[Cfairbank]

I wonder though, if a merchant takes a short term, 1.40, 5 month deal for $10k and never takes an advance again (of course, this generally doesn't happen since we're all about the renewals), why would there ever be a thought process related to APR? As opposed to simply stating the simple cost of $4,000 to borrow the $10k?

You identified the issue perfectly. If folks took ONE advance at those rates, there wouldnt even be this type of discussion either on this forum or on Capitol Hill. Problem is (as you highlight), it's expensive to acquire customers and most of the industry lives off renewals. And that 1.4x for five months (with a double dip renewal at 3.5 to 4 months) ends up renewing multiple times because they don't have a choice. In order for any form of lending/finance to work, the benefit (return) from the capital has to out weight the cost -- and that's impossible at an ongoing cycle of 1.4x (with a double dip, that's really a 1.55x+ over five months).

[FUNd]

You identified the issue perfectly. If folks took ONE advance at those rates, there wouldnt even be this type of discussion either on this forum or on Capitol Hill. Problem is (as you highlight), it's expensive to acquire customers and most of the industry lives off renewals. And that 1.4x for five months (with a double dip renewal at 3.5 to 4 months) ends up renewing multiple times because they don't have a choice. In order for any form of lending/finance to work, the benefit (return) from the capital has to out weight the cost -- and that's impossible at an ongoing cycle of 1.4x (with a double dip, that's really a 1.55x+ over five months).

Have to figure in federal, state, and local business fees and taxes into the ROI too. So at 100% margin, they about break even at a 1.4x.

[Cfairbank]

Have to figure in federal, state, and local business fees and taxes into the ROI too. So at 100% margin, they about break even at a 1.4x.

I was looking at it from the customers perspective -- a merchant can't survive if they are getting 20% to 30% pulls and continually renewing 1.4x 5 month deals because the return they get from that capital will never ultimately outweigh the cost.

[Cfairbank]

I was looking at it from the customers perspective -- a merchant can't survive if they are getting 20% to 30% pulls and continually renewing 1.4x 5 month deals because the return they get from that capital will never ultimately outweigh the cost.

And to be clear, I'm not here to argue about pricing, I get you need to price the risk and there is an high inherent cost in originating and funding a short term deal to a subprime customer -- my point is the problem with the current application of high cost products is the cycle on which many folks get stuck.