I am baffled to discover that the US has no anti-usury laws.
America, an unending fountain of bafflement!
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Neg on that, chummer.
Your premise fails on the presumption that their primary market for these and their higher rates are desperate people who would otherwise turn to crime.
I submit that their primary market is people not savvy enough to read the terms, who instead jump at every offer their bank or anyone else offers to up or offer a credit/limit. Who donât think about it so long as their paycheck to paycheck existence covers to minimum payments that allow them a lifestyle beyond their means temporarily, unitl the end of the cycle.
These are far easier to find, and far easier to collect from (after all, once youâve got the first 13-15 payments back, the rest is gravy). You find them quickly and in large numbers because our banks broadcast everything, including the frequency by which you accept or ask for raised credit limits. Banks offer at intervals based on performance, so a bit of analysis tells you who always takes the limit extensions, and there are scads of them.
This isnât crime prevention, youâre talking about miniscule numbers of people compared to their actual objective, which is itself by societal standards criminal despite the lack of a law.
Edit to add â FAR easier to collect the principal and large amounts of gravy from⌠guess where at least the principal and some of that gravy comes from⌠other banks, other lenders, natch!
OMG edit to edit to make principles into principals, something these lenders never thought of.
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Youâre really justifying this? You know for a fact that every one of these people would go âundergroundâ?
The payday loan usury feedback loop also created its own market, which would NOT exist in the underground.
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Hope springs eternalâŚ
âŚdrowning so, so many.
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What I would rather is that these people go through bankruptcy NOW, with smaller debt levels than later with higher debt levels.
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Did the GOP get rid of usury laws too?
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Itâs like trying to put out a fire by pouring gasoline on it.
Taking a loan like this takes your desperation, adds 100% compound interest to it, adds potentially unlimited fees to it, and adds 100% compound interest to those fees.
This isnât a loan thatâs meant to be repaid. No matter how hard you work, no matter what windfalls you get in life, youâll get to keep enough for your bread and water and everything else goes to your lender.
The whips and chains are invisible, but itâs plain and simple slavery.
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Not disagreeing with you, but I think we can wrongly flatter ourselves by supposing that people who accept predatory loans lack âfinancial literacyâ or are less smart.
The truth is that you and I and everyone else can do lots of less smart things if coerced by simple desperation.
Fair credit access and bankrupty relief must be restored for working households.
Predatory lenders and debt collectors should be criminally prosecuted and their assets forfeited â all the way up the chain.
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You are making an assumption. I happen to know a few people through my work who are subject to some of these awful loan shark businesses. For the most part, they are not desperate so much as completely lacking in foresight or the ability to delay gratification.
Yes, some people are in dire straights and take out a short term loan to cover something crucial. Most people are not, and are just bad at math and thinking about their future.
The predatory pursuit of these people is the basis for the entire credit card industry. These businesses are only slightly further out along the risk curve, and prey on the same weakness.
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While âGood enoughâ can be a functional life choiceâŚ
(âWho wants to what now? WellâŚâ
"Youâll cut it over here like this, and over here like that, and, do I like the color blue? WellâŚâ
Smoke what again?. WellâŚâ )
⌠rarely is it an even adequate societal one.
And when there isnât any other legal option?
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Iâm not sure that they âarenât meant to be repaid.â After all, the lenders want their money back. These sorts of loans ARE however intended to make the person go into default, incur extra interest and penalties, and become MORE desperate than they were when they took the loan. Desperate enough to to do the things (selling assets, begging relatives etc) that they werenât desperate enough to do when they got the loan. Indeed, like defaulting student loans, the borrowers end end up paying the lender more than they agreed to, once all the penalties are added to the balance.
There are usury laws in the US, just not at the federal level. Individual states set the maximum interest rates that can be charged.
This is a few years old, but lists the maximum interest rates by state:
http://www.lendingkarma.com/content/state-usury-laws-legal-interest-rates/
Unfortunately, some of those states really f things up by allowing the two parties to âcontract for any rate agreed upon.â (http://statelaws.findlaw.com/arizona-law/arizona-interest-rates-laws.html) In which case, I canât even really see a point in having the usury law in the first place. It pretty much only protects you from personal loans between parties where no contract exists.
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Has anyone other than Utah tackled these usurious loans? I havenât heard much from the others.
The purpose is to give libertarian contract supremacists a wink while doing absolutely nothing about the problem.
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