Here is an additional part of the scam I think. Issue credit cards. Most people pay. The minority that don't or are late are a double bonus for the CC Companies. They bump their rate to 25% or more. Now here is where it gets interesting. They should be able to deduct the moneies owed including interest as a bad deb't once they cannot pay. If this is correct they have a vast pool of money owed which they can as needed apply to offset real profits when they choose to. Give some kids (young people) a thousand dollar card and gain a many thousand dollar deduction. Then of course you can wreck the kids credit and charge outrageous rates for many years while they "rehab their credit".
Can some Accountant or CPA comment am I right about this or close?
Wm
Usury should still be a crime.
Not quite (I used to work for a credit card company). High interest rates, late fees, over limit fees and the like are a great source of "free" money for issuers. However bad debt isn't deducted, it's charged off; meaning it comes straight off of the bottom line.
Charge-off rates are tracked by investors. The usually run in the 5% range. Anything over that is considered a very bad thing, and it's why you don't see companies like Providian anymore.
Most people don't know that credit issuers have to raise the money they loan to people, usually through securities. Companies that make too many bad loans won't be able to raise as much money to loan.