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Now this is interesting. Cap on cc interest (1 Viewer)
- Thread starter supermike80
- Start date
Jackstraw
Footballguy
A little bit. This nation collectively owes a trillion dollars in college debt. I'm a lot closer to clamping down on money lenders than givign them carte blanche to rape and pillage to their hearts content.
Jackstraw
Footballguy
You understand we can have credit without predatory lending right? The two are not mutually exclusive.
Sand
Footballguy
If enough stores do this the fees will magically go back down. Or there will be competition that takes a different tack. These bubbles can and do pop.
Sand
Footballguy
Stealthycat
Footballguy
I guess its how you define predatory ... nobody makes you use a CC, take loans etc - that's choice isn't it ?
Jackstraw
Footballguy
YEAH. which is even more disgusting. Dems brought a bill to reduce rates and guess who killed it?
IvanKaramazov
Footballguy
Juxtatarot
Footballguy
Do you think student loan interest rates are at "raping and pillaging" levels? I'm having trouble understanding your points. Perhaps because you're being rather hyperbolic.
IvanKaramazov
Footballguy
What is the interest rate on federal student loans? It must be pretty high since you used this program as an example of raping and pillaging.
dkp993
Footballguy
Sure this is true is certain situations, though I believe this is not something that will happen with CC’s. Americans are to debt addicted to ever really allow it to take hold, this it puts businesses in the position of needing to accept CC’s to not turn customers away. My business is unique and there might be some room to control this cost but it’s a pretty small subset.
jonessed
Footballguy
Sand
Footballguy
Jackstraw
Footballguy
Yes. If the US government is turning a profit......ANY PROFIT....off student loans it is reprehensible. Education is an undeniable public good. This is in affect taxing people on what we want them to do.
By the way private institutions are doing the actual lending....and profiting.
Juxtatarot
Footballguy
dkp993
Footballguy
Juxtatarot
Footballguy
Sand
Footballguy
It has been established that Pell grants have mostly gone to fuel tuition increases instead of subsidizing costs. They just fed the beast. It's a very good question what the interest rate on these loans should be. We have a wonderful analogy going back to 2008 showing what artificially low interest rates did to housing. (i.e. you get effects you may not want by distorting markets). These unintended deleterious effects on markets aren't always self-evident, but they can be profound. They can go largely unnoticed as a root cause until they do something spectacular, like blow up the housing market and cause a deep recession.
It was. I was agreeing with you that Americans love CCs and that isn't going away anytime soon. The costs are now embedded into the system to such an extent that I don't see that changing anytime soon.
And it makes for a compelling case for buying a large moat business like this.
Stealthycat
Footballguy
how does one get principal on loans?
choices on borrowing ?
again - back to choices isn't it ?
Rove!
Footballguy
Rove!
Footballguy
yes, it's amazing the CC companies stay in business with everybody paying off their balance every month...they should make the rates 200% interest per month..../sarc
Last edited by a moderator:
jonessed
Footballguy
Because they can. The federal government backs everything.
With few exceptions, sending a graduate out with $200K+ in debt and a bachelor’s degree is insanity. You might as well tie a lead ball to their leg. That’s on the schools.
Juxtatarot
Footballguy
Reading this thread in the Free For All makes me chuckle about how several of you want the USPS to get involved in banking.
The Commish
Footballguy
Been thinking about this for a bit and I'm sort of confused around the argument that poor credit score people aren't going to get cards. Is it that they won't get the cards or the limits wouldn't be as high? I'm not really following either. If you have a person with debt at $20K and 25% interest it's still better for CC to have them at $20K at 15% interest rather than $0K and no CC. It would also still be advantageous for the CC to have a questionable person with $25K in credit at 15% than $15K at 15%. The concern of bankruptcy doesn't change...it's always there with low credit scores. You're rolling the dice on them regardless of the terms you set.
I think pollard makes the best argument for being against them. These companies won't have the income they did before to prop up their rewards programs and probably reduce them significantly. I get a week or so of hotel rooms every year just using my card. It would suck to see that stuff go away.
I think pollard makes the best argument for being against them. These companies won't have the income they did before to prop up their rewards programs and probably reduce them significantly. I get a week or so of hotel rooms every year just using my card. It would suck to see that stuff go away.
prefontaine
Footballguy
The risk adjusted return on these loans is barely worth it in the current competitive market. Anyone paying 25% interest on 20k in debt is very likely to default (it's been a while since I played with these but something like 20% of these loans will never be paid). The money is made by the 80% that do pay but they have to cover the loss on the 20% principle.
Change that equation to reduce the profit on those 80%*, and you don't end up net positive (or more likely your RAR does not meet capital thresholds). Price matters. Capital would move elsewhere. If there was a lot of money to be made, the price would be lower as someone would undercut or refinance the loans. But that doesn't happen because these are obviously high risk loans.
It's easy to say person X is a good person in a bad spot, has a bad loan they can't get out from under, and we should do something as a society. I won't argue that point. But I study this industry in aggregate. And in aggregate, virtually anyone with this kind of debt is a bad credit risk. Forcing banks to treat them like they aren't, isn't going to help (and yes, the banks will just walk away from this sort of risk).
Address the problems - poor personal financial education, predatory lending practices (high rates =/= predatory), ease of bk, and transparency in lending. Price caps are an attempt to address symptoms and are a self-defeating idea.
* loans with lower interest on the same risk will actually be more likely to pay back. This effect is small but it exists and I wouldn't want to ignore it, though I did for this example.
Juxtatarot
Footballguy
Losses aren’t just from bankruptcy. People also get behind and just stop paying.The Commish said:
As a hypothetical, consider someone who has two credit cards. One with a limit of $10,000 and another of only $1,000. Let’s say he’s maxed on both and suffers a hardship. The higher limit one is going to have a higher minimum payment and a larger interest amount assessed each month. It’s harder to keep up with. He might prioritize paying the smaller limit card so he can keep a card and scrounge enough for the small minimum payments. However, he might give up on the other one.
Limits on high risk individuals are way lower than for others. I most often see them under $1,000.
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