Louis M. Green, Attorney at Law

The current money crisis has brought up something I’ve  thought of as a consumer attorney but never shared with anyone.

It is that LOAN RATES ARE COUNTER-INTUITIVE.  People who have the worst credit ratings pay the highest interest rates, and people with the best credit pay the lowest.  It should be the reverse.

A lower payment is easier for a credit risk to repay; it accelerates equity accumulation, and therefore protects the loan owner and particularly the loan guarantor in the event of a default.   Those with excellent credit are better able to afford a higher payment and would have an incentive to accelerate their payments to increase their equity, choose shorter term loans and pay them off  sooner.

In reality, those with excellent credit don’t have to pay higher interest and because they create a competitive lending market for their business.  Therefore, for real money to be made in lending, particularly where there is a pressure to earn maximum short term profits, it has to be made by lending to higher risks, charging them high interest, adding on initiation points and lots of other fees and perpetuating 30 year mortgage as the norm.  Very few people understand what happens at a closing, and even fewer, even lawyers don’t read the fine print in their closing documents.

Why a sub-prime craze?  Because that’s where the money was made for a long time.  Why not short term greed if we’re all dead in the long run?

And now those that decry government welfare at the country club are now asking for….

Louis M. Green

http://louismgreen.com

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CNN posted an interesting story about how finance companies sucker people.  This included aggressive selling tactics to push customers  into cash advances, sometimes getting them to max out their credit
cards.

Read the article here.

Louis M. Green

Visit My Website:

LouisMGreen.com

 CNN How Banks Cheat Customers: Download

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New York Times: Congress Should Enact Credit Cardholders “Bill of Rights”

The September 14, 2008 edition of the  New York Times published an editorial in favor of the Credit Cardholders “Bill of Rights” pending before Congress. The legislation takes aim at retroactive rate increases, double cycle billing that allows assessment of interest on amounts already paid, multiple over-limit fees, and similar credit card company policies. Rep. Carolyn Maloney (D-NY), a champion of the legislation, has a webpage devoted to the issue, with links to key documents, including the legislation itself.

Read the NY Times article here.

See Rep. Maloney’s website here.

A tip of the hat to Brian Wolfman of the Public Citizen Consumer Law and Policy Blog for bringing this to my attention.

Louis M. Green

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A great piece from The Colbert Report!

Democrats may see the glass as half empty, but the repo men see that
you are behind payments on that glass. (03:31)

Louis M. Green

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