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:
“I concluded that I was skilled, however poorly, at only one thing: marriage. And so I set about the business of selling myself and two children to some unsuspecting man who might think me a desirable second-hand mate, a man of good means and disposition willing to support another man’s children in some semblance of the style to which they were accustomed. My heart was not in the chase, but I was tired and there was no alternative. I could not afford freedom.”
—Barbara Howar (b. 1934)
“... the outcome of the Clarence Thomas hearings and his subsequent appointment to the Supreme Court shows how misguided, narrow notions of racial solidarity that suppress dissent and critique can lead black folks to support individuals who will not protect their rights.”
—bell hooks (b. c. 1955)
“They [women] can use their abilities to support each other, even as they develop more effective and appropriate ways of dealing with power.... Women do not need to diminish other women ... [they] need the power to advance their own development, but they do not “need” the power to limit the development of others.”
—Jean Baker Miller (20th century)