SB 238 passed the Senate by a vote of 66 – 29. I haven’t read it in full; but generally it allows higher interest rates and charges for consumer loans and credit sales. If you have money, that’s probably good. If you don’t, not so much.
Masson's Blog
SB 238 passed the Senate by a vote of 66 – 29. I haven’t read it in full; but generally it allows higher interest rates and charges for consumer loans and credit sales. If you have money, that’s probably good. If you don’t, not so much.
My guess is that at least 66 of our senators have money.
In regards to your comment “if you don’t, not so much” I must respectfully disagree. I don’t think people understand the full impact of what this bill achieves. All people see if the “higher rates” but don’t realize the impact that would have taken place had the bill not passed. This bill allows the maximum rate on consumer closed-end loans to increase from 21% to 25%. The market that this covers is the finance company market. Finance companies lend to higher-risk, medium credit score consumers. In other words, blue collar middle to lower-middle class borrowers. These people aren’t always able to obtain credit from other sources like banks or credit unions. They also finance older used vehicles that banks and credit unions won’t touch. Hence, finance companies serve an important purposes in the economy. If it weren’t for them, higher risk and lower income consumers couldn’t repair their homes, pay medical bills, afford lower priced vehicles, and so on. Finance companies operate through local branches in order to keep a close relationship with their clients and by doing so, controlling their losses so that they can continue to operate. This comes at a much larger cost than having one centralized call center like the more mainstream credit sources. Finance companies also borrow the money that they in turn lend, since they aren’t backed by deposits like a bank. So they may pay 6-10% for the cost of the money. So all together after expenses and cost of funds, it may cost finance companies 15% to operate. Since the cost to operate continually increases, of course the charge for the product needs to increase as well. The rate increase is much better than the alternative. If the finance companies went out of business, think of the impact. Lower income consumers with no other access to credit would let their houses fall into disrepair, resulting in insurance losses, foreclosures, and falling property values. They wouldn’t be able to purchase cars they can afford, resulting in their inability to commute to work and increasing unemployment. They wouldn’t be able to pay medical bills, resulting in higher medical costs for everyone else. Not to mention all the employees of the finance companies and their families would be supported through unemployment payments and food stamps and other social assistance programs. In other words, this would all result in a drain on the economy, versus the stimulation it provides the economy now. It’s all interrelated.
These ‘good citizens’ drive the ignorant and desperate into bankruptcy and unemployment. Unless you know well the tricks and traps that await, getting a loan from these people invariably leads down a primrose path to bankruptcy and unemployment, where you can be signing your entire paycheck away each week and still have no hope of paying off.
Not sure what Manfred means by “signing away your entire paycheck each week.” Finance companies are heavily regulated by the FTC. Applicants must meet a minimum ability to pay; in other words there must be a certain percentage of the applicant’s income left over after all debts are taken into account for the month. It would be impossible for them to make a loan in which the payment consists of someone’s entire weekly paycheck. The loans are installment loans with a fixed payment each month, just like any other car loan or mortgage loan. I believe Manfred may be thinking of payday loan companies which are completely different.