The problem with payday loans

Brad DeLong discusses in a predictable manner the issue of high interest rate loans. The basic point-counterpoint is (point) high interest rates are unfair to the poor vs. (counterpoint) they represent an option that would be otherwise denied to the poor, namely gambling that if they get out of one disastrous situation, they will be able to get out of another (i.e., the loan). My feeling is that the answer is to raise wages and make health care universal. That takes care of 95% of the problem. But there's a problem with payday loans that the comfortable people discussing them don't know about: payday loans facilitate unscrupulous companies to place completely baseless liens against elderly people, especially non-English speakers. I became aware of this when a payday lender, acting through a collection agency, demanded the payment of hundreds of dollars from an elderly Hispanic woman of my acquaintance. Inquiring into the matter on her behalf, I was told that they could tell me nothing. Indeed, this is true; the law forbids them. But after some indirect inquiry, I determined that the charge was assigned to an address located in an urban park. The collection agency had not even verified the address they were calling to make sure it was occupied by humans rather than squirrels. Even more troubling, the collection agency never provided a description of a good or service that supposedly had been provided. The law demands that they do. They simply phoned with a demand, which may well have been fraudulent, against an elderly person whose English skills were presumably poor. Now, imagine that this is systematic, that the payday lender presents a certain number of charges it knows to be fraudulent. If some fraction of those from whom money is demanded aren't able to respond effectively, or if they die, they payday lender may well collect a certain amount of blood money to which it is not entitled. I have no proof that this incident was fraud. But, you know, a few months later, another collection agency attempted a similar thing against the same woman. On being told that the previous matter had been referred to the attorney general, they did not renew the contact. Maybe they checked their records and found an error. The problem with payday loans is that they create perfect camouflage for the commission of fraud against the most vulnerable. They need to be eliminated.