Er, no. NY shut down coinseed, which was definitely ripping people off.
Why do we continue to pretend that the "crypto" industry is not absolutely chock full of scammers?
Why do we continue to pretend that the "crypto" industry is not absolutely chock full of scammers?
The reality is the banks want it this way, not because it was ripped away from them by regulation.
They aren’t. Far from it. Now imagine how badly they’d behave without any oversight...
Understanding why they exist in the first place may be more important than banning them outright.
[1] https://www.washingtonpost.com/business/2021/10/04/usps-bank... [2] https://www.postoffice.co.uk/banking
Payday loans are fundamentally unprofitable if they charge less than usurious rates of interest.
First, the default rate is sky-high: News articles suggest that over half of payday borrowers default within a given year.
Second, the loan amounts are relatively small, but require a retail storefront and staff.
Think about other types of lending: A mortgage is underwritten once per decade and involves 100's of thousands of dollars at once with a three decade term. The band will earn hundreds of thousands of dollars in interest over the course of the loan, so having a banker in a tailored suit spend a couple hours with you is a trivial cost. It's also secured by real property which can be repossessed in the event of a default.
A credit card is underwritten once a decade. The small transactions are mostly automated and much of the risk is pushed onto the merchant. So, again, tens of thousands of dollars can be earned per account. Retail space is not required to scale the business. The default rate is higher and the loan is unsecured, so it carries a higher interest rate.
Now look at a payday loan. Half of borrowers will default each year, and collection rates will be low (the borrowers mostly don't have assets to recover). The term is usually a few weeks, so it requires human interaction 12-26 times per year. The loan amounts are also small, so 1/26th of whatever a reasonable interest rate is isn't enough to cover defaults and all the manual processes.
If you don't believe me, the above statements are trivially falsifiable: Just start your own payday loan company with "reasonable" interest rates and see how long you last.
If the news articles reporting 50%+ default rates are true, your non-profit payday loan company need to charge at least 100% APR just to break even before overhead and cost of capital.
None of which is illegal - perhaps it should be discouraged for people with very little on the line, but that's a separate argument.
The creditor will take a loss (writeoff/reschedule) or seize collateral.
It's better than having the same issue next month for a larger amount.
As long as the person doesn't take out loans there's a good chance they can recover with government assistance.
There are a consumer protections around necessities for survival for exactly this reason.
Why do we continue to pretend that the crypto industry is only full of scammers? Is Coinbase the HN unicorn a scam?