The couple did know what they were getting into, my sympathies lie with the lenders than with the couple. The lender for one thing should have been treated better for the following reasons,

1. They took the risk of lending to someone who probably couldn’t receive it from anywhere else, why else would they agree to such exhorbitant rates!

2. They are in the business of lending and making money out of it. Why should they be penalised when they were many other options available for the couple?

It seems the couple had the cake and ate it too now!! Thats highway robbery only inverse!!

If only there had been more competition between the lending community, then perhaps such high interest rates could have been avoided in the first place!

And why did the judge rule anything at all in this case? Why can’t people just stop looking towards the law for refuge everytime they make a bad decision?

The market-rationale could be summarized as: exorbitant price is justified given the demand.
What such textbook applications of supply-demand by even people like DOn Boudreaux at CafeHayek who has ranted in many a post on the benefits of price gouging forget: is that sometimes demand gets completely elastic.
That is, people are prepared to pay ridiculous amounts, tending for practical purposes to infinity, just to tide over the present moment.
A mother with a starving child, in the aftermath of an earthquake disaster, for eg. would be prepared to sell all her jewelery if that gets her food for her child.

Such 100% elastic demand is unnatural. The assumptions behind operations of a market FAIL. Thus, it is essential that there be curbs to exploiting this chink in the supply-demand curve and pass it off as “market forces”.

The small print of the loan agreement revealed that the couple would be charged a “compounded” interest rate if they ever fell into arrears.

Yeah yeah, you are supposed to read the entire contract agreement. Frankly, are the agreements even readable? 10 pages of f**ks**t, with one line somewhere in there that would kill you.

It wasn’t a wanton spending spree we went on back then

Absolutely. This is a specific ruling. Had the couple known about the interest rate, they would not have gotten into the agreement at all. Secondly, these people didn’t go on a spending spree… it was a one-time expense.

What next will we hear from the libertarians… that the exploitation of the poor in India by Zamindaars charging 200% interest rates was fair because of “market forces?” I am no leftist, hell not even a centrist… but is it so wrong to have a “people sensitive market force?”

If not, then the old adage of “caveat emptor” holds — let the buyer beware.

Judicial rulings have the power of precedence. What will be sad is a future where loans are simply not given because there is a fright that somewhere down the line a judge might forgive a defaulter.

Anyway, the situation is much worse in India where I have yet to hear of a foreclosure in the case of a default.

It could also mean a future where important considerations like charging compounded interest rates will need to ne mandatorily communicated upfront to people who take loans… rather than hide it in reams of ‘tiny print’!

As an aside, it wouldn’t make sense for police (in the US) to handover a sheet of paper with Miranda rights written on it in small print, would it?! ;-)

The slope you recommend is very slippery, my friend. I’ll leave you to figure out why.

Quote from the small print on my contract with Cingular Wireless - now the largest wireless provider in the US after buying out AT&T (about size 5 in font size)

“Cingular Wireless reserves the right to change wireless plan calling rates without notice and customers will be obligated to pay the revised rates”

WHAT?? I sign a 2 year contract with Cingular for wireless services (which I cannot break without heavy fines) and Cingular has the right to suddenly start charging me $10 a call instead of the 40c per call that was in the original contract. You can argue that I can leave Cingular - but hold a sec - I can’t - I also signed that if I cancelled the account before 2 years - I would pay a $150 fine. Do I have a choice - No - because all the cell phoe companies have pretty muh the same small print and contract obligations.

Is it legal ? Absolutely - is it right? You tell me? Luckily if Cingular ever tries to do this (and they try frequently believe me) the FCC will be on them like a ton of bricks and will in all liklihood allow me (and other customers) to break their contract without penalty.

The Free Market is great - but there needs to be soem recourse for customers who have no other choice.

“Credit card companies charge 36% interest on their outstanding balances. Is he suggesting that we shut them down too?”
Absolutely not. I am reading this verdict as KEY items of a contract (such as 36% interest rate) should be declared upfront, not relegated to fine print. I am not saying 36% is wrong. (It may be if someone exploits a situation such as drought or earthquake, I don’t know)

Ravikiran Rao:
I thought libertarians were thoughtful people, not the ones to use an emotive rhetoric. Thats the prerogative of the loony left :-) No seriously, can you refer the exact point in the comments or the original article that instigated you to make this statement?

I haven’t read the contract, so I don’t know how fine the fine print was. For example, my apartment lease reads:

$### per month… due first of each month… penalty $100 for late… $50 per day.

Would it be fair if the penalty was mentioned in the fine print. I believe Georgia law requires the apartment guys to declare this up front, instead of fine print. Else, I am sure there will be a lot of apartment complexes that will keep this in fine print, hope someone makes a mistak and BOOM! I think this helps me WITHOUT hurting the leasing agency.

I don’t think the libertarians suggest “power to leasing agencies” even if people get screwed, do they? I thought libertarianism would be about power to people and leasing agencies alike.