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Comment by FussyZeus | Hacker News Reader

> "Immobilizers are most often seen in cases of sub-prime borrowers with questionable credit," he said. "The devices are very effective at keeping people on time with their payments."

John Oliver did a whole segment on these scummy dealerships, unloading shitty cars at massive markups deliberately (and not even hiding that they are) targeting borrowers who will probably default, so they can repo the car and resell it to some other poor person.

None of this is illegal (except in this case obviously) but it still feels like something that should be illegal, amazes me we're so poor at going after what's obviously a predatory business practice.

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While i sympathize, with a high risk of default you need to charge very high interest rates and markups. You cannot get around the economics with a Care Bear stare.

I agree with you in theory, except that the artificially high prices and higher interest means that the people most at-risk for default are then made MORE RISKY. I understand that a bank has to be careful with high risk loans, but this is effectively like tying a ball and chain to an olympic runner, and then sending them to prison when they lose the race.

And frankly, all of that is forgivable; what is not is when the dealers then use these remote GPS devices to disable the vehicles, with NO GODDAMN IDEA what the vehicle is currently doing: Sure, they could tell if it was on the highway but would they actually care? And what if the person is working a night job, as many in poverty do? How do they get home?

Or what about the case awhile back of the woman who's baby was in the damn car when it was towed?

I get it, it's a business risk, but these things are DESIGNED, purposely, to fuck people out of their money and do tons of damage besides that. Exactly how much is a bank allowed to ruin someones life over a CAR LOAN?

Crap like this is why we need a Consumers Bill of Rights.

What do you mean by artificially high price and interest? I'm not familiar with Canada's auto sales market, but unless some organization has a monopoly on selling cars and there is a monopoly of lenders, then there are usually a sufficient number of buyers and sellers in the auto market so that price discovery is happening in sufficient manner such that neither the buyer nor seller are at an advantage.

Also, unless there is data, I don't believe a company would disable a car in a manner that would be unsafe for anyone, at the least since it's a massive liability for them and there's no reason to. If anything, the GPS/car disabling would allow for lower costs for buyers since there is less risk for the lender, which would benefit the buyers who are responsible.

You don't have to be familiar with Canada's auto sales market to see this - there are dealers like this all over the US, you just aren't aware of them because you haven't tried to buy a used car with a horrible credit score and no cash (good for you BTW).

These "tote-the-note" lots proliferate in low-income urban areas, and often offer sub-standard cars at higher prices than the traditional used car market, and top it off with really high interest rates. Often they will sell and repo the same cars over and over, taking payments and down payments until the buyer hits a streak of bad luck or poor decision making.

On one had, the fact that these dealers do repo cars so often sorta justifies the big interest rates - after all, why would you loan money at a higher risk without a higher return? The flip side is that this tends to be very bad for society as a whole, making it insanely more expensive to be poor.

I think you're making assumptions on intent/motivations. It's not like you can't bring your own financing to any car dealer, if you really can't secure a loan from anyone else - then for these used car lots the costs of being willing to deal with that market are rolled into the price of this car.

They aren't just a lot, they are a high-default finance and repo operation also. They need to pay additional insurance, monitor their cars - their rates can't be great and every car requires some version of gap insurance on their end probably at least for a while if they're rolling these costs into the sale price and then requiring no or little down payment. I assume since they're smaller operations their money has a higher time-value to them -- i.e. if a higher than normal number of people pay late one month, they may be late on their debt payments since I assume they have some type of line of credit and they themselves probably don't have the best rate.

I don't think they are specifically out to mess up people's lives is all I'm saying, it's easy to get caught up in the emotional side of a car repossession but think about if a client didn't pay you and you were racking up credit card interest waiting for them so you can pay your own bills -- would you feel bad about taking back your work after a certain period of time?

> every car requires some version of gap insurance on their end probably at least for a while if they're rolling these costs into the sale price

When you're selling a Kia with a KBB of $3,000 for $13,000, I'm going to assume you've adequately "factored in your costs" without resorting to gap insurance (which is going to be huge, because the insurer is going to pay fair market on KBB, not what you sold the car for) other than (further) extortion.

> they may be late on their debt payments since I assume they have some type of line of credit and they themselves probably don't have the best rate.

Hah. I had to use a subprime dealer after my divorce (not to the extent of GPS / immobilization, but 'pricy'). A year or so after buying the car, I got a call from a bank that I didn't recognize, saying that I owed them $2,000. This was the same amount that I'd written on a check for the down payment on the car. Sure, a cancelled check stub saying "Sorry, I paid the dealer the down payment" cleared it up, but something was awry.

Six months later, their multiple locations are shut and another bank has them in court for breaches of contract that I think ended up as fraud proceedings against the dealership owners for multiple financing issues (mind you, they were both still driving their Bentleys)...

> I think you're making assumptions on intent/motivations.

I’m not sure how you parsed that from my post - I didn’t ascribe any intent or motivation to any party.

They're easy enough to find using a good interactive map.

First, search for "title loan", "payday loan", and "check loan" businesses. This anchors your search areas to places where predatory lending is profitable. Then search for "car dealership" and ignore any results that have a brand name or a large lot, as those are the new car dealers. You will find the used car dealers with smaller inventories.

If you can get a street-level view of the lot, and see signage about "buy here pay here" or "no credit check", you have a winner. These types of businesses are literally everywhere, from downtown in a big city to the no-name dealer set up on the largest highway passing through a semi-rural town in the middle of nowhere. You can find them wherever poor people are to be found in North America, because having a mostly reliable personal vehicle is often the unavoidable first step to climbing out of abject, destitute, hopeless poverty into a more comfortable (but still bleak) working-class existence.

It is not entirely clear to me whether anti-usury laws would help or hurt more. Clearly, these businesses are providing a vital service to the poor. But they are also providing it in such a way that their customers are more likely to remain poor.

Put into a metaphor, imagine you have 10 flotation rings. That's all you can afford to keep in inventory, but you're going to make a business of reselling them. Now, you could check satellite maps, and go door-to-door, selling them one at a time to confirmed pool owners as a prophylactic safety device. But those people have no pressure to buy. You'll get a lower price. So instead, you can go to public aquatic recreation hot spots, with no lifeguards--that is, no one else around to compete with your service--and wait. When someone starts drowning, someone will call out to you, "Hey! You! We need that, right now!" And you will say, "Certainly. That will be $15000. Don't worry, it's payable with no money down and 120 easy monthly installments of $100, with a final balloon payment of $3000. Sign here." Faced with the choice between paying it and letting someone drown, they pay. If a buoyancy-hawker was not there, that swimmer would drown. But since you were there, you just put someone in debt-slavery to you for the next decade or so. Profit! And then when that 10 years is up, they still don't have that $3000 all at once, so you can stick them again on their way out. Profit again!

Obviously, the best solution all around would be for the parks department to provide prepaid lifeguards for everyone at fair prices. But the people who can afford to pay for that would rather swim at their private club than at a nasty river bank with a bunch of poor people. "Why don't they just learn how to swim better?" they say. "If a $50 annual pool club membership is too much, maybe they shouldn't swim at all," they say. And so the situation persists.

In poor areas, there are often fewer dealers, because you have to deal with poor people who have less access to money. It's often more profitable to sell expensive items. If you do serve a poor area, you are very likely to be able to force terms that are onerous. On the second issue, what if you drove that car out for a hike and its cold and started raining, and now you can't get inside it? What if you need to drive someone to the hospital? Of course, they can just die, because they are poor.

Most people have a low understanding of how financial products work. The lender, on the other hand, does this for a living. Most buyers are at a huge disadvantage.

> Also, unless there is data, I don't believe a company would disable a car in a manner that would be unsafe for anyone

Looking past the fact that I already gave you one example, how would they know? The GPS device knows where the vehicle is, what it's running state is, and that's it. They don't know if the vehicle is stopped helping another person on the side of the highway. It doesn't know if the driver just ran inside to get their kid from daycare. It doesn't know if the owner is at a doctor's appointment 40 miles from home.

And more to the point, it's not as if these solved a problem. Cars were repossessed aplenty before they were invented, the only difference is it used to be expensive, so a bank would work with the borrower to attempt to salvage the loan or at the very least, have to repossess the vehicle when the borrower was at home or at work. Now it's cheap to repo the car, so why bother? Why even notify the person other than with a text message, the Lender now has no reason to even attempt it, just repo the car, get it back on the lot and sell it to the next poor bastard who's desperate for a car.

I do not believe that. For one, those high interest rates and markups can often exacerbate the problem.

But for a lower rate, you can lend your money to someone much less risky. Why buy a 1% junk bond if you can get 1% government bonds?

The real long term solution is good public transit, so poor people don't have to go into debt to commute.

I don't buy it. The poorest often work the worst hours, such as late at night, and might travel the furthest. I've never seen a transit system anywhere that solves that problem. If I'm coming home at 3am I don't want to transfer buses 4 times.

Everything you just said supports the person you're replying to's argument about a better public transit system.

What's next, Bernie, do you believe that car ownership is a "right"?

Here's the thing, all rights are arbitrary and granted by people to people. Some are easy to agree on (right to life) and some are more contentious (right to bear arms) but all are intended for the benefit of society. If it would be in the best interest of a functional society to grant the right to reasonable transportation to everyone, then it is something we ought to consider.

Some things that were previously considered rights are no longer necessary or desirable as society advances (the right to own slaves) while other things that were not previously considered rights (guaranteed access to the internet) might start to make sense as our world changes around us.

Point of order: The right to own slaves was just the right to own property, the slaves were just declassified as property. There are very few instances where rights have changed based on how you describe, because the societal inertia is incredibly hard to overcome. That being said, I do agree with everything you're saying.

Fair point. Then instead maybe it makes more sense to consider the inverse: the refusal to grant the right of autonomy to certain people.

You also bring up a good point that there are currently few instances where this has occurred, but that's sort of my point, that past standards are not always applicable to the future.

Whether you buy it or not, all over the world public transit systems effectively provide transportation for many, many poor people. Yes, they don't cover every possible use case, but perhaps we shouldn't let the perfect be the enemy of the good?

I suspect self driving taxis/buses will solve this problem. If you don't have to pay drivers overtime, there's little reason not to run them all night.

Transit will ultimately become a ubiquitous utility like running water.

Maybe once we get self driving buses. Self driving taxis don't help unless costs plummet. Poor people don't take taxis a lot due to having no money.

There's a town in the US which has replaced its buses with subsidized "ride sharing".

One in Canada too. $5 off every Uber ride within Innisfil, Ontario, courtesy of the municipality. Way better than a bus.

Then again, taxi rates should go down once you no longer need to factor the driver's wages into the equation.

Also, insurance should be cheaper and running costs ditto (presumably, the bulk of autonomous vehicles will be electric)

Besides, in some markets taxis ARE the cheaper option if you don't need a car very often - when living in Norway's #2 town about a decade ago, the annual road tax, insurance, leased parking space &c added up to a cost equivalent to more than 200 4-mile taxi rides. And that is leaving depreciation and maintenance out of it...

In thinking about "minumum basic income" perhaps all public transit should be free?

Bart, muni, caltrain, amtrak, etc -- thos should be 100% subsidized by taxes.

We have a gas tax that is so high in california it hasnt even done anything for our roads and infra.

You hae one of the biggest companies in the world (chevron) based out of richmond, ca (one of the poorest cities in CA) paying nothing in taxes...

the basic income argument is bullshit, and politicians are freaking morons given that they cant take the freaking hammer to corps so large that due to their financial extraction from basic human living (movement) that this problem will never be solved.

capitalism is a brainwashing technique, not a basis for a human economy.

I am not saying that we should be communist - but we shouldnt complain about problems without understanding the ripple effect of so many other problems and wwhen they reasonate together, such as not taxing gas corps, but increasing "gas tax", yet not using the gas tax properly -- then having public transport agencies in corruption quagmire - the world is basically fucked.

Why do bart train drivers work 4 days a week, yet make over 125K/year for baby-sitting an automated train, then go on strike for more money when the trains are filthy and smell like piss? Why do they have the "train of the future" when not a single new train car "of the future" has a power port/USB port? (yes I looked and spoke to them about it.

Why hasnt any bart/muni operator ever been forced to go on a field-trip to some other major metropolis to see how efficient, clean, modern travel infra works?

Why are we spinning our retarded wheels on automated driving when we need to fix public transport?

Its a complicated issue - but only corruption and greed are truly preventing progress, as the corruption and greed results in us not taxing the fuck out of gas - and investing in very robust transportation systems that should be subsidized by general taxes.

How about we just say that if you make less than $50K per year, ALL transport is free -- THEN you have greater opportunity to find a job >$50K and can start paying for your rides.

There are dozens of lenders out there for car loans, plus dealership financing arrangements, etc. It's an extremely competitive market. If market economics has any real world validity at all, it's to show that interest rates on marginal borrowers are appropriately priced.

That assumes a lot of things which can't be assumed, information symmetry among them. There's nothing in market economics that insists on the theoretical impossibility of predatory subprime lending.

Information asymmetry happens when one side of a transaction inherently has more information about a product than the other side of a transaction. E.g. when it comes to food, the producer inherently knows more about the product than the consumer. A loan is pretty much exactly the opposite. All the information the seller has is conveyed to the buyer in the form of the loan terms.

That's obviously facile. Information asymmetry is not just about information contained within the four corners of a contract, but also about information that is not.

A market participant who engages in a very small number of borrowing transactions over a lifetime by definition has less available information than a lending institution.

For what it's worth I have a degree in economics, and in my experience I almost invariably hear this sort of characterization of economic systems as simple and Newtonian from people who are generally unfamiliar with contemporary economic theory.

The economy is a complex adaptive system that has a penchant for reaching inefficient local maxima. Not every market clears. It's quite plausible that subprime lending is one such example, a theory that is also well contained within the general heading of "market economics".

Or that they've all colluded. How many subprime lenders are there? How much competition is in that market?

Being poor is fucking expensive.

No, having a bad reputation and poor credit history is expensive.

Being poor is expensive

Creditors do not care a bit about your reputation.

And no credit history is almost as bad as poor credit. If you have no credit history, you should expect to overpay when financing anything.

No credit history is a wildcard. You could go either way and they choose to not trust a stranger to the system rather than give you huge credit that you may not be able to handle responsibly.

It's easy to get a low limit store credit card ($250 limit) as someone with no credit history. It may have an annual fee. If you pay it off reliably over a year, pay the annual fee one time you will have a moderately good credit history. Then you can get another credit card with no annual fee and cancel the first one. Then keep this second one for decades, because it will show that your nearly oldest credit card account is still in good standing after many years.

> no credit history is almost as bad as poor credit

Seconding this. It took me a long time to get over my German Swiss aversion to consumer debt. You are certainly penalised for doing that in America--from getting an apartment to factoring invoices at my business, many things became harder.

I was poor and unbanked for a while, and yes it is.

When you are poor, you generally can't take advantage of buying in bulk, even things like toilet paper. I save a substantial amount of money (and time) now that I can buy larger quantities of things.

Now that I have a car again, I'm able to save a tremendous amount of time which I can use towards leisure or making more money.

Having access to credit now allows me to get 1.5% cash back on all my purchases, this adds up to a fair amount of money over a year.

There's a lot more, but these are a few examples I've experienced personally.

Agreed. People with bad credit are pooled together and all charged more to make up for the ones within that pool who default. You can't simply put people with good credit in that pool because they will shop around for a better rate and they will find one.

As someone who has shared an apartment with a person with poor credit who is also a habitual liar and hides/blames others for their problems... I believe in giving people the opportunity to rebuild credit slowly, but have no problem whatsoever with limiting opportunities and charging those people more until they work to regain credibility.

In an ideal world, we wouldn't give more benefits to people who were more well off.

To use a rather odd analogy, imagine you're playing an RPG that becomes extremely easy as you advance in the game. Enemies just dying within 10 ft. of you. That's a shitty game. Earning that one extra dollar on the margin as you climb the economic hierarchy should be more difficult, not less.

I hate this idea that people wouldn't be motivated to earn more just because it's more challenging to do so. What kind of pathetic excuse for a human thinks like that? Our society is backwards.

I think if one really wanted to put effort into a Care Bear style NPO, one possible solution is to buy up a fleet of used toyota corollas and finance them to poorer buyers using similar style methods (e.g. keep the immobilizer and repossessions) but using non-predatory pricing schemes. As part of the deal, you provide all maintenance at your shops to keep the cars in good condition, but because you only deal with a single car type you can keep costs down, similar to how Ryanair maintains a homogeneous fleet of A330's. You might even be able to provide a group insurance plan.

Of course this would require a true Care Bear to execute, since you could probably make a lot of money if you just left in the predatory pricing. And the problem would have never existed if decent public transport existed in the first place, which self driving cars may eventually provide some semblance of.

I've suggested exactly this model every time someone claims the terms are unfair. It would give you a self-funding charity with an ever-upward beneficial spiral.

So why doesn't it happen? Because it's not unfair, in the sense of charging too much relative to the risk.

I think there's two factors here

1. The relative risk is reduced only when your risk pool size becomes huge, and it would be difficult for a start-up charity to weather the initial storm.

2. The execution of such a charity would be non-trivial. As a dumb example, if someone wanted to make "uber for the poor", a charity that provides free ride hailing using donated time and resources donated entirely by the drivers, you would still need to build the app and run the infrastructure. Actually owning the vehicles and maintaining them only adds to the burden.

> None of this is illegal (except in this case obviously) but it still feels like something that should be illegal, amazes me we're so poor at going after what's obviously a predatory business practice.

Legality often has nothing to do with it. It's whether or not someone is willing to fight. In the US, it's a cumbersome process to fight something like this, so businesses routinely abuse the system.

These scumbags are the only ones willing to provide financing for undocumented immigrants to get to their jobs. Cognitive Dissonance.

It amazes you? Really? It doesn't at all seem par for the course for a system that rewards this type of behavior? Profit no matter what is designed to fuck people over like this. Follow the money and it won't be surprising at all why the system still exists as it does.

It rewards taking a risk on people with questionable credit histories?

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