Could a check cashing / short term loan operation be operated in a more ethical fashion?
November 12, 2012 3:56 PM Subscribe
Could a check cashing / short term loan operation be operated in a more ethical fashion, while still making (what I consider to be) reasonable profits?
I'm thinking this might be an impossible question to answer in totality on Ask Metafilter for lack of public knowledge of the industry (I'm assuming it is secretive), so let me break it down like this, and see if components of what I'm wondering can be answered:
1) How much does it cost to open a check cashing operation that isn't part of a franchise?
2) What are the typical operating margins of a business like this?
3) Is there any public evidence that the profits are exorbitant and fees could be much lower?
Finally, to tie it all together, my theory is that a check cashing operation that charged merely bad credit credit card interest would still be profitable, even with loans going bad, storefront operating fees, labor, etc.
So on a $100 loan, the fee would be $1.56 at 30% APR (assuming I'm doing the math right.)
Obviously, the store would make additional money on (reasonable) late fees, check cashing fees, selling money orders, possibly other products a low income community would find interesting, all at reasonable rates.
I believe doing this would drive out all local competition. I believe some of societal ills could be solved by more ethical business, and I hate, hate, hate check cashing places and car title loan operations, etc. It seems like regulation doesn't work to drive them away, as Ohio passed laws against them, so I'm wondering if competition could do the job. Point out what I'm missing? I'm sure there's lots, but this is something I'm seriously considering.