How much of that is up to individual responsibility vs. the government though?
Quite frankly if people want to leave money on the table in all of their purchases because they refuse to read agreements, do due diligence before buying things et al, then I think it should be perfectly legal for businesses to prey upon this willful ignorance. That said where government has a role to play is to ensure transparency wherever possible to keep terms and conditions simple enough so people can make informed decisions should they choose to actually pay attention.
No wonder the NDP got elected, look at people wanting the Government to protect them from lenders and vice versa. At what point is your interest rate the Government's problem.
And while I'm morally pleased about making life harder for Cash Stores it should be reiterated that these are Lenders of Last Resort.
First of all if you're borrowing from them you have to be desperate, not that that should mean you're forever entwined in a life of enslavement to them, but at the same time they're giving the riskiest loans, so yeah, their interest rates are going to be insane, and secondly if you're borrowing from them it means no one else will lend to you and there are probably 'personal decision' reasons behind that unwillingness.
Similarly, if lenders want their loans guaranteed by the Government then they're not taking any risk and as such their rates would have to be adjusted to reflect the complete lack of risk. Then lenders would just have a supply.
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No wonder the NDP got elected, look at people wanting the Government to protect them from lenders and vice versa. At what point is your interest rate the Government's problem.
And while I'm morally pleased about making life harder for Cash Stores it should be reiterated that these are Lenders of Last Resort.
First of all if you're borrowing from them you have to be desperate, not that that should mean you're forever entwined in a life of enslavement to them, but at the same time they're giving the riskiest loans, so yeah, their interest rates are going to be insane, and secondly if you're borrowing from them it means no one else will lend to you and there are probably 'personal decision' reasons behind that unwillingness.
Similarly, if lenders want their loans guaranteed by the Government then they're not taking any risk and as such their rates would have to be adjusted to reflect the complete lack of risk. Then lenders would just have a supply.
We have to be careful what we wish for. Down in the US, in some states if you miss a payment for whatever reason, your interest rates spike on the outstanding debt. Plus they add penalty fees on top of that. That's highway robbery and that's why we hope our government keeps things somewhat regulated here.
And if we want the government completely out of giving loan guarantees, then we should start with the CHMC. Does that sound like a good idea?
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We have to be careful what we wish for. Down in the US, in some states if you miss a payment for whatever reason, your interest rates spike on the outstanding debt. Plus they add penalty fees on top of that. That's highway robbery and that's why we hope our government keeps things somewhat regulated here.
And if we want the government completely out of giving loan guarantees, then we should start with the CHMC. Does that sound like a good idea?
I totally agree, we have to find some happy balance.
I completely understand how bad some of those cash places are, miss one payment and it could cost you a fortune to repay a fairly small loan.
And I cant comment on the CMHC as I'm not really all that familiar with it.
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Why anyone would have emergency funds in cash (wasting away, not earning interest) when there is a Money Mart on every corner for when times are tough is beyond me.
Seriously? You think that's the best solution to a cash crunch?
None of those things force a consumer into taking on more than they can handle. You can contribute cash to tour RRSP, the dealership will tell you the total cost of your car and you shouldn't be worried about the interest rate on tour CC since you shouldn't carry a balance on it.
Even with the ads companies put out, the final responsibility is with the person making the decision, not with the company. I know I could go and get a $90k truck financed for 84 months, and the payment might look great. But I have to be responsible enough to understand what taking that debt on means to my life and finances, it's not the dealer's responsibility to pour over all my financials and tell me if it is a good idea or not.
But the lender of the money doesn't need more protection in these cases. We don't need a debtors jail or tougher bankruptcy laws to protect the lender. The lender if the risk is great too shouldn't lend the money. 17yr trailor loans -- dumb for both parties.
I agree with you on protecting land lords more though.
Seriously? You think that's the best solution to a cash crunch?
He's joking.
I'm not a fan of the NDP in general, but putting stronger regulations on those places is something I support. Otherwise, the onus should be on the person to control themselves with credit, and if people need to be talked down to or some feelings get hurt I think long term it's for the best. The amount my friends bitch and moan about their student loans and other debts as if they weren't responsible for incurring those costs is insane.
Get rid of CMHC for new mortgages and phase it out on renewals. Let the banks decide on their own qualifications for getting a mortgage, would probably wind up at about 15% down and max 25 year amortization
Last edited by llwhiteoutll; 08-03-2016 at 02:40 PM.
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Any "solution" that relies on people not being dumb is not a solution at all. Democracy is for the yobs and yokels as much as it is for the 1%er's like Locke and me, and thus the gov't can and should regulate commerce with the goal of keeping the naive, slow, and imprudent from hurting themselves as much as is possible without overly disadvantaging the sophisticated, quick and prudent.
And so - too bad Money Mart. It's back to organized crime for your loan sharking, everyone!
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Any "solution" that relies on people not being dumb is not a solution at all. Democracy is for the yobs and yokels as much as it is for the 1%er's like Locke and me, and thus the gov't can and should regulate commerce with the goal of keeping the naive, slow, and imprudent from hurting themselves as much as is possible without overly disadvantaging the sophisticated, quick and prudent.
And so - too bad Money Mart. It's back to organized crime for your loan sharking, everyone!
Well put.
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I'm not a fan of the NDP in general, but putting stronger regulations on those places is something I support. Otherwise, the onus should be on the person to control themselves with credit, and if people need to be talked down to or some feelings get hurt I think long term it's for the best. The amount my friends bitch and moan about their student loans and other debts as if they weren't responsible for incurring those costs is insane.
Get rid of CMHC for new mortgages and phase it out on renewals. Let the banks decide on their own qualifications for getting a mortgage, would probably wind up at about 15% down and max 25 year amortization
Unless you made insurance illegal a private company would step in and offer insurance. For example Genworth provides the same rates as CMHC. So CMHC just keeps a cap on the premium a private company might charge.
You also have some interesting side affects. Rents would go up dramatically as the barriers to entry for housing became higher. Rather than the demand side being driven by the relative cost of a mortgage it would be supply driven.
It would also decrease housing value which would be positive outcome for those who don't currently own however I think overall such a move is negative as it decreases home ownership and increases rent costs.
Any "solution" that relies on people not being dumb is not a solution at all. Democracy is for the yobs and yokels as much as it is for the 1%er's like Locke and me, and thus the gov't can and should regulate commerce with the goal of keeping the naive, slow, and imprudent from hurting themselves as much as is possible without overly disadvantaging the sophisticated, quick and prudent.
And so - too bad Money Mart. It's back to organized crime for your loan sharking, everyone!
I agree completely with your post, except for the last line.
The Money Marts of the world provide a service - one that there is demand for.
Risk and return are related, and there is a cost to providing this sort of service (a fair number of defaults being one such cost). If the interest rates and charges that they are implementing are exorbitant, other businesses are free to enter the space and provide a lower cost alternative.
However, the market isn't being flooded with new participants, so that says to me that profits aren't exorbitant.
Then along comes mother government and legislates reduced margins. This will cause some players to exit the market. And that will benefit no one - especially those in need of the service.
Get rid of CMHC for new mortgages and phase it out on renewals. Let the banks decide on their own qualifications for getting a mortgage, would probably wind up at about 15% down and max 25 year amortization
CMHC puts in rules because they know that banks are generally stupid and will do stupid things to get short term business at the expense of long term catastrophe.
Let the banks totally self regulate mortgages and you'll be able to sign a 50 year amortization with 1% down.
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I agree completely with your post, except for the last line.
The Money Marts of the world provide a service - one that there is demand for.
Risk and return are related, and there is a cost to providing this sort of service (a fair number of defaults being one such cost). If the interest rates and charges that they are implementing are exorbitant, other businesses are free to enter the space and provide a lower cost alternative.
However, the market isn't being flooded with new participants, so that says to me that profits aren't exorbitant.
Then along comes mother government and legislates reduced margins. This will cause some players to exit the market. And that will benefit no one - especially those in need of the service.
That's not really how the market works. There are plenty of reasons why the market isn't being flooded with new participants. Actually it isn't really true at all. The market is flooded with participants because it is such a lucrative business and it is basically an essential service because there are so many people who can't get by, even people who work.
Most people who use these services get sucked into using them. It is predatory lending. They are evidence that our social safety net isn't good enough, that our populace aren't financially literate and that it is way, way too easy to get into debt and not be able to survive on crappy pay, crappy EI/welfare and that affordable housing is generally insufficient.
CMHC puts in rules because they know that banks are generally stupid and will do stupid things to get short term business at the expense of long term catastrophe.
Let the banks totally self regulate mortgages and you'll be able to sign a 50 year amortization with 1% down.
I think the opposite is more true. It's really hard to get a non CMHC mortgage. You usually need closer to 50% down and fantastic credit or awesome income or huge net worth. If you're thinking US style lending pre 2008, none of those lenders ended up actually owning the mortgages they sold. They were packaged up and sold to investors like the next day. Our banks are incredibly risk averse.
Quote:
Originally Posted by Cecil Terwilliger
That's not really how the market works. There are plenty of reasons why the market isn't being flooded with new participants. Actually it isn't really true at all. The market is flooded with participants because it is such a lucrative business and it is basically an essential service because there are so many people who can't get by, even people who work.
It's not a very lucrative business at all. That's why banks don't do it. Surprisingly the default rate on Payday loans is no that much worse than typical bank loans. But the collection success is much less. It's a business that is totally dependent on volume. You need a whole lot of $100 loans each month to stay in business.
Quote:
Most people who use these services get sucked into using them. It is predatory lending. They are evidence that our social safety net isn't good enough, that our populace aren't financially literate and that it is way, way too easy to get into debt and not be able to survive on crappy pay, crappy EI/welfare and that affordable housing is generally insufficient.
There's a stupidly simple solution to the problem with payday loans. If there were a data base of users shared between businesses you could enforce the one loan at a time rule and the problem is literally solved. It's not the interest rate that is unfair or predatory...it costs so much more for so many more things. It's the 20% of customers who pay loans with loans.
I disagree that they are even an essential service. People I've known who use them are simply extremely undisciplined with money. They would take out a $100 loan on a Friday so they could have a fun weekend. Then the following week pay back $125. Every two weeks like clockwork, month after month. In the absence of those loans, they'll adapt. They won't starve or fail to make rent.
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I think the opposite is more true. It's really hard to get a non CMHC mortgage. You usually need closer to 50% down and fantastic credit or awesome income or huge net worth. If you're thinking US style lending pre 2008, none of those lenders ended up actually owning the mortgages they sold. They were packaged up and sold to investors like the next day. Our banks are incredibly risk averse.
That's totally untrue. Getting a conventional mortgage, if you have the money for a down payment, is incredibly easy and the banks have incredible flexibility that they don't have when they have to follow CMHC rules.
Quote:
It's not a very lucrative business at all. That's why banks don't do it. Surprisingly the default rate on Payday loans is no that much worse than typical bank loans. But the collection success is much less. It's a business that is totally dependent on volume. You need a whole lot of $100 loans each month to stay in business.
Well that's really weird that there are at least half a dozen national companies with literally thousands of stores if it isn't lucrative. They must all like losing money. And they must like doing it in close proximity to each other because they have a habit of opening tons of stores in low income areas where they can prey on people.
Banks don't do it because it is a waste of their time and it is a scummy business for scummy companies. And banks will do just about anything for profit, so it tells you how bad predatory lending must be for them to not want to be involved.
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There's a stupidly simple solution to the problem with payday loans. If there were a data base of users shared between businesses you could enforce the one loan at a time rule and the problem is literally solved. It's not the interest rate that is unfair or predatory...it costs so much more for so many more things. It's the 20% of customers who pay loans with loans.
Or just change the legislation and regulation surrounding them to be more consumer friendly. The "market" has proven time and time again that it can't be trusted to self regulate, in virtually every industry, including this one. And since it is an industry devoted to preying on the less fortunate, it is no surprise they need regulation the most.
I disagree that they are even an essential service. People I've known who use them are simply extremely undisciplined with money. They would take out a $100 loan on a Friday so they could have a fun weekend. Then the following week pay back $125. Every two weeks like clockwork, month after month. In the absence of those loans, they'll adapt. They won't starve or fail to make rent.
Like any available credit facility it can be abused. I don't think credit cards should be banned just because a lot of people misuse them. Neither should payday loans, but it doesn't make all people who rely on them irresponsible simpletons.
But sometimes the government uses regulation to protect consumers from themselves because they can't be trusted. Same with the companies that provide the loans.
That being said, they are essential for a lot of low income people who are vulnerable and can't turn to a bank for lending because they don't meet the requirements. No one is going to give you a $2000 loan so you can make rent that you can't afford because of the hospital bill you paid for your sick kid.
