Is it ethical to encourage tenants to get pay day loans

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Is it ethical to encourage tenants to get pay day loans

Al Williamson
Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes

Did anyone catch the AAOA post about a Utah Apartment Assoc. teaming up with a payday loan comapny to help tenants pay rent? Really, does anything go or is this over the line? Here's the link:
http://www.american-apartment-owners-association.org/blog/2012/03/12/landlords-partner-with-payday-loan-service-to-improve-rent-collection/

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Andy Hayes
Tucson, AZ · Member since 2012 · 29 posts · 5 votes
14y
Originally posted by James Martin:
I feel that it is another snare to keep poor people poor. Even when your money runs tight, a pay day loan never comes to mine. A trim carpenter will never catch a falling saw, its unforgiven if you do!

I agree.
When my daughter was 17, I took her to a payday loan store and walked her through the charges for a payday loan. I told her that it was better to go without a few meals than to borrow money from a payday lender.
I'm very happy to say that, at 22, she has almost one month's pay saved in a rainy day fund and no student loan or any other debt ... she graduated from college last May.

If you are even contemplating getting a payday loan, you've already made multiple poor financial decisions.

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  • Brian LevredgePro Member
    Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
    14y

    Depends on how you want to look at it. From the landlord's POV they want to get paid for services rendered. I've personally talked to tenants to see if they could borrow money from family or friends to make rent so I didn't have to evict, so I can relate somewhat. To me, this move seems to be delaying the inevitable. If your tenants are having to get payday loans to make rent, it's only a matter of time before you'll be evicting them anyway.

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  • James Martin
    Property Management · Memphis, TN · Member since 2009 · 667 posts · 362 votes
    14y

    I feel that it is another snare to keep poor people poor. Even when your money runs tight, a pay day loan never comes to mine. A trim carpenter will never catch a falling saw, its unforgiven if you do!

    1Reply
  • Al Williamson
    OP
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    14y

    The post seemed to apply the landlord would be a referral fee. If that's the case, the deal is too smelly for me. I can't put my finger on it - just think it stinks - it's like a sharecropping manuver.

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  • Kyle Meyers
    Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
    14y

    Depending on late fees and how much they are short, the payday loan could be a better choice. The payday loan charge is $17 for each $100 borrowed. If they were $100 short and the late fee is $25, they would be better off getting the loan. It obviously isn't a good long term solution but every once in a while, a payday loan could be beneficial.

    And of course, it always works well for the landlord cause they get their money and someone else (the payday loan place) has to worry about collecting from the tenant.

    1Reply
  • David Wedemire
    Real Estate Investor · Bellingham, WA · Member since 2008 · 407 posts · 90 votes
    14y

    The loan referral fee is probably crossing the line.

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  • Andy Hayes
    Tucson, AZ · Member since 2012 · 29 posts · 5 votes
    14y
    Originally posted by James Martin:
    I feel that it is another snare to keep poor people poor. Even when your money runs tight, a pay day loan never comes to mine. A trim carpenter will never catch a falling saw, its unforgiven if you do!

    I agree.
    When my daughter was 17, I took her to a payday loan store and walked her through the charges for a payday loan. I told her that it was better to go without a few meals than to borrow money from a payday lender.
    I'm very happy to say that, at 22, she has almost one month's pay saved in a rainy day fund and no student loan or any other debt ... she graduated from college last May.

    If you are even contemplating getting a payday loan, you've already made multiple poor financial decisions.

    2Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    That's all good and well.I don't listen to tenants STORIES.PAY THE RENT !

    If you are counting on tenants to make good life choices for themselves then you need to get your head out of the clouds and into reality.

    Most of our nation makes poor financial decisions because they want things NOW.They choose to carry debt they can't function with and pay back over a less quality of life and sacrifice to get ahead.

    As a landlord I wouldn't want a referral fee and the pay day loan is going to dig them a hole where it will be harder to pay next months rent.It could be a good tactic if you are evicting them anyways to get the back rent.

    If they want free rent they need to go live with government housing.I am not the red cross.

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  • Al Williamson
    OP
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    14y

    Looks like we are in agreement that referral fees are over the line. I'll call the folks and find out if my suspicions are correct. Hopefully, I'm missing a key fact that would make this tactic more palatable. I'll report back. Stay tuned.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    14y

    Having a business relationship with someone can put you in a position where you could become coupable for directing another in selecting a course of action. A judge may not take kindly to you trying to collect back rents from someone you sent to a loan shark where you obtained loan proceeds and due to that decission the tennant is now, not only owing back rents but also a sic loan. Using your influence to steer a less sophisticated person to make a bad decission can come back on you. You can be friendly with a tennant, but you have a business relationship.....

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  • James H.
    Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes
    14y
    Originally posted by James Martin:
    I feel that it is another snare to keep poor people poor. Even when your money runs tight, a pay day loan never comes to mine. A trim carpenter will never catch a falling saw, its unforgiven if you do!

    I'm all about getting my rent, but I'm not going to suggest to my tenants to get a payday loan. In fact, I'm not going to make any suggestions regarding how they come up with rent. They need to figure that out on their own. If they can't come up with rent, my job is to get them out, not find ways to get them into deeper messes before I get them out.

    I know there are lots of folks who will disagree with me here on BP, but I truly believe payday loans are scourge of the earth business tools and the people who offer and push them are poison to our society.

    1Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    14y

    Brian I looked at the Title Pawn business last year as another income stream but I just couldn't get excited about the business model.

    The business model made tons of money but didn't feel right about doing it.

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  • James Martin
    Property Management · Memphis, TN · Member since 2009 · 667 posts · 362 votes
    14y

    The business model made tons of money but didn't feel right about doing it.

    It called Morals. We have a vacant liquor store that came with one of our 4plexes. It will be easy to open it back up and sell liquor, loose sigs, and cashing checks, but just as you said "my partners and I just didn't feel right about doing it" we are in the process of turning it into a sandwich shop instead.

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  • Kevin Cordell
    Investor · Succasunna, NJ · Member since 2008 · 19 posts · 1 vote
    14y

    I think that is unethical to ask your tenants to get a payday loan to pay the rent. I was renting a unit to a young woman and she kept getting payday loans and those companies were debiting the money from her bank account, which meant I wasn't getting paid. I am in the note business and I never tell a borrower to get a payday loan or title pawn to make their payments. I am working on helping them get control of their finances so they can become a good performer. As a note buyer, I work with borrowers so they can afford to make payments on their mortgages.

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  • Al Williamson
    OP
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    14y

    OK, called the Utah Apartment Owners Association and was told the pay day loan company offers a 20% discount to tenants of their members. No kick back to landlord. The landlord is supposed to benefit by providing a “more affordable” short-term loan alternative to their tenant.

    I'm going to interview some landlords that are using this program and will report back.

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  • Account Closed
    Real Estate Investor · Lake Forest, CA · Member since 2011 · 49 posts · 21 votes
    14y

    @Al- my business is based mainly in Utah. There are more cash advance/payday loan places here than any place I have seen. We have had tenants use them to "bridge" themselves in times of hard ship. One of the programs I prefer is to make a payment plan with them myself. Rather than charge massive interest rates we have them sign an agreement that they will follow the plan or voluntarily vacate. As mentioned by previous contributors if they are considering a payday loan there is usually a deeper income issue.

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  • Al Williamson
    OP
    Rental Property Investor · Sacramento, CA · Member since 2011 · 2k+ posts · 1k+ votes
    14y

    Encouraging these loans is like offering bottled water to a drowning person. Wouldn't it be innovative to be able to offer a tenant a temp or part time job instead?

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  • Nathan Emmert
    Investor · San Ramon, CA · Member since 2011 · 1k+ posts · 569 votes
    14y

    Depends how you look at it.

    A "smart" person can use these loans to save money. Would you rather pay Payday Loans $34 to borrow $200 for a day or pay me $85 because you're $200 short in your rent and I'll charge you a 10% late fee on the entire amount?

    The problem is, most people who end up short $200 for rent aren't financially educated enough nor responsible enough to make these sorts of decisions. They are essentially toddlers playing with fire or some other dangerous entity.

    IMO, a "good" landlord will educate their tenants prior to having them pursue this path. Letting them know the good but also the risk. Leading a tenant down a bad financial path is bad for the landlord as sooner or later it will result in eviction, you may simply be delaying the inevitable. If you can empower them with information and access to capital, you can save yourself that headache potentially which is the goal for most of us.

    As for the UAA... sounds like I need to start going to some meetings, I'm missing out on all the fun!

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  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    14y

    I don't know why you want to open yourself up to liability by providing financial advice. That's like telling a homeowner to stop paying their mortgage so you can short sale their house.

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