They should be taken out and shot

[andrewducker]

I just opened some junk mail that had arrived here for tisme - offering credit - "No matter your credit history", at the low, low rate of 29.9% - but with the first week only costing £1!

Oh, and you had to buy from their store, where they were selling wide-screen TVs, over-priced computers and "authentic" leather beds.

So, they're aiming it at people with no money, a history of bad debt, a taste for stupidly expensive things, and no idea that 30% interest rates are a mindnumbingly horrible rip-off

They should all be fucking shot repeatedly through the head.

Comments

[bohemiancoast.livejournal.com]

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.

[channelpenguin.livejournal.com]

LOL!

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

[bohemiancoast.livejournal.com]

It wasn't meant to be funny...

[andrewducker]

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.

[bohemiancoast.livejournal.com]

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.

[andrewducker]

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.

[bohemiancoast.livejournal.com]

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.

[andrewducker]

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.