Pay day loans or legalised loan sharks are part of poker and gambling culture and always will be. Is it right or wrong does not come into it. If you win after borrowing at massive interest rate of course it was right. If you lose then it was wrong.
Our view is that pay day loans are wrong and should be heavily regulated. Will it facilitate loan sharks to take over the un-regulated sector? Yes, it was always part of the sector and will never change as long as there are financially illiterate people who will take a loan at silly rates of interest not realising that the odds of the loan against the odds of winning is not viable for a chance of winning.
The only time it is acceptable is when you have proper inside information of an outcome and you want to pile on and make the most out of it as possible. For example if you know of a soccer match or a horse race in which the outcome has already been determined then of course get as much money on as possible to take advantage.
If you know a fish is up for playing a cash game of poker and he or she is carrying a large amount of money to play, then of course approach a pay day loan for as much money so that you have a good bank to take care of any adverse variance when taking the poker fish down. But never, ever take out a pay day loan to buy a lottery ticket or to play a random game of online poker. That is just plain silly!
The reason pay day loans are becoming a big topic lately is that they are advertising on TV during programs which have a lot of children watching. Why advertise at times when children are watching? Well apparently it helps to create pester power ie if a child wants a video game and the parent has not got the money then it is quite common for children to suggest a pay day loan transaction to get the money for the video game.
This makes sense as pester power is part of the advertisers arsenal when it comes to Christmas and the serious selling that ensues. Therefore pay day loans should not and must not advertise during child friendly programs.
Grooming children for morally unacceptable behaviour is frowned upon. So the government must take action asap. The old libertarian opinion that they should ‘leave it to the markets’ is nonsense. There are plenty things we do in which it is not left to the markets such as selling nuclear weapons to anyone is not left to the markets.
Pay day loans are equivalent to financial dirty bombs as they lead people onto the road of usury and financial slavery.