
Secret Network Connects Harvard Money to Payday Loans - tinkerrr
http://www.bloomberg.com/news/2014-09-04/secret-network-connects-harvard-money-to-payday-loans.html
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jordan0day
Clearly there is a need for something _like_ payday loans, where people in
dire straits can get small cash infusion to get them by. It also seems to be
the general consensus that these same people are "high-risk", and so require
higher interest rates.

So what's the solution to this problem? Clearly a lot of (maybe all) of the
payday loan-type places are _evil_ \-- is there a way to service these
customers without being evil? Would a not-for-profit (or perhaps even a not-
for-an-exorbitant-profit) payday loan organization be possible? Or would the
typical nasty collections process, the thousands of dollars of interest on a
$500 loan still be required, even if the people at the top _weren 't_ becoming
millionaires?

I guess what I'm asking is, in the story, we see someone paying something like
$3900 on a $700 loan, made by one of these _evil_ companies. What would their
total bill be if the loan was made by a non-profit organization? Would it be
more like $1000, or still closer to $3900?

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a-priori
Instead of this, set up a non-profit payday loan company that offers loans at
market rates, but uses the profits from the loans to offer free financial
planning and education for its customers.

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refurb
Market rates? You mean the same rate that people with good credit get? I'm
guessing there would be no profit in such a situation.

~~~
a-priori
No, by 'market rate' I mean what other payday loan shops are charging in the
area.

The real problem isn't the loan itself, even if it seems exploitative: if
someone is in a cash crunch, it's perfectly rational to pay something like $20
to get $200 today (that seems to be what places near me advertise, at least as
introductory rates) so they can pay their rent and not be evicted. The problem
is the cycle they get into where then they're $20 behind for the next one.
Then they get another loan and they're $40 behind for the next one, and so on.

So you catch people that are already in the cycle, fix their immediate need
(they need $200 to pay their rent), then help them figure out a way to solve
the larger problem (have cash on hand in time for next month's rent) and break
out of the cycle.

So the 'mission' of the shop would become to put themselves _and all other
payday loan shops_ in the area out of business due to a lack of customers.

Of course, this assumes that the root problem is a lack of planning or
education about personal finance. Maybe an outsider's perspective would help.
Or maybe that's completely the wrong assumptions, I don't know.

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WestCoastJustin
If you are interested in this topic, you should watch: Last Week Tonight with
John Oliver: Predatory Lending (HBO) [1]. I think he does a pretty good job in
giving an overview of what predatory lending is. Although, he does not talk
about Harvard, MIT, or pension funds, this is all new as far as I know.

[1]
[https://www.youtube.com/watch?v=PDylgzybWAw](https://www.youtube.com/watch?v=PDylgzybWAw)

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cel1ne
There's a documentation called "Master of the universe" by Marc Bauder, which
really shows the insides of how finance works nowadays. I don't know if it's
available in english yet, :/.

Trailer with english subs:
[https://www.youtube.com/watch?v=OIUPWWwEclc](https://www.youtube.com/watch?v=OIUPWWwEclc)

From IMDB [0]: "A former banker in Germany, who entered the business with the
advent of modern computer systems reminisces of his working years in some of
the world-leading banking corporations."

[0]
[http://www.imdb.com/title/tt3129484/](http://www.imdb.com/title/tt3129484/)

~~~
themartorana
Even better, check out Last Week Tonight's bit (John Oliver's show on HBO) on
payday loan companies [0] - they're utterly appalling.

[0]
[http://m.youtube.com/watch?v=PDylgzybWAw](http://m.youtube.com/watch?v=PDylgzybWAw)

Edit: spelling

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yeukhon
Personally I think if a university is as rich as Harvard is "investing"
(unwillingly/indirectly accoding to the interview) in a payday loan, they
might as well just make a Harvard Loan Institution which it lends students
loans on a reasonable interest rate. Students CAN also invest in this loaning
business and get a fair share. But I am sure IRS, the state and the federal
government will jump in and make everything impossible to run.

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rbobby
Should Google really be selling advertising to these sites? Payday loan
operations really are the scum at the bottom of the barrel.

~~~
patio11
Google makes, quite literally, billions of dollars off the bottom of the
barrel.

There is a dark iceberg under the consumer Internet. Online pharmacies. Rebill
scams. "Government grant" applications. High interest loans. Educational
institutions of dubious utility (disclaimer: took one's shilling once,
indirectly, and regret it a bit). Spam, scams, and the like, on a massive
scale.

There is a UI for AdSense publishers where some Google PM made the decision
"If we give them options to tart up their website less, let's tell them how
much money it costs."

[http://www.seobook.com/how-make-easy-money-
google](http://www.seobook.com/how-make-easy-money-google)

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threejay
At least re: online pharmacy, that's patently false. Coming from someone who
currently runs a legitimate online pharmacy, there is a 9-12 month
accreditation process (VIPPS) that adwords, etc requires before letting you
advertise.

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patio11
That's presumably because Google doesn't want to be fined another $500 million
for having their AdWords sales reps give their pharmacy customers advice on
how to avoid Google's pharmacy compliance rules.

[http://bits.blogs.nytimes.com/2011/08/24/google-
reaches-500-...](http://bits.blogs.nytimes.com/2011/08/24/google-
reaches-500-million-settlement-with-government/?_php=true&_type=blogs&_r=0)

~~~
otakucode
That would depend on whether Google is ever actually expected to PAY $500
million and whether they earned more than $500 million by breaking the law to
begin with. If they made $501 million off of it, all the government has done
is guarantee that is the new standard for business conduct. And usually
companies that get hit with $500 million fines get that reduced to $100k or so
on appeal.

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harmegido
I think this raises the interesting point that investments have become
increasingly abstract. Money goes in, returns come out, and that's generally
the end of the story.

I certainly can't list all of the companies I have investments in, and I bet
most people can't either, other than to say they have a mix of mutual/index
funds.

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pktgen
I refuse to hold broad funds for this reason. It's much less convenient and
potentially a lot costlier (making individual stock trades or at least
sticking to smaller sector funds, which generally have higher expense ratios,
where I can approve of each holding), but I have my own definition of evil
companies and I refuse to hold even 0.0000000000000001% of them.

~~~
logicallee
>and I refuse to hold even 0.0000000000000001% of them.

You say that, but 0.0000000000000001% of even the world's largest company by
market cap (Apple, at 592.44B) would be $0.000000560337

if you ever so much as glance at an ad an evil company runs, then assuming a
CPM of $0.01 (two orders of magnitude lower than actual average cost), your
single glance is worth $0.00001 or 17 times the value you said you would never
hold.

So you'd never hold $0.0000000000000001% of an evil company but you are more
than happy to just give them 17 times that value for free by glancing at one
of their ads at some point in your life?

You need to lower your purity standards if you don't want to be a hypocrite :)

EDIT: all right, I mixed my metaphor. just think of an evil ad company :)

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pktgen
I'm not sure I follow you about giving them 17 times that value. If I think a
company is evil, that means I won't be buying their products, so if they're
paying for my ad impression, that's good from my point of view because they're
just throwing money away without any chance of me buying their product. (Not
that the amount of money is meaningful, but still.)

But yeah, the 0.xxx1% percentage was just exaggeration :P

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otakucode
The US has usury laws? I thought those were abandoned decades ago? Serious
question... I thought Delaware started by getting rid of them and everyone
else followed suit to attract the business of consumer lending companies? What
level does interest have to be to qualify as 'usury' now?

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downandout
Usury is defined by individual state law. Some states have no usury laws, but
many do. There are loopholes in alot of them as well. Here's a summary of the
state laws:

[http://www.lendingkarma.com/content/state-usury-laws-
legal-i...](http://www.lendingkarma.com/content/state-usury-laws-legal-
interest-rates/)

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jamestomasino
What an interesting and complex network.

It says some horrible things about me that what I found most interesting was
the demeanor of Zeke Faux. I have rarely ever seen someone so visibly
uncomfortable in front of the camera. It was kind of amazing.

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empressplay
Once again, ethics gets run-over by the greed bus. Nothing new to see here
folks, carry on...

