Wednesday, August 20, 2008

Discrimination based on the financial profiling and risk-based pricing

Risk-based pricing actually requires creating the misinformation that allows for making borrowers who should get lower rates agree to pay the higher rates that cover the losses of those that should not have been given credit… at least not at these high impossible rates.

Risk based pricing, which is similar to placing persons that after some doubtful genetic test are presumed to be especially exposed to an illness in a separate insurance pool, could be causing much of the growing social inequality that is currently attributed by some to globalization. Risk profiling, for a discriminatory purpose, is prohibited in most spheres of our social relations, except in lending where it is very much cheered, by most.

John, Paul and Peter, because of FICO have to pay high interest. John, though he might have been able to do so at lower rates, is not able to service the debt and loses. Paul, utterly responsible, services it, barely, and Peter who is in this group because no ones no why meets the payments with ease. Question: Any winners?

John should for a starter not have been given the credit, at least not at the high rate, and both Paul and Peter, having been able to service the debt at high rates evidenced de facto they merited lower rates. Answer: No winners! Except of course those who are not to be named!

How libertarians can shut up about the financial information cartels that chain the markets to neo-non-transparent-regulations, I have never understood.

How developed countries’ progressives can shut up about the discrimination implicit in risk based pricing and that could be introducing more inequality in the societies than what they sometimes attribute to globalization, I have never understood.