[GA - PASSED] Minimum Payment Act

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Cretox

Cretox

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Minimum Payment Act
Category: Regulation | Area of Effect: Consumer Protection
Proposed by: Imperium Anglorum | Onsite Topic​
The World Assembly,

Believing that it is an unfair business practice to set minimum payments so low that it does not even cover interest accrued,

Observing that many people use unsecured retail credit lines, such as credit cards and personal loans, and

Concerned that such low minimum payments lead to a cycle of ever-increasing debt, hereby enacts as follows.
  1. The minimum payment on any unsecured retail credit line must be equal to or greater than interest to be incurred over the payment period.

  2. If a person sets a minimum payment less than the amount calculated in section 1 and a borrower makes that minimum payment, that payment must be treated as if it were in the minimum amount compliant with section 1.
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Note: Only votes from TNP WA nations and NPA personnel will be counted. If you do not meet these requirements, please add (non-WA) or something of that effect to your vote.
Voting Instructions:
  • Vote For if you want the Delegate to vote For the resolution.
  • Vote Against if you want the Delegate to vote Against the resolution.
  • Vote Abstain if you want the Delegate to abstain from voting on this resolution.
  • Vote Present if you are personally abstaining from this vote.
Detailed opinions with your vote are appreciated and encouraged!
ForAgainstAbstainPresent
12000
 
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IFV - For
Overview
This proposal bans lenders that offer unsecured retail credit lines, such as credit cards and personal loans, to charge minimum payments over the payment period that are lower than the interest payable on the loan itself. If the lender sets a minimum payment lower than the interest payable, that payment must be treated as if it were in the minimum amount and the lender thus forfeits the difference between the minimum payment and the interest payable for that period.

Recommendation
We support the resolution, which prevents a snowballing of debt by way of individual borrowers failing to pay off at least the interest payable for that interest period (in real life, depending on jurisdiction, usually biweekly or monthly). This prevents the borrower's debt situation from spiralling out of control (inadvertently or otherwise) by getting the interest (and any fees) added to the principal and creating a bigger burden on the borrower over time, which the borrower may not be able to service. The restriction applies only to unsecured retail loans, and excludes corporate borrowers, which are more likely to be able to manage loans with deferred payment of interest in a sophisticated manner.

For the above reasons, the Ministry of World Assembly Affairs recommends a vote For the General Assembly Resolution at vote, "Minimum Payment Act".

This IFV Recommendation was written in collaboration with our World Assembly Legislative League partners.
 
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For.
As an argument for the IFV, I'll highlight that this addresses a predatory practice in real life where lenders when giving unsecured loans (So fx. credit cards, overdrafts, etc.) set the interest rate high, but disguises it behind very low minimum payments, which requires the borrower to increase payments themselves (Which most won't do, trusting the minimum payments), or the difference between interest and minimum payment is added to the principal, trapping the borrower in a spiral of debt. The resolution aims to end this practice by forcing companies to set the real cost in interest as the minimum payment (Making it explicit what a loan actually costs) or, if a lender still seeks to exploit borrowers through these predatory means, to accept the minimum payment as always enough to clear any interest. Thus, in the future, anyone who takes out an unsecured loan and pays the minimum due will never have the principal increase, thus enabling them to trust the up-front pricetag on that loan and plan for the future.
 
For. I made some minor comments on the onsite Forum already and won't repeat them here.
 
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For (Non-WA). A simple, but very effective proposal to a solution that stops Banking Companies from messing up their client's money/interest rates/and payables for the Government of a nation.
 
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