Friday, 26 October, 2012

Exploiting Financial Ignorance

Exploiting Financial Ignorance

Out here in India, we're reasonably familiar with the notorious moneylenders exploiting ignorant, impoverished, illiterate people quite liberally. We're also familiar with the kind of usurious rates of interest charged by them.

Apparently, we're not the only ones who have such moneylenders. Out there in the US, the entire process has been institutionalised.

Take a look at:

A key difference that I noticed was that in our case, the moneylenders' loans are comparatively risky. In contrast, the so-called "Payday loans" offered by the US banks appear to be completely secure, linked as they are, to the weekly / monthly salary that's likely to be credited into the very same accounts, with a provision for directly debiting the amount due to the banks from the customers' savings accounts!

Obviously, a Heads-I-win-Tails-you-lose situation for the banks.

I'm sure that a class-action suit is not too far off out there.

But then, I wonder if our banks and NBFCs are having any such interesting products and whether our regulators are keeping a watch to prevent customers from being fleeced???

The only obvious thing that I can think of is the "revolving credit" facility offered by credit card providers to their customers.

I'd welcome feedback on your experiences in this connection. 



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