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Response to nc4bo (Reply #28)

Sun Nov 9, 2014, 12:59 PM

222. "Banks Can’t Get Away With Horrible Mortgage Practices Anymore, So Now They’re Doing It With Car

Loans"

http://consumerist.com/2014/07/21/banks-cant-get-away-with-horrible-mortgage-practices-anymore-so-now-theyre-doing-it-with-car-loans/

Subprime loans: they aren’t just for mortgages anymore. The next big bubble of ill-advised loans to borrowers who can’t pay is coming due. This time, it’s used car dealers reaping the interest and repossessing the cars.
The New York Times reports that subprime auto loans have risen over 130% in the five years since the big financial crisis hit in 2008. Over a quarter of all new auto loans issued in 2013 went to lower-credit borrowers.
The wave of questionable lending is being driven by exactly the same thing that drove the mortgage bubble, according to the NYT: Wall Street firms making a buck on trading packages of bundled loans. These complex bonds then increase the demand (from insurance companies, mutual funds, and financial companies, not from consumers) for more loans, triggering a big cycle.
The subprime loans, meanwhile, come with sky-high interest rates — up to 23%, reports the NYT. They add, “The loans were typically at least twice the size of the value of the used cars purchased, including dozens of battered vehicles with mechanical defects hidden from borrowers.”


Your post is so on point. This is tied to the latest Wall Street plundering. And it's a double hit, since many of the same people who were devastated by the early 2000's Wall Street financial debacle had their credit ratings impacted, so now are being hit by this as well. In the meantime, the same people and their buddies are still cashing on on others' misery.

And similar practices are extending into other arenas- see my post at #216 for more on that.

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