes reasoned,
| was because they managed to spend less money.
|
| Take boots, for example. He earned thirty-eight dollars a
| month plus allowances. A really good pair of leather
| boots cost fifty dollars. But an affordable pair of
| boots, which were sort of OK for a season or two and then
| leaked like hell when the cardboard gave out, cost about
| ten dollars. Those were the kind of boots Vimes always
| bought, and wore until the soles were so thin that he
| could tell where he was in Ankh-Morpork on a foggy night
| by the feel of the cobbles.
|
| But the thing was that good boots lasted for years and
| years. A man who could afford fifty dollars had a pair of
| boots that'd still be keeping his feet dry in ten years'
| time, while the poor man who could only afford cheap
| boots would have spent a hundred dollars on boots in the
| same time and would still have wet feet.
|
| This was the Captain Samuel Vimes 'Boots' theory of
| socioeconomic unfairness."
| throwaway0a5e wrote:
| I absolutely hate that quote. It may have been true-ish
| for classes of goods and services 150yr ago but today it
| serves little purpose than letting yuppie consumers pat
| themselves on the back for buying premium products.
| dstick wrote:
| As someone who has been poor 10 years ago, trying to
| raise a family, that's just false. We had to deal with
| the literal situation from the quote: shoes. We could
| only afford cheap ones for our children and the shoes
| "broke" before they grew out of them. If you think this
| only happened 150 years ago then I envy your privileged
| outlook on life. This quote is as relevant today, as it
| was then. Being poor is expensive.
| throwaway0a5e wrote:
| I stand by my statement. You might occasionally find
| classes of long term consumable goods where the literal
| cheapest is just too short lived to work or medium term
| consumable goods where the fancier options last longer by
| a big enough margin to be worth it (sawzall blades and
| dish soap are the only two I can think of). The majority
| of long term consumables get destroyed by a mishap long
| before it succumbs to wear and tear. Coats and pants get
| torn. Tools get broken from too much being asked of them
| in a pinch. Anything with an electric motor will live
| until you do something dumb that lets the smoke out. If
| you want to save money your default should be to cheap
| out. You will win some and lose some but the losses will
| be so, so, so rare as to be a rounding error. More often
| the problem is you buy something that is cheap junk and
| it refuses to die so you are left suffering though it
| forever.
|
| I went through my fair share of Walmart black no slip
| shoes before moving into tech. I hope financial hardship
| is in your future as well as your past. Maybe you'll
| figure it out the second time around.
| 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.
| ab_testing wrote:
| But then what is the alternative. If you don't get the
| car fixed, then you will not be able to commute to work.
| If you won't work, then you won't be able to pay rent.
| Isn't the $500 loan then a better alternative than ending
| up homeless ?
|
| Would'nt it be better to rack up a $500 loan and then try
| to pay $100 per month so that it can be paid off in 6-9
| months - even with 36% interest ?
| Steko wrote:
| One alternative is the guy who needs a $500 emergency
| loan gets it at a non-usurius interest rate. The system
| could be revamped to support easier repayment for actual
| emergency loans.
| PaulDavisThe1st wrote:
| The sane alternative is being part of movement of
| millions of people that pushes for better wages, better
| working conditions, etc. But no, instead everybody's
| forced into dealing with their own individual
| situation(s) as if they are not actually all connected to
| the greater economic organization picture.
| otterley wrote:
| > If you don't get the car fixed, then you will not be
| able to commute to work.
|
| Don't most metro areas have public transit? Perhaps buses
| are not the most comfortable or convenient, but they do
| exist, and for good reason.
| emodendroket wrote:
| I would say that it's a pretty substantial portion of the
| population for whom this is not a serious option.
| obstacle1 wrote:
| While true, vehicle dependency is a serious societal
| problem in North America that needs to be fixed. This is
| partially the reason. Nobody should need a personal
| vehicle in order to be able to live a baseline
| satisfactory life.
| emodendroket wrote:
| Don't disagree, but you won't get a paycheck standing on
| principle here.
| int_19h wrote:
| The alternative is a society where nobody is homeless
| regardless of their income or lack thereof.
| 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...
| edoceo wrote:
| Can you expand?
| jacquesm wrote:
| The UK has payday loans as well. As do a few other
| countries.
| 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).
| int_19h wrote:
| Why shouldn't people be allowed to buy and own slaves, if
| there are takers willing to sell themselves into slavery
| (say, to provide for their family)?
| lief79 wrote:
| Is the bottom 10% that sticky ... nvm, looks like it may
| be. From a quick search, 43% of the individuals raised in
| the bottom 25% stay in the bottom quartile.
|
| https://www.pewtrusts.org/~/media/legacy/uploadedfiles/pc
| s_a...
| throwaway0a5e wrote:
| So if you're born into the bottom 25 you have slightly
| worse than 60-40 odds odds of getting out?
|
| Those seem like damn good odds for something that is
| necessarily a zero sum.
|
| I would expect that as you get lower down (say bottom 10)
| it becomes even more volatile since the wealth needed to
| get out gets even lower.
| syki wrote:
| Your response delves into topics my post does not cover.
| I think society would be better off banning exorbitant
| interest rate loans. Beyond this, on this topic, I have
| said nothing.
| confidantlake wrote:
| The loan sharks being the ones exploited and abused is
| certainly an interesting take.
| Zigurd wrote:
| > _Why shouldn 't some minority of people be allowed to
| lend at 43% interest if there are takers at that rate?_
|
| For the same reasons we have regulations and standards in
| construction, transportation, etc. Because we know that
| uninspected cars will leads to death and injury on the
| roads. So laws and regulations are there to reduce
| selling and using blatantly unsafe vehicles.
| 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.
| ModernMech wrote:
| The valuation of assets doesn't matter when you have cash
| flow issues (especially when you can't sell that asset).
| It really doesn't matter in the short term how fast an
| asset is depreciating as long as it's doing the job in
| the short term. This is why people say it's expensive to
| be poor. Someone with good cash flow can make better long
| term financial decisions.
| nikanj wrote:
| You're absolutely right, and it's so frustrating to see
| someone opting for additional $150 per month in car
| payments, because they couldn't afford a $500 repair,
| because they're already doing $350 per month in car
| payments.
| whatever1 wrote:
| An old car is not a 2000$ surprise bill and you are done.
| It's 1000 and after a couple of months another 2000 and
| after that another 1000. It never stops asking randomly
| for money.
|
| While I was a student over the span of 5 years I had
| spent to the mechanic more than what I had paid the
| dealer for my 10 yo used car. Without the help of my
| parents I am not sure how I would be able to spit enough
| money to pay all of these bills.
|
| So yes paying 400 per month for 7 years with high
| interest is a better deal that getting a car that you can
| afford with cash.
| ak217 wrote:
| I don't mean to downplay people's problems, but this very
| much depends on the car, your local climate, and your
| ability to spot problems before they become serious. Lots
| of Toyotas out there that you only need to budget oil and
| tires for, and the occasional strut/brake pads/spark
| plugs as needed every few years. And there is plenty of
| information out there on which used cars are more
| reliable and how to spot parts that will need
| maintenance, if one is resourceful enough to search for
| it.
| [deleted]
| wpietri wrote:
| I think it's pretty hard to measure people's actual
| intelligence here given the way they are manipulated. US
| carmakers spend something like $10bn/year on advertising,
| for example. And car salesman are a byword for making
| sales by any means necessary. Car makers and dealers do
| that shit because it works on enough people to keep the
| money rolling in.
| emodendroket wrote:
| Most people don't make great decisions buying cars, rich
| or poor, but that logic isn't entirely specious. If your
| car spends weeks at a time in the shop, and you need it
| to get around, it's a false economy to keep fixing it
| instead of buying one that is reliable.
| whatever1 wrote:
| But you don't know it when you are in the process of
| fixing an old car. You pay $1000 and you think that you
| will be good for a couple of years. The reality is that
| after a couple of months you will probably need to fix
| something else. Flush and repeat.
| emodendroket wrote:
| Oh, after a couple goes at it you figure it out.
| 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.
| 8note wrote:
| I'm guessing that it's to ensure their loyalty, and the
| loan can't be paid off by them doing something bad for the
| military?
| [deleted]
| 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.
| 0xB31B1B wrote:
| The issue with low APRs on high risk short term debt for
| consumers that need it is that it generally makes it expensive
| to issue the debt almost regardless of the risk of the person.
|
| Hypothetically if you need a $700 payday advance today, paid
| back in 2 weeks when you are paid, a credit card level (25%
| apr) would be an extremely small amount of money paid to the
| servicer (like 7 dollars total).
| 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.
| KingMachiavelli wrote:
| Depends on how many future benefits/welfare payments you can
| get be loaned/played early. Seems like eventually people
| would max out that option and then need some other source of
| loans.
| emodendroket wrote:
| If the services are truly essential and basic and the
| government is stepping in, I think it's worth asking if we
| need to be bothering with repayment at all.
| _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.
| ggrrhh_ta wrote:
| > Perhaps it's because such high rates are necessary to
| make the business profitable at all.
|
| It could also be that undercutting that 36% rate does not
| make you _competitive_ (instead of profitable) against
| less scrupulous actors (they can advertise more and lobby
| more; convincing society that they are necessary). Also,
| it is a kind of business that has a very very high
| barriers to entry (enormous amounts of capital,
| regulatory, etc.).
|
| Competition alone can not solve profitable abuse
| (particularly on those with no options). The less
| scrupulous you are the more you can abuse, the more you
| can profit, and the more you drive your competition to
| implement your practices. The only limit is that fine-
| tuned equilibrium of casinos: only constrained to the
| point that allows the larger proportions of your
| customers just get by earning & spending (as long as
| minimizing the ones that get under the bus does not
| reduce the income generated by the majority kept at
| equilibrium).
| hellojesus wrote:
| > It could also be that undercutting that 36% rate does
| not make you competitive (instead of profitable) against
| less scrupulous actors (they can advertise more and lobby
| more; convincing society that they are necessary).
|
| This is still consistent with profitability. If you're
| not competitive, you can't earn customers. Businesses are
| thought to set prices at the level where the margin cost
| of acquiring a new customer is 0.
|
| However, if you could find a more efficient way to
| deliver value, reduce costs, etc. you could do so and
| flourish at a price lower than your competition.
|
| > Also, it is a kind of business that has a very very
| high barriers to entry (enormous amounts of capital,
| regulatory, etc.).
|
| Part of the barriers to entry are exactly the regulatory
| hurdles in place, which are totally unnecessary in my
| opinion.
|
| Two parties could draft a contract and sign it
| voluntarily, without government oversight, and petition
| the courts if any grievances occurr. Keeps government out
| and lowers costs, likely lowering the necessary apr
| charged.
|
| > Competition alone can not solve profitable abuse
| (particularly on those with no options).
|
| This completely violates the idea of a market economy.
| There are laws against collusion to fix prices. Such laws
| exist precisely because competition is the mechanism to
| prevent abuse.
|
| > The only limit is that fine-tuned equilibrium of
| casinos: only constrained to the point that allows the
| larger proportions of your customers just get by earning
| & spending.
|
| While true, this is still not a problem. People are
| voluntarily transacting at the casino. It's not for a 3rd
| party to determine if they can or cannot give it a shot
| to get under the bus.
| ggrrhh_ta wrote:
| I understand the foundation of your reasoning; boiling
| down liberty to the freedom of self harm. Mill was a lot
| more nuanced.
| 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.
| FireBeyond wrote:
| Those loans wouldn't really exist because of the free
| market.
|
| The people who are going to take those loans because they
| can't get one at 150|100|50|whatever% are going to have a
| huge challenge, if they are even (blood from a stone)
| able to.
|
| And while you as the lender may "enforce" repayment with
| guns and violence, you can only hurt someone so much, and
| the dead don't repay loans. You can't visit that violence
| on family and friends, because that is a crime, even if
| in the most wild west environment you're being allowed to
| enforce repayment from the lendee with violence. And in
| the end, while beating the shit out of someone delinquent
| may be psychologically satisfying to your psycopathic or
| sadistic ways, you're still out your principal.
|
| The wise lenders will rapidly find the sweet spot between
| repayment and default.
| 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]
| engineeringwoke wrote:
| Why do you believe any of that marketing? Rogue states?
| Terrorist groups? It's about power. If the US government
| cared about its people, then there would be real
| regulation to protect them. There isn't any because it's
| profitable to exploit them, not because of any
| libertarian ideal.
|
| Meddling in the affairs of any corporation that handles
| just a single US dollar transaction is the opposite of
| interpersonal freedom. I am not sure how you can get this
| far into thinking about the subject while holding such a
| bizarrely cognitively dissonant belief.
| 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.
| int_19h wrote:
| I find it more amusing that the same people also worship
| the _police_ ( "thin blue line" etc), despite the fact that
| cops are literally the very people who implement day-to-day
| government intervention in their lives.
|
| It gets even weirder when the same person also rants about
| the federal (FBI, BATFE, DEA etc) "jack-booted thugs". This
| is incredibly common in the right-wing gun owner community.
| 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.
| jessaustin wrote:
| Your experiences are meaningful to you, but they don't
| indicate anything significant about socialism. Socialism
| is not the goal of USA military. The point of the
| exercise is to transfer resources from citizens to
| armaments manufacturers. Who lives or dies, how they're
| treated in the meantime, the stories we tell about the
| whole mess, all this is random noise about which the
| generals DGAF. If we want to know about socialism, we'll
| observe Scandinavia or anywhere else where it actually
| happens. We don't need the tortured analogies of
| frustrated NCOs.
|
| I'm not a socialist, BTW.
| kodah wrote:
| I don't think it's entirely accurate to say "ignore this
| evidence of a failed system". My point in highlighting it
| is there's an opportunity to fix it and experiment on a
| small scale. Imagine if you made that system work, how
| much you'd learn, and how much support you'd garner.
| jessaustin wrote:
| You only consider USA military to be a "failed system"
| because you don't realize its actual purpose. One might
| imagine that it's about security... which, sure, total
| failure on that front. The actual purpose, as indicated
| above, is to transfer resources from USA citizens to
| armaments manufacturers, a purpose that is accomplished
| to greater degrees every year. Taking good care of the
| troops would _detract_ from the goal, which is why that
| doesn 't happen.
| kodah wrote:
| Eh, what?
| lapetitejort wrote:
| On the flip side, the military also has Bethesda Naval
| Hospital and Walter Reed Medical Center (both who
| regularly treat the President, such as when Trump had
| covid), life insurance, TSGLI, G.I. Bill (free plus
| monthly stipend), lifetime disability, Tricare, VA home
| loans, among others. I know people who lived in brand new
| barracks with keycards. People who lived in air
| conditioned pods in the middle of the desert with four
| square meals a day.
|
| Sounds like you had a bad experience and things could
| certainly improve. The military won't always offer a
| stellar experience, and Marines are often rough with
| their surroundings. Just ask people deployed to Iraq and
| Afghanistan.
| 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.
| kodah wrote:
| I think it's possible. I existed in that system and am at
| times still bound to it when dealing with the VA. I think
| my attitude is more, "go fix the system you already have
| to experiment with."
| 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.
| FireBeyond wrote:
| > 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 military implements socialism _poorly_.
|
| By contrast, when I had a horrific gout flareup in
| Australia, there was no approvals needed to admit me for
| a nine day inpatient stay with rheumatologist, PT, etc.
|
| I am getting surgery on a heavily deviated septum, in the
| US. It shows up on imaging so notably that even when I
| had a head CT for something completely else, the
| radiologist flagged it as being of note. When I went to
| an ENT, he confirmed a "90%+" occlusion that would need
| septoplasty and a bilateral turbinate reduction to
| relieve. He talked me through the pros and cons of
| surgery for informed consent purposes.
|
| "I'm fine with all of that, let's schedule."
|
| "So, no. Not yet. First I'm going to give you these two
| nasal sprays for six weeks, that you'll take and come
| back and tell me didn't resolve your issue, and _then_ we
| can schedule. That way your insurance won't reject it."
|
| I had to spend $180 on two nasal sprays that, according
| to my insurer, may have resolved a cartilage issue in my
| nose.
|
| i.e. 1) the non-socialist system in the US also requires
| all kinds of approvals (I'm also a paramedic - UHC years
| ago got fined for denying Heli EMS coverage for people
| involved in among other things, car accidents, for "lack
| of preapproval"), and 2) "socialist" systems in other
| countries don't require all kinds of approvals - that
| isn't an inherent aspect of the socialism.
| 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...
| RicoElectrico wrote:
| > When they can't pay they will attempt to contact the
| chain of command and pressure the military into intervening
|
| What logic does this follow? Like, why would I ask my
| employer to intervene if I have taken some loan with bad
| conditions?
| kodah wrote:
| I worded that poorly, sorry. Businesses will contact the
| troops chain of command.
|
| The military exercises a lot influence over troops, they
| can bust you down or remove your security clearance. They
| can also push you into payment plans and reflect these
| situations in your performance reviews. The military, for
| all intents and purposes, acts as much more than just a
| simple employer and lending services (among other
| businesses and people) exploit that.
| michaelt wrote:
| The military provides your clothes, your housing, your
| food, your laundry, your transport, your healthcare, and
| your chaplain. They can control your schedule 24 hours a
| day, decide who you're allowed to call or write to and
| what you're allowed to say, and decide what electric
| appliances you're allowed in your quarters. They can
| change your place of work to a foreign country, prevent
| you from resigning, and even literally have you
| imprisoned or executed.
|
| While in some regards the military is like an employer,
| in other regards it's very different.
| 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.
| Closi wrote:
| > I assumed and hope all that cash was because they're
| actually lending directly.
|
| It's not typical that you lend your own money out, and
| banking 101 is usually that you borrow money from one
| person (E.g. someone who has a bank account with you that
| you pay interest) to lend it to another at a premium (and
| you get the profit between those two figures in return for
| holding the risk if there is a default).
|
| Investors will typically expect a much higher return on
| their own funds than the loan APR (unless the APR is eye
| wateringly high).
|
| Edit: Apologies I stand corrected - I've just looked at the
| internet archive and it shows rates of up to 1825% APR.
| These loans are definitely predatory and so could have been
| done directly from the capital. Not surprised they got shut
| down, similar companies operating in the UK got shut down
| years ago and pretty much everyone is better off for it.
| It's a hugely predatory industry.
| garmaine wrote:
| > I've just looked at the internet archive and it shows
| rates of up to 1825% APR. These loans are definitely
| predatory and so could have been done directly from the
| capital. Not surprised they got shut down, similar
| companies operating in the UK got shut down years ago and
| pretty much everyone is better off for it. It's a hugely
| predatory industry.
|
| It is a hugely predatory industry that ought to be shut
| down. Unfortunately the "payday loan" industry is still
| 100% legal here in the USA :( It looks like LendUp got
| shut down for the misleading marketing about their evil
| lending practices, and not the fact that it was evil in
| the first place.
| CaptainZapp wrote:
| > I've just looked at the internet archive and it shows
| rates of up to 1825% APR
|
| Sheesh, APR on loans in Switzerland - Not exactly known
| as a socialist hell hole - are capped by law at 15%.
|
| Anything above this is usury and a criminal offence.
| Closi wrote:
| The UK is similar, but splits it across two rules (which
| allow for higher interest loans but cap the potential
| impact):
|
| * Interest must not exceed 0.8% per day.
|
| * The total cost of any loan must not exceed 100% of the
| original loan amount.
|
| (NB: This is only for consumer loans, commercial loans do
| not have a cap.)
| 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.
| outside1234 wrote:
| Just wait until they shut all of A16z's crypto startups down...
| 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
| simplestats wrote:
| I agree that one single metric like APR is not sufficient
| to compare all possible cases of lending without making
| some options to look worse than they really are.
|
| But if you were a safe enough borrower to even get a $100k
| loan, then you're sfe to loan $100 to for a tiny return
| also. Payday loans probably tend to be for people who can't
| get better loans of any size.
| 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.
| halpert wrote:
| Unless you're entering an agreement where you MUST wait a
| year before paying the second loan off, it absolutely
| makes sense to compare the APR of those two loans. If you
| could pay the second loan after a day, you would save
| money.
| 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."?
| sofixa wrote:
| The point is to have an equal point of comparison (APR or
| gallon or 100ml or whatever), so that the vendor can't
| trick you with numbers - e.g. a bottle of Fanta is 3
| bolivars, a bottle of Sprite 3.5 bolivars, but the first
| one is 85ml, the second one 100ml. Most people wouldn't
| be able to do the math even if they immediately notice
| the difference in size/quantity.
|
| Same thing with interest. Unless it's normalised ( in a
| yearly equivalent), it's _very_ hard to know how
| expensive the loan will be. That 's why in France it's
| mandatory when advertising loans to state the yearly
| interest rate and the total amount paid in the end, just
| to be clear what you're getting into.
| 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.
| Karunamon wrote:
| If I had a credit card with a limit large enough for the
| need, I wouldn't be even thinking about payday loans in
| the first place.
|
| This hypothetical doesn't happen in the real world;
| there's no time where even the most awful subprime credit
| card (even at cash advance rates!) will be cheaper than a
| payday loan.
|
| Its usefulness as a metric for a loan intended to be held
| for a couple of weeks to a month is very limited. Maybe
| when shopping across short-term lenders, but at that
| point, it's more intuitive to think in terms of how much
| the fee is in absolute terms.
| 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.
| simplestats wrote:
| Yeah but the point of withdrawing cash is to buy stuff.
|
| Credit card checks can also be used in many cases where
| credit cards cannot, and those don't always have the fee
| or immediate interest of cash advances.
| 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.
| dragonwriter wrote:
| > It seemed to me like the business is having financial
| trouble
|
| They were ordered to pay $1.2 million in fines and
| restitution for the military lending violations earlier this
| year, and ordered not to collect (or sell or assign) on a
| bunch of those illegal loans, plus the new case has them
| prohibited from making any new loans _and_ from collecting
| (selling /assigning) on a large share of their remaining
| outstanding loans.
|
| So, yeah, they are having financial problems.
| ConcernedCoder wrote:
| I'm always amazed at the sheer magnitude of crimes commited by
| "businesses" with nothing but an eventual fine(s) as a slap on
| the wrist... Individuals are routinely dragged off to jail for
| doing much less to the public, if they're lucky enough not to be
| choked in the street until dead...
| ComputerGuru wrote:
| But that didn't happen here?
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