Predatory loans = more jobs for NC?

Ummm, I guess so, if you are an NC Republican legislator.  There’s just no limit to their willingness to screw over NC’s poor in order to help rich people get richer.  Pretty disgusting:

RALEIGH, N.C. — A proposal to allow consumer finance companies in North Carolina to charge higher rates and more fees is headed to the Senate floor after passing the Commerce Committee Tuesday on a voice vote. 

The proposal, Senate Bill 489, would roll back several of the state’s legal limits on consumer lending.

Lenders can currently loan up to $7,500 at a maximum annual interest rate of 30 percent for the first $1,000, and 18 percent for the next $6,500. For loans from $7,500 to $10,000, the maximum annual interest rate is 18 percent and the maximum term is seven years. 

The bill would expand the cap from $10,000 to $15,000 and increase the rates: 30 percent for the first $5,000, 24 percent for the second $5,000 and 18 percent for the third $5,000. The maximum term would be eight years.

To put that into perspective, someone who borrows $10,000 can currently only be charged 18 percent annual interest. Under the proposal, that borrower could be charged 27 percent – an increase of 50 percent.

The legislation also allows finance companies to charge late fees of $15 per payment and charge up to 1.5 percent for a deferred payment. 

Sponsor Senator Rick Gunn, R-Alamance, said small consumer lenders haven’t been allowed to raise their interest rates in 30 years.

“Some reasonable adjustments are necessary,” he said. “Forty to 50 percent of these companies have operated at a loss” over the past few years.

“We have lost over 1,000 jobs in the last decade,” Gunn said of the consumer lending industry. “We sit down eye to eye and qualify these folks. The last thing I want them doing is going to these other places where they’ll get the credit but the terms are not good.”

Sen. Jerry Tillman, R-Randolph, agreed. “It will bring reputable lenders back to North Carolina. It will bring jobs back to North Carolina,” he said of the proposal. “The need is there.”   

1) Oh no, the interest rates have been capped at already exorbitant levels for 30 years.  Ummm, surely they therefore need to go up.  The logic is simply unassailable.

2) I’ll expect our state unemployment rate to drop a full percentage point after this is implemented.  Not to mention, it will bring back all those “reputable lenders” who charge 30% interest.  

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About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

One Response to Predatory loans = more jobs for NC?

  1. Deborah Ferry says:

    Arizona allows title loan companies to charge up to 125% interest. That’s definitely predatory lending.

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