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127 Banking L.J. 581 (2010)
History Repeats Itself: Why Interest Rate Caps Pave the Way for the Return of the Loan Sharks

handle is hein.journals/blj127 and id is 595 raw text is: HISTORY REPEATS ITSELF:
WHY INTEREST RATE CAPS PAVE THE WAY FOR
THE RETURN OF THE LOAN SHARKS
JUSTICE DAVID BAKER AND MACKENZIE BREITENSTEIN
There is never any misunderstanding between the loan-shark and the borrower
about their relationship or the collateral for the loan. Seldom does any paper
pass between borrower and lender; a handshake usually confirms the bargain.
The borrower realizes that he is offering his body and his family's well being as
collateral... In some cases the underlying threat is communicated subrly; in other
cases it is made explicitly clear'
Due to the current economic recession, legislators are taking a closer
look at credit regulation in the United States. Many consumer ad-
vocate groups are calling for more stringent interest rate caps, es-
pecially for credit card companies and payday lenders. Unfortunately, for
many borrowers in the United States, interest rate caps do not remedy debt
problems. While it is true that high interest rates make it more difficult for
borrowers to repay large accumulations of debt, it is equally true that interest
rate caps do not prevent excessively high interest lending. Interest rate caps
instead have a tendency to force low-income individuals out of the market
for legal lending because lenders cannot charge high enough interest rates to
Following graduation from law school, the Honorable Justice David Baker worked
in the private practice of law for 25 years. In 2005, he was appointed as a district
court judge for the Sixth Judicial District in Iowa. Justice Baker was appointed to
the Iowa Court of Appeals in 2006, where he served until his appointment to the
Iowa Supreme Court in 2008. MacKenzie Breitenstein is a 2010 graduate of Drake
University Law School.

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