patrick.net

caps are like rent control, help some but hurt others.

I say anybody should be able to request as much interest payment as they want.

But they shouldn't come crying to government run courts and police to be the enforcer of those contracts.

When are people, especially "conservatives", going to get over the idea that everything written and signed to by two parties must be enforced by the State? At the taxpayers expense too! Some kinds of contracts are beneficial to society. Some are not. Unless there is some compelling reason for the State to enforce a class of contracts, government should be limited.

In the third world, 10% interest per month from loan sharks in not uncommon. That's 212%/yr compounded. Often the loan shark is one's own employer. If a family member gets sick, it is not hard at all to fall into debt servitude to your employer. I have personally seen the effects of this.

I'd love to see some people step up here and say the US government should enforce those kind of contracts.

This is something you should always think about...

Why would THEY screw over their buddies, for YOUR benefit?

E-man says

@ Mark,

You don’t have to go to third world country to have loan sharks. I know a few loan sharks in San Jose if you need one :-). 10%/month sounds about right. If you don’t pay them back, they’ll send someone after you. That’s all.

Hope I don't need their, um, "services".

The point is do we want our government to be in the position knee breaker?

Many people think so. If not knee caps, debtors prisons. I've even seen few supporters on patrick.net.

ptiemann says

Go over to PLA at http://www.predatorylendingassociation.com/

I love this site.

Lame! do you even understand the relationship between risk and rates ? Why should higher risk borrowers be given free ride ? This isnt about rich or poor!

thomas.wong1986 says

Lame! do you even understand the relationship between risk and rates ?

The problem is, the statistical "risk" model breaks down pretty quickly once risk is high and impossible to evaluate in any objective way. Cause and effect get confused. Could the fact that 30% of a borrowers income is going toward just interest payments have something to do with not being able to pay off the loan?

Nah.

thomas.wong1986 says

Senate refused to let states cap credit card rates.

So, you think states should be obligated to enforce every single debt contract?

I lend you a dollar. You agree to pay met a trillion dollars within a week. Hell, I see you saying "I would never do that!". So flip it. I owe you a trillion dollars. Should that be a lawful contract, to be enforced by the courts and police? If so, why? And more importantly, if not, why not?

First, people who are a higher risk just shouldn't be allowed credit cards. They have other options like pre-paid cards and debit cards. What I don't understand is why the banks can charge so much in interest for money we borrow, but there is no parity to what interest they have to pay on money they borrow from us.