Reply #6: Going after very high risk lendees

[salin]

offering good sounding deals, with very punitive fees hidden in the small print;

sending out gazillions of offers for credit to high school students (or younger);

sending out gazillions of offers to anyone/anything (examples of folks getting offers sent to their pets as if they were individuals... preapproved and all...)

sending out offers for third and fourth refi deals to folks on their homes - offering more than 150% in credit than the equity on the home and promising almost anyone (regardless of former credit history) will be approved in 48 hours (I recieve one of these offers almost every month - but given that I fully own my home so I find the offers laughable... but can see how if a person/family found themselves in sudden dire straights - how it would appear attractive, esp if I had no financial savvy - but terms that make it almost inevitable for folks on fixed income or lower wage incomes to be able to keep terms with - ergo most likely will end in default.)

My point is that for small businesses, nonprofits - and in the past, most businesses - one ascribed "risk" to the ventures and prepared to cover that risk accordingly... it was in the business plan. However in some lending and credit card companies they have exponentially increased their offers to "high risk" lendees/ due to realizing the great profits to be made on those who pay off the least and carry debt. But instead of being held accountable for their corporate practices of intentionally taking risk (and thus covering for such risk in their business plan) they want to increase this business while having the fed govt/courts play enforcer, so to speak, to decrease the degree that they have to cover their "risky" lending practices.

Consider that during the most recent negotiations for this version of the bill, that sadly was passed on into law, there was debate as to putting a cap on the level of interest that could be charged (not just on late balance) once a credit card holder fell late, even a single time, in a payment ... these rates have already in some cases reportedly been increased to more than 30% annually -- some might call that usury. The discussion, if I recall, was to put a cap somewhere in the high 30%s - then discussed in the 40%s - and then dropped altogether.

At the same time there was resistance (and final blocking) of making loopholes for those filing bankruptcies due to sudden medical emergencies (documented as the cause for more than 50% of bankruptcies), or those who find themselves in financial distress due to natural disasters (think - owing on a mortgage of a home ruined in Katrina - losing employment that could help pay for said mortgage, etc.) Suddenly, in these cases, the practice of offering higher amounts of credit - based on income, than in the past would be considered TOO high (eg the formulaes of how much to offer in credit based on income has changed - so now another form of high risk lending is too offer more than is wise based on income... shouldn't the lenders making these calls be subject to cost on that risk? Not according to the new law.)

As the efforts of the credit card/lending industries become more sophisticated... and their business models depend MORE on folks NOT paying full payments (eg the interest rates as the big money maker) it seems ridiculous to put the full brunt of "responsibility" on recipients - who do not have nearly the same level of sophistication in interpreting what various offers really entail.

For some of the worst cases - read up on some of the refi programs in urban areas that intentionally target older, fixed income poor folks... horror stories abound per the companies practices... yet at the state and fed level there have been efforts to invalidate local initiatives/laws to prevent certain fraudulent/or near fraudulent predatory lending practices - by stating that much looser and not enforced state or fed laws supercede local or state ordinances/laws.

Was it Ameriquest that was written up recently per their horrendous track record in urban areas (they blamed it on "subcontractors") that has slowed down (or stopped) the company's head for some nomination by Bush?