[SHAFTED] Credit Protection Act (CPA)

[Berhakonia]

The General Assembly,

RECOGNIZING the dangers of bad-faith creditors and lenders and credit fraud.

APPALLED by the underhanded practices and abuses that have gone on unchecked in certain nations and regions.

DETERMINED to enforce stricter codes and guidelines on credit and lending practices deemed predatory or malignant to the principles of a free market economy.

Hereby ENFORCES the following provisions and obligates all members of the World Assembly to comply:

I. Defining debt as any deficit incrued through negative financing or loans, owed to the lender or creditor.

II. Defining a creditor as any person, institution or otherwise whom extends credit by granting the buyer permission to borrow money intended to be repaid in the future.

III. Requiring any transaction by which a person becomes indebted to a creditor is to be treated as the making of a loan from the creditor to the person.

IV. Limiting the amount of debt one is allowed to incur from any given creditor

V. Preventing any creditor from demanding equity exceeding this limit.

VI. Mandating all approved creditors and lenders to act in full transparency around clients.

VII. Requiring loan agreements have no hidden clauses.

VIII. Requiring all government legislation on credit law be simplified, condensed and reviewed every five years to eliminate loopholes.

IX. Requires all government legislation regarding credit and loans to be readily accessible to the public.

[Separatist Peoples]

The General Assembly,

III. Requiring any transaction by which a person becomes indebted to a creditor is to be treated as the making of a loan from the creditor to the person.

"Even where there is no promissory note and subsequent lending of liquid assets? This is an odd approach to, say, offering services on a contingency."

IV. Limiting the amount of debt one is allowed to incur from any given creditor

"To what? What if the credit offered exceeds this amount, should borrowers be able to unjustly enrich themselves? Say the limit is one million pesos and I borrow two million. If I enter into default, my creditors cannot recoup that second million. What stops me from borrowing only to declare my intention not to repay? What do I do if the lender refuses to loan two million pesos and I have expenses in excess of one million?"

V. Preventing any creditor from demanding equity exceeding this limit

"Capping equity makes default more attractive than repayment. Collateral must exceed the loan value, even if it only satisfies the original amount, or it is not useful."

VI. Mandating all approved creditors and lenders to act in full transparency around clients.

"Most lending practices are very transparent. Want of understanding is not lack of transparency."

VII. Requiring loan agreements have no hidden clauses.

"This clause assumes a violation of one of the most foundational concepts of contract law, which seems odd."

VIII. Requiring all government legislation on credit law be simplified, condensed and reviewed every five years to eliminate loopholes.

"The requirement of a delegate without a firm grasp of secured and unsecured transactions. How does one simplify it? What constitutes simplicity?"

IX. Requires all government legislation regarding credit and loans to be readily accessible to the public.

"Does extant law not already require this?

"Overall, we are not impressed by the author's grasp on the topic and cannot support the draft or the implicit policy assumptions made therein."

[Imperium Anglorum]

II. Defining a creditor as any person, institution or otherwise whom extends credit by granting the buyer permission to borrow money intended to be repaid in the future.

Elsie Mortimer Wellesley. What buyer? Why would the purchaser of a loan be given a line of credit?

IV. Limiting the amount of debt one is allowed to incur from any given creditor

E. It appears that use of 'one' would imply a standard ceiling on all legal persons. Such a ceiling would be profoundly useless. If calibrated for individuals it would drive all corporations to equity financing and also destroy both government and corporate securities markets. Because most government securities are sold in competitive auctions to primary dealers who then sell those securities on the second-hand market, this would also make it extremely difficult for governments to raise money, imperilling member nation finances directly. We cannot support such a scheme.

V. Preventing any creditor from demanding equity exceeding [a per creditor debt cap]

E. This doesn't make any sense. Debt is not normally in the form of a convertible note, it isn't clear what this does other than distort debt pricing by placing onerous and arbitrary restrictions on such notes. Such notes also have substantial beneficial properties in reducing debt financing costs when the conversion option is exercised.

VI. Mandating all approved creditors and lenders to act in full transparency around clients.

VII. Requiring loan agreements have no hidden clauses.

VIII. Requiring all government legislation on credit law be simplified, condensed and reviewed every five years to eliminate loopholes.

IX. Requires all government legislation regarding credit and loans to be readily accessible to the public.

E. All these provisions are core either to contract law or already covered under the GA resolution "No Penalty without Law". If any kind of policy were to be pursued, one may want to require those contracts to be readily understandable with guidelines making it clear the terms on which money was borrowed. But such guidelines also should only be done on over-the-counter instruments; a sophisticated borrower would have no need of such handholding.

[Separatist Peoples]

OOC: The author has begun another draft on a different topic. Has this been abandoned?

[Berhakonia]

OOC: The author has begun another draft on a different topic. Has this been abandoned?

Essentially