boutons_deux
10-22-2014, 08:18 AM
States Ease Interest Rate Laws That Protected Poor Borrowers
Lenders have come under fire in Washington in recent years. Yet one corner of the financial industry — lending to people with poor credit scores (http://topics.nytimes.com/your-money/credit/credit-scores/index.html?inline=nyt-classifier) — has found sympathetic audiences in many state capitals.
Over the last two years, lawmakers in at least eight states have voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit.
The overhaul of the state lending laws comes after a lobbying push by the consumer loan industry and a wave of campaign donations to state lawmakers. In North Carolina, for example, lenders and their lobbyists overcame unusually dogged opposition from military commanders, who two years earlier had warned that raising rates on loans could harm their troops.
The lenders argued that interest rate caps had not kept pace with the increased costs of doing business, including running branches and hiring employees.
But a recent regulatory filing by one of the nation’s largest subprime consumer lenders (http://www.nytimes.com/interactive/2014/10/22/business/dealbook/22rates-document.html), Citigroup (http://dealbook.on.nytimes.com/public/overview?symbol=C&inline=nyt-org)’s OneMain Financial unit, shows that making personal loans to people on the financial margins can be a highly profitable business — even before state lending laws were changed. Last year, OneMain’s profit increased 31 percent from 2012.
“There was simply no need to change the law,” said Rick Glazier, a North Carolina lawmaker, who opposed the industry’s effort to change the rate structure in his state. “It was one of the most brazen efforts by a special interest group to increase its own profits that I have ever seen.”
The legislative victories in states including Kentucky, Arizona, Missouri, Indiana and Florida ( RED STATES! :LOL )have come at a particularly opportune time for Citigroup, as the bank prepares to sell or spin off OneMain into a separate, publicly traded company.
Another large subprime consumer lender, Springleaf Financial, went public last October, and its shares have increased 78 percent since then.
Under the previous law, lenders could charge 30 percent interest on loans up to $1,000 and 18 percent on a remaining balance of $6,500. The new law allows for rates of up to 30 percent on the first $4,000 of a loan and 24 percent on the next $4,000.
http://mobile.nytimes.com/blogs/dealbook/2014/10/21/states-ease-laws-that-protected-poor-borrowers/
Lenders have come under fire in Washington in recent years. Yet one corner of the financial industry — lending to people with poor credit scores (http://topics.nytimes.com/your-money/credit/credit-scores/index.html?inline=nyt-classifier) — has found sympathetic audiences in many state capitals.
Over the last two years, lawmakers in at least eight states have voted to increase the fees or the interest rates that lenders can charge on certain personal loans used by millions of borrowers with subpar credit.
The overhaul of the state lending laws comes after a lobbying push by the consumer loan industry and a wave of campaign donations to state lawmakers. In North Carolina, for example, lenders and their lobbyists overcame unusually dogged opposition from military commanders, who two years earlier had warned that raising rates on loans could harm their troops.
The lenders argued that interest rate caps had not kept pace with the increased costs of doing business, including running branches and hiring employees.
But a recent regulatory filing by one of the nation’s largest subprime consumer lenders (http://www.nytimes.com/interactive/2014/10/22/business/dealbook/22rates-document.html), Citigroup (http://dealbook.on.nytimes.com/public/overview?symbol=C&inline=nyt-org)’s OneMain Financial unit, shows that making personal loans to people on the financial margins can be a highly profitable business — even before state lending laws were changed. Last year, OneMain’s profit increased 31 percent from 2012.
“There was simply no need to change the law,” said Rick Glazier, a North Carolina lawmaker, who opposed the industry’s effort to change the rate structure in his state. “It was one of the most brazen efforts by a special interest group to increase its own profits that I have ever seen.”
The legislative victories in states including Kentucky, Arizona, Missouri, Indiana and Florida ( RED STATES! :LOL )have come at a particularly opportune time for Citigroup, as the bank prepares to sell or spin off OneMain into a separate, publicly traded company.
Another large subprime consumer lender, Springleaf Financial, went public last October, and its shares have increased 78 percent since then.
Under the previous law, lenders could charge 30 percent interest on loans up to $1,000 and 18 percent on a remaining balance of $6,500. The new law allows for rates of up to 30 percent on the first $4,000 of a loan and 24 percent on the next $4,000.
http://mobile.nytimes.com/blogs/dealbook/2014/10/21/states-ease-laws-that-protected-poor-borrowers/