Why was Katrina in there?

It's hard to imagine what life would be like without credit cards these days. Imagine how different buying things online would be-- probably close to impossible-- or almost to the point where you would say--why bother?

The movie mentioned sounds interesting though. Although I don't know how long I would be willing to watch.

It's not the credit cards shouldn't exist -- it's that the credit card corporations are close to completely unregulated, as well as the credit agencies. Errors made by either corporation works in their favor, so they have very little incentive to make sure things work -- putting the consumer in the annoying position of having to fight every error. In addition, they are not responsible for identity theft, the consumer is, which gives them little incentive to keep your information safe.

See, e.g., http://www.washingtonmonthly.com/features/2005/0512.drum.html.

Monk, check out (if you can find it) the U.S. Dep. of Commerce publication on consumer credit protections. Credit and Financial Issues:Responsive Business Approaches to Consumer Needs; May 1995.

Legislation like the Fair Credit Billing Act of 1975 specify some pretty clear protections and procedures in place.

Ultimately, while I think there is ample loansharking going on, the American consumer psyche is the real culprit.

I certainly agree that the consumer psyche is responsible for quite a few problems, but I think you give the current laws too much credit, so to speak. There's an excellent article called "Taking Charge" (by people from the Center for American Progress) from the Dec. 2005 Washington Monthly that deals with this issue, but it's unfortunately not online.

Here are a few quotes:

"All the remains of consumer credit protection today are weak disclosure requirements. Companies must include a box on all bills with key rate and fee information. But these details are confusing even to lawyers: A typical MBNA disclosure box contains 18 different Annual Percentage Rates (APRs). And some critical information doesn't even have to be put in the box. Consider Chase's breathtaking assertion that 'we reserve the right to change the terms of your account (including the APRs) at any time, for any reason.'"

"In addition, companies are not required to disclose basic terms of credit, such as how much time and money a customer will have to spend in order to pay a bill if they make the minimum payment. Car companies and mortgagte lenders give customers this information, but credit-card companies have fought to make sure that they don't have to."

"A traditional liberal approach to this crisis would be to restore limits on interest rates and fees... but this goal should not be to save consumers from themselves by making it impossible for them to get credit cards... They need the information and tools to make the best choices for themselves."

"Congress should enact a "Credit Card Users' Bill of Rights... When signing up for a card, companies should be required to have a policy of linking their customers' credit cards to their checking account. Those accounts would be set up to make automatic regular payments... Customers could choose to opt out of the system... Such a system would significantly reduce the chance of incurring late fees or higher interest. In Japan, where a similar practice is in place, consumers carry far less debt."

"The most egregious industry abuse is the practice of 'universal default,' in which a company retroactively raises interest rates, even for customers who never missed a payment with the company itself... Congress should require companies to drop this tactic unless a consumer specifically authorizes them to do so in exchange for lower fees or better benefits."

"...as a 'service,' companies accept [over-the-limit] charges on a card that has reached its credit limit, and then they impose a large fee. Companies should be required to get approval for the practice -- either by letting consumers sign up in advance (which few likely would) or by giving customers a choice at the point of sale."

"Finally, consumers need to know the risks associated with their credit cards. Companies have information about their cardholders' borrowing habits -- how much debt they have taken on in the past, how often their payments have been late, and what costs can be expected if they continue borrowing at the same levels... It is only fair that customers get the same information... [Companies] should be required to include this information on bills."

"In addition, a rating system could help consumers judge the risks involved with different cards... [S]uch a system would help create a market for more 'green cards.' These might offer fewer bells and whistles -- not as many frequent-flier miles, perhaps an annual fee -- but they would also have lower penalty fees and interest rates. Consultants... say that there isn't a market for such cards. But the auto industry once offered the same line: 'Safety doesn't sell.' Actually, it does, as companies like Michelin and Volvo know well. But it only sells if the government helps to build the market first."

"Many Democratic policy solutions depend on tax increases or government program expansions, but the battle against abusive credit-card practices demands neither... The abuses of the credit-card industry cry out for a new consumer-protection movement. Progressives ought to lead it."

see? fight club is starting to make more sense now, isn't it?

True. Maybe I couldn't appreciate it when I was a college student with very little knowledge as to how credit card companies operate.

There was a great Frontline about this very issue. You can watch is for free here.

http://www.pbs.org/wgbh/pages/frontline/shows/credit/

unrelated: apparantly, bradley played pittsburgh on sunday in the ncaa tourney, leading to the on-screen scorebox reading "Brad Pitt"

Interesting movie synopsis. Although the movie seems to focus on the most egregious and hopefully rarer sins of the credit industry i.e. that company that shredded customers' check so they could charge late fees, the synopsis pissed me off. Why aren't people more mobilized against the credit industry? Isn't this a political issue that your average joe could get behind?

A few months ago I read this article:
http://www.salon.com/mwt/feature/2006/02/21/generation_debt/index_np.htm...

From what I remember the author writes about our culture of debt and about how our generation is ill prepared to deal with all the credit card offers etc. She notes that we receive sex ed in school, but not basic finance courses.

Back in 98, I took an itro to communications course. One day a student tried to paint Howard Stern as an iconoclast who told it like it is rather than the moderately funny media genius who appeals to the lowest common denonimator. To challenge the student's assertion, the curmudgeony priest who taught the class asked if Stern spoke out against the banking industry, explaining that the banking industry was a very powerful force that not many challenged. This seemed neither here nor there at the time, but I imagine I think back to conversation more than many others from college.

It is really scary to know how much power the credit card companies and credit reporting folks have. I myself have had to embark on an unending battle with Experian a couple years back to correct something on my report and it STILL isn't fixed all the way through. They are evil.

Some of that is pretty nasty stuff, like the universal default. But much of the call for protection reeks of paternalism. Much like the tobacco plaintiffs that have some less than compelling arguments about individuals who were unaware of the health risks, I think the credit crisis advocates often try to sidestep the issue of personal irresponsability. While I might be giving too much of the benefit to companies, I don't think you rag on the consumer enough: We long for immediate gratification, we fetishize commodities, we need the newest, biggest, most technologically advanced widgets--and we mistakenly think that we can pay on unlimited credit and have the money later. This is just pure ignorance of the credit business. Alas, people volunteer to take on the responsibility of credit without knowing the ropes.

Don't get me wrong. Some needed protections I wholeheartedly support, particularly the ones that are based in educating the consumer about the nature of credit lending, and some protections for younger debtors who will forever be haunted by the damage done to their FICO scores by abusing credit. But the entire weight of the blame need not fall on the companies.

Ultimately, the main point I have is this: The worst thing that could happen is to completely close off access to credit for lower-earning individuals who are able and prepared to meet the demands of the lending process. As one of them, I'm glad to have credit available to me. If credit lines were limited purely because of my income, I'd be last on the list for a credit card. Instead, the system is based on your "creditworthiness," determined by previous use of credit. If you have been responsible in the past, you're rewarded with lower interest rates (because of the lower risk of default). If not, you are expected to pay higher interest rates because of the higher risk. Were further restrictions placed upon the lending companies, the likely effect would be the withdrawal of higher-risk lending practices to the people who might need it most. People like little ol' me.

"Ultimately, the main point I have is this: The worst thing that could happen is to completely close off access to credit for lower-earning individuals who are able and prepared to meet the demands of the lending process."

Wow, you are still a libertarian! I thought you'd given it up!

I'm not a libertarian.

I don't think anyone wants to take away credit cards from the poor. But these companies are making the poor poorer. Because of Bush, you can't even declare bankruptcy to free yourself from credit card debt. These companies often raise your interest rate without telling you, simply because you went to a car dealer, looked at a car, and they ran a credit check on you. All of a sudden your 0% interest card is raised to 18% and they don't even have to tell you. They are loan sharks and it needs to be stopped. And it won't be as long as we have this president and this congress.

Yes, people should be accountable for their actions. But the companies should act fairly and they do not. The deck is stacked against you.

I remember during the first week of college, you could get an awesome BayBank water bottle if you got a credit card. Wow!