Law could hinder those it was enacted to help.

• Position: Brief Article

In 1999 the General Assembly enacted strict limit on "predatory lending" - loans aimed at unsophisticated borrowers, often those with bad credit, and carrying high rates and fees. Robert Lamy, a management professor at Wake Forest's Babcock School of Management, says the restrictions may end up hurting the people they're supposed to help.

BNC: What's meant by "the subprime market"?

Lamy: It's the market below the traditional lending credit limits, people with blemishes on their credit histories. It can be something minor like a missed payment or something serious like a bankruptcy.

The new law passed the N. C. Senate 48-1 and the House 110-2, yet you're worried. Why?

Politically speaking, how could you vote against this kind of legislation? Some consumers are being ripped off. So how could you say no? I think the legislation is in the right direction, but we need to be careful. For a long time in the subprime area, lenders didn't lend at all. Now they do. So the question is: How do we balance economic realities of risk and return with the need to protect these consumers? These loans are riskier, so lenders have to be able to charge more.

Stories of abuses abound.

People have been abused for decades in not being able to get loans, and I don't want us to go back to that. For the individuals being blatantly taken advantage of, more consumer protections make sense. At the same time, a lot of good has come out of the subprime market, and we need to be careful not to stifle it.

You've written "a few bad apples" abuse consumers. The Durham-based Center for Community Self-Help says a quarter of subprime loans have predatory provisions. So who's right?

Even a few bad apples can wreak a lot of havoc. There are probably few firms that are quite bad, but the volume of their business could be significant. But don't want the lenders who are trying to do the right thing to be painted with the same brush as the true scumbags.

What particular provisions of the law worry you?

The rate cap. We lived for a long time in this country with fixed interest rates, and a small sector of our economy always got all the capital. We moved to having markets determine what rates should be, and capital is much more widely available. Look at credit-card rate caps. In the old days, states passed usury laws that said credit-card issuers could only charge X%. People in certain states -- Arkansas was a prime example -- couldn't get credit cards. Banks wouldn't issue them.

You...