In the latest account of NBA big man Eddy Curry’s never-ending money woes, this passage jumped out at us:
On Friday, a Manhattan court ordered Curry to pay $75,000 a month to lender Allstar Capital Inc. to resolve a debt that swelled to $1.2 million with interest. The court also has issued an order letting Las Vegas-based Allstar seize three of the cars: a Rolls Royce Phantom convertible and two Land Rover SUVs, all 2009 models.
He took out the $570,000 personal loan in February 2008, promising to pay it back in five months at a nearly 85 percent annual interest rate–legal in Nevada, according to Allstar lawyer Donald N. David.
Wait, an 85 percent APR on a loan exceeding half-a-million dollars? That sounds rather usurious, and it would certainly be illegal in virtually any other state. But Nevada is unique, in that it explicitly allows such loans provided that certain conditions are met. (For example, the monthly debt service cannot exceed 25 percent of the loan recipient’s annual income—no problem for Curry, who is playing through an eight-figure contract.) Furthermore, there seems to be few restrictions on who can lend—based on our research, we could find no other mention of Allstar Capital Inc. in the Nevada legal archives. We have to wonder if the company isn’t simply a one-man lending operation, of the sort that commonly operates without legal protection in other states.
The question then is whether Nevada’s permissive law is an odious curiosity, or something that deserves to be replicated elsewhere. Many moons ago, we wrote a tongue-in-cheek Slate piece that made the case for the legalization of private high-interest lending. The article was in part a polemic against payday lenders, who often profit by obscuring the outrageously usurious nature of their loans. But we also pointed out that pushing loan sharking above-ground would eliminate violence—why kneecap a deadbeat when you can just sue him instead?
The key, of course, would be transparency—some measure of regulation would be required to ensure that loan recipients understood their obligations, and that terms couldn’t be changed on the fly. While we do sympathize with Curry’s plight, we also have little doubt that he understood the terms of the Allstar deal. In the end, we’re glad he’s in debt to an entity that sees fit to seize his cars through legal means, rather than do him bodily harm.
(Image via the Leicestershire City Council)
Brian Moore // May 25, 2010 at 2:20 pm
I think you may have even linked it before, but there’s a whole science of “high income sports players who find it difficult to manage even their huge wealth”. I vaguely remember some statistic about something like 75% of football players are bankrupt a few years after retiring.
I guess this guy’s pushing the envelope by running out of money before retiring!
Brendan I. Koerner // May 26, 2010 at 10:58 am
Antoine Walker seems to be pushing the envelope even further:
http://sports.espn.go.com/nba/columns/story?page=100320otlwalker
Craziest quote from that story: “A lot of friends I grew up with would have a business venture and hit me with a sob story and I would say ‘yes,’ and I got burned a lot of times that way. People say ‘I need to borrow $200,000 for this deal and I’ll give it back to you,’ and then I never hear from them.”
Brian Moore // May 26, 2010 at 1:17 pm
Is it wrong that my first reaction to this was: “Wow, I need to hang out with Antoine Walker more.”
Brendan I. Koerner // May 26, 2010 at 1:19 pm
Not at all. Whenever I’m at the supermarket and debating whether to spend the extra twenty cents on a better class of canned beans, I think to myself, “If Antoine Walker was here, I wouldn’t be having this problem.”