I feel the same way about racism and One Direction, but there they are…
also, Dodos were tasty, unlike loan sharks.
Cute or not , the evidence is right there in the original post: the contract disclosed the usurious rate.
How many underground loansharks do that?
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It’s when they collect that they turn to illegal tactics. Consider what they’re doing, extending a loan with terms that they know the borrowers are highly unlikely to repay. Why would they do that unless they had some plan to extort the interest from the borrowers?
Nah, it’s a myth that there’s a sharp divide between the above-board loan market and a black loan market. Reality is a few big consolidated banks that don’t loan to someone with trashed credit (federal credit unions are the best of these), and a wilderness of small time lenders, the majority of which adhere as much as they’re compelled to the very loose financial industry regulations on marketing and extending loans, and then use violence, threats and other intimidation tactics to get paid. If they get sued in civil court, they reincorporate, change shell companies and/or move their incorporation to one of the many companies that offer P.O. boxes and answering services to fly-by-night paper corporations in the less regulated states. Regulatory agencies haven’t the resources or will to go after all the small fry that abuse the system, and people taking out loans rarely have the resources for bringing civil suits, so these predatory lenders get away with criminal behavior. There’s a lot more to obeying the law that disclosing interest rates.
I’ve had the misfortune of helping friends deal with these scum. As bad as the big banks are, the supposedly regulated small financial services industry is more toxic than you can probably imagine.
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They should not be shut out of the legal banking system. Banks should be forced to deal with people with a bad credit risk. Maybe if people had access to cheap banking (like they did back before regulation, where people were guaranteed a 5% savings interest rate), there would be fewer people with bad credit. I can see charging them a higher rate, but this business of not having a cap at all should change.
Legal loan sharking (i.e., charging ridiculous interest rates, which in my mind is around 20%) needs to stop.
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I suppose that’s one way to pay for those cancer treatments.
How is any of this legal? Who thought this would be the path to a livable society and economy?
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Rules that trap desperate working people in punitively regulated debt choke off demand.
It ain’t great economics even if you think debt relief and other regulatory support for working people (instead of people who own stuff, like the racist GOP POTUS nominee) is some kind of moral hazard.
The moral hazard argument is actually more persuasive against working people voting for regulations that support “job creators” entitled delusions, but that’s another issue.
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Thanks for sharing your experience. You raise good points – which is why I think we’re mostly agreeing.
If the current “scum” don’t respect the laws on collection, why would they respect the laws on interest rates?
You’ve hit upon the key problem: poor enforcement mechanisms for borrower protections.
I presume a key part of the problem is that these cases typically involve amounts less then $30,000 and therefore are too small to be pursued via conventional lawsuits and also too small to be of interest to prosecutors such as District Attorneys.
However, for these smaller amounts, many states do have efficient mechanisms for dispute resoluation: small claims court.
Would your friends have benefited from a change in the law that would allow them to reduce their debt burdens in small claims court if they could show “bad behavior” on the part of the collectors? Just a thought.
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this isn’t quite right.
Future demand depends on future borrowing capacity. If a current borrower can’t pay, s/he are less likely to be able to borrow in the future, thereby choking off future demand.
The demand question revolves around how to regulate/manage/forgive current debt in a way that maximizes future economic activity. Moral Hazard is but a piece, and typically a small piece, of this analysis. Since a loan requires both the borrower and the lender to come to terms, one can’t simply examine one side of the question.
But you do have a point: debtor’s prisons are a really bad idea, and some of our current “bankruptcy” laws, especially what was added to the “non-dischargeable” category in Bankruptcy Reform Act of 2005 bears a more than passing resemblance.
Trickledown, of course.
You’re mistaken. When working households pay nearly all their income to rent and private debt service without the same access to bankruptcy remedies enjoyed by larger commercial enterprises then they have less for goods and services over the course of their lives.
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Are these guys the same as Cashcall? They offer the same crappy loan amounts at the same crappy rates. They used to be better known when they had Gary Coleman as a spokesperson, but then got reviled and disappeared for a bit. Now they only operate in six states.
Time to sharpen the guillotine.
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Based on your past history here, I take it as read that we’re on the same side (so to speak), and merely differ on how precisely borrowers can be protected.
I agree a big part of the problem is enforcement. But I’m pretty skeptical of the idea that interest rate regulations are fundamentally less enforceable than collections regulations. It’s true some lenders will always skirt the laws, but I don’t see that as a reason to not have those laws. More than even enforcement, however, I think consumer protection laws that level debilitating penalties for predatory lenders would be the most effective means of combating them. Criminal enterprises thrive when they’re profitable. Just look at copyright trollies.
The two biggest fixes I can think of are enforcement of laws governing collection practices and making it illegal to sell debt. But they’d have to be implemented together or neither would be very effective. In a wider context, the ability to use limited liability to avoid personal repsonsiblity for corporate misconduct must end, but I don’t see how that’s going to happen as long as lawmakers are put and kept in office by corporate tycoons.
In fact this is what we ended up doing, or rather they and the counsel I connected them to did. Unfortunately, had I not been friends with the attorneys that helped them, they would not have had much chance. The costs of taking bad faith creditors to small claims court is out of range of a lot of people. And while my friends were successful, there’s nothing to stop those creditors from re-incorporating in another state and preying on more borrowers they know can’t afford their loans.
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There’s literally none reason you should ever take one of these loans. Desperation.
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It depends – can I buy and sell children as objects of personal use? If so, then YES!
If not, the market isn’t ‘really’ free, it’s just on a slippery slope to Pinko commie scumland.
Isn’t Clinton in the pocket of big loan?
The concept of this not being illegal is beyond me.
I mean, this is legal, or did I get something wrong here?
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that’s incorrect.
the point is the fees and continuing payments mean the lender is guaranteed to make a profit. most people don’t have the means or resources to declare bankruptcy, and there’s wage garnishment, claims court, property forfeiture, and a million other things in the lender’s favor.
a person’s credit worthiness does not factor into these loans. if anything, the fact the system has marginalised these borrowers means - if they need credit - they have no choice but to deal with these sorts of sharks. ruining someone’s credit is great for businessesd and it virtually assures a repeat clientele. bonus points if you can erode a whole community, so that there’s no social network to fall back upon. double bonus points if you can do it to a whole class of people and still have the law at your back.
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Indirectly; Biden and DWS are.
Retail loansharking is a bit small fry for Clinton; she’s more of a hedge-fund lackey.
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