NEWS: The World's Worst Visa

CULTURE: The World's Worst Visa

If you've ever gone to school, you'll understand the evil temptation of the devil credit card. If you've ever faced the possibility of true credit failure, bankruptcy, or have been called collection agencies, you'll know the sickening panic that washes over you when you realize how financially fucked you are. Credit card providers dedicate a significant amount of money and energy to educated consumers on over-extending their credit, but are also more than happy to collect fees and interest on people's mazed out credit cards.



One company in Great Britain is offering a credit card to low-income individuals to help establish a credit history.



With 70% interest_the highest percentage in history.

Seriously, I know loan sharks with better interest rates than these assholes.

yeah i want that card!

Why, again, are they assholes? They are offering credit to an extremely high-risk sector. They probably have to charge insane interests to expect, actuarially, any kind of profit. It sounds like nobody else is offering credit to this demographic. Without Vanquis, Bob Creditproblem can get no financing. With Vanquis, he can choose not to get financing, or he can choose to get financing with full knowledge of the terms. Nobody's forcing him to do it.

I understand that creditors have to be responsible, and cannot ethically use a person's hopelessness to weasel her last few pennies out of her. But it is possible to offer credit to a high-risk sector without encouraging high-risk borrowing. My friend works with microfinance in Kenya, for entrepeneurs in something like the poorest 10% of the poorest 10% of a poor country, and they have something like a 98% return rate on their loans. It's about education and support. The high interest rate is still required because no lender can justify making a loan that has a negative expected value, unless the lender is a nonprofit and has reliable grants to cover the loss.

It's a hairy situation, and I don't support those who take advantage of poverty, but I don't think it helps any to demonize parties, and namecalling in a "news" story is just a demonstration of journalistic immaturity.

Wow... and I thought the 30% max rate here was nasty :/

And the reason they're assholes?

Because in offering high rates to high risk folks - they're encouraging them to fail again. The goal would be to profit off the less fortunate... which might be okay in a nation based on making money off the sweat of the poor, but in a primarily socialist society such as those prevalent in the UK, you'd expect better.

[Edited on Feb 12, 2005 8:16PM]

Apparently you didn't read but the first sentence (or possibly paragraph) of my post. Upon reading the rest, you'll find that you just told me nothing that I haven't already demonstrated knowing.

Ouch. *hugs his perfect credit rating* I can't even imagine letting myself get into that kind of situation.

My sentiments for the credit industry are very similar to those found in the book "Fight Club."

Hell's bells...doesn't the UK have laws against usury? I'm pretty sure 70% would fall under such...

Screw that I got like three credit cards with $10,000 +, I feel the temptation but don't give in very often. It shows with my "A" credit rating!

If you have a credit line like that (and I speak from experience, as mine engulfs 50k nicely), you do not feel the same temptation as someone who is below the poverty line trying to feed her children. Microfinance, or whatever you want to call giving credit to the poorest of the poor with low credit rating, is a delicate process. It is hard to strike a balance between pleasing the board/shareholders and doing any kind of responsible lending, without being a nonprofit.

Loaning to those in dire straits is about the hairiest venture an ethical person can undertake, these days. It's not nearly the same as loaning to someone with a good credit line.

Sign me up!

As your financial advisor I recommend maxing it out on Scratch-it tickets.

Or a ski mask and a shotgun.

You're a genius! I can't lose!

What the heck is the highest legally allowable rate of interest in the UK? Don't they have loan sharking laws?

The U.K. and the U.S. have no national usury laws.

Does the government bail out the credit industry in the UK when it tanks like it does here in the U.S.A.? If it does, legally or extra-legally, I'd think they could lower the rate a bit.

They could. The problem is, if the rate were lower, all the actuarial tables would dictate that the lender cease making loans to this demographic. It's hard enough for nonprofits to stay afloat loaning to high-risk clients (as my friend in Kenya will attest). For a lender that is expected to turn any profit, loans to this group with any kind of sane interest rate are, well, insane.

If the government twisted arms, the lenders would just stop offering the loans. Maybe that's the best thing, if the lenders are profiteers. But if they are sincerely trying to provide a lifeline to the critically uncreditworthy, any such intervention would be a Bad Thing. As I've said before, it's a hairy situation. There are bad guys and good guys on both sides, but to namecall or suggest that it is black and white is to demonstrate shallow understanding of the situation.

your comments sound reasonable, but let's add a little context about credit card debt in the UK:

According to the Bank of England the total borrowing growth this year has raised households' debt to 140% of aggregate income. This is above the levels in the United States and most large European countries.

According to the National Consumer Council one in five people are borrowing money just to pay household bills, and one in four are struggling to meet bills and credit repayments. Six million families are already struggling to keep up with credit commitments at a time when borrowing is rising.

More than half a million people may have crippling debts on their credit cards, MPs were told in October. The massive problem was revealed when credit card chiefs were grilled by senior MPs. The bosses admitted that between one and four per cent of customers were in severe financial difficulties. Members of the powerful Commons Treasury committee _ which is probing credit card charges and marketing _ estimated that this meant more than 500,000 people have huge balances which they are struggling to pay off.

read it for yourself:
http://www.creditaction.org.uk/debtstats.htm

This isn't Kenya. It's not microfinance, which is a remarkable form of capital intervention practiced on a very small scale--neighborhood or village.

you sd "But if they are sincerely trying to provide a lifeline to the critically uncreditworthy, any such intervention would be a Bad Thing."

They're not. They're sincerely trying to squeeze a few quid out of those desperate enough to borrow money and then try to repay.

In many parts of the developed world, there is a name for this: "savage capitalism."

Assholes because ignorance is a demographic strip-mine only those with small penises would capitalize on. Fight Club. Watch it now.

if you are dumb enough to spend more than you can pay than you deserve to get raped by the credit card companies.

*hugs his perfect credit rating

I'm not trying to exonerate or prosecute them: I was just giving them the benefit of the (considerable, given the lack of evidence presented so far) doubt. Can you provide evidence of the claim that this particular lender's intent is to find clients who will default?

Namecalling is about the best way I've found to identify someone without anything much to add.

That is an oversimplification of Dubyan proportions. It's easy for those of us who have never been faced with the "feed your kids and go further in debt, or don't feed your kids" choice to criticize those who face that choice every month.

Usury is real, and it is a hallmark of the ethically bankrupt.

I already have. Read the link I supplied about the credit situation in the U.K.

Or, if you prefer, I haven't--as you well know. Asking me to supply evidence is, as you also know, an example of reductio ad absurdum--loosely applied, I admit.

It would seem to me that, despite the apt and appreciated jab at Dubya, you are guilty of oversimplification as well. In this case, it would be an oversimplification of Johnsonian proportion--Samuel not Lyndon Baines. The great Johnson refuted Bishop Berkeley's denial of the material world by kicking a stone and stating, "I refute it thus."

There is, in your request for "evidence" of such a particular and exacting sort, something reminiscent of the claims and counterclaims of Holocaust-deniers. I am not calling you by this hateful epithet but calling attention to something I do find disturbing in all your reasonableness.

I apologize if I offend. Again, I am not resorting to calling you names.

Wow...isn't this in vein of the same type of tactics that large corporations use to keep developing countries within their iron grip?

No offense taken.

I am trying, if anything, to dismiss oversimplifications. I don't refute your claims about the state of credit in the U.K., and I don't refute that a 70% interest rate is suspect. At the same time, when I put myself in the shoes of a for-profit, ethical lender, I cannot find any strategy that cannot be (in the vague terms presented here) described as this lender's policy is described.

Without further evidence regarding this lender, I just don't like the quick jump to "asshole". "Suspect", sure. Usury is serious business, and it is unjustifiable in any situation. I just don't like the "if she weighed the same as a duck, she's made of wood" attitude taken by some in the thread. "But can you not also build bridges out of stone?"

Again, if an honest lender wanted to give the poor a way to establish credit, he would find those who make some kind of an income and offer to loan them tiny amounts of money at high interest rates (unless he were a nonprofit). Beyond that, he would take steps to find those who would be unlikely to default or overborrow.

I will not apologize for asking for evidence of wrongdoing, because in this case I don't feel that it is obvious. Some people would accuse my friend's nonprofit in Kenya of being "obviously profiteers". Other outfits in Kenya are obviously profiteers. If the evidence is so obvious, it should not be hard to provide. Evidence of the Holocaust is ample, despite the tenuous claims of some who deny it. If Vanquis is equally obviously shady, evidence should not be hard to unearth.