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Thread: AOC and Sanders call for capping credit card interest rates at 15%

  1. #11
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    Quote Originally Posted by Gingersnap View Post
    ....... Credit card companies are essentially making bets: you bet you'll pay it off before the interest kicks in or within a very short time, they are betting that you will make the minimum payments.
    If I hadn't worked for mega-bank I might agree with you. I had a young man quit about a week after he made it from training to the floor. He said , "I am Catholic (childhood Cuban immigrant) and I cannot treat people this way."

    27% interest to the least wealthy customers and 0% floats to customers with New York addresses. $35 late fee on a $500 balance. Automatic re-submission of checks so mutiple fees attach. And don't get me started on the insurance scams.
    I'm thinking that once, in 1953, a group of interesting people just happened to be in a coffee shop at the same time and a great discussion of issues, ideas, and the meaning of life occurred. Since then we have been waiting at Starbucks for Lawrence Ferlinghetti to say something heavy.

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    Quote Originally Posted by Novaheart View Post
    If I hadn't worked for mega-bank I might agree with you. I had a young man quit about a week after he made it from training to the floor. He said , "I am Catholic (childhood Cuban immigrant) and I cannot treat people this way."

    27% interest to the least wealthy customers and 0% floats to customers with New York addresses. $35 late fee on a $500 balance. Automatic re-submission of checks so mutiple fees attach. And don't get me started on the insurance scams.
    Oh, I'm not saying they aren't scum - most are but there's no business practice that doesn't work the margins for increased profit. Even government does this. That's an ethical problem.

    The economic bets are a market force. They exist whether the market is full of saints or full of sinners. As history has demonstrated over and over with both sets.

    Top down control just never seems to work. It sounds good. It just never seems to play out as intended.

    A smarter option would be 4 years of mandatory financial education in schools. You may never have sex or need to know the square root of 100 but by God, you will pay debts, use credit, and have to figure out insurance, retirement accounts, depreciation, learn to budget, and do your taxes.

    This wouldn't end the need for high risk loans (that will never end) but a more educated populace will shop their banking needs better and make different decisions in terms of lifestyle which might avert their need for predatory lenders.
    "Alexa, slaughter the fatted calf."

  3. #13
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    Quote Originally Posted by Gingersnap View Post
    Oh, I'm not saying they aren't scum - most are but there's no business practice that doesn't work the margins for increased profit. Even government does this. That's an ethical problem.

    The economic bets are a market force. They exist whether the market is full of saints or full of sinners. As history has demonstrated over and over with both sets.

    Top down control just never seems to work. It sounds good. It just never seems to play out as intended.

    A smarter option would be 4 years of mandatory financial education in schools. You may never have sex or need to know the square root of 100 but by God, you will pay debts, use credit, and have to figure out insurance, retirement accounts, depreciation, learn to budget, and do your taxes.

    This wouldn't end the need for high risk loans (that will never end) but a more educated populace will shop their banking needs better and make different decisions in terms of lifestyle which might avert their need for predatory lenders.

    One of the most plausible arguments is that if we cap loan rates at 15% then the banks will charge everyone 15%. IT's plausible, perhaps even likely, but it's also an attempt to divide the issue along credit scores. Internal training at megabank was that the bank needed to make an average of 12.5% on credit cards to "make a profit". So we should take them at their word as well as taking the warning and at most set the rate at 12.5%.

    What I really want to know is how a 7-11 changes hand three times in ten years and stiil makes a profit for the newest owner. Where are the poor refugees getting the cash to buy businesses?
    I'm thinking that once, in 1953, a group of interesting people just happened to be in a coffee shop at the same time and a great discussion of issues, ideas, and the meaning of life occurred. Since then we have been waiting at Starbucks for Lawrence Ferlinghetti to say something heavy.

  4. #14
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    Quote Originally Posted by Novaheart View Post
    One of the most plausible arguments is that if we cap loan rates at 15% then the banks will charge everyone 15%. IT's plausible, perhaps even likely, but it's also an attempt to divide the issue along credit scores. Internal training at megabank was that the bank needed to make an average of 12.5% on credit cards to "make a profit". So we should take them at their word as well as taking the warning and at most set the rate at 12.5%.

    What I really want to know is how a 7-11 changes hand three times in ten years and stiil makes a profit for the newest owner. Where are the poor refugees getting the cash to buy businesses?
    They are pooling extended family resources. They are betting that the investment will generate a mutually profitable return. They are often right, it will. This is a very old strategy but not one common among X generation Americans. It is common elsewhere and was common here until the New Deal era.

    But it depends on large, tightly knit families. You can't pull it off with 1 kid and no aunts and uncles.

    As far as interest goes, it's complicated - as I'm sure you know. The bet is on what most people do. Most carry a substantial debt, treat it as "normal" like a utility bill, and never expect to pay it off. That's what banks/credit "bank" on and it does pay off handsomely.

    Nobody has to do that. Not playing along is difficult - more emotionally than practically. I have lived right on the bone and it's not fun but it isn't undoable. The worst part is the peer pressure. They are buying, eating, wearing stuff and traveling and putting it off on credit. That's not wrong but it isn't always smart. However, resisting that can be hard.

    Nobody admires the person who has no consumer debt but who never buys trips or expensive toys.

    Extensive education will be a start in changing that.
    "Alexa, slaughter the fatted calf."

  5. #15
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    Quote Originally Posted by Novaheart View Post
    One of the most plausible arguments is that if we cap loan rates at 15% then the banks will charge everyone 15%.
    I heard that. Frankly I'd guess that reality will be much more complicated. But the principle is exactly right: regulations will be tailored and exploited, and the results will have unintended (" and ") consequences....

    I cringe when I see someone in a 7-11 store, say, take $20 out of an ATM, pay a $3 fee there, and likely a fee on the other end, too.

    Usury laws exist because clever people with pencil and paper skills will take cruel advantage of people without, and as a society we don't consider that a fair contract. I'd count that ATM transaction as an example. A poor schlub ends up perhaps paying 30% up front to get his own twenty dollar bill.

    I haven't thought much about this new proposal for government minding. AOC may know almost as much as I do about usury and such, considering she graduated near the top of her class from Boston University, with a major in economics. But I also know that government control of prices never works well. I don't know if Boston University covers that part of Econ 101 or not. Probably not.

    Quote Originally Posted by 80zephyr View Post
    I agree with that...to a point. There are really only 3 major credit cards out there, and I have a feeling none will "rock the boat".

    Mark
    The "tell" is usually the reaction of the major players targeted for regulation. I don't know, but I'd guess they are much less opposed than you'd imagine, and probably suggest "working with" regulators to be more self-righteous than ever. Farmers "working with" the foxes seldom works out well for the chickens.
    "We have to stop demonizing people and realize the biggest terror threat in this country is white men, most of them radicalized to the right, and we have to start doing something about them." óCNN's Don Lemon, showing how to stop demonizing people.

  6. #16
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    Quote Originally Posted by Gingersnap View Post
    While this seems useful at first glance, I don't think it really is when you think about it. Credit card companies are essentially making bets: you bet you'll pay it off before the interest kicks in or within a very short time, they are betting that you will make the minimum payments. If interest is capped, why wouldn't companies severely restrict credit to make a safer bet? Better to get 15% from customers who always pay on time and are never late than to extend credit when the customer has a spotty work history or has too many late payments which could end up in collections.

    I remember when credit was difficult to get. You had to start out with a store card (Sears was our credit foundation). You bought one item a month and paid it off. Everything else was cash or check.

    This would also impact small business since a lot of starting business owners use credit cards to float their initial investments. A huge number of businesses fail within 18 months but not all. Without that access to money, how many can afford to start? Many are very small initially - they can't get a bank loan.

    How many people will be cut out of credit with this scheme? Sure, the lower middle and working class can go back to cash but what would be the impact? Not the "we can't go on vacation" thing but the "we can't help buy your food truck" thing?

    Wash Ex
    Will these government types cap IRS interest at 15% too?
    "What truly matters is not which party controls our government, but whether our government is controlled by the people. January 20th 2017, will be remembered as the day the people became the rulers of this nation again. The forgotten men and women of our country will be forgotten no longer."

    link

    Time will tell.

  7. #17
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    If they want to cap interest rates, the cap should include an inflation term (i.e. inflation + X%).

    Priebus recalled that McGahn said that the President had asked him to "do crazy shit," but he thought McGahn did not tell him the specifics of the President's request because McGahn was trying to protect Priebus from what he did not need to know.

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