They _want_ people who arn't completely broke but can't afford the credit so they'll keep making minimum payments forever. ......
Yep, every dollar of debt you take puts $10 back into the sytem which they can then lend out to ten more suckers. Gotta love it.
Not completely. It might seem that people who pay off their credit cards every month would be refused credit under the "sucker system" y'all describe. But those people result in cash flow for the companies. If everyone made the easy minimum payments, it would be a big problem for them.
There are multiple games ... like a casino.... each game has it's own odds and action.
The people that pay off their debt are a predictable cash flow.
The fee that the merchant pays is what the casinos call action.
With fees in the 2.5% to 3.5% the lender can make 12x2.5% on
his bank... a 30% margin is not a bad business.
A second game is the individual with a constant balance of say $5000..
and a constant cash transaction rate of also $5000 a month. This is almost
a double dip situation because the full $10,000 is subject to interest at
near 25%per year and the $5000 action is also 30% so.
(30% of $5000)+(25% of $10,000)=$4000
Since on average the bank has floating $7500 this is a marvelous rate of
return. The banks will argue and toss better data models and calculus
at you but the difference is often padded with short term-overnight loans
from the Fed. at one percent.
It is a racket (IMO), there are serious writedowns for fraud but I might assert
the biggest expense is the layers of management and regulatory compliance.
Most organizations do not care about regulatory compliance because
it is a documented obligatory expense and comes of the books very quickly.
Our elected officials need to pay attention....
First they need to pay attention to regulations crafted under the rule of law.
We no longer live in a world of law we live under a burden of dynamic
regulations rubber stamped by laws that allow regulations to go into effect
as a default fall through.
Comments like this illuminate the problem. When House Minority Leader Nancy Pelosi (D-CA) to
defend her 2010 comment that “we have to pass the bill so that you can find out what is in it, away from the fog of the controversy.”
She and the press ignored the reality that the law was simply a framework for regulations that on the first iteration
comprised 10x the page count of the law the reality is more obese...11,588,500 Words: Obamacare Regs 30x as Long as Law...
"Bureaucracies in the Obama Administration have thus far published approximately 11,588,500 words
of final Obamacare regulations, while there are only 381,517 words in the Obamacare law itself.
That means unelected federal officials have now written 30 words of regulations for each word in the law."
Golly I got off track...