OWL recommends voting FOR the at-vote resolution, "Minimum Payment Act". The Delegate has been asked to cast their vote accordingly.
Please find below the Office's Analysis for an examination of the resolution and the reasons for the final recommendation.
More or less directly understandable to non-economists, the "Minimum Payment Act" ultimately codifies what most would consider common sense. It orders that for business such as private loans, the loan-giver may not set the minimum payment to be below the sum of money that would be owed additionally due to incurred interest; furthermore, as a disincentive for loan-givers who consider ignoring this threshold, any set payment below this bar is to be considered to have met it, effectively netting delinquent loan-givers the loss of the incurred interest.
While this all may sound intimidating at first, the Office finds the author's simplified example calculation extremely helpful. In case the interest incurred is not wholly covered by a payment, the effective sum owed to the loan-giver increases ‒ which, in turn, increases the sum of the interest on the loan and, if repeated for a few periods of the loan repayment, sends the borrower down a spiral of ever-increasing debt.
The proposal tackles this unacceptable practice very effectively. Particularly, the treatment of any non-compliant payment as a compliant payment is a quite strong argument for loan-givers to adhere to the resolution's terms ‒ after all, the non-paid interest would be forfeit, and what stronger incentive to comply is there for a professional loan-giver, other than the very fate of their profits?
Thus, OWL recommends to vote FOR the at-vote resolution, "Minimum Payment Act".