It's time to bring back usury laws.

[KrazyHorse]

I'm not surprised that a zealot of the market doesn't grant that governments rightly play a roll in regulating society, including contracts.

at total cluelessness.

[DanS]

So not only are individuals too stupid to figure out what their interest rates are, but now the banks have to be protected from losing money on bad loans to high-risk individuals? Seriously? What ****ing world do you live in where the gov't knows more about banking than banks?

I think usury laws have value in reassuring society that credit is by-and-large a force for good and that there are some rules to the road. Think of it as positive marketing for banks. Better than having banker pogroms, as has happened from time-to-time in history.

[KrazyHorse]

You mean over the last year or so?

[Dinner]

I'm not well-acquainted with your banking system, so please bear with me as I pester you with questions.
What does building a credit mean? Establishing a good credit history? What benefits does it have? Lower rates on future loans? Here in Russia only a bad credit history means anything, it means you won't get another loan.
Do many people use credit cards for their primary purpose, unlike Asher? Why do they do so? It might make sense here, with higher inflation overtaking the interest, but why do they do that in the US?
Can you get these other benefits Asher talked about when using a debit card? I can, here in Russia.

It means that you have a bad credit rating and so you can only get credit in the future by paying a usurious rate. You can still get credit though the rate might be extraordinarily high. The problem is most of those people who are charged extremely high rates never actually get repaired and instead end up being debts discharge in bankruptcy. As a result the lenders are not able to make up their loses and so must charge, or claim to must charge, other people more. The reality is that if these highly risky lending practices were curtailed then likely those who do have good credit would pay lower rates and those who have bad credit would have to try harder to build good credit if they wanted access to credit.

[DanS]

Unfortunately, there were no bankers burned at the stake over the last year or so. Sometimes
in the past, the pogroms had a religious element as well.

[DinoDoc]

But Dino those articles were pretty basic and also pretty irrelevent as a response to my credit card habits

I don't see much value in discussing anecdotes as if they were universally applicable. Perhaps you could enlighten me.

[ShaneWalter]

KH, I have to agree with NYE. The argument that "there are times when responsible people need access to credit, even if that credit is very expensive" fails simply because responsible people will almost always have alternatives they can approach for credit.

[Dinner]

I think usury laws have value in reassuring society that credit is by-and-large a force for good and that there are some rules to the road. Think of it as positive marketing for banks. Better than having banker pogroms, as has happened from time-to-time in history.

Exactly. It is about public opinion and the best use of available manpower and resources. The reality is the banks worked profitably under such usury laws for centuries and without the back lash against abusive policies but ignore such cries and you'll see it consume the entire public discussion. We won't have violence but we will have millions of people constantly shouting about these abuses and it will down out just about everything else. We need fair and equitable regulations other wise we may very well find people militantly opposed to the status quo.

[KrazyHorse]

KH, I have to agree with NYE. The argument that "there are times when responsible people need access to credit, even if that credit is very expensive" fails simply because responsible people will almost always have alternatives they can approach for credit.

No, responsible people will NOT always have alternatives which are more attractive than an 80% APR.

I got lucky because I was a student at a university which had this type of program set up specifically for that type of situation. What if I'd been temporarily unemployed? Why is it that you think that YOU can make the decision for everybody else? Do you really believe that you know better than them what's good for them? The utter ridiculousness of such a claim is precisely why heavy-handed government regulations of contracts between free individuals is retarded.

[KrazyHorse]

I find it incredible that you have such difficulty imagining a situation in which it would be preferable to have 500$ today rather than 550$ in a month (as flubber put it). That works out to a 213% interest rate, by the way.

[KrazyHorse]

Price controls always lead to the same thing: a shortage for people wanting to consume at the margin. Ignorant and arrogant decisions as to what others should find reasonable as far as interest rates go leading to more hardship in their lives

[notyoueither]

Because there are, or should be, alternatives to borrowing at such a rate in a situation such as you presented.

In my location I can think of several.

Edit: program through school, social service agency (public) social service agency (private, I can think of several who would give someone in deserving circumstances the $500 and not be displeased if they never saw it again; turn around and donate $550 and they would think you a saint). Any of these would not require you to look to family for help or sell something.

[Zkribbler]

Caveat Emptor.

Even with the 77 percent or so, it has zero effect on anyone who does not carry a regular balance.

"Caveat Emptor" was the rule in the Roman Empire. In the modern era, there are laws -- or at least there used to be -- to protect consumers.

Banks often target college kids and low-income folks because the banks know they lack economic sophistication and thus can be easily cheated.

Banks are teh Evil. A couple of months ago, I had to fire off a hostile letter to my old bank because, after I closed out my account, they charged me $45 in fees. What were the fees for? Well, my account no longer had the required minimum balance, and because I had not paid off the fees for the previous months for not having a bank account with a minimum balance.
Guys, the account is CLOSED! That's why the balance is 0 -- or at least it was until you started charging me fees.

Oh and BTW, when I closed out the account, there was a closing-account fee which I'd never been told about until I closed out the account. I paid it, because I was on the way to the airport, but I was pissed!

[ShaneWalter]

No, responsible people will NOT always have alternatives which are more attractive than an 80% APR.

I got lucky because I was a student at a university which had this type of program set up specifically for that type of situation. What if I'd been temporarily unemployed? Why is it that you think that YOU can make the decision for everybody else? Do you really believe that you know better than them what's good for them? The utter ridiculousness of such a claim is precisely why heavy-handed government regulations of contracts between free individuals is retarded.

We make choices all the time about what is good for people. I don't see usury laws as any different than many other laws.

You bring up the hypothetical example of somebody that has been temporarily unemployed? So, he would have no savings at all from his previous job? This person can handle money responsibly, but yet none of his riends or family members trust him enough to loan him $500 for a month? He never applied for a credit card or line of credit before he lost his job? I mean, I guess the answers to all three questions could be no, but with each no answer, it seems less likely we're talking about somebody that is financially responsible.

If we're not talking about somebody that is financially responsible, then I really don't think there will be a good result if they get a credit card with 80% APR.

I guess my point is this: You make the assertion that a credit card with 80% APR could allow people to repair their credit rating. What percentage of people, after recieving a credit card that charges 80% interest, would see their credit rating rise? I would think the vast majority would just incur further debts and a spiraling credit rating.

If this is harmful to the majority of people that would use it, I don't see anything wrong with banning it.

Do I know what is better for people than they do? Well no, not on an individual level. But on a collective level, it doesn't take much statistical analysis to say "Credit cards with 80% APR are harmful for the vast majority of people that utilize them." I don't know if that is the case, but I strongly suspect it would be, and that is why I would support usury laws.

[ShaneWalter]

I find it incredible that you have such difficulty imagining a situation in which it would be preferable to have 500$ today rather than 550$ in a month (as flubber put it). That works out to a 213% interest rate, by the way.

I don't find it impossible to imagine it. I just think that such a scenario would be rare enough, that the people that are hurt by banning a 213% interest rate would be far less numerous than the people that are hurt by allowing such an interest rate.