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04-11-2012 06:35 AM
This article today in the New York Times:
04-11-2012 06:37 AM
It truly is a vicious cycle, isn't it? And there will be those who didn't learn their lesson from 2008 and be doomed to repeat their past mistakes. It's unfortunate.
Follow my financial journey: http://www.frugalrican.com
04-11-2012 09:01 AM
Interesting that it mentioned JP Morgan Chase as tiptoeing into the subprime market. I'll have to keep an eye out, I haven't seen much of this yet.....
04-11-2012 09:58 AM
So many thoughts came to my mind when reading the article and the comments about it after the article.
What I will say is that everyone deserves a second chance in the credit world and the fact that banks are willing to lend to ask risk borowers is a good thing. By keeping CLs low and interest rates high, that helps to mitigate risk and offset the costs for everyone.
04-12-2012 06:16 PM
People want/need a fresh start after setbacks and lendors are going to capitalize on that fact.
04-12-2012 11:32 PM - edited 04-13-2012 01:26 PM
The credit crisis was mostly on mortgage-backed security defaults, credit cards were still profitable by and large; however, CL's and accounts were slashed since they count against the metrics that Federal Reserve requirements are calculated off of (pretty certain of that fact at least) and everyone was hurting for cash to meet their mandated reserve.
I've worked for enough lenders which have historically dealt with subprime borrowers and there is tremendous money in that market space. Capital One did just fine during the downturn. Nothing new in this article, everyone wants a slice of the pie now that people have realized that. Like anything else though there's different tiers of subprime, and some cases you do have to charge quite a bit, especially when you're dealing with 30% default rates in some strata.
People tend to cry about predation and other things such as this article espouses; however, credit plays an increasing role in all of our lives... even I've realized that I can't continue a cash-based existence. So in this case, subprime lending is a good for America thing; however, you can't expect them to do so without making some money... unless we want to have to bail them out, again. I didn't understand that (edit: the rationale for the Bailout) the first time personally.
That said, I don't know the rates / fees some of these companies are charging, but do we really think it's the same level as FP or Credit One? I'd certainly take a card with JPM or Chase as a subprime person over either of those two.