Charles Schumer, senior senator from New York, really does not seem to trust consumers to decide on their own arrangements, notes Steve Chapman.
P.S. Nor it seems is military spouse Holly Petraeus [Ira Stoll]
Charles Schumer, senior senator from New York, really does not seem to trust consumers to decide on their own arrangements, notes Steve Chapman.
P.S. Nor it seems is military spouse Holly Petraeus [Ira Stoll]
7 Comments
That’s right. The hell with consumer protection for the low income. They can either pay extra or do without.
I commented to friends the other day, after having visited numerous “dollar stores” in search of a certain style reading glasses, about how dollar stores sell products for $1 in affluent neighborhoods, but the prices are $1.50 – $3 per item or more in poor neighborhoods.
Hey – if they want a package of hair bands for $1, let them take a bus.
Same with the layaway. If they don’t want to pay 100% interest over 90 days for a child’s Christmas toy, they can simply buy a plastic fairy princess wand at the local dollar store – for $2.49.
Ah, that fresh smell of petty paternalistic economic fascism in the morning. It’s really a shame stores get to charge for their wares what the market supports – Frank really should decide it for us in his highly scientific determination of going to stores until he finds the lowest price and ordering all stores to sell it for that price. And no layaway, either, because Frank knows what is best for your money.
Frank, I was sold an inferior rotisserie chicken for $8 at the local Whole Foods yesterday. I have found that the $5 rotisserie chickens at Kroger are actually better! Save me, Frank, because I don’t know if I’ll be able to use my brains to avoid Whole Foods rotisserie chicken in the future!
I love how “consumer protection” is now arguing about the price of dollar store crap with your friends.
Frank,
Unfortunately, many of the regulations to protect low income consumers have the opposite effect. Your two results “pay extra or do without” ignores at least one more option; save, then buy the item when you have the money.
Thomas Sowell and Walter Williamson, who are both economists, have written many articles to explain why the cost of doing business is much higher in poor neighborhoods than affluent ones. Simply put, there are higher costs that are passed along to the consumer.
http://econfaculty.gmu.edu/wew/articles/04/politics.html
It usually costs more cto operate a store in those poor neighborhoods, first because they tend to be in cities with their plethora of licenses, taxes, fees, and bribes, and because they are often in more dangerous and larcenous naighborhoods.
The dilemma of “pay more or do without” often results in doing without because the regulated options do not offer the chance to make a fair profit. The investor takes his money elsewhere.
This argument is based on an accounting for the $5 as interest. It is not interest, it is a fee. Effective interest is = (fee + interest)/cost. In this case, no interest is being charged. So the effective interest is $5/cost. If the cost of the item is $1o, the effective interest is %50, clearly quite excessive. On the other hand, if the cost is $100, the effective interest is only %5.
Note that in this situation, the buyer is getting something for the fee, namely the seller will hold it until the buyer returns with the total amount of the cost. If the item is an exact replica of a cheap ring your daughter lost but cherishes, it will probably be worth the $5 fee. If it is something you can buy somewhere else without a fee, forget about it.
Assuming everything is legit–
Technically, the buyer is purchasing an option, for 10% of the purchase price (up front), to buy the item at at a future date. If the buyer chooses to go through with the deal, he pays an extra $5. If he doesn’t buy it, he loses the 10%. The buyer is guarantying that the item will be available when he wants it at a predetermined price, and the seller is giving up the opportunity of selling the item immediately. This is a fair arrangement.
The problem that needs to be addressed are the layaway deals, particularly in furniture retailing, where the buyer lives up to his end of the contract, but the furniture retailer then goes belly-up and files for bankruptcy and no furniture ever gets delivered.
VMS:
First: Yes, you’re spot on with that analysis of what the transaction is.
In regards to the 2nd paragraph: I believe in the hypothetical you posit, they’re an unsecured creditor.
Frank: Your statement “They can either pay extra or do without.” is a false choice. Leaf’s points out the obvious option to both lay away or doing without – do what people did about 50 years ago, SAVE FIRST, THEN BUY. I know, I know….it’s a novel concept for almost anyone in the Baby Boomer or later generations. But this concept of delayed gratification, planning ahead and self discipline actually does work – perhaps you should try it some time. Ditto that for those of limited means – they might end up spending less once they realize how long it takes to actually buy some cheap piece of consumer crap that they just “had to have”. I know it sure modifies my view on “must have” to wait and save until I can pay cash.