Maxed Out: Take It For What It's Worth

We just finished watching Maxed Out, the recent documentary about the viperous evils of the credit industry. We agree with the basic premise: Underinformed debtors are getting taking advantage of. And the stories are horrific, with three different people driven to suicide because of debt. The doc does a good job of outlining the links from debtor, to bank, to debt collector, to government representatives. It’s a nasty apparatus.

However, we found ourselves growing annoyed at the lack of appreciation for individual fiscal responsibility. At only one point that we can recall does one lady say something to the effect of, “yeah, I shoulda read the fine print.”

Yes, you should have. The bank is not going to manage your money for you. If you live beyond your means, you will some day lose control of your life. You spend other people’s money, they’re going to want it back. Yes, the credit industry should have stricter screening measures (though the prospect seems unlikely as it’s so much more profitable to not), but as long as you believe you are a victim of external circumstances, you will find yourself victimized.

Maxed Out is out on DVD, as well as Netflix’s “Watch Now.” — BEN POPKEN

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  1. BillyMumphry says:

    best post ever.

  2. TPIRman says:

    Agreed. An excellent, carefully reasoned review. Predatory credit practices do need to be addressed. At the same time, if you ignore the role of personal responsibility, you’re going to be a victim no matter how industry practice evolves/devolves.

  3. loueloui says:

    I agree that people should take an active role in managing their money. If you don’t, someone else (your bank, the government, credit card companies)will manage it for you. The problem is that they’re not likely to have the same goals as you, and more often than not, will keep a big chunk of it for themselves.

    That being said, a lot of people do not have the skills necessary to defend themselves against unethical financial institutions. Although bad things sometimes happen to good people, and a failure to plan can create financial hardship -especially if you are unprepared; some companies seize upon this opportunity to reap obscene profits.

    I don’t think anyone out there would willingly enter into any agreement if the person presenting it said ,’This will probably force you into bankruptcy’, or ,’We are always looking for an excuse to charge you the maximum penalty’ or ,’You have no hope of affording these payments’. It is never that simple.

    Ths fact of the matter is that the credit industry is rife with dishonesty, corruption, and greed, and even companies who would not otherwise stoop to such tactics are oversome by those who will, and any attempt to sto pthese actions is seen as interfering with the market.


    I fear that we are becoming a society in which corporate dishonesty has become the norm, and consumers are too passive to hold them accountable.

  4. EvilTapioca says:

    I just don’t understand why people don’t get the simple concept of READ and REVIEW EVERYTHING before you sign or agree to a loan/credit card. If you know you won’t be able to at least make the minimum payment well then you obviously shouldn’t get the credit card or loan. Though a company breaking an agreement or contract is an entirely different thing and they shouldn’t be allowed to just up interest rates for no reason.

  5. rodeobob says:

    I absolutely feel that personal responsibility is an important component in finance. At the same time, there is a certain degree of intentional obfuscation by credit card lenders about the very fundamental assumptions behind their business transactions.

    If you or I borrow money from a bank, the bank has an expectation that you will pay off that loan within a certain time frame. Above & beyond that, they actually schedule your payments so that your loan is repaid by a specific date.

    On the other hand, if you borrow money with a credit card, either directly (as a cash advance) or indirectly, (by purchasing more than you can immediately pay off) it is the sincere and earnest hope of the credit card lenders that you never fully repay that debt.

    Think about that for a minute.

    I can demonstrate these two different approaches using a 7-year car loan and comparing it to the same amount of credit card debt, but to really illustrate the relationship between principle, interest, minimum payments, and payment schedules, I’d need to use a spreadsheet to show all the values. And to understand it, you’d need at least high school level algebra and a very sharp mind, or more likely a junior-college level finance course. Nice for me (degree in accounting) but most people don’t want to spend their free time making amortization schedules in Excel, even if they knew how. Which is a very long-winded way of saying “most people don’t realize that credit card lenders don’t have the same values/expectations/rules/ethics as traditional lenders”.

  6. WebUrbanist says:

    To be honest, I think that there needs to be more early-life education about fiscal responsibility. The problem is that – like sex – we aren’t taught enough at a young age about managing our finances.

  7. PenguinBlue says:

    As much as I think lenders DO take advantage of financially irresponsible people, I think the answer here is in education about fiscal responsibility, not legislation to further regulate the credit card companies. People who ignore the fine print before signing serious contracts and spending large amounts of money are going to get screwed no matter who the culprit if they aren’t taught better.

  8. shoegazer says:

    I agree with all of the sentiments here, and add another: At the end of the day, it’s your signature (and your personal commitment) at the end of that application form. Most people assume the role of victim far too easily and refuse to acknowledge their role in the process.

    Legislation to “protect” the public just increases the cost of administration and, hey, drives up the fees for the lenders. This is why we now have to sign ridiculous papers in the UK saying “we really DO understand if we do not pay, bad men will creep into our house and break our kneecaps”, even BEFORE a loan is approved. (It’s called a statement of facts, it’s tedious)

    I am all in favor of restricting truly predatory lending (Payday loans, hidden or arbitrary bank / card charges) – but I think consumer education should come before regulation.

  9. aikoto says:

    I’m a big proponent of personal responsibility, but there’s a problem with the view that “you signed it, you should have read the fine print” philosophy.

    For example, you can read all the fine print on a rebate form, fill it out and send it in and still not get the rebate. Companies know this. They’ve designed the process to be as simple sounding as possible when actually, there are lots of hoops (especially if something goes wrong).

    Fine print is called that for a reason. It’s usually small, there’s a lot of it, and it’s hard to understand (or easy to misinterpret).

    I believe that people have a right to expect that the companies they’re doing business with aren’t going to rob them blind.

  10. Orchid64 says:

    It’s well understood that putting more food in front a person will make him eat more. It’s also known that looking at appealing food will make you want to eat that food. The same logic can be applied to other attractive goods. If you see something again and again and the picture is presented with messages about how purchasing that item will in some way make you happier or more satisfied with life, you will want to buy that item. The more often you see it, the more you will want it.

    The reason credit card debt is out of control and people spend money they don’t have and can’t pay back is that they are inundated with messages about goods they desire but cannot afford and the credit card companies are saying you can have it now if you take advantage of what we have to offer.

    The coupling of advertising meant to make people identify so closely with their purchases that they start to define their value by their possessions and what appears to be a means of having whatever they want right now is a lethal one. The people who have the least end up feeling the most inadequate because they believe everyone around them has things they don’t and are sent the message that those things make them happy. They want to be happy, too, so they use the cards with the best of intentions to pay back promptly.

    The problem is that things happen. People lose jobs. People end up having to use the cards for emergencies on top of discretionary expenses or they just plain distort reality to convince themselves they can handle more debt than they actually can.

    While people do have to be responsible, so do advertisers and financial institutions. Most people cannot constantly be exposed to the messages the media serves up and fail to be influenced and credit card companies are all about taking advantage of the hunger for things you can’t afford. They aren’t even interested in people who can pay back their debts because they don’t make enough money from them. They target people who aren’t going to be able to make above minimum payments because they can make the most from them.

    If we’re going to talk about responsibility, then there has to be some regulation about who can and can’t have cards. Unemployed college students shouldn’t have them, for instance. People who are at an income level which shows limited ability to pay back should have a limit on the credit line they can run up based upon their means. This won’t happen, of course, because it’s all about business making money by taking advantage of human weakness, not about being responsible.

  11. dbeahn says:

    I know a lot of banks in my area (including national one) advertise their services as “You live your life, we’ll take care of your finances”.

    Of course, they don’t. But why do we, as a society, allow this kind of thing to go on? Personal responsibility is important, but there are laws to enforce it, too – wearing my seatbelt is a personal responsibility, but there’s a law that say I have to do it. How is the credit industry different? Banks have encouraged us to live WAY beyond our means for a long time, because there’s a lot of money in it. Time to reign that shit back in.

  12. KSE says:

    I found this movie to be a joke. There was literally zero personal responsibility taken. At one point, the reservist/cop said that the Army didn’t pay him enough. No genius, you spent too much. When you’re taking a second job (albeit an amazingly honorable one) to pay the bills, perhaps that is a hint to cut back…maybe the brand new truck wasn’t necessary?

    The most ridiculous part of the movie was pretty much any time bankruptcy came up. Regardless of who donated to whom to get the bill passed, filing bankruptcy should be incredibly difficult. The ease of the system previously pretty much allowed people to rent items for a set period of time, pay none of the money they promised, file bankruptcy and move on. Bankruptcy is the same as welshing on a debt, it’s cowardly and dishonest in almost every case.

    Millions of people use credit responsibly. Toughening the laws or increasing regulation will make this more difficult/expensive for those who are intelligent about their finances. A better solution would be to teach a personal finance course (omit art or music or gym or other nonessentials) in schools so that children, from a young age, understand how to be responsible. If the kid knows how/when to start saving for retirement, they’ll have all kinds of time for finger painting and learning to play the xylophone.

  13. zibby says:

    I’m convinced. In fact, just reading this thread makes me want to spend a bunch of money I don’t have on a bunch of crap I don’t need.

  14. Joe_Bagadonuts says:

    Good post. I had the same thoughts as I watched the movie. Yeah, standards are lax and anyone can seemingly get a line of credit, most likely well beyond means to repay it if run up. Yeah, fees and rates can be absurdly high. Something needs to be done to reign this in and make it a little more user-friendly when reading and agreeing to the terms and conditions, and at the same time, folks need to become better educated on handling money and credit and understand exactly what they’re signing up for. Knowledge is power, or something.

  15. FLConsumer says:

    Where’s that SNL skit when I need it?

    Don’t buy shit you don’t have the money for today (can’t afford).

    Pure & simple. It’s something I’ve lived by since I was little and you know what? IT WORKS! Even with all the fine print, this will keep you out of trouble 99% of the time.

    On the fine print, our legal system (greedy lawyers, mainly) have made the volumes of legalese to be written into every contract. Still would be nice to see a company come up with a “plain English” common-sense disclaimer/agreement that could still cover them enough legally. Cheaper and easier to do the legalese.

    Then again, looking at Americans’ ever-expanding waist-lines shows they have no self-control whatsoever.

  16. mwdavis says:

    Sound financial planning, personal responsibility, budgeting — these are good things.

    I know two people who are in dire straits financially: one who, for lack of any alternative, put medical expenses on a credit card (not having insurance and having exhausted his savings in one day of hospitalization & procedures) and the other being an abandoned woman with two small children facing a long gap between need and assistance (she was charging food & took cash advances to make rent). I haven’t seen the documentary and don’t know to what extent these kind of factors play in to the stories, but I think the failure of our society to provide a good social safety net and the lack of affordable health care probably are factors.

  17. Squeezer99 says:

    thats what i’ve been saying for a while now, these people lacked personal responsibility. the banks didn’t force these people to spend money and rack up credit card debt, they did it to themselves. the reason why they lack financial education is instead of reading something or talking to someone about some financal skills, they probabvly care more about when paris hilton gets out of jail.

  18. anatak says:

    Read the fine print? People don’t read bold faced type when its in front of their faces. The fact is that debt is now the most heavily marketed product in North America. We are absolutely inundated with debt advertising tellings us to “live in the moment” and even going so far as to imply that its required. TV, radio, print, junk mail – it’s everywhere. And unless you know better, after a while you tend to believe it. Its very easy to fall for clever marketing. And thus, when people hear, “you’re pre-approved” they tend to think that has something to do with them being able to afford this loan and not just the fact that they have a valid address and maybe a pulse.

    We can beat our chests and tell people to understand what they are getting into, but there are a lot (A LOT) of people who barely have a concept of their own basic finances. They don’t know how much they have coming in each month, let alone if they can afford a $10,000 loan at the low, low introductory rate of 3.9% over 48 months. “But that does sound pretty good. I’ve been wanting to get a dog and a new roto-tiller, and it would be nice to spruce up the house. Plus I hear you can get a better rate of return on on-line savings accounts. And see here? I’m PRE-approved.” People think that these loan officers and credit card pushers are somehow qualified professionals who can actually tell something about your ability to repay because they pulled your almighty credit score and looked into their crystal ball. When in reality they are just another slimeball salesman looking to make quota at any cost.

    The government came down hard on tobacco advertising (notice its not the Winston Cup anymore), and there is no reason why they cannot regulate debt advertising. That would of course require Capitol Hill to understand that debt is bad….. The best thing people can do is to finally reach a point where they’ve had enough of this crap and find a place to turn for financial education that isn’t a lender.

  19. kimsama says:

    I agree that people are being taken advantage of, but I disagree to some extent that they can be protected any more than they already are. I grew up in a poor rural town, and we actually had a “personal finance” day at school every year. Bank and credit union people would come in and be pretty honest with us about what debt was, how to plan for retirement, etc.

    I remember very clearly the story that one of the gentlemen, a credit union loan manager, told. He talked about how high of a monthly payment you could afford on a given income level for different things (mortgage, car payment, utilities, etc). He then said that when people came in for a car loan or a mortgage through the credit union, he would tell them if they couldn’t afford it (because even if they thought they could, they might not be considering emergencies, day-to-day unbudgeted expenses, etc). Nine times out of ten the person he told could not afford the loan would simply go to another lender to get the loan they wanted. He specifically told the story of an acquaintance of his who came in for a loan for a truck. When the manager told him he couldn’t afford it, the man went to another bank and got the loan. Eight months later, he lost the truck. After that, he came back and told the manager “why didn’t you convince me more that I couldn’t afford it?”

    I don’t know exactly what the problem is in our country with easy credit, but what I take from that story is that there is information out there — whether it is through an honest loan officer, or through a careful consideration of your budget using a spreadsheet, the fine print of a loan, or through finance courses, books, etc. The problem seems to be that people ignore or selectively ignore this information, because dammit, they are getting that new truck.

    I don’t think more protection is going to help people like that. If you remove one type of predatory lending institution, they’ll go to the next one. They will find a way to spend their, and other people’s, money, by going to the path of least resistance to get the cash. They will ignore all warnings until it is too late.

    While growing up, I personally saw people in our neighborhood lose their houses because of HELOCing them and then blowing the cash. One family went through $90k with nothing to show for it — seriously, it was all cigarettes, booze, cars they then wrecked for fun, clothes, etc. And at the end of that, no house, and “why us? Help us!”

    Only a cultural change or very strict regulation (like, almost no one is eligible for a loan) will change that. Where would that leave us? No credit cards, no easy loans, a return to the traditional mortgage maybe?

    Seriously, I don’t know the answer, but having grown up around people who would blow any and all money at the first opportunity, I don’t have much faith in either the lending institutions or their “victims” anymore!

    Whew, what a rant, sorry! Sorry to be so bitter (hope you people who grew up in a comfortable ‘burb can understand where I’m coming from, though!)

  20. chefmatty says:

    I have two somewhat conflicting opinions here.

    First is that the government should step in and attempt to implement some controls on the credit industry. It is a runaway freight train that is starting to effect everyone. There are more forecloses and personal bankruptcies than ever. This is contributing to an economic slow down in the country and it effects us all.

    However, I am BIG beliver personal responsibility. In other words: you sign it you own it. People with huge credit card debt have to admit to the that they put themselves in that situation. This is a free country, and people can choose to have a credit cards or not. Once they do…they have to be held accountable for their actions.

  21. ThinkAboutItPlease says:

    The credit card industry absolutely thrives on ignorance. Ditto for cookie-based spying companies like DoubleClick. Beware any company that would go out of business if people were more educated.

    This would be a nice chain reaction:

    (1) “Maxed Out,” Consumerist, etc. educates consumers –>
    (2) Consumers become much, much wiser about spending and use of credit cards –>
    (3) Consumers stop “falling” for credit card BS (careful bookkeepping and planning, or always paying in cash would help) –>
    (4) Credit card companies no longer have the opportunity they used to have to be exploitative scumbags –>
    (5) The whole economy improves, as does mental health, and unnecessary, rampant consumption decreases (helping the environment, etc.).

    And if people in the credit card industry lose their jobs, I’m OK with that. Just as I am with people in the tobacco industry, or in the AOL retention queue, or at Best Buy losing their jobs. The displacement is unfortunate, but it’s temporary, while everyone is better off.

  22. badteaparty says:

    FLConsumer, and other “personal responsibility” guys – I agree 100%. HOWEVER, if you saw the movie it was really disturbing the way they preyed on people who absolutely did not have the wherewithal to understand what they were getting into. Yes, the woman who got into credit trouble buying Franklin Mint plates probably had it coming. But the poor elderly, seemingly not well-educated woman who had owned her little shack down in (Louisiana? Mississippi?) until a bank swooped in on her and offered her money without explaining the terms? And then took every last penny she had and put her into stress and debt servitude until the end of her days? That was criminal in my opinion.

    It’s nice that you and I have enough education and life experience to know about the dangers of easy credit. But as a country we have the power to pass laws to protect people, and I think this is an example where it is sorely needed. We don’t allow college students to DRINK until they are 21, because presumably they’re somewhere between adults and children in the responsibility department. But taking out credit that could haunt them the rest of their lives? No problem. And where’s the education beforehand? I think “Maxed Out” should be required high school viewing, for starters.

  23. @mwdavis: At least someone else here recognizes that poor people exist…

  24. alpha says:

    @badteaparty:

    I agree entirely. I think some people get themselves into it and have no one to blame really…But the stories about the people when a bank came in and “offered to help” by “lowering their payment” and then in every case the payment went up! Now, somewhere in that fine print did it say that the payment actually went up? Perhaps…(I’d think it would have to), but seriously. That’s out-right lying.

    And I realize that credit card companies make their money off of the people that never really pay off the debt…but even just one rule that says something like “Oh you can’t give out new credit cards if they are already in so many thousands of credit card debt” would at least provide one last, meager attempt at stopping people before they slam full speed right into rock bottom.

    Colleges getting paid for letting credit card companies come on their campus was the other thing that really bothered me…much like the recent loan scandals.

  25. ThinkAboutItPlease says:

    @kimsama: Great post! I’m glad to hear about the personal finance day at school. You are fortunate that people gave you the straight skinny. It’s too bad it didn’t work with everyone.

    My schooling was very weak on economics, and I don’t recall a shred of education at school on debt or mortgages, even in math classes. I was thinking the other day about the hours and hours of instruction and practice relative to solving quadratic equations that I had in 8th grade and after. I can’t think of a single application of that knowledge (mostly forgotten) that I’ve had in real life. And I’ve used the year’s worth of instruction in trigonometry that I had exactly once (to design a triangular item for a home project). Calculus gave me an appreciation for how certain natural phenomena work, but I’ve never, ever actually used calculus in real life.

    I will say that math classes did gave me a very useful appreciation for geometrically-increasing functions, which has contributed to my resolve to avoid overspending on a credit card like the plague. I just wish they would have spent less time on subjects that would be of practical use to only a small number of people (such as future professional engineers), and more time on things like how to save and plan for a truck, and the consequences of an ill-timed purchase.

  26. ThinkAboutItPlease says:

    @mwdavis: I appreciate your post as well.

  27. badteaparty says:

    @alpha: Exactly. How about a law that doesn’t allow you to have more than a 35% debt-to-income ratio, which is the guideline a a bank uses when deciding if you can handle a mortgage (the ratio varies, but whatever it is.) Of course then it would take more than 2 seconds to issue people a credit card, and I don’t think credit companies will want that. I was shocked to discover in this movie that MBNA was Bush’s biggest campaign contributor. What does that say about our government’s priorities?

  28. tcp100 says:

    Well, as far as schooling goes, I hate to say it but you can’t rely on your average teachers to set curricula for such things – since they’re pressed to do nothing but raise test scores, and usually aren’t any better off when it comes to financial knowledge than your average Joe.

    I’m not sure about anyone else, but I learned about fiscal responsibility by example – that is, by the example of watching someone else (my folks) mess up with credit card debt, and telling myself I’d never do that.

    The problem is, however, that it really doesn’t take much of an education. It’s a cultural problem. If you abide by the rules that ‘there ain’t no such thing as a free lunch’ and that NOBODY outside a charity, best friend, church, or family is going to do anything for you just out of the kindness of their hearts.

    I’m shocked when I meet friends who don’t get it why the bank won’t give them a break when they tell them their sob story, or are surprised when the person selling them the loan wasn’t 100% honest. Perhaps that’s an option – don’t allow commissions and awards for selling loans.. but really, try enforcing that.

    Unfortunately I’m currently dealing with a friend of the family with a similar situation to another poster.. HELOC’ed to hell, facing foreclosure, not a damn thing to show for it. They’re not dumb, either, and they understand all terms of their loans. The problem is, they simply don’t get that they HAVE to pay their mortgage or they will LOSE THEIR HOUSE, and they can’t talk nicely to the bank and get pity from them, as if they were a friend. Believe me. They’ve tried.

  29. Pelagius says:

    So the retarded man who was getting credit card offers for thousands of dollars should have just read the fine print? Or the cat who got a $4000 card?

    I agree that more education is necessary, but at the same time predatory lending practices – including the bombardment of every living soul over the age of 18 with dozens of misleading sales come-ons – needs to be curbed.

  30. MaineCoast says:


    Some good reading today, thanks to all who are posting. To be sure the posts about personal responsibility are spot on, but the earlier comment about “intentional obfuscation” is especially insightful and important and very also accurate.

    Wising up to the mass and deep deception that almost ALL marketers and advertisers use to sell services and products (along with user agreements, terms, policies, etc) is not as easy at it sounds OR that stuff would not work.

    We all (most of us anyway) continue to sign on the dotted line anyway… why?

    The scale of the ongoing deception is unbelievably huge.

  31. savvy9999 says:

    Legislate the default maximum limit on any single credit card to be 1% of a consumer’s gross income. Legislate that a person can initially only have up to a maximum of 3 cards. No cash advances.

    The technology is in place already to do this. All of the credit reporting agencies know exactly how many revolving accounts you have, they could easily put a “stop” on approvals for additional cards or higher limits after you hit the max.

    Again, these are just starting points, a sort-of “learning permit” for credit. Those who are well-off and can afford to do so, an opt-in agreement (very detailed and explicit) can be obtained, perhaps exempted based upon existing high FICO scores. Noobs to the system get more limits and plastic only after attending an accredited (!) personal-finance course +/or establishing a long record of excellent payments.

    Gee.. isn’t that kinda how the system used to work? What happened?

    What’s the point of Equifax/Experian/TransUnion, if lenders of all credit are not forced BY LAW to listen to and enforce policy based upon the data these institutions already possess? No free-market argument can be made to raising the bar for obtaining initial credit, or upping that credit in a controlled and incremental way. Responsible borrowers won’t notice a thing.

    The latest mortgage default data shows that even the most staid banks– who were formerly prudent and wisely used FICO scores to determine credit-worthiness– have lost their minds too. The profit orgy has made every lender crazy, and they all need a slap back by the law. Sorry, the banks and CC companies brought this upon themselves, by an utter lack of self-control.

  32. Little Miss Moneybags says:

    Those were exactly my thoughts upon watching the movie (there’s a companion book which covers the same stories and more. Full disclosure: I work for the publishing house that produced the book, but was not involved in its creation).

    There is definitely predatory lending out there. But people need to take responsibility for their own lives. I really can’t wrap my head around the concept that people believe, “Well, if the bank thought we couldn’t afford it, they wouldn’t have given us the loan/card/line of credit”. Maybe it’s just my nature, but I am waaaaaay too skeptical of anyone trying to do me a favor, especially a huge corporation. I admit to not reading every single line of text in the credit card application I filled out, but that doesn’t mean I purchase whatever I want using it. The credit card is there for me for convenience, for emergencies (and not even for emergencies, really, I have savings for that). I don’t put Tuesday’s lunch on it just because I feel like it.

    I realize that there are people out there whose circumstances are nothing like my own (healthy, able and willing to work, college-educated) but I don’t think that precludes them from common sense or responsibility for their own lives. There are plenty of very low income people out there who DON’T get taken advantage of–and it’s not because the lenders are selectively predatory.

  33. shoegazer says:

    Good posts all.

    @savvy9999: The loosening of credit standards happened, on a global level. Money is cheap these days, there’s so much out there that people are willing to lend to anyone and everyone without doing the proper checks. Add to that the fact that debt itself is now being bought and sold as market commodities in an alphabet soup of products (CDOs, CMOs MBS…). The mortgage business is a volume business.

    Unfortunately Experian / Equifax and the like are not prescriptive services. There is no law against lending to subprime creditors, and frankly there shouldn’t be. Why withhold money from the people who need it most?

    What SHOULD happen is restrictions on how DEBT is bought and sold, to provide accountability if and when the original creditors default.

    @MaineCoast, and others: Yes there is a lot of FUD and regulation SHOULD curb the worst abuses. My fear is that bringing the hammer down on all lenders will only make it even more difficult for the poor to get money. The smoking / obesity analogy is false – there is no hazard to prevent here. Poor folks will need cash, and will get into debt, and if banks are legislated against providing this then the black market criminals – REAL ones – WILL step in. It’s happened before.

    You can’t “legislate” more awareness – how much more explicit can you get than YOU WILL LOSE YOUR HOUSE IF YOU DON’T PAY?

  34. shoegazer says:

    BTW I don’t work for a bank – I agree their marketing tactics are scummy – however, I would rather see government support agencies step in to educate, not legislate, for the (long winded) reasons above.

  35. tentimesodds says:

    @savvy9999: Moronic paternalism. I should be able to get whatever credit cards I want to. Why would you force your will on me? Are you a communist?

  36. savvy9999 says:

    @tentimesodds: Ah, resorting to cheap labels and name-calling. Nice.

    Do you also complain about having to have a license to drive? Before you got that license to drive, did you balk about first being required to get a learner’s permit, or perhaps take Driver’s Ed? A graduated system of learning -> testing -> achievement -> reward… how paternal!

    If anything, I am an anti-communist; I don’t want any part of taking from the rich and give to the poor, I simply want faceless and unethical companies to stop ripping off everybody, by their specific tactics of overextending credit to the clearly unworthy. So that makes me… a consumerist?

    If you could comprehend reading material, you would have noticed that my plan has almost no impact upon able consumers. The credit/lending system is not broken for those who know how to use it (or abuse it, as you seem wont to do).

    The problem is that it is unfairly predatory upon the very young, very old, and unaware. These are the people that need help. Up front. Better to give them the tools (easy LOW credit with LOW limits) to learn how to fish day-by-day, than to give them a 30-foot yacht (unlimited cards and limits far out of proportion to income) with no instructions on how to use it.

    Some people think education solely will get us there; I do not. Financial literacy is in a shambles (as pointed out by other excellent posters), but that will take decades to improve.

    The lending system will clearly not fix itself, there is zero incentive to self-regulate.

    If you think there’s no problem, then why are you reading this post? If you do agree there is a problem, then what’s your solution? Look the other way and spend like there’s no tomorrow? How insightful, how helpful.

  37. Buran says:

    I am starting to wonder if the editors of this site get some kind of kickback for every sale of this movie considering how often it’s brought up.

  38. pestie says:

    Amen! That’s exactly how I felt about it, too.

  39. spanky says:

    It’s been a while since I saw it, but my impression was that the movie was fairly focused. That is, it was a documentary about the credit industry, not about personal finances in general.

    It wasn’t an instructional film, designed to answer questions about managing your credit or anything. It’s a documentary for people who would willingly watch a documentary about consumer lending. That target audience doesn’t need to be reminded to read through credit applications and avoid overspending. The big question, for that audience, is “How do people get into these messes?”

    The fact that it didn’t dwell so much on consumer responsibility or tips on managing personal finances doesn’t necessarily discount the importance of those things. It’s just that the movie wasn’t about that, and the people who are likely to see it already know that stuff.

  40. ThinkAboutItPlease says:

    Wise legislation absolutely has a place. A measure of protection of citizens is a reasonable thing. I vastly prefer reasonable regulation over people who haven’t learned how to drive being able to drive, or there being Lord-knows-what in my Colgate.

    Also: I think showing “Maxed Out” in high schools would be a fantastic idea.

  41. @EvilTapioca: “I just don’t understand why people don’t get the simple concept of READ and REVIEW EVERYTHING before you sign or agree to a loan/credit card.”

    Because a lot of people simply don’t have the reading comprehension level to understand what it is they’re reading, let alone the financial sophistication, and those are a lot of the people who end up in trouble.

    I’m a lawyer and some of these credit card agreements take me an hour to read and I have to annotate it to figure out what the hell they’re talking about — BECAUSE THEY’RE WRITTEN TO BE SNEAKY!

    Even if we get beyond the individuals who simply don’t have the literacy skills to understand, I had a client who was a widow, well-educated, RN, who understood basic finances but did NOT understand why credit card debt wasn’t “good” debt no matter how much I explained she needed to pay it off, not let it revolve, since she could (easily) afford to do so. She finally did so not becuase she understood WHY, but because she trusted my advice after our professional relationship had been going on for a while. She was just like, “well, this way I have more money NOW, and I can just make payments. The interest isn’t that bad.” I wanted to pull my hair out!

    To be frank, I can’t get the local poverty mission center to let me teach a basic finance class or work with people trying to get their finances in order — the people who run it don’t understand enough about personal finance to see how this is part of the problem. They think “They just need jobs, they need to make more money, then it will all be okay.” Argh!

  42. tentimesodds says:

    @savvy9999: Driving affects other citizens because it involves public roads and the safety of all. Your analogy sucks.

    Your proposal:

    “Legislate the default maximum limit on any single credit card to be 1% of a consumer’s gross income. Legislate that a person can initially only have up to a maximum of 3 cards. No cash advances.”

    proscribes your view that debt is bad over others’ views that they want access to credit cards. You are legislating your view over the view of others. That’s socialism.

    Prohibiting fraud and requiring clear language in contracts is one thing. Banning lending practices because people don’t care to read before the sign is another.

  43. @EvilTapioca: Just to add — I would be SHOCKED if the average well-educated, financially-comfortable consumer “understands” everything they’re agreeing to even after reading and “understanding” the agreement. These are legal contracts that frequently require specialized legal knowledge to interpret.

    And I don’t say this to be like “Lawyers rule!” but because I have to have my husband, who deals with Health Care law, read our health insurance contracts because it’s sooooooo complex I don’t know what particular clauses mean because I don’t specialize in that area. The difference might be that I know enough about the law to know when something looks innocuous but is actually freighted with legal meaning.

    I ALL THE TIME get calls from people who have stumbled into financial ickiness because of a bite-them-in-the-ass clause that sounded innocuous but in fact handed the card issuer ENORMOUS power in the event of a minor happenstance and they say, “Well, I knew it was for X situation, but I DIDN’T KNOW IT MEANT Y TOO!”

    (I’m a big advocate for “plain English” lawyering, but boy does it feel like a losing battle.)

  44. ThinkAboutItPlease says:

    @Eyebrows McGee: That must be frustrating — the ignorance is so widespread…

    How nice it would be if there were an epidemic of “a-has” about credit card debt. These kinds of blog postings and discussions will help.

    By the way, I highly recommend to everyone the PBS Frontline documentary “The Secret History of the Credit Card.” It’s available online in its entirety: [www.pbs.org]

    That documentary points out how “just read what you signing” isn’t really a sufficient defense against credit card company predation. As Eyebrows notes, the agreements are expressly written to be sneaky.

  45. @tentimesodds: “You are legislating your view over the view of others. That’s socialism.”

    No, that’s government. (Oh, my bad, did you think that everyone in the US agrees with every law passed? That nobody’s views are ever legislated over the views of others?) Socialism is when the social good is put limitedly ahead of individual rights, typically characterized by some form of state ownership of various goods or methods of production. You may be thinking of paternalism, wherein we tell other people what’s good for them.

    Legislating debt regulations isn’t by any stretch of the imagination inherently socialist. (And it’s frankly a bizarre choice for an ad hominem attack. I’d go with paternalism, myself. At least be accurate with your ad hominems.)

  46. ThinkAboutItPlease says:

    @Eyebrows McGee: Plain English, yes. We need plain English. Thank you for your posts, Eyebrows.

  47. tentimesodds says:

    @Eyebrows McGee: *sigh*

    The proposal restricts the freedom of an individual to make his own choice in the marketplace. Any such restriction is inherently anti-capitalist. The state, in this proposal, is putting the “social good” of protecting the poor/uninformed from credit cards over the individual freedom to contract. HTFH

  48. Ah, but he didn’t SAY anything about restricting economic freedom. He was talking about people’s “views” on debt. He said “legislating your views on others” was socialism.

    HTFH, RTFP

    (And incidentally, there’s a whole universe of things that are “not-capitalism” that are not included under the umbrella of “socialism” no matter how loosely the term is being flung about. It’s not a binary dichotomy!)

  49. To be frank, I can’t get the local poverty mission center to let me teach a basic finance class or work with people trying to get their finances in order — the people who run it don’t understand enough about personal finance to see how this is part of the problem. They think “They just need jobs, they need to make more money, then it will all be okay.” Argh!

    @Eyebrows McGee: That is some bull! How is understanding personal finance not important to getting out of poverty?!?!

    Can they really stop you from working with individuals in the poverty mission? Apparently they won’t let you help them there but maybe you could give them business cards and hold the class elsewhere.

  50. savvy9999 says:

    @tentimesodds: And poor credit card practices and consumerism does not affect everyone? We are all in the same economy (= road) after all. Either you don’t accept the premise that when large swaths of the population are buried under credit card debt, foreclosures, etc– that doesn’t affect you… or you don’t care (life is good for me, I’m OK, don’t legislate on my parade, etc). Which is it?

    Again, I fail to see how you are adding to the discussion by proposing any remotely good or original idea.

    @shoegazer: you have an excellent point, thanks for pointing out the debt-commodity issues. I had not considered those.

  51. yahonza says:

    Interesting discussion. I’d like to add $.02. on a different notion.

    Often discounted when discussing the costs and benefits of credit cards is the incredible value of the system itself.

    Visa and AMEX developed a system that allows me to:

    Purchase anything I want on the web with some numbers,
    Buy pretty much whatever I want with a piece of plastic in almost all stores without me having to carry cash,
    Walk into stores anywhere in the world and purchase whatever I want there to.

    This system is a convenience to the world that almost can’t be measured…..they have largely replaced cash.

    Yes, they should, like all companies, treat people fairly (and I don’t think they always do), but let’s not forget the incedible benefits they have provided.

  52. Lazlo Nibble says:

    That documentary points out how “just read what you signing” isn’t really a sufficient defense against credit card company predation.

    Well, then how about this: “Read what you’re signing, and when you come across a portion you don’t understand, just assume it’s describing a way they plan to screw you.”

    Any terms that benefit you aren’t going to be buried in the fine print — they’re going to be splashed across the front of the brochure…

  53. ironchef says:

    Even if you bother to read the fine print, the credit card company has a nasty habit of changing the rules…months down the line with an obscure update written on the same mailings as the dreaded “convenience checks” …the ones I normally shred the second I get them.

    Also they love to change the rules when you get your credit card renewal automatically. When you phone in and activate, whatever they amend, you are now automatically contractually bound to.