Hammer Time: The Happy Hocker

One bit of deregulation which has been a big problem is the removal of usury laws. These laws used to put an upper cap on the maximum consumer interest which could be charged. Now those laws are gone, and we have passbook savings accounts paying less than 1% while credit card rates are routinely 18% and higher. The bank's justification for these high rates is that they are suffering high losses ... which is because credit is being given out in amounts and/or to people which shouldn't be getting it. Bring back usury laws with reasonable interest rate caps and a whole bunch of crap goes away. Some argue this would hurt the poor, but what is really hurting the poor is a debt and interest cycle which has them spending an inordinate portion of their income on interest payments.

One rule I'd like to see is a prohibition on raising a customer's interest rate within 12 months of offering credit (raising the limit, for example, qualifies as offering credit) or attempting to sell the customer a new service. We see a situation where people who really are credit-worthy make a single mistake and it puts them on the road to credit hell. One late payment is often used as an excuse to jack rates beyond what the customer can actually pay. This leads to a cycle of trouble. I'm not saying people never make bad decisions but many of these problems aren't solely because of the borrower.

John's absolutely correct. I have absolutely no qualms with having a title pawn industry, or any financial industry that uses assets as collateral for loans. However the interest rates should be capped at a far lower annual rate than 300+% AND the other 'charges and fees' should be eliminated. The way it stands now is that we have predatory folks who manipulate the system in order to screw as many people as possible. It's their right to pursue that if they wish (as evidenced by the recent bailouts). But at the same time we should have laws in place that restrain the activities of these heartless folks. I've actually taken advantage of the title pawn phenomena by offering folks to pay off their loans in exchange for buying their car. Just got a 1998 Honda Prelude that way and the folks ended up with an $80 a week payment on a 2002 Ford Explorer. If they miss the payment and don't tell me the truth (some of these folks do have honesty issues), I get MY vehicle back and that will be that. But at least this way they have daily transportation that does not require a usurious rate of interest. So far I've only had to repo one vehicle this year and no, this hadn't been a substantial portion of my business until the economy started tanking in September. Before that time everyone I dealt with was a cash customer. As a side income, auto retailing has been very good to me. But that's only because I primarily deal with customers who already know about the product and the history of the car beforehand. I publish the car's history on the web and doing so makes the buying process a lot easier to handle.

Gotta agree with Mr. Horner here as well. No surprise I suppose.