15% Cap on Credit Card Interest Rates

[framer]

These are rentals. Most houses here are selling to rental companies, I think the last report I read was that 60% of single family home sales were to rental companies.

Yeah, but part of the shortage problem is that people are never going to leave a home that they are paying 1980's property tax on, especially when those property tax rates have skyrocketed like they have. The won't leave even if a different sized home or another area might make sense to them. This has stunted the market for rentals and home ownership. The same thing applies for New York City rent controls.

 

[framer]

That's true for pretty much every speck of land in the US.

Amen, brother.

 

[reignman40]

I saw my neighbor who has 3 generations living in the same 1400 square foot house because it is going for 400k on this housing market. So far so good, amirite?

Yeah that's a b****** price for a 1400 sq ft house. Sell that **** while its high and go buy something bigger in a different area for 250k.

EDIT: Didn't know they were renting, in LA/Calif of all places. Get the hell out of LA I say..

 

[AlaskanAssassin]

I understand why they feel the need to try to tackle the debt problem many Americans face, but to my mind this is treating the symptom rather than the cause, which is that wages are not high enough in this country to support the lifestyles we have become accustomed to. Not to mention skyrocketing medical debt.

I thought this was a good point. I think if they are trying to fix the actual issue, it's a mix of assistance to the poor (welfare type assistance, job training, tax credits) and some training to assist people in learning to live within their means. If the 2nd part doesn't happen, I'm not sure anything else the government does can help.

 

[AlaskanAssassin]

It's both, actually.

I'm not saying that lenders aren't screwing over some people, but it's hard to really prove that they are all in cahoots to ensure that the poor stay poor through high interest rates. I tend to assume that most people are good people. I think it's primarily driven by the default rates among "risky" (poor) borrowers.

 

[AlaskanAssassin]

I'd love to read your argument that usury should be legal and is not the business of the government. It will make for good example of when the capitalist mentality goes too far into libertarianism.

1- When two parties enter into a mutually agreed-upon arrangement (no coercion), I believe the argument to apply regulation would need to come from the government side.
2- Who has the right to define what usury is? At various points in history charging ANY interest on loans was considered usury.

I'm not opposed to the government stepping in to try and help people that actually need it, but just capping interest rates seems arbitrary and is unlikely to actually help people get out of debt. If anything, it might encourage people just to borrow more.

 

[AlaskanAssassin]

I don’t favor going back to the 1930s, when opening up a line of credit first evolved and opened the door for our consumer economy. But from what I’ve read, we need stronger regulation and limits to protect both consumers and lenders.

I agree that if regulation is passed, it does need to protect both sides. I'm not sure if everyone is aware of how many scumbags rack up a ton of credit card on electronics, vacations, etc. knowing that they will be declaring bankruptcy in the near future and that the debt will be wiped clean.

 

[AlaskanAssassin]

Credit card interest rates caps were based on state law up until the late 70's. I'd much rather go back to that than have a federally mandated cap.

Obama's 2009 Credit Card Act was the common sense legislation we needed that did away with the hidden fees and fine print ******** credit card companies used to pull to generate revenue.

While I don't know the deep details of Obama's Credit Card Act, this is at least legislation that makes some sense. Consumers were not understanding what the lenders were doing (hidden fees that most would have trouble understanding) and the government required more transparency to protect borrowers.

 

[AlaskanAssassin]

Come to the LA area and the inland empire. Rent is out of control. Housing prices are bubbling but this time there are no signs of a burst in the wings. Not good here right now. Someone recently moved into our Ward, they rented a 2 bedroom 900 sq ft apartment and moved in with 2 generations (3 families essentially) because the rent was 2100. As I said, my neighbor lives with 3 generations of family because the rent on their house is 2800. It's crazy.

From my understanding, there are lots of capitalists that want to invest and bring additional affordable housing to places like LA and San Francisco. Unfortunately, the local governments don't want to let them do that. They place so much red tape that it's virtually impossible. I watched a John Stossel video once that described trying to build new housing in San Francisco as virtually impossible. Essentially, local people don't want new housing, because that will only lower the value of their properties.

 

[One Brow]

I'm not saying that lenders aren't screwing over some people, but it's hard to really prove that they are all in cahoots to ensure that the poor stay poor through high interest rates. I tend to assume that most people are good people. I think it's primarily driven by the default rates among "risky" (poor) borrowers.

I'm not sure what to tell you if you don't think the lenders know that people will make poor long-term decisions, and rely on that to take advantage of the poor.

 

[AlaskanAssassin]

I'm not sure what to tell you if you don't think the lenders know that people will make poor long-term decisions, and rely on that to take advantage of the poor.

All that you have clarified is that poor people are more prone to making bad long-term decisions. That's not the lender's fault. Should we be focused on helping people make better long-term decisions, or restricting legal, non-coerced transactions?

Is capping interest rates the solution to fix the issue and help poor people get out of debt? If a 20% rate is necessary for lenders to break even on these high-risk loans and defaults (I have no idea what the actual break even % is) then capping the rate at 15% is going to restrict borrowing on those who might genuinely need it.

 

[One Brow]

All that you have clarified is that poor people are more prone to making bad long-term decisions.

Wow, you sure have a sense of entitlement. I said, "people will make poor long-term decisions", which is equally true regardless of their financial status. However, poor people are less able to recover from these bad decisions.

That's not the lender's fault. Should we be focused on helping people make better long-term decisions, or restricting legal, non-coerced transactions?

It's much more difficult to change human cognitive processing than to protect people from their own tendency to make bad decisions. Still, if you have a plan for helping people avoid hyperbolic discounting, I'm all ears.

Is capping interest rates the solution to fix the issue and help poor people get out of debt?

It helps them avoid debt in the first place.

If a 20% rate is necessary for lenders to break even on these high-risk loans and defaults (I have no idea what the actual break even % is) then capping the rate at 15% is going to restrict borrowing on those who might genuinely need it.

In reality, the people who get these credit cards make current purchases using present bias and unrealistic assumptions about their ability to pay them off.