Talking Points About Consumer Finance Lending

Why Did We Oppose HB 810?

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Rates on small loans in NC are already too high. With families struggling, making these loans more expensive will be a disaster for NC consumers.

  • 25 to 54% interest is enough. Consumer finance companies can already charge up to 54% annual interest on the smallest of these loans. They can also charge about 25% annual interest on loans up to $10,000. This is more than enough.
  • The companies are profitable already. The NC Commissioner of Banks has studied this industry in depth and concluded that there is no need for higher rates or fees.  
  • High interest would have stripped $50-70 million from NC consumers every year. We estimate that the bill that died in 2012 would have stripped an extra $50-70 million from NC families in interest alone, not even counting the cost of additional fees included in the bill --late fees, fees to record a security interest on the loan, and deferral charges.
  • Big giveaway to the companies that contributed to the financial crisis and have already gotten our bailout money. Two-thirds of these extra profits would have gone directly to CitiFinancial and American General (owned by AIG and a NY hedge fund).
  • Loans already trap borrowers in debt. 80% of the consumer finance loans made in 2009 were to existing or former customers. While repeat business is good in a lot of areas, it's a disaster for borrowers caught in high-cost debt.
  • Would restrict access to credit.  Consumer finance companies typically charge the maximum allowed under law.  By making these loans more expensive, some borrowers who qualify now would no longer qualify under the higher rate structure.  And, everyone will be paying more.   

Published: May 27, 2011