It’s always the same; the malicious, xenophobic, chauvinistic, bigoted lenders take advantage of innocent, pure, naïve borrowers in the dog-eat-dog world of financial capitalism.
A recent Wall Street Journal article describes that
“Several states are putting curbs on loans backed by car titles—short-term, high-interest debt that critics say too often results in consumers losing their vehicle when they can’t keep up with the payments. Auto-title lending, where the owner of a car hands over its title as collateral, will become illegal in Wisconsin later this year. Virginia will impose new regulations Oct. 1, structuring the loans to keep consumers from falling into a cycle of debt. Illinois last year capped car-title loans at $4,000 and slapped numerous restrictions on the industry. At least six other states have implemented new regulations since 2007.”
Before indulging in what is and is not moral, let us summon up the business model of ‘cash-loan-for-car-title’ businesses.
Essentially, there is no credit check, and therefore no real trust mechanism to base borrowing and lending. In spite of this, one party gives another party a few thousand dollars in exchange for a piece of paper that says they own the rights to the very car they watch drive off their parking lot with their money. All along, knowing that the borrower is cradled by rich men in congress who may at any time write off said debts with a swipe of their pen.
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this is but one strand of a much wider problem. It points up the hollowness of the much-vaunted ‘all equal before the law’ principle. When different groups of people are held to different standards of behaviour, with different rules, the law stops being justice and becomes an instrument of oppression. Theres not a nation anywhere whose laws have not been subject to this disease. while laws have made some progress in washing out the appalling gender and race discrimination ( having in some cases unhelpfully gone to the opposite extreme), laws that used to be , er, universal, have been hopelessly subverted by all sorts of legislation. These days, in many countries, there are vastly different rules for borrowers and lenders. For buyers and sellers. For employers and employees. And they all have the effect of making everybody ( including those the asymmetric laws vainly try to ‘protect’) worse off.
mushindo: There is no greater area in American law where inequality is built in than that of lender vs. borrower. However the law is overwhelmingly on the side of the lender– and always has been. In fact the basis for US law is the protection of property rights.
So where the article maintains that “..one party gives another party a few thousand dollars in exchange for a piece of paper that says they own the rights to the very car they watch drive off their parking lot with their money. All along, knowing that the borrower is cradled by rich men in congress who may at any time write off said debts with a swipe of their pen..” it does so misleadingly.
Could you please point me toward one single instance where a US court voided a legitimate debt, forcing the lender to forfeit the cash he has invested? I’d be very interested to see whether this has ever actually happened.
Nobody said anything about the courts – Congress has a bad habit of screwing creditors.
I fortunately don’t deal with title loan companies. So I wonder, who do they ask to collect the vehicles if the borrower defaults? States may have a legitimate complaint if the civil authorities are regularly asked to mediate.
Who do they call when somebody fails to make car payments? It’s the same people.
This is a civil matter, not a criminal action so the authorities are not involved. The cars are repossessed, so it’s the repo man that collects when someone defaults on the loan.
Reposessions are typically performed by private individuals. A standard trick for reposessing vehicles is for the repo man to tail you and wait until you reach a place you’ll be at for a long while. At that point, they break into your car, hotwire it, and wait for you to come back out again. At that point, they inform you your vehicle is being reposessed and drive away. Government agents are rarely used in matters of reposession, except for evictions from permanent structures.
I have never dealt with those places since I think they’re a rip off, but if others want to deal with them that is their decision and the government shouldn’t interfere.
The problem with these laws is that while they’re well intentioned they really don’t address the real issue. The issue is that these folks need short term loans and they have no place else to turn. Mainstream financial institutions like banks and credit unions won’t give the people a loan, so they go where they can get a one.
When Georgia cracked down on the industry they all moved across the border to South Carolina. The folks that used them then had to go to South Carolina to get a loan, or pay additional fees to do it by mail. The legislature there was flooded with complaints from the customers of the title loans shops because they were affected by the crack down in a very negative way. In some cases that was the money that fed their kids that day.
For every action there is an equal and opposite reaction. The reaction here will be if legitimate businesses can’t offer the service, then a loan shark will. The need for short-term cash does not go away and some enterprising entrepreneur will meet the need, legally or illegally.
Are the folks really better of dealing with a loan shark?
Before the big inflation of the 1960s it was against the law in most states for anyone to charge more than 18% interest. Before the world went off the gold standard and the invention of credit cards for the working class became possible . . . car loans were a big deal and most working class people had to go to a loan shark to get any kind of loan.
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