Bah humbug, y’all.
Or: here is my reminder that our betters, the MOTU, and their eager servants in the political class never, ever rest from their quest to enrich (themselves) and immiserate (anyone it takes).
Fresh on the heels of the GOP’s decision in the omnibus funding bill to gut one more of the laughingly minor restrictions on bankster crime, we get this Christmas Day report from our friends at The New York Times:
“Turn your car title into holiday cash,” TitleMax, a large title lender, declares in a recent television commercial, showing a Christmas stocking overflowing with money.
More than 1.1 million households in the United States used auto title loans in 2013, according to a survey by the Federal Deposit Insurance Corporation — the first time the agency has included the loans in its annual survey.
Title loans are becoming an increasingly prevalent form of high-cost, short-term credit in subprime finance, as regulators in a number of states crack down on payday loans.
For many borrowers, title loans, also sometimes known as motor-vehicle equity lines of credit or title pawns, are having ruinous financial consequences, causing owners to lose their vehicles and plunging them further into debt.
In the case with which Times reporters Jessica Silver-Greenberg and Michael Corkery open their piece, a borrower took a $1,000 loan that carried a 171% annual interest rate. That’s not a typo. Unsurprisingly, she lost her car and remains about $1,000 in debt on that one transaction. At that, she got off … well, better than some:
A review by The New York Times of more than three dozen loan agreements found that after factoring in various fees, the effective interest rates ranged from nearly 80 percent to more than 500 percent. While some loans come with terms of 30 days, many borrowers, unable to pay the full loan and interest payments, say that they are forced to renew the loans at the end of each month, incurring a new round of fees.
This isn’t really a banking business (obviously); it’s closer to a combo pawn shop and loan sharking business:
…lenders make the loan based on an assessment of a used car’s resale value, not on a borrower’s ability to repay that money, many people find that they are struggling to keep up almost as soon as they drive off with the cash.
As a result, roughly one in every six borrowers who take out title loans have their cars repossessed, according to an analysis of 561 title loans by the Center for Responsible Lending, a nonprofit in Durham, N.C.
And, of course, something that offers so much easy money to be grabbed from those least likely to find any kind of resource is attracting the finest members of our community:
The high interest rates on the loans have enticed an influx of Wall Street money. Private equity firms are investing in lenders, and some big banks are ramping up their auto lending to people with blemished credit.
What about regulation? Hah! Vampire squid and masters of the universe laugh at your regulation:
for every state where there has been a crackdown, there are more where the industry has mobilized to beat back regulations.
In Wisconsin, it took the title loan industry only one year to reverse a ban on the loans that had been put in place in 2010. In New Hampshire in 2008, state legislators enacted a law that put a 36 percent ceiling on the rates that title lenders could charge. Four years later, though, lobbyists for the industry won a repeal of the law.
America! F**K Yeah!
It’s ruinously expensive to be poor in this exceptional country. It’s too damn easy to profit on the bitter hardship of others here. I’m betting that most of those doing so have today talked pretty about the meaning of Christmas. If so, let me leave them with Albert Einstein’s injunction, issued almost exactly 100 years ago:
“Honor your master Jesus Christ not only in words and songs but rather, foremost, by your deeds.”*
*Albert Einstein, “My Opinion on the War.“
Image: Rembrandt van Rijn, Jesus driving the money-changers from the Temple, 1635.
Villago Delenda Est
The parasites need to be eradicated.
schrodinger's cat
How is this not illegal. Many third world countries have better regulations on their financial sector than this.
Parfigliano
This third world nation does not.
BillinGlendaleCA
@schrodinger’s cat: Freedumb!!!
burnspbesq
The default rate on payday and car-title loans is astronomical. There is no Default Risk Fairy out there waiting to make the risk magically disappear. If you cap the interest rate on payday and car title loans at a rate that investors think doesn’t adequately compensate them for taking that risk, then the supply dries up, and then what?
Even if you set up a system of Federal guarantees that shifts the default risk to the taxpayer and allows payday and car-title lenders to price like they were loaning to GE Capital, you’re sill slapping a bnad-aid on a rapidly-spreading tumor.
The only long-term solution is for working-class Americans to earn enough money so that they can actually save. And given the current alignment of political power, I have no idea how to make that happen. If you do, I’d love to hear it.
You can “eradicate” all the “parasites” you want, but as long as there is demand for these loans, a new, more evolved species will appear to satisfy it. The only way to make “predatory” lending disappear is to make borrowing from “predatory” lenders unnecessary.
Les Nessman
“I know this 2014 Bentley looks expensive, but I’m only paying $500 a month*, so I can afford it!” – local idiot
* for the next 360 months
Ruckus
@burnspbesq:
So with too many regulations that keep people from financially fucking others, they wouldn’t be able to financially fuck others? Can’t have that, those doing the fucking will need tax lawyers.
How to make it so that at least the average person can save? You have no idea? YOU PAY THEM A LIVING WAGE. YOU TAX THOSE THAT CAN AFFORD IT. And if you are making over a 1/4 mill a year, you can afford it. If you are making over a mill a year you can really afford it.
SATSQ. Brought to you by someone that gets by on far far less. Given my experience and skills, I should be making about twice what I do, without SS. But then some rich motherfucker might have to make do with the standard Porsche Cheyenne rather than the turbo model.
Corner Stone
@burnspbesq:
The “WTF” factor regarding the sublime stupidity of this quoted statement…I’m not sure what else to say except Merry Christmas 1%’ers!
Ruckus
@Les Nessman:
At least the payment would be less than the gas. Although I wonder what he’ll do when he finds out what the deprecation is. If he’s smart, and we already know that he’s not, when he finds out in 5 yrs that the car is worth about a tenth of what he still owes, he’d just drive it off a very tall cliff with out his seat belt on.
Ruckus
Tom
It’s not closer to loan sharking. Let us not mince words. It is loan sharking.
The mafia would be proud. And also pissed that they pretty much got run off before they could think of it. Either that or it’s actually their idea, they went ligit(so to speak) and found something much better for them than breaking kneecaps.
Villago Delenda Est
@burnspbesq: The apologists for the parasites need to go, too.
Les Nessman
@Ruckus:
You made me think of this:
http://youtu.be/ywQEcv22Mdk?t=2m20s
Ruckus
@Villago Delenda Est:
The parasites and their supporters? That’s asking an awful lot isn’t it?
WereBear
We were nearly crushed by the effects of putting medical care on our credit cards — at a time when the Bush administration allowed credit card companies to play with the due date until one missed an on-time payment.
Then we had our interest rate jacked up to 30%. If we hadn’t been able to climb out with the help of a non-profit debt consolidation company (in New York) we would still be paying; perhaps for the rest of our lives.
Goblue72
@Corner Stone: he’s a douchecanoe who needs to put “esq” at the end of his nym, fer chrissakes. One might ask what he is compensating for, but it’s Xmas so I won’t.
Pogonip
Those car-title loanshark shops are sprouting like weeds around here.
Historically, conditions like this caused the middle class to demand
reforms, sometimes violently, sometimes not–but now we can’t. “They” have drones, credit-rating companies, militarized police, the Internet. They monitor every aspect of our lives. They can lock you out of the economy, they can lock you into a prison. There is nothing we can do within their system. We must build a system of our own, one not readily perceived, so they can’t outlaw it. I think the first step is to use barter and cash whenever possible.
burnspbesq
@Ruckus:
Actually, the capitalized part is exactly what I said, minus the qualifier about the political difficulty of accomplishing it. So shove your straw man up your ass.
burnspbesq
Merry Christmas to all of you who can’t face the truth.
Pogonip
@Ruckus: I don’t think he’s saying he approves of the status quo. He’s just describing it.
Ruckus
@Pogonip:
I think the first step is to use barter and cash whenever possible.
With the banks paying zero or 1/4 percent on what you put in the bank, a mattress is about as safe. So cash it is. Of course you can’t purchase anything if you don’t have cash but once you transition to cash you find that it is much easier to control your finances. Of course some things requires at the very least checks, to pay say a utilities bill. But it’s cheaper to have a free checking account and pay online for those things, keeping only a bit in your account to meet those needs.
Ruckus
@Pogonip:
You may be giving too much credit. I may be giving too little. But there is a history here with attitudes that make me think I stand a better chance of being correct. It does happen once in a while.
brent
@burnspbesq:
I am certain there is plenty of room between “charge whatever we can get way with” and “too little to pay for the risk.” But in any case, significant diminishment of the payday loan industry is not anything that any of us would need to cry ourselves to sleep over.
Being poor and lacking access to credit for emergencies is certainly terribly uncomfortable. Believe me, I have been there in my life. But there are certainly dozens of policy initiatives that are better attuned to addressing this problem than leaving the poor to the predations of these particular assholes.
mai naem
These loans are awful. I know a young woman who got a title loan because her dog got sick and she needed $1000 for the emergency vet bill and she paid something like $3200 for the loan when all was said and done. A guy I know got into some unexpected financial issues and got a $1000 loan and he said he’s going to have to pay back $2100. Oh, BTW, both of these people work their asses off but make <$10/hr, live with other people who also work. I know one didn't have health insurance. WTF? Fuck Mitch McConnell and Ted Cruz. Also too, the local rag runs a weekly biggest residential deals of the week where they mention the amount andthe sellers and buyers along with their professions if known. One of these several months ago was the owner of a local payday/title loan chain in Phoenix. He paid for the house in cash(he apparently didn't even need a non loan shark loan) . Not sure of the exact amount but it was over $2M
ellennellee
i don’t know which modeled which, but this is about the same scheme we see in student loans, doncha know.
i’m about ready to send in my pound of flesh to sallie mae, courtesy of my local butcher’s beef section.
seems we might be able to make a bold statement if we picked a day to do it and thousands of students all sent in their pound of flesh.
especially if the selected date of delivery was in early august.
;-)
Tissue Thin Pseudonym
burnsie is actually right on this one. People demand these loans because they need them. If you make it impossible for them to borrow, that won’t eliminate their cash flow problems. They’ll still be in crisis.
People seem to think that these are high margin products for the creditors but they aren’t. They can make large amounts of money on them but it’s because of the volume, not because the returns on each loan are very high. One of the things about the private equity money rushing in is that it makes it a very competitive business. If their margins were that high, someone would be moving in to undercut them. So capping them at reasonable rates will mostly end the business.
I’m marginally in favor of capping them anyway because I think the number of people who would be better off declaring bankruptcy right now rather than digging the hole deeper probably outweighs those who make this sort of thing work. But I’m not really crazy about it and I’m under no illusions that doing so will prevent bankruptcies, just improve the timing.
Ruckus
@burnspbesq:
It’s probably just the way you state things, especially over time that makes people think you are an ass.
And as well the second part of my answer is also necessary. Taxes are the cost of being alive, not just what you pay an accountant to avoid and a lawyer to save your ass when you don’t.
You make it politically possible by making sure not only that everyone can vote but that they do. Sure some won’t vote in their own best interest but that’s always been the case.
James Gary
@Tissue Thin Pseudonym: I think the number of people who would be better off declaring bankruptcy right now rather than digging the hole deeper probably outweighs those who make this sort of thing work.
The timing of bankruptcy….seriously, WTF? People who take out loans on such horrible terms don’t see them as a way to maintain financial solvency. They generally need money to pay for basic expenses, right now–and they don’t have any other options.
Citizen Alan
Is there a statement more blasphemous and sacrilegious than “America is a Christian nation”? Our entire system of government from the day the Constitution was enacted was designed to form a more perfect plutocracy for the glory of Mammon.
Pogonip
@Ruckus: Step 2 is probably gardening, for those who have yards. There have been attempts at community gardening around here but theft is a big problem.
Also, we should all be thinking of what to do when zoning laws are changed to ban home gardening (and believe me, it’s coming). Maybe we can rent space in the woods from the pot growers.
Woodrowfan
my cousin’s EX-husband lost their house when he got too much into debt with these places. He started throwing away the local property tax bills and utility bills because he couldn’t pay them and since he insisted that HE was the man, so HE would deal with the bills, she didn’t know what was happening until all of the sudden the power went off and bill collectors started calling.
Ruckus
@Pogonip:
If you could afford to rent space from the pot farmers……
Pogonip
@Ruckus: We can always offer to weed the dope!
Nicole
@Pogonip: My parents’ HOA has forbidden gardens. My stepmom continues to plant vegetables anyway. Of course, she spent four years in a labor camp during the Pol Pot regime, so I think she’s not that concerned with an HOA’s threats.
Pogonip
@Nicole: She probably just farts in their general direction and goes on picking. And if she doesn’t, may I suggest it. Tell me which end of the country Stepmom’s on and I’ll fart in their general direction on her behalf. I’m about halfway between coasts.
jake the antisoshul soshulist
I think it was Sojourner Truth who said, the poor are preyed on by both the rich and the poor.
Pogonip
You know, since we are all inevitably going to fart anyway, why not do it in the general direction of Wall Street and D.C., both of which have been conveniently located on the East Coast for our farting convenience?
But save one per day for Nicole’s stepmother’s HOA.
And for you ladies who are about to say you never fart, (a) it’s double-plus-ungood to lie on Christmas, and (b) even if, somehow, you rarely fart now, the frequency will multiply exponentially once you pass menopause. So gas up and do what you can. Your fellow citizens, especially Nicole’s stepmom, need your support.
And If you’re young and limber enough to stand on your head, why not fart in the general direction of any drones that fly over?
drkrick
The commercial that really pissed me off is the one pushing a title loan as a way to pay for your vacation. If you really have to borrow at 170% to take a vacation, you can’t afford the vacation and the people trying to convince you to do so are as evil as you are unwise.
The other thing I wonder is how many of the people who go this route would be eligible for access to borrowing on better terms if they knew how to find it.
Nicole
@Pogonip: it also grates on me that the HOA forbids drying clothes on lines. Run up your electric, because god forbid someone see underwear drying in a back yard.
Mr Stagger Lee
So obviously the Republicans won’t do jacksh*t about it, but will the Democrats come and save the day for working America? Yeah Right.
Pogonip
@Nicole: My landlord forbids that too. Those who have patios hang things on the redwood patio walls and fart in his general direction.
billb
YO, these dirtbags exist in your community because YOU let them, if they are below your standard of moral decency then get a truckload of friends and protest in front of their biz. Get your church down there, get your softball team down there. Make the local news, ask why your politicians allow them to prey on your community.
Goblue72
@Ruckus: it’s that he thinks anyone who disagrees with him is stupid. I knew gunners like him in law school. They weren’t the ones who wound up clerking for SCOTUS or making partner at BigLaw or working in the White House. The real sharp tacks were actually fairly decent people.
Goblue72
@Tissue Thin Pseudonym: state usury laws traditionally were a lot more restrictive in the past with lower rate caps. Nobody complained except the banks.
There are a lot of possible consumer protection solutions to this issue than “whaddayagonnado”.
Ruckus
@Goblue72:
I’ve known a few lawyers over the years and they are like anyone else, some nice, some not so much and some asshollerthanthou. You can most likely deduce which box is which in my estimation given the long term experiences on the blog. A degree and a professional title don’t by themselves earn respect. And in some cases they detract.
Lurking Canadian
@Goblue72: I am positively loving the juxtaposition of Christmas Day posts in favour of usury.
Especially when the thread right downstairs is about Mr Potter. I mean, you couldn’t make that shit up.
Kay
Even if you do regulate them, you have to then essentially take a full time volunteer job watching them because they’ve so completely purchased every branch of government they simply redefine terms and continue stealing from people:
This was a law passed by voters to get around the industry-captured legislature. Predatory lenders went right back to work getting around the new law.
You have to absolutely hammer them, because they don’t have any other way of making money other than ripping off poor people.
Outlaw usury interest rates and then prosecute lenders who flout the law. Nothing else will work. They don’t respond to lesser sanctions and weaker regulation. You have to put them out of business.
Kay
The thing that worries me is that I increasingly get the sense that they don’t really have any “business ideas” or “innovations”.
They’re bankrupt as far as figuring out ways to offer real value and get paid for it.
They HAVE to do this stuff. They don’t have any other way to keep the revenue growing. They’ve already picked off the ethical and productive loans and loaded up the middle class with debt at better rates. Now they’re scraping the bottom of the barrel with these borrowers and this collateral and these rates.
There’s a reek of desperation about this that is frightening. Really? They’re lending on nearly worthless automobiles? What do they turn to after this? People’s furniture? I mean, God almighty, figure out a way to make money that doesn’t involve this bullshit predatory behavior.
Kay
@burnspbesq:
Or. you could outlaw usury rates and force finance and lending to invent a way to make money that doesn’t involve usury lending.
Your assumption is lenders are preying on desperate people and they could remain in business without doing that. That’s not a given. Maybe it’s circular, and the lenders are as desperate for a revenue source as the borrowers are for a lender. What if there’s two desperate groups here, lenders who have no other way to grow and borrowers who have no other way to pay their bills? Lenders are going down the chain from the middle class to the working class to unemployed people because they’re out of ideas and out of options? What if there’s two sets of bankrupts here? The finance and lending industry and poor people? One group is out of ideas on how to squeeze more out of existing assets and the other is out of money at the end of the month.
Ruckus
@Kay:
I used to equate growth in business with cancer. All organisms grow. But at some point they stop growing and move into repair mode. And then into disrepair mode. And then of course they die. Cancer keeps growing when doing so kills the host. The financial sector seems to be at the point that they are cancerous. They have been told that the only healthy business is one with maximum growth at all times. So they have figured out how to capture all the food sources both by normal channels and by subverting the survival channels of the host.
But as so many things in life, that’s not healthy for the host. And it isn’t us doing this to ourselves, it is a cancer on the body politic.
Kay
@Ruckus:
I think it’s what’s behind privatization, too. They HAVE to cut off a piece of the public sector. It’s their only “new market”. They’re out of ideas.
They’re surviving by expanding and creating less and less value in every “new!” area they enter. They’re as desperate as the people they’re exploiting. If they don’t grow they die, and they’re not growing in any healthy sustainable way.
Ruckus
@Kay:
Also, people complain that we don’t make stuff any more. That of course is not true, I’d be out of a job if that were so. And I believe you’ve said your son works in mfg. But, and it is a big huge round but, we don’t manufacture as much as we used to, from raw materials to finished products. And our productivity per worker is up a lot over the last 50 yrs. So fewer mfg jobs per capita. Farming is in the same boat. A much larger portion of the population used to grow or raise food. Now, fewer jobs. So we have more professional jobs, school administrators, lawyers, etc. And many of them are not getting any work, law schools have seemingly raised the rates huge amounts without any increase in output with so many not able to find work just to pay back loans for their schooling, loans that can not be discharged in bankruptcy. Wonder who it was that figured out that if you overloaded people with debt and then saddled them with no relief possible, they’d be subservient for life? The law schools? No, it’s the financial sector, the people making the loans.
I’m beginning to agree with VDE, that the only way to cure the disease is to wipe out the entire strain and start over. Surgery, radiation, chemo. It may kill the patient but if for sure will kill the cancer.
Ruckus
@Kay:
They’re out of ideas.
They are out of constructive, useful ideas. Ideas that sustain the organism that they are supposed to be working for. They are only interested in finding ways to support themselves. And they have just about sucked the life out of that which they need to sustain themselves. They have just about killed the bottom half of the economy and are moving on to the rest of it. I’m just hoping that I’m gone before the implosion happens and we have another depression. We came close 7 yrs ago, I lost my business, as did so many others. I’ve managed, mostly because of SS and my skills still have some value. But I’m old and have been through the grinder enough times that I don’t have a lot left in me. And what do I do if SS gets cut or my skills deteriorate too far or this old body just can’t keep up any more? Notice that only one of those might not happen, the last two absolutely will. What about the 20 yr old who looks around and says fuck it? Work hard for 40-50 yrs and end up sleeping under a bridge? Enough of them say fuck it why bother and the whole thing collapses in on itself.
I'mNotSureWhoIWantToBeYet
Title loans are a huge problem in NoVA and the surrounding areas. They’re a blight and usury laws need to be strengthened. Of course, too many politicians benefit from political contributions from these outfits, so …
Credit unions somehow manage to survive making loans to people without a lot of money. There are issues with CUs (single locations that are often hard to reach without a car, restricted hours, limited membership populations, etc.), but they (it seems to me) should be a big part of the interim solution. Post Office banking is another possible interim solution.
The longer term solution, of course, is higher wages that let people save for emergencies.
Somehow people survived without these loan sharks in the past. I’m not going to be crying if they are forced out of business by not being able charge 80-300+% APRs. 30% interest on credit cards at a time when banks can get money at 0-0.25% should be outlawed as well. Maximum interest rates in the colonies were 8% at Independence. There were ways around the limits, of course, but default risk was quite a bit higher back then than now…
As long as politicians are dependent upon campaign contributions from rich people and financial institutions, it’s hard to see things like usury laws changed back to more sensible policies for the masses. Too much money and power is at stake, and if masses of people are ruined, well, tough. Rmoney needs come first.
(sigh)
Cheers,
Scott.
Kay
@Ruckus:
That’s why I love the idea that if they would just get back to their core business of community lending it all would be fine. When was the last time that was their “core business”? 1984? They’re going on 40 years of this. What if their “core business” doesn’t support those giant bonuses and ridiculous compensation levels at the tippy-top and they can’t sustain that business model without ripping people off?
They’ve already got the next generation of middle class borrowers staggering around like over-loaded mules with student debt. They’re not going to be borrowing a while lot additional now that they maxed out at 25. It makes sense that they’re branching out into middle-aged people who make 9 dollars an hour.
Han
@burnspbesq: Did you ever consider they might find it easier to repay the loan, and thus lower the risk of default if the interest rate was reasonable, you asshole apologist for the 1%? And there IS no risk they won’t get their principle back, it’s just a question of how much interest they’ll make. In case you hadn’t noticed, these are SECURED loans.
Kay
@Ruckus:
I don’t know where it ends. When they can’t squeeze one more fucking dime out of working people and we finally, finally look to government and business leaders and say “you know, THEY might BE the problem!”
How did I know a discussion about predatory lenders was going to end at the same place? In our deep disappointment in the ability of working people to make more. Them, again! It’s always them!
Let’s try a bold experiment. Outlaw usury rates and see what happens. It worked pretty well for 100 years. Maybe it will work again.
Kay
@Han:
They found the only thing lower income people own that they absolutely cannot lose because if they DO lose the car they can no longer get to work.
It’s VERY innovative. This is how they earn those giant bonuses in finance and lending, “ideas” like this one.
Han
@Tissue Thin Pseudonym: You are a moron, or an apologist. Or both. If the margins were so thin, private equity wouldn’t be looking to enter the market. Again, these car loans are SECURED loans. Based on the loan company’s evaluation of the car. That they forclose on. If they’re not making big money under these rules, they’re too stupid to breathe and should be put out of their misery on general principles.
Han
@Kay: Yeah, I’m probably sounding rather intemperate, but this sort of thing absolutely pisses me off. There are so many “poor taxes” in this country. And everything is based on credit score. So someone goes through a crisis and has to resort to this, even if they manage to pay it off and keep their car, if their credit score took too much of a ding they’ll keep paying for it in higher car insurance premiums.
Kay
@Han:
They could have modernized usury laws in the late 19070’s and early 1980’s. They could have done all kinds of things; floating rates, tiers, but conservative free market dogma forbade it, so instead we went from regulation to “transparency” and “disclosure”. Let the buyer beware! Just print the terms in larger and larger print, and if regulators are really feeling bold they’ll insist lenders put a black box around the warning!
How’s that working out? Can we scrap this dumb idea that “disclosure” = “regulation”, and start regulating again?
They could start by writing some state laws that makes it more difficult for lenders to seize the collateral. It’s too easy for them. Make it harder. They’ll stop making dumb loans if it costs them.
Kay
@Han:
We used to be able to regulate lenders in this country. What happened? Now it’s impossible? Why?
They’re reversing the laws because lawmakers and regulators are corrupt and captured. That’s what happened in Ohio and that’s what happened in Wisconsin. They’re bought. They work for the lending industry.
4jkb4ia
I introduced that to my husband as “Here is a story about how title loans on your car are a rip-off”. This seemed patently obvious. He then used the words “loan sharking” spontaneously and I was pleased to tell him that the VA state legislator agreed. We couldn’t think which federal agency ought to be responsible for looking into this.