Usery, Loans with very high interest rates.

[Darius11 12]

In Iran they call it Nozool and it is considered one of the worst sins a person can do. To take a usery loan or give a usery loan is considered a huge sin.


Now aside from the religious aspect of it, lets apply the common sense aspect.

The people who are going to agree to such loans are usually people in dire need.
As a society do we want to allow such loans to be legal? They currently are.

Or is this yet another way that we keep the poor poor.

Now if you have never had a problem making ends meet, or money has just never been a big issue for your life please take a moment to understand that not all these loans are for drugs, or losers. Often the people taking these payday loans, or cash advances from their credit cards have to choose, between losing their house, apartment, not having food, or power or taking one of these loans.

So what do you think.

I'd rather be hated for who I am, than loved for who I am not." - Kurt Cobain

[JohnRich 4]

There are already usury laws which define a maximum allowable interest rate.

If they don't want to pay the rate, don't take out the loan.

[jcd11235 0]

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There are already usury laws which define a maximum allowable interest rate.

There are also sufficient loopholes to allow some of the worst offenders to get around such laws.

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[TomAiello 25]

A rate cap would _hurt_ the people in dire need who really need the loans.

A maximum allowed rate will simply result in people getting denied more often. If the lender can increase the rate to compensate for the risk of default, it can make loans to people with worse credit, who may need the loans "more." If it doesn't have this option, it won't extend them credit at a lower rate--it will simply refuse to extend them credit.

From there, what are you going to do? Force the lenders to make loans that they know aren't going to pay off? And then when those loans fail to pay, and the lenders are going bankrupt, will you want to give the lenders trillions of dollars because they are "too big to fail"?

-- Tom Aiello

[email protected]
SnakeRiverBASE.com

[Darius11 12]

Yea that’s the first argument I thought of as well. If I have to choose from losing my car, home, or food I might like to have the option of taking an insane loan out just to survive as the other choice is to steel and go to jail.

But as a society can we not think of a better way?

Its one thing to not care about the people who do not want to produce or work. What about the people (and there are a lot of them in the last two years) who do want to work are skilled but are forced to live on unemployment because there is no jobs.

Is there a better way then to rape the people in need? Is the only option to become homeless and go hungry or pay a ridiculous rate?

I don't know the answere, but think there should be a better way. Or at least a way of setting some sort of max rate they can charge.

I'd rather be hated for who I am, than loved for who I am not." - Kurt Cobain

[TomAiello 25]

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But as a society can we not think of a better way?

Sure we can. Microfinance, for example. But in many places, microfinance is either hamstrung or totally banned by the same banking laws that prohibit usury.

-- Tom Aiello

[email protected]
SnakeRiverBASE.com

[Krip 2]

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There are already usury laws which define a maximum allowable interest rate.

If they don't want to pay the rate, don't take out the loan.

One Jump Wonder

[JohnRich 4]

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There are already usury laws which define a maximum allowable interest rate.

There are also sufficient loopholes to allow some of the worst offenders to get around such laws.

Nobody is forcing people at gunpoint to sign those loans. People have free will to enter into contracts of their choosing, or not to. The government should not be involved in telling people what loans they can or cannot have. And if they can't afford it but do it anyway, the rest of the taxpayers should not have to bail them out.

Life is tough sometimes. The Constitution does not guarantee you a low-interest loan at someone else's expense.

[jcd11235 0]

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Nobody is forcing people at gunpoint to sign those loans.

Not directly, no. However, people often have legally binding financial obligations that must be met. If very high interest loans are the only means available to meet those obligations, then there is often little choice in the matter.

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The government should not be involved in telling people what loans they can or cannot have.

If those loans result in economic problems for more people than just those who gave or accepted the loans, then yes, the government should be involved.

I suspect that, in most cases, simplifying existing laws to eliminate loopholes and disreputable practices that take advantage of those loopholes (e.g. counting fees separate from interest when obtaining APR's in order to claim that loans have a lower finance charges than the actually have) would be sufficient.

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[Andrewwhyte 1]

These laws will solve the problem in exactly the same way the prohibition laws solved the alchohol problem. On the other hand if we did it at the same time we reform the drug laws we could see a less violent downsizing of the narcotics industry. The gangsters could just move more heavily into usery instead of fighting over a smaller drug pie.

[kelpdiver 2]

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These laws will solve the problem in exactly the same way the prohibition laws solved the alchohol problem. On the other hand if we did it at the same time we reform the drug laws we could see a less violent downsizing of the narcotics industry. The gangsters could just move more heavily into usery instead of fighting over a smaller drug pie.

This could be an outcome - loans by Louis replaces the payday loan centers.

In a sense, those operators are fair in pointing out that they are entitled to charge a base fee per transaction, and the short duration of the loan means that counting it as interest is misleading. They're not paying 600% interest; rather they're paying $40 for 2 weeks.

But where it falls apart is visible in the huge marketing that these divisions do, as well as the excess profit rate that these divisions represent to their more respectable owners.

Ultimately, I think they're are legit, if among the lower lifeforms in our society. So long as the costs are transparent (you write a postdated check for 200 in two weeks, I give you 160 now), consumers can make their choices.

I think the abuses in the car loan market are more egregious - charging 20% with prepayment penalties and an overly long loan period to increase the finance charges - it's not nearly so transparent, and the interest charges are front loaded so even if you wanted to shorten the loan, you cannot.

The funny bit now of course is that virtually every credit card is behaving in userous ways. Capitol One responded to the bill passage by redefining my current rate as a promotional one for the next 2 years, so they could have a higher rate on standby in 2011 if they think they can keep my business still. Pay attention to your mail, and think twice about their pleas to go paperless - I think they'd love to sneak by change notices in an invisible electronic form.

---
In the more orthodox Muslims, charging interest is so evil that even a home mortgage at 6% is immoral. Such practicers have to go through some very interesting (yet ultimately silly) gymnastics to get a home loan without it being a home loan.

How widely practiced is the more extreme form of no interest allowed? Does this explain part of the poverty in the Muslim world? If you cannot lend money out at a rate to match inflation and risk return, you never would.

[JohnRich 4]

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Nobody is forcing people at gunpoint to sign those loans.

Not directly, no. However, people often have legally binding financial obligations that must be met. If very high interest loans are the only means available to meet those obligations, then there is often little choice in the matter.

Another choice is to let the bank take back the nice car they can't afford the monthly payments for. Or move to a cheaper apartment. Sometimes life sucks. That's not always somebody else's fault, and does not oblige others to bail them out, so they can maintain their cushy lifestyle. If it's something like a hospital bill, you can default on the payments. Yeah, it'll lower your credit rating, but so what. If you have a choice between eating or having a lower credit rating, then you default on the non-mandatory bills.

[nathaniel 0]

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Microfinance, for example.

So-called microfinance is often conducted at rates that would be usurious to those of us accustomed to liquid credit markets, generally because these are very high risk instruments for creditors.

20% - 50% APR, for instance.

The alternative is no loan; praying for charity and its market distorting effects.

Who can make a living farming rice or digging pit latrines when the NGOs will do it free?

My advice is to do what your parents did; get a job, sir. The bums will always lose. Do you hear me, Lebowski?

[jcd11235 0]

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Another choice is to let the bank take back the nice car they can't afford the monthly payments for. Or move to a cheaper apartment.

Options that are well and good for those who have them, but it's naïve to think everyone has such options. Not everyone has a car, let alone a nice one. Some people already live in the least expensive apartment they can find. They don't have a "cushy lifestyle." They struggle making ends meet with 2-3 jobs.

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[rhaig 0]

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They struggle making ends meet with 2-3 jobs.

the bankruptcy courts are there for a reason. they don't dismiss debt out of hand like they used to but if there isn't sufficient income to cover debts and living expenses they can (and do) make adjustments.

Let's also not be naive. The reason this law is being proposed is because there are a bunch of middle-class folks that have been over-spending for the past 10 years (not excluding myself here) and digging a hole that's hard to get out of. Those same folks made some phone calls, put some nice dinners on their platinum cards, and got this bill written.

--
Rob

[SivaGanesha 2]

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So what do you think.

What recourse does the lender hope to have if the loan goes bad? For example, do they expect to report this loan to a credit bureau if the loan goes bad? Are most other participants in that community--eg mainstream banks, the credit bureaus themselves, etc--subject to some level of government regulation? What justification does the lender have for wanting to remain completely unregulated while still retaining the power to screw up the customer's life in the more regulated sector of the economy? That seems a little unfair to me.

My general feeling is that such lenders should be allowed to charge a one time fixed application fee, at whatever fixed cost the market will bear, the first time they deal with a given customer, but after that they should be allowed to charge interest no higher than a mainstream credit card issuer in the state would be allowed to charge. If the state allows unlimited interest in general, then so be it.

I believe in the free market, but I also realize that in practice not all markets are completely free, and if the government is in the habit of helping the more affluent sector of the economy while letting the law of the jungle rule for the poorer folks, then I think that really stinks.

"It's hard to have fun at 4-way unless your whole team gets down to the ground safely to do it again!"--Northern California Skydiving League re USPA Safety Day, March 8, 2014

[jcd11235 0]

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the bankruptcy courts are there for a reason. they don't dismiss debt out of hand like they used to but if there isn't sufficient income to cover debts and living expenses they can (and do) make adjustments.

Bankruptcy helps with debt, but not bills like rent, insurance, food, clothing, etc. Bankruptcy also does very little good in the immediate short term. It is a process that typically takes much longer than the term of the very high interest loans being discussed.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[JohnRich 4]

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The funny bit now of course is that virtually every credit card is behaving in userous ways.

Here's an example. One of my credit cards (Credit First N.A.) had a balance of $2,034. I paid it off in one lump sum, on a normal monthly payment. The bill I received for the following month should have indicated a zero balance, right? Wrong! They charged me interest on the $2,034 I paid off, and wanted $60 for the following month.

How did they figure $60 interest on a zero balance?

Easy. They calculate the interest BEFORE they deduct your current payment. They take the previous balance, add interest, then deduct your last payment. That's your new payment. So every month, they're charging you interest on the amount that you paid off.

I called customer service and asked them to remove the interest charge. They did so "as a courtesy" to me, they said. Courtesy hell, if they hadn't done it, I wouldn't have paid it.

[JackC 0]

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Courtesy hell, if they hadn't done it, I wouldn't have paid it.

If you don't want to pay the rate, don't take out the loan.

You know, I'm sure I've read that somewhere recently. I wonder where it could have been.

[billvon 2,400]

> If it's something like a hospital bill, you can default on the payments.
> Yeah, it'll lower your credit rating, but so what.

Why, I've heard of this - it's the right wing's version of socialized medicine! Go to the ER and just don't pay. All the convenience, none of the hassle.