Annals of Finance: Those Loan Checks in the Mail

[substitute]

You may have seen these things, I get a couple a month. A check arrives in the mail. Sometimes it's an actual negotiable check, or if not it's a binding voucher of some kind. It's for a large sum of money, made out to me. If I cash it, it turns into an unsecured loan. I've always been curious why everyone wants to loan me $5000-$8000 without security.

I always shred these, since I don't need any more debt. But I can imagine getting one of these and saying "Okay, I sure do need five grand right now" and cashing/redeeming the thing.

I looked at the latest one more carefully. The "check" is bilingual; they sent it to me Spanish side out. It's for $6,000.95 (love the 95 cents). I can redeem it at any HSBC office. I have then taken out a loan for this amount at 29.980% APR. Because we still have some vestiges of government they have to tell me this in bold type, and also tell me my payments, how many payments there will be, and the total finance charges. This is a five year loan with monthly payments of $194.08 and:

The total finance charges are $5,643.85.

So that's why they're happy to loan that much.

Comments

[substitute.livejournal.com]

There is no federal usury law. At least two states, North Dakota and Delaware, have no state usury law. Just about every credit card issuer is based in one of those two states.

[srl.livejournal.com]

Mmm, the joys of federalism.

Here, the news has been full of stories along the lines of "Bankruptcy filings are sharply up this week, as people rush to file before the new federal laws go into effect." Like, say, this one:

Credit card companies and financial institutions lobbied for eight years for the changes, arguing that revisions to the bankruptcy codes were needed because the system was being abused. Opponents of the changes said they will hurt middle-class wage earners and be particularly hard on single mothers, minorities, and the elderly by removing a safety net for individuals who have suffered unexpected hardships, such as unemployment or mounting medical bills.

usury for fun and, well, profit

[citizenx.livejournal.com]

Wait. There are credit card issuers based out of North Dakota? I thought they were all Delaware (specifically Wilmington).

Also, you can totally make, like, $60 with that loan check.