Support
Supporters of the concept argue that lenders should use all available information at all times in order to avoid adverse selection. These supporters argue that the continuing practice of charging higher prices reflective of risk will allow lenders to charge lower prices reflective of non-risk, or, to extend credit to those previously thought to be too risky in the past, giving benefits to those potential borrowers. These supporters argue that the increased rates reflect the risk and are not price gouging, as proven by the steady or diminishing profit margins of the credit card business.
Still others, while admitting that the increased default rate more than compensates for the risk, argue that competitive pressure makes that so (i.e. because lenders who do not charge the default rate can possibly offer lower normal rates, while lenders who don't would seemingly have to try and advertise that the lack of a default rate is a competitive advantage (opening them up to adverse selection), or adopt the practice themselves.
Read more about this topic: Universal Default
Famous quotes containing the word support:
“Never support two weaknesses at the same time. It’s your combination sinners—your lecherous liars and your miserly drunkards—who dishonor the vices and bring them into bad repute.”
—Thornton Wilder (1897–1975)
“Because the young child feels with such intensity, he experiences sorrows that seem inconsolable and losses that feel unbearable. A precious toy gets broken or a good-bye cannot be endured. When this happens, words like “sad” or “disappointed” seem a travesty because they cannot possibly capture the enormity of the child’s loss. He needs a loving adult presence to support him in his pain but he does not want to be talked out of it.”
—Alicia F. Lieberman (20th century)
“... married women work and neglect their children because the duties of the homemaker become so depreciated that women feel compelled to take a job in order to hold the respect of the community. It is one thing if women work, as many of them must, to help support the family. It is quite another thing—it is destructive of woman’s freedom—if society forces her out of the home and into the labor market in order that she may respect herself and gain the respect of others.”
—Agnes E. Meyer (1887–1970)