4 ms·

don't understand this comment. what about current accounts, checking, transfers?

by 001sky 11y ago

easytiger 11y ago
The primary motivation was lending, as mentioned several times in the article.
- URSpider94 11y ago
  Do you not believe that responsible lending can be a community benefit?
- karlkatzke 11y ago
  He mentioned that he didn't want to start a predatory subprime loan shop. He wanted to offer non-predatory lower interest loans to higher risk clients, in concert with banking services that are difficult to provide to higher risk immigrant clients like checking and savings accounts and debit cards. But the NCUA wouldn't allow him to set interest rates lower or offer checking/debit accounts.
  - zeveb 11y ago
    > But the NCUA wouldn't allow him to set interest rates lower That indicates that those rates aren't actually predatory at all, but required in order to defend against default. Which really isn't all that surprising: in the case of payday loans and such, there are many operators, and anyone who could lessen his profit-per-loan could very easily snap up a great number of customers, increasing his net profit. That no-one has done this indicates either collusion or that the rates are fair.
  - easytiger 11y ago
    > loans to higher risk clients, sub prime lending then?
    - Jtsummers 11y ago
      I was curious so I looked up the definition (well, Wikipedia). Turns out, you're correct. Lending to high risk clients is the key component of subprime lending. What many people seem to think of is the high interest rates, unfavorable terms and other things which push subprime loans into the predatory loan category. It's entirely possible (though apparently hard here, with the restrictions on rates they could provide) to offer non-predatory subprime loans.
  - ams6110 11y ago
    Sorry but this is playing with words. If you are making loans to high risk clients, this is predatory lending. There's a reason they are high-risk: they are less likely to be able to pay the loans, or have demonstrated prior poor handling of debt. Don't be misled by "low interest" either: the "predatory lenders" in the last housing bubble were not for the most part charging exorbitant interest rates, rather they were lending far too much money to people with almost no qualifications. If you make credit easy to get for people who can't handle it, they will end up bankrupt and the creditors will end up holding the bag.
    - Jtsummers 11y ago
      Lending to high risk clients, on its own, is not predatory lending. If I'm willing to accept the risk, I could loan $5k to someone with a poor credit history and frequent unemployment at a low interest rate. I have to be somewhat altruistic to do this, and most banks and lenders aren't. I have to be willing to write it off. It sounded like this was the market they wanted to be in. Poor people needing money, instead of getting payday loans or high-interest CC debt, could get low interest loans from this credit union. It's the opposite of predatory. I'm not sure it's viable or sustainable, but it is a noble goal, at least.
      - phdp 11y ago
        The issue is that you are using your customer deposits to make the loans. When the loans default and they aren't paying a high interest rate to compensate you for the higher default rates, you don't have the money to redeem those deposits at face value, and then the NCUSIF (FDIC for credit unions) will have to step it. The regulators would rather prevent that in the first place.
        Jtsummers 11y ago
        Right, I understand why they couldn't make the loans (regulators not allowing it). But if someone were to establish themselves in a way that could make the sorts of loans this credit union wanted to, they wouldnot be predatory. > If you are making loans to high risk clients, this is predatory lending. What I was specifically replying to. High risk loans are not predatory loans. Predatory loans are high risk, high interest, unfavorable terms (short repayment periods, high-value collateral for low-value loans, aggressive collection tactics, etc.). We have to be clear when we talk about a topic to not mix the terms in a way that skews our discussion from the actual circumstances. That way lies miscommunication and misrepresentation of those involved.

don't understand this comment. what about current accounts, checking, transfers?

by 001sky 11y ago

don't understand this comment. what about current accounts, checking, transfers?

easytiger 11y ago

The primary motivation was lending, as mentioned several times in the article.

URSpider94 11y ago
Do you not believe that responsible lending can be a community benefit?
karlkatzke 11y ago
He mentioned that he didn't want to start a predatory subprime loan shop. He wanted to offer non-predatory lower interest loans to higher risk clients, in concert with banking services that are difficult to provide to higher risk immigrant clients like checking and savings accounts and debit cards. But the NCUA wouldn't allow him to set interest rates lower or offer checking/debit accounts.
- zeveb 11y ago
  > But the NCUA wouldn't allow him to set interest rates lower That indicates that those rates aren't actually predatory at all, but required in order to defend against default. Which really isn't all that surprising: in the case of payday loans and such, there are many operators, and anyone who could lessen his profit-per-loan could very easily snap up a great number of customers, increasing his net profit. That no-one has done this indicates either collusion or that the rates are fair.
- easytiger 11y ago
  > loans to higher risk clients, sub prime lending then?
  - Jtsummers 11y ago
    I was curious so I looked up the definition (well, Wikipedia). Turns out, you're correct. Lending to high risk clients is the key component of subprime lending. What many people seem to think of is the high interest rates, unfavorable terms and other things which push subprime loans into the predatory loan category. It's entirely possible (though apparently hard here, with the restrictions on rates they could provide) to offer non-predatory subprime loans.
- ams6110 11y ago
  Sorry but this is playing with words. If you are making loans to high risk clients, this is predatory lending. There's a reason they are high-risk: they are less likely to be able to pay the loans, or have demonstrated prior poor handling of debt. Don't be misled by "low interest" either: the "predatory lenders" in the last housing bubble were not for the most part charging exorbitant interest rates, rather they were lending far too much money to people with almost no qualifications. If you make credit easy to get for people who can't handle it, they will end up bankrupt and the creditors will end up holding the bag.
  - Jtsummers 11y ago
    Lending to high risk clients, on its own, is not predatory lending. If I'm willing to accept the risk, I could loan $5k to someone with a poor credit history and frequent unemployment at a low interest rate. I have to be somewhat altruistic to do this, and most banks and lenders aren't. I have to be willing to write it off. It sounded like this was the market they wanted to be in. Poor people needing money, instead of getting payday loans or high-interest CC debt, could get low interest loans from this credit union. It's the opposite of predatory. I'm not sure it's viable or sustainable, but it is a noble goal, at least.
    - phdp 11y ago
      The issue is that you are using your customer deposits to make the loans. When the loans default and they aren't paying a high interest rate to compensate you for the higher default rates, you don't have the money to redeem those deposits at face value, and then the NCUSIF (FDIC for credit unions) will have to step it. The regulators would rather prevent that in the first place.
      - Jtsummers 11y ago
        Right, I understand why they couldn't make the loans (regulators not allowing it). But if someone were to establish themselves in a way that could make the sorts of loans this credit union wanted to, they wouldnot be predatory. > If you are making loans to high risk clients, this is predatory lending. What I was specifically replying to. High risk loans are not predatory loans. Predatory loans are high risk, high interest, unfavorable terms (short repayment periods, high-value collateral for low-value loans, aggressive collection tactics, etc.). We have to be clear when we talk about a topic to not mix the terms in a way that skews our discussion from the actual circumstances. That way lies miscommunication and misrepresentation of those involved.