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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 Committee [1]who 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 [2] — 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 [3]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 [1] to get it.