A simple solution that helps the little guy

[zeemike]

Pass into law a Usury bill that would limit the internist that can be charged by anyone to 7%
That is enough profit for anyone. And it would stop this addiction we have to getting rich quick no mater what the human cost. And then perhaps people will actually go back to work producing something of real value instead of just letting there money hustle for them.

[question everything]

1. And how do you determine that 7% is enough?

With inflation going higher and with taking into accounts bad debts - too many of them - lending institutions have to be able to still cover their expenses and make a profit.

I agree, though, that some of these 24% should be illegal, especially when imposed on someone who pays on time but who was late on a separate account. I think that Congress is working on this, to outlaw "universal default" (I think this is how it is called).

[zeemike]

2. When times are tough we should all share the burden

So if the bank does not have faith then let them not make the loan.
This thing of charging higher interest rates with the excuse that they made a lot of risky loans just don't cut it.
Right now the burden is on the Little guy. No one wants to bail him out.

[Warpy]

3. You'd dry up loans really, really fast that way

Loan interest is based on risk. People who have money present the least amount of risk and get the lowest interest rates. People who need money the most present the most risk. If interest rates are limited to the rich man's rate, then poor people are going to do without and that means they will never manage to get seed money to start businesses of their own and get out of poverty.

Peer to peer microloans at Kiva, Grameen and other outfits are extremely high risk, given to people in the third world who have nothing to offer as collateral but their dreams. The interest rate is 16%. Loans are paid back in under two years and the small amount of the loan ($500 to about $2500 US) doesn't keep them in debt. Businesses prosper and so do the people who own them. Drop the interest below what it takes to do the paperwork and you'll dry these loans up.

Likewise, the original 18% interest on credit cards was reasonable. That February 2 weeks in Aruba would have been paid back over a year and the credit card company made money on the interest on the balance carried over.

However, nobody needs an interest rate over 25%. If a loan is that risky, it should never have been issued.

Usury laws are a good thing. However, make the rate too low and you'll hurt the very people you want to protect.