Hacker News Reader

Comment by ryandrake | Hacker News Reader

> See, one problem in Mexico is that defaulting in a loan is not a crime

Nor should it be. Lenders like to conveniently forget: the risk of default is the reason they charge interest. If there was no risk of default, you couldn't really justify charging much interest, could you?

Issuing a loan is a business arrangement, and default is one of several clearly defined ways of exiting that arrangement. Lenders have been very successful in their attempt to smear default as some sort of moral failure. Like you're some kind of bad person for making a sensible business decision!

View on HN

Is the US any different? I'm pretty sure it's almost impossible to get a criminal conviction for bad debt these days. Maybe in a really extreme case like a deliberate fraud scheme that used defaulting as a key part of the process, but not a normal person just normally not repaying a loan.

The US requires you pay back loans and has a scheme of forcing that including confiscation of income from your emoloyer. You can declare bankruptcy to get around that, but it isn't automatic, and the courts can tell you no you have to pay your debt (though in practice anyone going this far is bad enough off that they get out of debt maybe owing pennies)

> > defaulting in a loan is not a crime

> Nor should it be.

Sometimes it should be. If you have the money to pay back a loan but just choose not to, that should be a crime. Similarly, if you somehow know that you won't be able to pay back a loan before you take it out, but you take it out anyway, that should be a crime too.

But isn’t the risk rolled into the interest rate ?

If everyone pays the usurious loans then the lender double dipped

Are the loans not insured ?

IMHO all of this should be clear up front - the consequences of not paying should be part of the contract: credit bureau, jail time, first-born child…

That's the point - if you can't count on legal system to prevent loan abuse/fraud then everyone pays higher interest or people start doing illegal things to collect

Why isn't insurance fraud legal, since the risk is rolled into the premiums?

Because insurance companies want to be middle men that do nothing and just collect a monthly premium. It's best if the thing you're insuring against never happens.

Risk is one reason, another is that banks are businesses and charge a fee, another is that people prefer to keep their money immediately available for themsels rather than giving up liquidity. Money gives us the power to decide at the drop of a hat, lent out money requires cooperation or patience.

Reply on news.ycombinator.com