How to sell payday loans
Payday Loans - The Perfect Way to Exploit the Poor
i'm sure i've said something that is
going to make some people want to smash
the dislike button
[Music]
hello everybody welcome back to another
brand new episode of business blaze now
this one payday loans the perfect way to
exploit the poor
obviously what goes on here is if you if
you're new to business plays
which in this case welcome you might
enjoy it you might know it's a little
bit weird it's probably not like
something you've seen before
i have a script that danny writes i read
it
never seen this before and react to it
and then sam edit it
and throws in a ton of memes what does
me mean
you know how they um meme this one
payday loans the perfect way to exploit
the poor this is a
viewer suggestion thank you richard
sanchez you legends
the other day in one of these videos i
said i'm a capitalist
but not a piece of you know like there's
capitalism where it's like there's a
great reddit sub forum called late stage
capitalism
and it's like yeah i like capitalism
it's grown some pretty incredible
economies and given everyone a wonderful
chance
at uh you know i was i was just checking
if my shirt's untucked it is
remember brian the meme accountant
untucked uh that you know
let's you know capitalism's great just
let's not be a piece of [ __ ] business
plays
life lessons okay imagine that you're
broke
that might be a bit easier for some to
imagine than others
this is definitely true maybe you're not
completely and hopelessly broke without
the
faintest flicker of light at the end of
the tunnel you're just experiencing
a cash flow problem you found yourself a
bit short
you're expecting some more money coming
in later but that's not going to help
you eat today
and put a packet of fun dinosaur-shaped
chicken nuggets
on the family dinner table now normally
in these videos i'm like danny
what is up with this you eat but i mean
still i mean that you eat but i've also
had fun dinosaur-shaped chicken nuggets
they're pretty nasty um but i'm sure my
children will one day
love that [ __ ] because they're shaped
like diner who thought up with that it's
like yeah yeah
what should we shape the chicken nuggets
like let's shape them like dinosaurs
because people
love eating dinosaurs under these
troubling circumstances you might be
tempted to grab a quick
payday loan the enticing headline in the
shop window poster
or the online ad seems reasonable enough
fast and friendly
no credit checks same-day service any of
those things should be throwing up red
flags
check the mother interest rates because
you're gonna get
financially raped it seems like a piece
of piss to borrow about four hundred
dollars and gain the peace of mind and
these are not just american like these
were a big deal in the uk
and they particularly piss me off and
gay you can gain the peace of mind that
you can live like a king for the next
couple of weeks
what 200 a week and
stuff yourself silly with enough tinned
hamburgers in onion gravy
oh my god danny is tinned hamburger an
actual thing
er they make you pass out from the sheer
culinary pleasure of it all
what is going on dany but of course
looking
beyond the marketing headlines and
delving into the fine print
reveals the devil in the details when
that devil
is you getting financially the general
idea behind a payday loan is that you
generally need to pay it back pretty
quickly as the name seems to suggest
these loans
are apparently aimed at workers who have
found themselves unexpectedly short
halfway through the month and need a bit
of help to tide them over
until they next get paid ah so loans for
desperate people
we're off to a fantastic start there's
obviously i'm gonna sh
so hard on this concept and i'm sure
you've heard of companies that i'm not
gonna mention
but just imagine that i'm saying those
companies there's obviously gonna be a
bit of interest for you to pay out as
these businesses sadly aren't doing this
out of the kindness of their hearts
but when you dig out a magnifying glass
and study the terms and conditions of
the loan you'll find that the interest
rates
and fees on payday loans can be
eye-wateringly high the apr
is typically 400 percent
although it can climb even higher than
that and this is the big question
how is this legal now if you're in a
position to pay back that 400
loan in the agreed two weeks you'll
usually get away with about paying
an extra 100 dollars in interest and
if you know i have mentioned in these
videos before when there's a ponzi
scheme and they're like yeah you get
back 10
a month that have been like that's
absurd well here you go this is how you
do it
25 in two weeks so if you want
unattainable returns on your money that
are basically impossible to get
payday loans uh that's high enough for
most people
but it gets far far worse if the deal
dragged out for any length of time
and this is the deceit that lies at the
very heart
of payday loans despite the friendly and
encouraging marketing which seems to
imply that these companies are just here
to
lift you out of a temporary hole the
truth is that they're largely aimed at
low-income workers
with a poor credit history who can't get
a conventional loan elsewhere
and will struggle to pay back the debt
in full yeah and there are also as as
well as that they're also targeted at
people who are too desperate to read the
terms and conditions or the terms and
conditions are like
buried deep in that [ __ ] page
of tiny stop hiding
the insane uh percentages i paid the
hospital bill but now i need twenty
thousand dollars to pay the loan shark
i'm gonna get so much
being a socialist on this one but maybe
i lean to the left on this issue the
next payday may just be around the
corner but then
so are the usual stack of other monthly
bills and expenses that need to be
covered
on a tight budget it's estimated that
only around 14 percent of borrowers will
be
in a position to pay back the loan in a
full and walk away
this obvious so like that 25 in two
weeks is just not enough for them and
they know this
86 will go over that and they will pay
more this obviously means that an
overwhelming majority of borrowers have
ended up digging an even
bigger hole and have now become trapped
in an endless cycle of debt
even if you manage to pay back the debt
within months it's not uncommon to end
up paying over 800
in interest for that 400 loan an
alternative outcome
is to pay back the debt in full on time
but then almost immediately take out
another loan to cover your other bills
and expenses for the month ahead if you
get stuck in this kind of loop for a
full year
you could end up forking out 1 200 in
interest for that original 400
loan and that's if you do it properly
and that's if you play the game
and you still [ __ ] lose and it's gone
and the story may even not be over as
you head back to the payday loan company
throughout the following 12 months and
beyond payday loans are certainly a big
business the industry is worth about 46
billion
a year in the united states alone and
it's been reported that over 774 million
dollars worth of consumer spending is
pissed away
every year on paying the interest and
it's an industry which seems to be built
on the principle of sucking
poor people dry as we've commented
before on business plays it's always the
rich people that either get the things
for free
or get offered the most amazing deals
while the people with no money
are the ones expected to pay through the
nose for everything and this is so
true like as a it seems bizarre in
a way that an entire industry has been
built around the idea of leeching
excessive amounts of money from the
sector of society who simply don't
have any to begin with but is this a
harsh assessment
of a perfectly legitimate business model
charging reasonable fees
and how did we ever get to this point
what are you talking about danny no it's
not
and they're not reasonable fees and how
did we get to this point anyway because
we're all
business place is normally like amusing
this one
is 90 percent rant and i'm not sure if
it's actually amusing is it amusing
american businessman and former wrestler
alan jones is largely to blame
the concept of salary purchases in which
a lender effectively buys a worker's
next salary for
less than the full value of been
knocking around since the early 1900s
that's very clever and also shitty but
it was alan jones who went on to take
the title
of the father of the payday loan
industry when he launched
the check into cash company in 1993.
a few years earlier banking deregulation
had caused many local community banks to
go out of business which
meant that low-income customers had
suddenly lost all all access
to short-term credit the payday loan
industry was alan jones's proposed
solution
to fill the vacuum it actually stolen
the idea from a former credit bureau
manager
who was running a very similar operation
from a local small local service station
i can see
how this is a good idea which can be
done to be profitable
and not super exploitative because you
can reduce the risk
because you can have the worker sign
over the next paycheck ahead of time
much like you'd sign over a check if you
cash it
and then you can charge a reasonable
money say five percent
and that is i'm only saying that's
reasonable because it's so
low compared to where the current payday
lenders
sit and but five percent for like two
weeks
is still so far above the 1.6 percent a
year or let's say you know more
reasonably three and a half percent
that is you know offered on things like
secured
loans but maybe they didn't follow that
sort of ethical solution
and in ted stead turned into late stage
capitalists
let us see the idea behind the
traditional retail business model is
that the borrower writes a post-dated
check to the lender for the full value
of the loan and fees which the lender
keeps for a while
and then submits to the bank after the
borrower has received his or her next
salary packet
just like i said if the check bounces
additional fees are accrued and the loan
continues to generate interest for the
lender
i once bounced to check by accident and
i had to pay a fine
of like seven pounds fifty and i was a
little bit upset about that because
i guess it was my own fault because i
just didn't have enough money
but yeah no that was embarrassing
variations on this model have sprung up
since then and many loan companies now
inviting borrowers to submit a simple
online application and fax through the
relevant documentation
they're going to purchase a fax machine
from somewhere with this money
i've made fun of fax machines before
that people are like we still use them
in the medical industry and i was like
well that's
backwards with the repayments and
charges getting automatically deducted
from the borrower's bank account on the
agreed date
one minor problem that allen jones
encountered during the early years of
check into cash was the legality of his
business was often brought into question
in many u.s states loans with sky-high
interest rates were downright illegal
so what has happened but jones got
around this by donating huge amounts of
money to multiple state legislators
which encouraged them to see allen's
perspective
so allegedly some people might describe
that
as bribery thor's that had previously
placed tight caps on interest rates were
charged and new ads were introduced
which identified the sky-high interest
rates as perfectly legal fees
rather than perfectly illegal sky-high
interest rates
what's that great movie about lobbying
um thank you for smoking
that's a great movie worth checking out
lobbying is all kinds of shady uh it's
often been alleged by critics and i
stress the word alleged
not in fear of simon getting sued but
nineveh allen jones looking like one big
tough
bastard the land jones effectively
bought the slate legislation that
allowed him to carry out his business
what allegedly who's saying that
definitely not danny or me
but however he went about it there's no
doubt that jones became
incredibly wealthy and was able to lead
a wildly extravagant lifestyle by
squeezing
every last crumb from the poor and
desperate allegedly
don't sue me and he was certain that the
man
and he was certainly the man who
kick-started a whole
new massive industry within a decade of
check into cash opening
the first of its many stores ten
thousand other payday loan officers
sprang up around the u.s by the year
2008 payday loan stores even outnumbered
branches of starbucks and mcdonald's on
the streets of america
now we don't have any money and our
feelings are hurt
that is all kinds of depressing
all this does beg the question
if we all know they're a bit of a scam
how are they making so much money and
who exactly is still using them we
already know this the poor and desperate
it's like
if you are not making a lot of money and
you're living paycheck to paycheck and
an unexpected expense comes up
yeah kind of some hard-nosed cynics may
suggest anyone silly enough to take out
a payday loan without thinking it
through
properly deserves to be saddled in a
never-ending cycle of debt
yes totally if they are silly enough to
do that but the reality is
they're often in an insanely hard place
and i am sounding
so far left that people are definitely
gonna have a go at me generally
i don't sit that far on that side of the
i don't really even sit that side of the
political spectrum i'm very much in the
center but that's probably a lot easier
to say if you're not the one panicking
about keeping a roof over your head this
month while there may be
some borrowers who fail to review the
fine print the majority of them
are more likely are more likely to
understand exactly what a payday loan
means
but they feel painted into a corner with
no other options left on the table
also they do make it like it's really
those if you don't pay it back on time
because they always say pay it back
within two weeks and you'll be fine but
people don't they think oh yeah i'll
totally be able to do that because you
know they're not the most financially
literate people in the world
not everyone in general just a select
group of people who take these you're
like yeah i'll definitely be able to pay
that back look i'm getting paid next
week and then things come up and you
don't and then you get into this crazy
cycle of paying them a
ton of money according to research
conducted by the pew charitable trust
the average payday loan borrower in the
u.s is white
female and between 25 to 44 years old
but the report also highlights other
significant high risks too
including high-risk groups too including
home renters african-americans divorcees
those without a college degree and those
who earn less than 40 grand a year
there are usually at least a small
number of other viable options for these
groups to consider before going down the
dark
path to payday loans for example
borrowing money from family and friends
with a more reasonable and less
crippling interest rate
debt consolidation cutting down on
expenses having a clear out and flogging
stuff you don't urgently need
selling a kidney jesus starting up your
own mukbang channel
that's what you should do but i'll pay
my rent may as well start a mukbang
channel that'll work it's like whenever
my you know career goes to ah thank god
i can sell my old xbox and start a
mukbang channel or taking some of your
more valuable positions down to the pawn
brokers shop
some of those were slightly more serious
than others but
just to illustrate a point i know of one
guy who would regularly visit the pawn
brokers
when he found himself short of cash now
danny's also british i'm british we
don't really call them pawn brokers but
they exist they're like a computer or
something exchange
and like we just don't call them pawn
breakers who must appoint his xbox
console and then claimed it back more
times than he ever got around to
actually playing the damn thing
it seemed like a hell of a lot of
pissing about to me at the time but in
fairness he surely avoided having to pay
excessive fees
for a short-term cash loan asking
friends and family for a loan is often
an ideal solution
whenever possible particularly if they
get a chance to earn a little bit of
money from the deal too
wow and i think i'd loan my family money
anyway
i i guess i'd just give it to them if
they really needed money
also i definitely wouldn't charge them
interest because that feels a bit weird
but it can also be hideously
embarrassing i can remember squirming
when i had to ask simon to get me a
couple of quid so i could buy a tin
opener to get inside a can of kambel's
creamy cauliflower cooking soup
danny what is wrong with you that i
found while rummaging around in the bits
probably outside the back of the office
here um when i lay him out of the cellar
he eventually agreed to rent me his own
tin opener for half an hour
but it was still an experience i would
have rather avoided it
it was extremely expensive it's a very
nice tin opener danny and plenty of
people in financial difficulty tend to
prefer the relatively impersonal
and formal nature of dealing with a
complete stranger when it comes to
asking for money the irony is that
although some borrowers initially
dismiss these alternative options in
favor of a nice and
simple and hideously expensive payday
loan
they later up resorting to one of the
alternatives in order to pay back the
huge
payday loan debt hopefully not many
people resort to flogging their own
kidney though
it's maybe worth bearing in mind that
critics who are calling for a radical
overhaul or even a complete ban on
payday loans are not usually the ones
who are actually using them
yeah i mean i'm not i'm not for banning
these
i i really not i'm just for making them
not sh it's a complicated issue it
clearly is
it's all very because people do need
these clearly there's a demand for them
it's all very well for people in
stronger financial positions to dismiss
the whole thing as a predatory business
model which shouldn't be allowed to
operate but getting rid of them all
together could potentially rob borrowers
of what they perceive to be their last
remaining lifeline
exactly they suck but it's like the only
choice
and you could say and it's easy and and
like i'd be tempted to say well you know
i've said like make it fair make it a
reasonable thing
but then it's like well these are super
high-risk people that are borrowing
money so the odds of getting it back is
going to be reduced so you do need to
high
have a high interest rate but does it
need to be this high guys oh i guess
this is why this is an issue that hasn't
been solved because it's more
complicated than it appears
on the face of things sorry yeah that's
gone please step aside for people who
actually have money the industry agrees
that payday loans are an essential
financial tool for people who have
exhausted all other avenues
and who may otherwise have been forced
into considering alternative illegal
solutions
to survive in other words they're doing
us all a big favor by stopping all the
poor people from turning into nuisance
shoplifters
however i was surprised to discover
while writing this script that in the
last few years
payday loans have been already been made
illegal in 14 u.s states
it's still considered to be a thriving
industry in the uk although tighter rate
restrictions have recently been
introduced to ensure that firms only
lend to borrowers
who can genuinely afford to pay back the
debt good
but while there's no federal ban in the
united states 14 states have either
outlawed them or completely capped the
interest rates to a point
where such a business would be
unprofitable that seems a bit extreme
let's just cap them at a point where
it's like yeah they're making a
reasonable amount of money
and not an insane amount of money and
the digital world is taking a sense too
in 2016 google declared a complete ban
on adverts for payday loans defined by
an advert promoting a loan
with 36 apr and above or in which
repayment is expected within 60 days
i'm with google on that that seems
pretty smart that's like i don't know
but that seems like a good middle ground
but is a complete ban really the right
answer some would argue that this
doesn't remove
the basic need for a payday loan and
that it simply drives the industry
underground
back in the day chicago mobsters used to
run similar sort of schemes with the
main difference being that if you didn't
pay the loan back in time you got your
kneecaps broken
way look what they did to me my legs are
useless now
instead of pushing the problem into the
hands of shady criminals it could be
considered a healthier move to keep the
industry completely legal
and fully regulated of course we'd all
love to see more
conventional or at least more realistic
interest rates charged on a typical
payday loan but there's a big problem
there
the industry argues that such a move
would render business unprofitable
if for example they charged a 20 apr on
a short-term loan of 100
they would only end up making 40 cents
on the whole deal
that is a good point and if this sounds
like a lame excuse from an industry
clutching as straws
actually seems like a good point it has
to be said that some recent evidence
seems to back up their argument
back in 2010 the state of montana voted
to introduce a strict 36
interest rate cap on payday loans and
there was a general feeling of
celebration and trump and justice for
the common man
now that the greedy loan sharks have
been forced to curb their crazy
cash-grab charges
however within the space of just a year
all the payday loan stores in town well
over a hundred of them
boarded up their windows and closed up
shop for good taking hundreds of jobs
with them what would be a good solution
to this like i feel like
maybe the government can offer some sort
of emergency loan system
um and still make because the government
would be happy with
40 cents on a hundred dollars because it
is still a 20 apr
and it could be a governmental thing
they'd make money people wouldn't get
screwed
uh also the government is the government
so if you don't pay them back
well you're gonna pay them back it's the
government they'll just take it out of
your paycheck
like and again i don't wanna seem like
i'm sliding into that
area of having the government there to
support but this does seem
like something that could be either run
by a government
or some sort of non-governmental entity
but not a business
charity some something like that that
that would be an interesting model or a
semi-public body
wow simon you are drifting to the left
son
and a disastrous side effect of this
development is that all those low-income
workers
are still in need of a short-term loan
and they have to look elsewhere
they didn't exactly go underground as
much as they went online to source
unscrupulous lending firms who are
charging even more than the legal
brick and mortar stores ever had
unfortunately there's no easy solution
when it comes to fixing
a business model that was fatally flawed
to begin with the very idea of running a
business aimed at getting money from
people in financial difficulty which is
both reasonable and
profitable is a bit of a non-starter
campaigners often call for
more transparency in payday loan
marketing and this could potentially
help a little but i don't believe it's
the core problem with an industry in
which most borrowers
are very much aware of the terrible
terms and conditions but feel as if they
have no other viable alternative to
pursue
i like that dany is delivering us
something a bit more balanced than
my general rant against these but also
realizing
that they are something that people do
want and need which isn't something i'd
thought a ton about before i just
i guess i'd been like the privileged
person who was like yeah [ __ ] this and
now i'm realizing okay i see why these
exist but
there needs to be a better solution than
this because this they're saying yeah a
longer-term solution might be to
incentivize banks in some better way to
offer better and fairer loan services
for people on low incomes
although that leads to a separate debate
on whether the whole thing becomes a
high risk charitable venture
rather than a sound business model or
here's a crazy idea maybe people on low
incomes need to be paid a bit more so
that they're less likely to be in need
of an emergency micro loan in the first
place which is
a very complicated and controversial
thing because while it's wonderful i
think you know
i think people should get paid more and
i don't know i don't really know how i
this is beyond what i've thought about
and can think about in this short video
but even if you bump that up i still
think you know
there's always that great example of you
know if you earn 40 000 a year
you live off 50 because you have credit
card debt and then you make 50 and
you're like great i won't have credit
card debt anymore but you live off 60
grand a year i don't know if that's
actually true it's just one of those
things you hear
i just think this is something that
escalates with time i think this should
be governmental
is that so bad in the meantime we may
well continue to see much
tighter regulations and widespread bans
on a universally hated industry
built on the principle of draining every
last cent from four families but unless
this is complemented with other
meaningful initiatives and services for
low-income workers to consider
it won't magically heal the problem it
will just slam yet another door
in the face of someone who was already
running out of options
agreed fully agree with danny fully
agree
bonus fact this business place has been
intense
it's not been like yeah let's laugh at
some been like oh
so the poor are screwed and our feelings
are hurt
bonus facts one of the most famous
payday loan providers in the uk and
other european
com countries was a company called wonga
i remember one girl they had shitty ads
or ads that didn't make any sense which
ran from 2006-2018
the award-winning outfit became famous
for its friendly tv commercials often
featuring bizarre comedy puppets for
some reason
which explained how easy and simple it
was to save money by getting yourself a
cheap one good loan
yeah saving money in fact it wasn't very
cheap at all the apr in a wank alone
could be as much
as wait for it
1509
a whole string of these puppet-based
advertisements were swiftly banned
by the advertising standards authority
on the grounds that they presented
information
which was either misleading or
irrelevant yes because save money
and 1509 interest should not be in the
same
advert okay that's real
the company also came under fire in 2014
for sending out hundreds of thousands of
aggressively
this feels much more like an episode of
uh last week tonight
have they done an episode on this that i
haven't seen i would love i bet john
oliver has done
he probably has done something on this
hasn't he let me check he's done
something on predatory lending auto
lending debt buyers
uh predatory lending's got to be it
right are you watching this
just go watch john oliver he probably
got all of these points across and
made it funny at the same time the
company also came
the company also came under fire in 2014
for sending out hundreds of thousands of
aggressively worded debt collection
letters purporting to be from legal
firms which in fact didn't exist at all
because
wonga just completely made them up that
is sketchy af but it's wonga
what a fact following discussions with
the office of fair trading wonga ended
up writing off 22 million pounds of debt
over that little error of judgment good
wonga sadly the wonga dream came to an
end i'm going to edit that
the longer dream came to an end in 2018
after a huge surge in customer
compensation claims which eventually
forced the company
into administration if only they could
have sourced a loan with fair and
competitive rates helped tied them over
during this difficult period
there might be a gap in the market there
this has been business plays
i'm sure i've said something that is
going to make some people want to smash
the dislike button
so i'd invite you to do that right now
you legends it doesn't matter that you
smash the dislike button you watch to
the end
and you gave me all of that sweet watch
time if it's a hate watch
that's okay it's still watch time smash
that dislike button
subscribe i'll see you next time
it's that whenever my you know career
goes to sh oh thank god i can sell my
old xbox and start a mukbang channel
