September 5, 2017

Lenders will not regulate themselves – but they clearly need rules.

The government has imposed some rules on credit card issuers for instance requiring that they inform consumers how long it will take them to pay off their balances with minimum monthly payments.  That is of little comfort to elderly borrowers on fixed incomes with 158 years to make restitution.

Commercial borrowers are not extended the same courtesy.  Nonetheless after looking at a recent commercial credit card statement from Canada’s largest bank and plugging the information provided (interest rate, minimum required payment and balance) into a spreadsheet I was able to determine that the balance would actually grow year over year creating a state of perpetual debt.

Such practices must be regulated as lenders will not regulate themselves.  Clearly responsible lending could end my career every bit as quickly as responsible borrowing but the whole economy would be the beneficiary.