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It's All About the Money
Apr. 15th, 2005 07:18 amThe Bankruptcy Reform Bill has sailed through Congress.
Because the Republicans care about you.
The rationale is that individuals should be responsible for their own poor decisions and not shift the burden of their debts onto others. Which is true. I can't argue that point.
But whatever happen to corporations being responsible for their poor decisions? Why should the credit card issuing institutions - who were the impetus behind this reform - be rewarded for their foolish and aggressive marketing strategies that issue vast amounts of credit to people who clearly are incapable of repaying the debt? Business to business, companies monitor the debts and credit rating of their clients because they know that if they overextend and a company goes belly-up, they are unlikely to see a dime in return. But in order to increase their profit margin in a competitive marketplace, credit card issuers have been handing out plastic like Santa hands out candy canes. And there are a whole line of Santas, each ready with one more, no matter how many you already have stuffed in your pockets. It seemed like the more the economy dipped, the more solicitations arrived in the mail. 0% APR for 6 months if you roll your debt onto this card! Or this one! 4.5% for life!
You see, credit card companies like you to carry a big balance. Sure, they had to front the expense of your purchase, but they'll make you pay for it many times over before they're done. Responsible consumer spending bums them out - if you pay off your bill every month, you are barely worth their business. So it is in their best interest to encourage consumers to spend more than they make, to run up debt. So they push cards at consumers, and they push consumption so that you'll run up that card.
A truly capitalistic system would recognize that part of the risk of doing business in this way is a pretty high default margin. And a little research seems to peg that rate at about 7%. Which is a lot. But this is a trillion dollar a year industry, and it got that way by aggressively selling debt. Default margins are a cost of doing business in this way. Suck it up and deal with your choices. That is capitalism. End of story.
Except. When you have that kind of cash at your disposal, it's really easy to throw some around in Washington, DC, and paint yourself as the poor victim of those terrible, rotten shiftless individuals who took advantage of your good will in badgering them continually to buy your product. Now, they're all "gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires - often celebrities - who buy mansions in states with liberal homestead exemptions to shelter assets from creditors."
Come on.
Certainly, those people are out there (the child support part is bullshit, since child support obligations are not dischargeable under current bankruptcy law), but a lot of them are people who've lost their jobs, or people who have crushing medical bills and no insurance. Or the very same single mothers who have been abandoned by those deadbeat dads and can't make ends meet.
Of course, the next appeal is to how this will help "all of us" because default costs an average of $400 per household in additional interest charges.
In other words, the credit card companies are already shifting the burden of their bad business decisions to Joe Consumer. And if you think that credit card interest rates will actually fall as a result of this plan, I have a nice bridge to sell you.
I'll let you buy it with no money down and no payments for the first year.
Because the Republicans care about you.
The rationale is that individuals should be responsible for their own poor decisions and not shift the burden of their debts onto others. Which is true. I can't argue that point.
But whatever happen to corporations being responsible for their poor decisions? Why should the credit card issuing institutions - who were the impetus behind this reform - be rewarded for their foolish and aggressive marketing strategies that issue vast amounts of credit to people who clearly are incapable of repaying the debt? Business to business, companies monitor the debts and credit rating of their clients because they know that if they overextend and a company goes belly-up, they are unlikely to see a dime in return. But in order to increase their profit margin in a competitive marketplace, credit card issuers have been handing out plastic like Santa hands out candy canes. And there are a whole line of Santas, each ready with one more, no matter how many you already have stuffed in your pockets. It seemed like the more the economy dipped, the more solicitations arrived in the mail. 0% APR for 6 months if you roll your debt onto this card! Or this one! 4.5% for life!
You see, credit card companies like you to carry a big balance. Sure, they had to front the expense of your purchase, but they'll make you pay for it many times over before they're done. Responsible consumer spending bums them out - if you pay off your bill every month, you are barely worth their business. So it is in their best interest to encourage consumers to spend more than they make, to run up debt. So they push cards at consumers, and they push consumption so that you'll run up that card.
A truly capitalistic system would recognize that part of the risk of doing business in this way is a pretty high default margin. And a little research seems to peg that rate at about 7%. Which is a lot. But this is a trillion dollar a year industry, and it got that way by aggressively selling debt. Default margins are a cost of doing business in this way. Suck it up and deal with your choices. That is capitalism. End of story.
Except. When you have that kind of cash at your disposal, it's really easy to throw some around in Washington, DC, and paint yourself as the poor victim of those terrible, rotten shiftless individuals who took advantage of your good will in badgering them continually to buy your product. Now, they're all "gamblers, impulsive shoppers, divorced or separated fathers avoiding child support, and multimillionaires - often celebrities - who buy mansions in states with liberal homestead exemptions to shelter assets from creditors."
Come on.
Certainly, those people are out there (the child support part is bullshit, since child support obligations are not dischargeable under current bankruptcy law), but a lot of them are people who've lost their jobs, or people who have crushing medical bills and no insurance. Or the very same single mothers who have been abandoned by those deadbeat dads and can't make ends meet.
Of course, the next appeal is to how this will help "all of us" because default costs an average of $400 per household in additional interest charges.
In other words, the credit card companies are already shifting the burden of their bad business decisions to Joe Consumer. And if you think that credit card interest rates will actually fall as a result of this plan, I have a nice bridge to sell you.
I'll let you buy it with no money down and no payments for the first year.
