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Loan company B.S.

The House Banking Committee approved HB 810 yesterday- AKA “The Predatory Consumer Finance lenders Relief Act.” Word from Jones Street is that the Double-Speaker himself strong-armed Republican members of the Committeewho had originally intended to vote “no” after hearing the compelling testimony of military leaders opposed to the bill. Good government advocate Bob Hall points out that there was something very Jim Blackian about the whole deal.  

The arguments against jacking up interest rates and fees on loans that already run in excess of 50% are so compelling that it’s not worth going into them in great detail here. But there is one particularly misleading  industry argument that deserves to be debunked right here and now.

According to the industry, the companies need to be allowed higher rates and fees because “they haven’t had a rate hike since 1983.”

But, of course, this is completely illogical. Interest rates are not like the price of gas or bread; they don’t rise with inflation. (This assertion about “no relief since ’83” is also a lie — the industry has been given fee hikes in the intervening years that have the same effect as interest rate hikes.)

In fact, consider the following: In 1983  the prime rate — i.e. the main money industry lending rate was 11%. It had been as high as 21% just a few years earlier.  A fixed home mortgage went for 13.4%. Today the prime rate is 3.25% and mortgage rates are around 5%. And yet, through all this, effective consumer finance rates in North Carolina have stayed at their astronomical levels of as high as 50% or more.

And now, the usurers lenders want even more and are apparently willing to  pay the price to get it.

6 Comments

  1. Dallas Woodhouse

    May 27, 2011 at 9:45 am

    HMMMM

    Lets look at some of the lending from groups opposed to this bill> AARP, NAACP and AFL-CIO who all oppose this bill appear to be protecting their own high fee, high interest credit cards

    AARP Card-Offered through Chase

    Interest Rate:
    • APR: 13.24%-19.24% afterwards depending on credit and Prime Rate
    o (Prime + 9.99 to 15.99%)
    • Cash Advance APR: 24.24%
    • Penalty APR: 29.99%
    Fees:
    • Late Payment: Up to $35
    • Overlimit: Up to $35
    • Return Payment: Up to $35
    • Return Check: Up to $35

    NAACP Credit Card

    Interest Rate:

    • APR: 12.99-21.99% afterwards depending on credit and Prime Rate
    • Cash Advance APR: 23.99%
    Fees:
    • Late Payment: $35
    • Return Payment: $35
    • Overlimit: $35

    Of course these groups oppose this bill

  2. Rob Schofield

    May 27, 2011 at 10:02 am

    As usual, your argument makes no sense whatsoever.

  3. LegalLender

    May 27, 2011 at 2:41 pm

    Lets take a look at your comment on the matter Rob.

    Now I know you don’t have the first clue about how a real operating business works (one that is not supported or subsidized by taxpayer dollars) but we will try to work around that.

    You see, in the consumer finance business, you have to actually pay the people that work for you. You have to pay rent. You have to pay utilities. You have to pay for those things that are required to run the business.

    Now it appears as though you are suggesting that the only factor to consider is cost of funds.

    I guess you expect consumer finance offices to pay for all their operating expenses out of their prinicpal capital. I think you are looking at it like a non-profit. You accept money, you spend it.

    Before you attempt to ponder on the financial aspects of business operations and show how little you understand, perhaps I might suggest you take a basic business or accounting course (available at most community colleges). This would afford you an opportunity to make a more informed opinion instead of demonstrating how naive a person can be.

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  5. FainessInTheMedia

    May 30, 2011 at 7:53 am

    I think Mr. Woodhouse’s comments make perfect sense. And it shows that anyone can write a blog, whether they know what they are talking about or not.

    My understanding is that the installment loan industry effected by this bill cannot at this time charge late fees, return check fees and such. I don’t know of any other industry that has their hands so tied. Even if you are late on your rent or mortgage you have to pay a late fee. I just paid a $5 late fee on my storage unit because I was out of town and didn’t get the payment to them on time. $5 on a $45 storage, some would call that usury. I would call it my fault, pay it and move on. It is also my understanding that if you add a fee like this to a short term loan it makes the APR look outrageous. But it isn’t that big a deal because as a consumer I know what I can pay and am paying. Take a look at your mortgage papers, the APR is low but over 30 years on a $100,000 mortgage you will pay about $300,000 for you home. Why is no one crying out about that? Because people shop for payment they can afford, not total due. My question is this, if consumers like myself can no longer get quick and easy financing because these lenders can no longer afford to do business, where do we turn?

    If the people who are using this vehicle to help them in their lives are happy with the service, then who are you to say you are protecting the people? I am pretty tired of righteous indignation from people who don’t really know what they are talking about, and I’m pretty sure I can make an educated decision about whom I choose to do business with.

  6. Pollytiques

    May 30, 2011 at 1:35 pm

    It’s not a good argument to say because AARP gets away with usury that every one else should. The argument there is it’s not AARP in the first place, but Chase that should be investigated and some laws changed to protect the customer. That why the panic in Washington right now.

    But THIRTY SIX PERCENT.. that is REALLY pushing it.

    And these people target the poorest least educated people possible to get this money out of their pockets. Just like the payday lenders used to do. I can certainly see why they like to do business near Ft. Bragg. Nothing as easy as the easy money that can be taken from sad, homesick kids that wasn’t even allowed to get old enough to open a bank account.