M Holmes wrote:
>> Yes they have an obligation to repay, but that obligation is limited and
>> the lender's steps to ensure repayment are also limited. This is what we
>> are discussing. The only sensible discussion is where these limits
>> should lie.
>
> Clearly attaching the debt to the borrower's house is already inside the
> limit. That seems reasonable to me. Surely if a debtor has assets then
> the lender should be able to claim a defaulted debt against those assets?
>
Not so clear. Some forms of debt are not inside this limit. I do not
know which forms are and which forms are not.
You may take an interest in this subject but most people do not.
>>> It's not like it's poor widdle borrowers versus huge mega corporations
>>> run by Ernst Stavros Blofeld.
>
>> Yes that is exactly what it is like.
>
> Nope. The banks are run by twits only marginally less hapless than the
> borrowers themselves. How else to explain the fact that between them
> they've probably scattered trillions of Dollars to the four winds?
And yet they still make huge amounts of money and are certainly the
financial power house of London which subsidises the rest of the country.
>
>>> In fact the money that's been borrowed is
>>> often the savings of a little old lady or the pension fund of someone's
>>> granny. Why should they go without just because someone doesn't like the
>>> borrowing deal they signed up for?
>
>> Investors too should also be protected from corporations such as
>> Northern Rock.
>
> They have all the protection they need: they can disinvest in the company.
>
They have the protection now. But a standard bank investor is looking
for a safe low risk environment, it would be uneconomic for them to
investigate a bank's finances. The failure of Northern Rock was because
the regulation failed and needs to be looked at. Confidence in the
banking system is required for commerce.
>>> You're right that some borrowers were remarkably stupid and didn't take
>>> the trouble to understand what they were getting into, but that means
>>> they should have either done some research or lived within their means,
>>> not that they shouldn't have to pay back what they owe.
>
>> Borrowers may get in to difficulties for all sorts of reasons not just
>> remarkable stupidity. Life is a gamble and sometimes a quite reasonable
>> risk turns bad.
>
> Which is why having a plan B is necessary when the original plan doesn't
> work out. If only the board of Northern Rock had understood that.
>
I was actually referring to small borrowers.
>> The obligation to repay is limited and the limits should
>> be clearly defined, not hidden in the small print are extended via some
>> technical manoeuvre.
>
> Is this possibility hidden, or is it there for anyone who cares to read
> of it? After all, we know about it and we (well I anyway) don't have any
> borrowings riding on the issue.
>
Financial contracts are very difficult to understand. My experience
tends to suggest that a tiny percentage of financial customers would be
aware of the terms or implications of the financial deals they enter
into. You may want everyone to spend their time researching this
particular issue, but we could say the same about many issues. It really
is a waste of time. Much better to have fair contracts with important
terms clearly expressed.
>> It is not reasonable to expect a consumer to research fully every
>> product they buy.
>
> It's reasonable however to expect them to research a product
> to a degree commensurate with the cost of what they're buying. Reading
> the blurb on the back of a paperback is sufficient research. However
> taking a mechanic friend to a car auction is advised because a car costs
> more than a book and a faulty one can cost lives. When someone is buying
> a house, it is for most the most expensive purchase they'll ever make in
> their lives. Some serious research is needed. Moreover, doing so on
> borrowed money vastly increases the financial risk involved, and so
> anyone doing this should understand the product they contract into and
> the general risks surrounding such products.
>
This again isn't true if I put 100k in a bank account I expect it to be
safe, I don't expect to have to research it. I expect to get the rate
quoted and for the bank not to default.
If I put 100k on a horse or a DotCom company I know I need to do my
research, but it is a different thing.
Not having to research banks it vital for an efficient economy.
>> The should expect a certain quality and fairness.
>
> It seems the very definition of fairness that if someone borrows money
> from someone else, they should pay it back.
>
Not to me, or it seems large multi nationals.
>> If they enter a secured loan they know their property is at stake if
>> they do not their property should not be used as security. The banks are
>> perfectly free to insist upon security if they wish.
>
> If they borrow money at all (and to be honest I think by and large
> people shouldn't) then they should know that if they have any assets at
> all, they'll be at risk if they don't pay their debts.
>
You don't believe in finance? A little difficult as it has become the
UK's principal industry.
>> You appear to live in a black and white world which favours loan sharks
>> and the Victorian debtors prison approach even when we have the example
>> of history to show us why this approach is flawed.
>
> Whereas we have the current mess of a bursting credit bubble to indicate
> why people should have a very much greater fear of debt and the risk it
> entails. We've gone a great deal too far the other way from the
> debtor's prison. Your kind of thinking is a big part of why.
>
Do you not think it is the lenders who should be expected to have taken
a more sophisticated view not the little man.
Particularly as the UK consumer's credit bubble doesn't seem to have
burst yet.
I actually share your view that credit has been too easily available
however I take the view that it is easier to control the pushers rather
than the addicts.
It figures that you would hate my way of thinking but I'm not sure if
you realise quite how much.
> FoFP
> |