andrewducker | They should be taken out and shot

Jeez, 30% is just insane.

Damn. Anything over 25% is illegal in the US, if I recall correctly. What's the maximum in the UK?

"In Great Britain legal interest rates are not fixed by the government, but courts can determine whether a given rate is injurious." it says on a website I just found.

"In the United States, the individual states are responsible for setting a legal rate at which debts may be assessed if they have come due and remain unpaid, and for setting the maximum rate allowed in a contract."

The 24.9% cards they target the young adults with here must be a compromise that fits for all states, then.

There is no maximum - an agreement cannot be extortionate but there's no definition of what extortionate means. I don't think there's even any agreement from government that it would be a good thing to have a maximum - they tend to be concerned about reducing access to the market.

In that FSA report I think I linked you to about young people's lack of knowledge about finance, there was a footnote that almost the entirety of their sample group had heard the term "hire-purchase" (used negatively, usually) except because that term is rarely used any more (due to said negative connotations), they often didn't realise that contacts they'd entered into -were- hire-purchase ones (because they just wanted item X and didn't think much about this whole repayments thing...)

There was some newspaper article recently about just how quickly and easily you'd be tens of thousands of pounds in debt if you took up all the offers that came through the door in the space of a week or two.

Well, to give them their dues, they did target the perfect candidate...

I can't think of any public discussion of ethics which focuses on whether people are working for that sort of company. It's all impact on the environment, or people's sex lives, or embryonic stem cell research, or low wages, but nothing about whether you're simply and blatantly ripping orr your customers.

There are _no_ people who will take up an interest rate over 15% unless they either (a)have no choice because they're already fucked or (b)have no understanding of the situation.

Which means that anyone offering interest rates higher than that are deliberately preying on (a) the defenseless or (b) the stupid.

And therefore the government should step in, shut them down, and shoot everyone operating at any level of management in the back of the head.

There are _no_ people who will take up an interest rate over 15% unless they either (a)have no choice because they're already fucked or (b)have no understanding of the situation.

Sure there are. Never seen goods offered for half-price or less? It could be the cheapest way to buy something if you manage to pay it off in a year.

But of course people are being ripped off, but you're just assuming they don't know it. It's like smoking. Plenty of smart people smoke, even though they know it's going to kill half of those that do. Should the government pass a law to stop them smoking?

Ironically, as an aside, this government is probably going to pass a law to stop smoking in public places....

Actually, there will always be plenty of people offering rates like this to the poor. Your 'solution' is that the government should abolish companies that are regulated, have addresses, can be stopped if their rates are too high, so that the only people offering rates like this will be 'informal' lenders.

There's never a shortage of the latter, no matter where you are, and 30% APR would be a low rate for them.

LOL!

maybe I should rent a few heavies and set up shop...

It wasn't meant to be funny...

Which is something that shouldn't be allowed to continue. And 30% _is_ too high, and they aren't being stopped.

Off the top of my head (and therefore probably obviously wrong in a way that will occur to me tomorrow morning) I'd say that one solution was for the government to make itself the lender of last resort - combining debt counselling and a loan service at (say) 20%. You'd only go to it if you really need the cash, and their job would be to help you try to manage your debt and sort out your problems, with loans to cover essentials. That should instantly wipe out lenders that charge more than 20%, as well as providing more debt advice to people that really, really need it.

The Government already does a bit of that through the Social Fund. But of course, the amount people can borrow is limited. When people have exhausted all lines of borrowing, they will still want to borrow money. You might well argue that they shouldn't; but you won't stop it happening.

Your suggestion that the state should step in as a debt-counsellor is common; it's pretty damned expensive as you can probably imagine. We used to do it, and I'm not sure we ever did much good. And it does nothing to discourage informal borrowing.

The main approach instead is credit unions; much better in principle than the government for this sort of thing, because they're local and community based. But they have some of the same sorts of limitations as the Social Fund; eventually, if people manage their money badly enough, they will reach the end of what the credit union is prepared to offer.

I don't see anything in your argument that comes remotely close to an explanation of why you think 30% is an excessive charge, particularly on people who have repeatedly defaulted. Remember that the process isn't risk free; the courts will almost never order poor people to repay unsecured loans at any serious rate, so that '30% APR' is primarily a risk charge and cost-of-colleciton charge, rather than the cost-of-capital charge.

In practice, the real problem with APR as a measure it's that it's not how people think; they think 'oh, I borrow £100 from Bill, and pay him back £5 per week for 6 months; that's ok, I can manage that', rather than 'That's 96% APR! That's far too high!' APR works quite well as a tool for middle-class people to calculate the cost of large loans; it's not at all good as a way for poor people to manage small loans.

Oh, I realise that it's 30% because a fair number are going to default. On a purely risk-basis, it doesn't sound like an entirely unreasonable figure.

But once you get beyond a certain point, you find yourself trapped in debt-hell, unable to pay anything back, and having to take on bigger loans to deal with the fact you couldn't pay your current ones and got charged extra.

When you've completely trashed your credit history, have demonstrated you can't handle money, are clearly in debt and are _still_ about to buy a wide-screen high definition TV for £1500 - you've reached that point. You've held up your hands and said "I am an idiot, who should not be allowed to buy things." and any company taking your money knows full well that they are selling to idiots who want things they cannot afford.

They are taking advantage of people who clearly cannot help themselves, and I believe that this is wrong.

Oh, now we agree. Yes, we live in a world where we convince ourselves that we'll be happier if only we have a better telly.

Of course, I *was* happier when I got a computer with a big wide screen. But that's *me*, and I'm not in debt*.

*Apart from the mortgage. We don't talk about the mortgage.

Yeah - I'm not convinced that banning it would work - but I still think that people who do it are scum.

I suspect I feel similarly about hard drugs - I think that banning them is wrong, but I also wouldn't feel kindly towards people who sold heroin.

And do, we don't talk about the mortgage. I don't talk about my debt either, although at least that's under control and is going down by £350 a month.

There are some arguments against making it a legal issue, but whether it should be or not, I don't think you're going to get the sort of law you want if there isn't some moral disapproval first.

Actually, if you're a finance company, you can get fined for making such offers to debt-ridden folk :-)

Whether it's enforced or actually backed up by the government is another matter.

It'd be nice to see it eradicated.

Yeah, I was thinking I'd read something about that. Cool.

So, they're aiming it at people with no money, a history of bad debt, a taste for stupidly expensive things

Actually, you could say that's just the price you pay for having a history of bad debt. You're high risk, so it's going to cost you more...

And for that matter, what are you charged on your credit-card?

Hee - and there was a TV doco here last night on house-buying. One of the banks is offering zero-deposit home loans...

4.9%.

A couple of years ago, some young city types in London were getting zero deposit, 120% mortgages....

(I had to look that up: I've never actually been charged anything on it.)

4.9%?

Compare: http://www.interest.co.nz/creditcards.html

;-)

A couple of years ago, some young city types in London were getting zero deposit, 120% mortgages....

Go the young city types. ;-)

A couple in the doco were suddenly paying twice what they'd been paying in rent, with 30 years of mortgage payments ahead of them. As no doubt lots are. And lots of others are expecting a correction (or crash) in the market soon, and interest rates to rise. Which means that lots might soon be paying off homes that are not worth anywhere near what they paid for them...

Holy cow. That's absurd! Typical UK rates seem to be about 10-15%. But it's complicated, becuase of the zero rated balance transfers, cash back, reward points....

I couldn't believe that people were taking out such huge mortgates. A lot of them were also self-declaring income, so taking far larger amounts than the banks would normally allow. It's probably a good thing for them that the rates and prices have stayed fairly stable, rather than shooting off in opposite directions as expected: by now, of course, they're probably earning £20-30k per year more than they were then, so they can afford it....

"Our" banks are mostly owned by Australian banks too, which adds to the insult.

When it's been twenty years or so since the last major dip in an economy, a lot of the young (and not so young) think things are going to stay the same or just keep getting better. Which kinda assumes humans have evolved more smarts in just twenty years, but I haven't noticed it...

You think 20% interest rates on cards are high? When I was young, NZ had a 21% inflation rate for a while...

I have never actually -owned- (well, mortgaged, property), I live in a rented flat.

Reading about mortgages (since I'm trying to study for an CFP), when they're actually discussed in depth as a product, they sound even more than usual like a really elaborate scam on the part of the banks ;-)

Am I just missing something here?

Very few people are so dim as to be unable to *count*, right? I mean they exist but it's rare. (Please tell it's rare). Most people can read. All of these agreements always say somewhere how much it will actually cost in the end overall - or even if you can neither count nor read (shudder)JUST FUCKING ASK!!!!

I really have zero problem with people preying on the stupid. Why not shoot the stupid people instead - solves the problem and leaves the world in a much nicer state.... at least they don't end up stealing/mugging etc. when they get completely skint that way.

I have the same problem with people preying on the stupid that I have with them preying on the weak. Just because you _can_ push someone into doing something doesn't mean you should, and just because someone was unlucky enough to not be born smart/be educated well does not mean they should be left to die in the streets.

And you don't want to kill the stupid people - unless _you_ want to work as a 'refuse disposal technician'.

It's a damn sight easier to get round your own stupidity than it is to get round physical weakness (in the kind of circumstances where the latter matters). It's called asking someone cleverer.

You don't have to be all that bright to be able to count, which is all that's required to work out that a high-interest loan is insanely expensive.

Being intelligent may be mostly luck, but education to a reasonable level is more about priorities/applying yourself. If you can read and have access to information (which isn't hard in this country) that's all that is required.

I'm sure we can invent some kind of automated solution :-)

Hey! SOme of our known associates are bin men. And wanna be bin men!

nothing wrong with being a bin man if you want to be!

You assume too much of meek humanity.

I mean, to me it's the same situation as "Joe Blogs has sent you BRITTANY_SPEARES_NAKED_REALLY_COOL.JPG.PNG.EXE. This may be a virus. Do you want to open it? [Yes]|[No]"

Most of the time the mouse moves to the yes button.

Anyway, I live in place where salesmen come door to door to sell TV's on (increadably expensive) HP, that have a coin slot in the side so you can pay them monthly when they come round.

(It's actually 1968 where I live)

I live in a neighborhood that is considered "low-income" which is hilarious if you knew how much we pay in rent, and the zip-code generated come-ons we receive in the mail should be criminal.

Are those annoying, spinning tire (tyre) rims that young men preoccupied with rap music seem to love to put on a car that can only be defined as a "heap" a big thing in Scotland? They sure are here. And today I got a come-on letter announcing I could not only buy the useless things, but that I could also finance them at 26.99% interest at a local store that would also window tint my car for the same interest rate. Hurrah!

The worst part about it is I wonder how many young men on my block will succumb to this come-on. By the end of this week, I suspect many will have. Ugh!

They should be taken out and shot

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