this post was submitted on 13 Jan 2025
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A Boring Dystopia
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Payday loans making a comeback, eh?
And because they don't appear on your credit check you can take a dozen out from different companies! What could possibly go wrong?
They’ve been here to stay. They just yassified them and are now aiming them at a different demographic. They’re trying—against all logic—to gentrify poverty traps. Welcome to the future.
They never left. The financial vultures just keep renaming them and finding other loopholes to skirt regulations and keep trapping victims in their endless debt spirals.
It tends to move around from scam to scam.
A lot of the payday loan companies seemed to disappear in the UK. The main one was Wonga, which went under after we made it so that companies lending money would have to pay compensation if they lent money to people who would be unlikely to be able to repay it.
Then there was places like BrightHouse which specialised in selling basic household items to poor people with a 99% APR on them. So that £300 washing machine ends up costing over £1000 by the time they own it.
The current one is places like Klarna, which is a buy now pay later system. Popular because it doesn't charge any interest (most of the money comes in fees from the retailers) and they don't put it on your credit history, but miss a payment and they'll be on you like a ton of bricks.
It's just the same thing over and over, which a slight change to skirt any new regulations. It's still the same cash flow problems underlying it all.
I used to work for one the biggest in the UK. A lot of the new legislation at the time destroyed us. Deservingly so.
I felt our company wasn't the worse because we were upfront about what we would charge but we had a lot of sister companies that would have a lot of hidden charges and the execs loved those. Well, guess what, legislation hit us hard because all those others wouldn't be compliant.
Personally, I hated payday loans and I think they're horrible, but I worked at Barclays too. An interview I had with a team there was basically working on "cheating" taxes. So like, it's not much better for society in my opinion either.
What's that you say? You want to order Chinese food tonight and pay for it in 4 separate payments over 4 months? Sign up here!
I avoid Klarna and similar services like the plague. But if it's really interest-free, it doesn't belong in the same category as those scummy loans with crazy interest at least.
There's some different options they offer. One where you pay installments with interest, and another where it's just like credit cards - if you pay it off before the period (30 days), you don't pay any interest.
Still a million times better than payday loans, but ideally people shouldn't put themselves into debt for stuff they don't need.
I dont use Klarna myself, but from what I've heard from people that do use it, it's a decent company.
For one, their business model isn't based on trapping people I debt, but is more akin to PayPal, in that what they do is offer a transaction service. Most people I've heard of just use it to handle online transactions, without using the "split up payment" version. I've been told one reason (besides protecting their payment information from third parties) is that if they return something, they just forward confirmation that it was returned to Klarna, and the payment is cancelled. That way, they can buy stuff and only pay if they actually keep it, rather than having to go after some company to get their money back.
On general grounds though, I'm sceptical of any "buy now, pay later" service.
When Arizona banned them almost all of them just pivoted to auto title loans. These use the same laws pawn shops exist under, so you're basically pawning off your car for a couple hundred dollars.
I've just got two kneecaps but those payday loan chumps will let me come back again and again! Sounds like a win for me