For the provision of a good or a service to be ripping people off it is necessary for someone to be making more than a normal profit or income out of that provision. If everyone doing the providing is, instead, just making the normal sort of money then it tells us that this good or service, whatever its price, is just expensive to produce or provide.
At which point some interesting numbers from the payday loan industry. Agreed, these are for the US but still, they're a useful insight:
A federal agency on Thursday imposed tough new restrictions on so-called payday lending, dealing a potentially crushing blow to an industry that churns out billions of dollars a year in high-interest loans to working-class and poor Americans.
The rules announced by the agency, the Consumer Financial Protection Bureau, are likely to sharply curtail the use of payday loans, which critics say prey on the vulnerable through their huge fees.
Currently, a cash-strapped customer might borrow $400 from a payday lender. The loan would be due two weeks later — plus $60 in interest and fees. That is the equivalent of an annual interest rate of more than 300 percent, far higher than what banks and credit cards charge for loans.
OK, agreed, this is expensive. But in order for this to be preying there does have to be some evidence of outsized returns.
The operators of those stores make around $46 billion a year in loans, collecting $7 billion in fees.
OK, fees include the costs of running the stores, paying the staff - and no, we don't think that's a highly paid job - covering the defaults and so on.
The restrictions, which have been under development for five years, are fiercely opposed by those in the industry, who say the measures will force many of the nation’s nearly 18,000 payday loan stores out of business.
There are many such stores, we'd expect competition to rather lower the profits of the industry.
A dropoff of that magnitude would push many small lending operations out of business, lenders have said. The $37,000 annual profit generated by the average storefront lender would become a $28,000 loss, according to an economic study paid for by an industry trade association.
We've 18,000 stores each making an average of $37,000, that's total profits of $660 million, a lovely number for something considered so perfidious. There're $46 billion of such loans a year, making the profits 1.43 % of the amount advanced. That's not in relation to capital employed of course but a 1.43 % reduction in interest charged - or fees - would seem to wipe out the industry as a profitable enterprise.
At which point we've our answer, which is that this isn't a rip off as there is no excess profit or income from the provision. It's just a very expensive service to provide.
As to what that means should be done, well. We think that consenting adults should indeed be able to live their lives as they wish. Others apparently don't. But there still isn't any justification about rip offs here to justify that second attitude.