1) Define “the poor” so that I may answer your question appropriately.

Beyond that, however, assuming you mean “exploitation” in the pejorative sense, who are YOU to render a moral judgment? Who are YOU to say PDL customers are being “exploited”? Is it possible that the vast majority of PDL customers are grateful the service is there, and that they don’t need YOU to speak for them?

As for “exploitation” in the non-pejorative sense, this is simple capitalism. If a market exists, it will be serviced. If a market exists, opportunity is created.

Are you suggesting that the opportunity not be utilized? In that case, what short-term credit solution do you propose?

“Your analysis is flawed in several ways.”

Please be specific.

“The PayDay lenders are simply utilizing their credit to extend credit while cutting an enormous profit. ”

Please define “enormous profit”. In relation to what? PROFIT DOES NOT EXIST IN A VACUUM. Profit in relation to risk? In relative % terms, compared to what other businesses? In absolute dollar terms? Be specific.

“Entities like micro-finance (aka Grameen Bank) provide solutions that build both credit and social capital for those in need.”

It’s an idea worth exploring, but without having yet research GB and how it stays afloat, I cannot answer this just yet. But I will and get back to you.

“Your logic is so grounded in the Wall Street paradigm that you really ought to be on Mad Money with Cramer!”

He’s going to drop dead of a heart attack on the air, so I’ll be waiting to replace him!

We can therefore attribute this to either or both of the following:
1) An inability to stand behind his arguments when confronted, or
2) A poor style of writing, lending itself to multiple interpretations.

For examples, in our discussion of loan amount being made on the basis of salary, Mr. Krishnan says he refers to Take Home (or net) salary and my calculation was based upon Gross salary. Well, if he meant net salary, he should have said “net salary” and not leave the matter open to interpretation. He also says the paycheck “could be weekly to monthly”. If he meant that, why not say that up front instead of adding the modifier after being challenged.

As for this rubbish that “oh, we will find jobs for those people [put out of work by a ban on payday lenders]” — Really? How long will it take? In this economy? With jobs being lost in the thousands? What job will you give them, specifically? What about them and their families? You are pushing them right into the economic demographic that you decry payday lenders are taking advantage of.

I love how elitists love to endorse policy designed to kill jobs, then wave the ensuing problem away with a wave of their hand. It’s like my critique of Dr. Stephen Graves who said people in need of short term credit should just “do without” whatever it is they need the credit for.

Sorry, Mr. Krishnan, but that doesn’t cut it.

All I can say to readers is — you decide.

Your analysis is flawed in several ways. The PayDay lenders are simply utilizing their credit to extend credit while cutting an enormous profit. Entities like micro-finance (aka Grameen Bank) provide solutions that build both credit and social capital for those in need.

Your logic is so grounded in the Wall Street paradigm that you really ought to be on Mad Money with Cramer!

Please note that Lawrence Meyers and I are separately having a very civil discussion and these postings do not imply any disrespect to either, by either, and it is just a difference of opinion, and more frequently, a difference of understanding.

I never stated many of the following. These are interpretations by Meyers – PLEASE do not ascribe words to me that I never wrote. I mean what I say, and I say what I mean. I am not well informed on Payday loans, I have previously stated that. But do not put words in my mouth

“…. they aren’t “sophisticated” enough to understand what the borrowing does to them; and that they are stupid for taking out a PDL more than an arbitrary number of time over an arbitrary period. The solution is to support a politician (Terry McAuliffe) who calls for a ban on payday loans.”

>>>>> I explicitly stated that not-sophisticated does not mean stupid, so why is Meyers being provocative and disrespectful of the average American? I never stated that the solution is to support McAuliffe or any other politician who calls for a ban on payday loans….

Mr. Krishnan, however, appears to be arbitrarily deciding how many payday loans someone should be able to take out in one year. He says, “The point of concern is when any one takes more than four such loans in a year”.

>>>>> I never “decided” how many payday loans any one should take. To Err is Human, but if the eraser wears off before the pencil, there is a problem. Any one who takes a payday loan every month has a problem, no reflection on intelligence, or sophistication, just an indication of a problem. No discussion. A loan once a quarter is not unreasonable, as the remaining 5-6 pay checks could be used to pay back the loan. That is a matter of opinion, but certainly not disrespectful.

“Indeed, why should anyone — especially government — say how many loans a person can take out in a year, any more than how many Big Macs or shots of tequila one may consumer in any given period?”

>>>>> Never recommended any of the above – so it is all simply irrational and provocative writing.

“Mr. Krishnan has a low opinion of American society, and uses this opinion as the basis for most of his arguments against payday loans. He declares, “the average working American is not sophisticated”. I wonder how most Americans would feel, being insulted in this manner? Since Mr. Krishnan took me to task for interpreting his writing in a manner other than which it was intended, I suppose I should ask for clarification. However, since he insists that he does not mean “stupid”, I can only turn to the dictionary for the defintion of “sophistication”. This is defined as, “having worldly knowledge, lacking naivete”.”

>>>>> Total nonsense again. I have a very high opinion of the average American – they are honest, hard working and frequently exploited all around. Watch Daily Kos for a Diary on this topic in the next month. I never insulted any one, least of all the average American, and so this again simple provocative writing by Meyers.

“Mr. Krishnan says, “If you took 10 payday loans in six months, I would have no hesitation stating that your action is probably stupid.” Mr. Krishnan renders judgment upon a person’s actions without knowing that person’s circumstances.”

>>>>> Completely irrational misinterpretation and misquoting (I will give the benefit of doubt) probably arising from misunderstanding I know the financial circumstances of Meyers, and the “you” is Mr. Lawrence Meyers. When is the last time Mr. Meyers (I avoid using “you” so there is no misunderstanding here)took a payday loan? I wrote that if Mr. Meyers took 10 payday loans in six months, his action is probably stupid. Does not Mr. Meyers agree with this? If he does not, each of us is entitled to our opinions, I agree. If the average American took 10 payday loans in six months, it is not stupid, it is very sad and he/she needs help managing finances.

“Mr. Krishnan somehow extrapolates that using PDLs are a good option for some to the suggestion that they are right for everyone. I never implicitly nor explicitly stated such a thing. He talks about how his finances are easily managed through credit cards and lines of credit. Good for him. Does he believe that everyone has those options? If not, why call the behavior of someone who chooses a payday loan “stupid”?”

>>>>>> Where we disagree is frequency of use, and for whom it is a good option. That is a matter of opinion and not open to argument. My contention is that the ones who use PDL services are those who do not have other options, and therefore, it is not an informed decision, but a desperate action. This is what I stated in my last response.

“Mr. Krishnan says, “You have a great talent for using statistics in support of your pet theory, and vested interests. If you want to flaunt that they turned to them [PDLs] 154 million times last year, why do you not talk of the billions of times every week that folks turn to credit cards? By your own admission, the incidence of payday loans is insignificant in the big picture of the unsecured loans industry, does that reflect on their popularity?”

I’m not sure what pet theory he is referring to, other than the fact that payday loans are the best option for some people, some of the time. The fact that they were used 154 million times last year does not invalidate the viability of other options. It just points out that PDLs are a popular product, and people used them in spite of there being other choices.”

>>>>> The pet theory is that PDLs are good and selected over other options. There are other choices, but frequently not for those who use PDLs. Just do a survey and truth will prevail.

“Mr. Krishnan demonstrates further ignorance about PDLs, “Explain this: For some one making $24,000 a year, with a paycheck of about $750 every two weeks (and say about $1,600 every two weeks for some one making $50,000 a year) the payday loan will vary between $500 and $1,600. Right?”

Wrong. The most generous PDLs will not loan more than 25% of gross salary, so the range is actually $188 to $400.”

>>>>>Mr. Meyers should stop trying to focus on his belief of my ignorance and do some math. I refer to Take home salary, and his formula is on gross salary. This also depends on frequency of paycheck – weekly to monthly. The gross salary varies between $500 to $2,000 on an annual $24,000 and between $1,000 to $4,000 for some one grossing $48,000. 25% would then range from $125 to $ 1,000.

“Mr. Krishnan makes another false statement, and this one is huge, further demonstrating how little he understands of the short-term credit market. I told him that people choose payday loans over other options because the other options are unpalatable for one reason or another. He falsely asserts, “No, they did not chose payday loans because the other choices weren’t palatable for one reason or another – they just did not have another choice!”

There are other choices, which I’ve outlined many times.”

>>>>>Choices in the market are not relevant – what is relevant is the choices open to the individual. Neither of us has data, and so it is an opinion. I am willing to stand behind my opinion that those taking out PDL do not have many choices and I am prepared to validate this in the next six months.

“Further mistakes made by Mr. Krishnan: “With the high rates of repayment on payday loans…there is no way any lender will lose [on the PDL business model].”

Of course lenders can lose. Three things can happen that can kill PDLs:
1) Rising expenses
2) Increase in defaults
3) Paternalistic legislation that unreasonably caps rates”

>>>>> And, of course the sky could fall down. We already know that for a few minutes work, the fees are $16 per $100, every two weeks. We already know that repayment rates are 94%. “Rates” ? I thought these were fees, per Meyers.

“He says, “Sadly, this program makes one borrow regularly, because most paychecks are gone to paying back the previous pay period’s payday loan! ”

No, PDLs do not make anyone do anything. People are not controlled by things. People control their own lives. However, if they put themselves in situations where they give up that control, that is on them. If they choose to use drugs, then the drugs will control them. If they choose to take out a loan that they are not 100% certain they can repay, then they should not take out that loan.”

>>>>>> Now, now, who is being disrespectful? When the child is in hospital and you need medication, when that car needs to be repaired to go to work, and so on as previously stated by Meyers, what are the options? Let us not ignore reality, no matter how distasteful it is.

“Mr. Krishnan continues to decry borrower responsibility. “You ignore that most of these borrowers cannot afford [even] a payment plan – they need every penny to pay their bills and put food on the table, and THAT is why they go back a week later and take another payday loan!”

Not true at all. 94% of PDLs are paid back on time. If they cannot even afford a payment plan, then they should not have taken out the loan in the first place.”

>>>>> Again, who is doing the value judgment? Let us not ignore people’s circumstances and difficulties – it is easy for Meyers to do this as the CEO of a company that finances PDL operations. Try to walk in the shoes of the people who take out PDLs.

“Mr. Krishnan’s judgment continues. “When some one borrows to pay rent, put food on the table or get their car fixed, they are desperate. At all other times, they are being irresponsible – unless the loan is an investment for their home, education, automobile or other asset.”

At all other time they are being irresponsible? Says who? The fact that somebody may find themselves in an emergency situation, not of their own doing, makes them irresponsible?”

>>>>>>> What other emergency situations? It is a cycle of debt that the borrower is not able to get out of and this is basically a problem of budgeting, and getting out of the rut. The loans are not growing, and they are not reducing. That is why it is a sad situation.

“Where we do agree is Mr. Krishnan’s call for the public to take better control of their finances. I am a big advocate for a personal finance course to be required in the senior year of high school in every state. But for Mr. Krishnan to state that PDLs are not in the public interest is to deny reality. There is a need for them. Eliminating them will hurt consumers. I suppose, in a perfect world, we’d never have need for them. But we don’t live in Paradise, do we?”

>>>>>>I agree on all above points, so we have hopes of doing something to change the world, as we privately discussed

“Finally, Mr. Krishnan says, “The key is to get more jobs, and get all our people gainfully employed. McAuliffe is our best candidate to bring jobs to Virginia.”

It’s an ironic statement, considering that if McAuliffe gets his way and payday lenders are banned, 1,500 people will lose their jobs.”

>>>>>>>> Oh no, we will find other jobs for these folks. They could be very valuable credit counselors and financial planning facilitators. They are probably some of the most informed individuals in our society, and their knowledge, experience and rapport is invaluable.

I hope we can put this discussion to rest for some time? We are getting repetitive and I am sure in the coming weeks we will develop solutions that will make a difference.

I appreciate your patience, and your genuine interest in finding a viable alternative. Thank you.