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> Even adults need protection, depending on circumstances I think the argument is that it's not protection. If someone won't lend to you at 25% (but they would

> Even adults need protection, depending on circumstances I think the argument is that it's not protection. If someone won't lend to you at 25% (but they would at 27%), then you can't borrow. Is it protection to just prevent those people from borrowing at all?

toomuchtodo 3y ago
Yes. Usury law serves this purpose, to draw a line. https://www.law.cornell.edu/wex/usury https://www.law.cornell.edu/wex/usury At least in the case of auto loans, usury limits do not limit subprime credit access. If you want to refer specifically to deep subprime unsecured model profitability, if it’s profitable, clearly there is room for margin compression through interest rate limits. https://www.fdic.gov/analysis/cfr/consumer/2015/presentations/4a-schroeder.pdf https://www.fdic.gov/analysis/cfr/consumer/2015/presentation...
- RHSeeger 3y ago
  > Yes. Usury law serves this purpose, to draw a line. I do not understand what you're trying to say here. We're talking about - putting an upper limit on the interest rate for loans (which is what said usary limits _are_), and - if that means some people cannot get loans, and - if that inability to get a loan is really helping that person The fact that usary law exists and puts a limit on the interest rate for loans doesn't answer the question, since it's only the starting point from which the question is asked. That being said, what you linked seems to say something along the lines of 1. For dealer + bank loan setups, the usary limits do indeed reduce the ability of the dealer setup a loan (with the bank) for a buyer. This is the case we were originally talking about, for which we have an unanswered question. 2. For BHPH (the car dealer is the one doing the loan), the limit is worked around by increasing the amount of the loan. This _seems_ to be similar to buying points on a loan. This seems like a better tradeoff than "a loan isn't possible", since the buyer still has an option (where they wind up paying more by the end, but with less risk; to both parties). My thought would be that this is actually helpful for the buyer, but it's debateable.
  - b112 3y ago
    The logic is, our ancestors and our current laws are there for a reason. And to push aside ursary laws, and their logic without reading in depth the logic as to why, is throwing away valuable, empirically derived, real world research. And sometime the corporate body needs externally deroved guardrails. That said, secured credit cards exist. No one need be given credit, to have a credit card. And secured can lead to unsecured in time. Companies have this as a patch already. And they want to lend, so market forces work here. And there already is a limit under ursary laws, and yet magically, we still have sub prime credit. So to both sides of this discussion I say, ursary doesn't solve having subprime, because there is always a subprime. Remove existing subprime clients, and the next tier becomes the new subprime. It's merely a label for the "riskiest people we lend to". Chase that label, and eventually no one will be lent to. At all.
    - RHSeeger 3y ago
      I feel like we're talking past each other here. What I'm saying is that it's hard to tell if the usary limits actually provide a benefit to the borrowers. And I'm discussing the topics related to figuring out if they do or don't. And what you appear to be saying is that we need those limits because we've always had those limits, and because limits are good. And that the limits don't limit people because secured credit cards exist. Which doesn't really speak to the question I was trying to raise... of whether or not those usary limits provide the benefits they are supposed to.
      - b112 3y ago
        Well I'm also saying that those limits exist because of historical reasons, and those reasons were derived from issues in the past, and we should examine that context, and logic for those laws, before questioning if we need usury laws. Why? Because they've done a lot of research, and there was lead up, there were issues, that caused those laws to exist. Study that, before we ponder is what I say.
        RHSeeger 3y ago
kaashif 3y ago
I think I'm on your side because it's possible for anyone to understand how interest works and make these judgements themselves. But a lot of people just straight up don't understand interest (despite it being within their capabilities) and e.g. make minimum payments on their loans and complain when the balance goes up. A particularly egregious case (because the people in question are educated) is when people make minimum payments on student loans and don't seem to understand why the balance is increasing.
deleted 3y ago
[deleted]

toomuchtodo 3y ago

Yes. Usury law serves this purpose, to draw a line. https://www.law.cornell.edu/wex/usury https://www.law.cornell.edu/wex/usury At least in the case of auto loans, usury limits do not limit subprime credit access. If you want to refer specifically to deep subprime unsecured model profitability, if it’s profitable, clearly there is room for margin compression through interest rate limits. https://www.fdic.gov/analysis/cfr/consumer/2015/presentations/4a-schroeder.pdf https://www.fdic.gov/analysis/cfr/consumer/2015/presentation...

RHSeeger 3y ago
> Yes. Usury law serves this purpose, to draw a line. I do not understand what you're trying to say here. We're talking about - putting an upper limit on the interest rate for loans (which is what said usary limits _are_), and - if that means some people cannot get loans, and - if that inability to get a loan is really helping that person The fact that usary law exists and puts a limit on the interest rate for loans doesn't answer the question, since it's only the starting point from which the question is asked. That being said, what you linked seems to say something along the lines of 1. For dealer + bank loan setups, the usary limits do indeed reduce the ability of the dealer setup a loan (with the bank) for a buyer. This is the case we were originally talking about, for which we have an unanswered question. 2. For BHPH (the car dealer is the one doing the loan), the limit is worked around by increasing the amount of the loan. This _seems_ to be similar to buying points on a loan. This seems like a better tradeoff than "a loan isn't possible", since the buyer still has an option (where they wind up paying more by the end, but with less risk; to both parties). My thought would be that this is actually helpful for the buyer, but it's debateable.
- b112 3y ago
  The logic is, our ancestors and our current laws are there for a reason. And to push aside ursary laws, and their logic without reading in depth the logic as to why, is throwing away valuable, empirically derived, real world research. And sometime the corporate body needs externally deroved guardrails. That said, secured credit cards exist. No one need be given credit, to have a credit card. And secured can lead to unsecured in time. Companies have this as a patch already. And they want to lend, so market forces work here. And there already is a limit under ursary laws, and yet magically, we still have sub prime credit. So to both sides of this discussion I say, ursary doesn't solve having subprime, because there is always a subprime. Remove existing subprime clients, and the next tier becomes the new subprime. It's merely a label for the "riskiest people we lend to". Chase that label, and eventually no one will be lent to. At all.
  - RHSeeger 3y ago
    I feel like we're talking past each other here. What I'm saying is that it's hard to tell if the usary limits actually provide a benefit to the borrowers. And I'm discussing the topics related to figuring out if they do or don't. And what you appear to be saying is that we need those limits because we've always had those limits, and because limits are good. And that the limits don't limit people because secured credit cards exist. Which doesn't really speak to the question I was trying to raise... of whether or not those usary limits provide the benefits they are supposed to.
    - b112 3y ago
      Well I'm also saying that those limits exist because of historical reasons, and those reasons were derived from issues in the past, and we should examine that context, and logic for those laws, before questioning if we need usury laws. Why? Because they've done a lot of research, and there was lead up, there were issues, that caused those laws to exist. Study that, before we ponder is what I say.
      - RHSeeger 3y ago

kaashif 3y ago

I think I'm on your side because it's possible for anyone to understand how interest works and make these judgements themselves. But a lot of people just straight up don't understand interest (despite it being within their capabilities) and e.g. make minimum payments on their loans and complain when the balance goes up. A particularly egregious case (because the people in question are educated) is when people make minimum payments on student loans and don't seem to understand why the balance is increasing.

deleted 3y ago

[deleted]