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The 1,147% APR Loan: For A Limited Time Only?

January 7, 2010, 12:00 am
By Corey Pein
Here's hoping.

In the issue of SFR that hit the streets yesterday, we noted legislative proposals by Lt. Gov. Diane Denish and state Sen. Peter Wirth, D-Santa Fe, to curtail the quickly evolving practices of predatory lenders.



This morning, Reuters blogger Felix Salmon picks up on the New Mexico Attorney General's efforts in that vein. Check out the outrageous terms of the loan in Salmon's post: To borrow $100, a New Mexico man was asked to pay $999.71 in finance charges.

That's "loan sharking, pure and simple," Salmon writes. But the secondary market in debt complicates matters, at least from the perspective of the courts:
It's possible that if Cash Loans Now [the lender] tried to take [the borrower] to court, the judge would just throw out the case, since the loan was so unconscionable. But if Cash Loans Now just sold its defaulted loan to Fastbucks [another loan shark], while Fastbucks sold its defaulted loan to Cash Loans Now, then both would have bought legitimate debts of over a thousand dollars and wouldn't have been paid a penny on them: indeed, they would both be out of pocket. It would be very hard for a judge to throw out that kind of case.

 

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