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When the Ordinary Becomes Predatory, Part II
As the AP reported today, many victims of Katrina have no choice but to use their credit cards to support themselves while they scramble to get their lives in order.
In ordinary times, people use credit to bridge a gap between paychecks or to cover an unexpected expense or, to be fair, to buy an otherwise unaffordable luxury. In these times, people are using credit to survive because they have no choice.
While some credit card companies have said they will waive late fees for Katrina victims, others have not yet made such a commitment. A more uniform policy would be a great help to Katrina victims.
A deeper question that still needs answering (as my colleagues on this blog and others have highlighted) is what is going to happen to those Katrina victims who can't "get back on their feet." Will they be forced to set up a payment plan to pay interest and late fees on debt they incurred trying to survive?
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I have to take issue with the statement "In these times, people are using credit to survive because they have no choice."
We all have a choice to use credit cards or not. Katrina victim's choice is starve and sleep on the street, or use a credit card because it is available and they are hungry and need shelter. When they make that choice, they would be wise to consider the longer term consequences, and not make their situation worse by using a credit card.
This is where the credit card companies have set their trap. Katrina victims are given rope to hang themselves, and when it seems necessary they put the noose around their neck and let the credit card company tighten the rope. Credit card companies profit from it, and being a free country, we have to take responsibility for that choice. It is like the tobacco companies - in a free country we should be able to choose to use a product that we know will likely give us cancer. Yet, people choose to ignore the facts. The difference with credit cards is that it hurts all of us when poverty is created for profit.
A better scenario would be that credit card companies waive all interest and fees for victims of Katrina and send the bills to charitable organizations, where prior arrangements have been made. Even that is a dangerous thng to do, the credit card companies would have to strictly enforce limits based on what they know will be paid by the charitable organizations.
Barring some arrangement like this, the credit card companies would be more responsible if they froze the account and not allowed any new charges. Waiving payments and letting interest pile up is not helping anyone except the credit card company by compound interest. It gets people in deeper trouble, and they are highly unlikely to be able to bring the account current on payments. It is simply letting the economic credit card trap spring and put the cardholder, Katrina victim or not, into economic slavery. It could end up being for life, with the new bankruptcy law and the outrageous interest charged. Waiving a late fee is far too little, in fact it is encouraging irresponsibility. The very thing the credit card lobby was whining about - consumer irresponsibility. Yet at the same time, it is encouraging corporate irresponsibility by allowing the banks to win a windfall of profit off of hurricane victims. They may not get the bill paid soon, but they will garnish wages for life if they have to. If that isn't economic and political oppression, I don't know what is.
In my opinion, the proper thing for credit card companies to do would be to:
1. close the account and cease collection activity for 5 years or so, stop accumulating high rates of interest and reduce it to the wholesale rate,
2. write off the accounts as bad debt and NOT make a report on the account to the credit bureaus,
3. if the debtor cannot pay off the debt in their lifetime, forgive it. Take it as a hurricane loss.
September 14, 2005 6:12 PM | Reply | Permalink
One more thought.
These people need charity - not credit.
Credit is NOT charity in today's world, it is a ticket to poverty and economic slavery. You could be making an income of six figures a year and still be forced to live at poverty levels because of debt payments on high interest loans.
September 14, 2005 6:19 PM | Reply | Permalink
Quite a choice, eh? Starve and sleep on the street. If faced with this situation, would you wisely consider your credit rating? I'd like to see a situation like that: mother with children stranded in the filthy, crime-ridden aftermath of a major hurricane, no food for days, kids crying, and the mother prudently considering her credit debts: "Sorry, kids, we'll have to squat here without food. Don't want to incur more debt." Junior may die or contract a dangerous infectious illness, but mom's credit will be spared!
That's exactly why congress should make the credit card companies provide some kind of amnesty for hurricane victims. In fact, the overwhelming debt (for usurious rates!) is exactly why Congress shouldn't have thrown the credit industry the juicy bone that is the bankruptcy "reform" bill.
September 14, 2005 6:46 PM | Reply | Permalink
Yes, I would because it is simply wrong to borrow knowing you won't be able to pay it back. Legally that is fraud. The Bible says it is literally wicked.
Not many people understand the economics of this. The responsible thing to do is seek help from a relief organization, not a credit card company. The credit card company isn't going to do anything it doesn't profit from doing. By using the credit card, you become enslaved to the credit card company. (The rich rule over the poor, and the borrower becomes the lender's slave.) Would you sell your children into slavery? Or would you find another way out of your situation?
It isn't just your credit rating you are considering. It is your entire future. Without bankruptcy protection, there is no forgiveness. In fact, you get slapped with such high interest rates and fees that your payments may not even keep up with a rising balance.
People died for freedom and liberty, not for a society of economic slavery. It is irresponsible on many levels, and unethical to borrow knowing you can't pay it back, under an agreement that will force you to pay it back. Would you exchange your freedom to keep your life? That my friend is un-American. But then again, maybe that is why we are losing our freedom through laws like the Patriot Act, Real ID, and this bankruptcy law - it doesn't mean enough to us. Maybe that is why we accept credit card agreements without understanding them, because we don't intend on keeping the agreement anyway.
It is attitudes toward credit cards like you're suggesting which gave Congress the open door to pass this terrible bankruptcy law, and we allowed it.
September 14, 2005 7:56 PM | Reply | Permalink
I understand your point in general, but in terms of hurricane victims, it's ludicrous. Have you ever been in a situation of extreme desperation? Have you ever gone hungry for a week? How can you possibly blame hurricane victims for doing anything possible just to survive? The responsibility here should be on the credit companies that practice usury and on our government that supports this.
September 14, 2005 9:31 PM | Reply | Permalink
Have you ever been in a situation of extreme desperation?
Yes, I have. I did what most people would do, and I paid the price for it. I realize now it doesn't matter what your circumstances are, truth is truth, wrong is wrong, and we still suffer consequences for bad decisions. When you get desperate, it isn't a license to steal. Using a credit card knowing you won't pay it, is stealing. That is no different, morally, than the credit card company tricking you into accepting an agreement that takes away constitutional rights, and systematically siphons your wealth by encouraging and capitalizing on your bad decisions.
If it is a matter of immenent life or death, sure, the right thing to do is save the life and work out the details later. But, if you know you won't make the payment, and can't, you'll suffer the consequences regardless. Intent to pay, and a commitment to fulfilling your promise to the lender is key. At the same time it is our responsibility to help those who can't help themselves, even if it means paying off their credit cards for them, or the credit card companies forgiving the balances. This is a harsh reality.
Using the credit card in these circumstances wouldn't be such an issue if we knew others would come to our assistance later and take care of it, but how much in relief funds go to pay credit card bills?
Have you ever gone hungry for a week?
Yes, I went hungry for years growing up in Mineral Wells Texas, when we didn't have enough money to buy food. You do what you can. We didn't rack up credit card debt buying food because we couldn't get a credit card. Good thing we didn't. It would have sabotaged my ability to get out of that situation.
How can you possibly blame hurricane victims for doing anything possible just to survive?
I don't blame them, I blame the rest of us for not being more responsive in a way that could have prevented the aftermath. However, I feel strongly as someone who has faced many difficulties, that we must learn that we create our own problems on an individual level and on a societal level. What we see in the response to this hurricane on many levels is highlighting that. Why do we build entire cities below sea level? Do we think we can hold back the sea indefinitely? Why do we make our government our god, who comes to our rescue in times of trouble? Do we not realize people, which are imperfect, will always fail us at one time or another? Do we not realize that we all must help each other? The founders of this country had a solid faith in God, they knew the value of the security of faith. Why do we belittle it now and use it as a political tool? Do we not realize that building our security on fallible ground will fail us when we need it the most? Our true character comes out in times of difficulty. We are seeing our true character as a country right now. We are selfish and unforgiving.
The responsibility here should be on the credit companies that practice usury and on our government that supports this.
As much as I dislike the credit card companies and believe they are no better than thieves, I don't agree they should shoulder the burden. It is everyone's responsibility. The credit card companies didn't call up the hurricane. However, their predatory nature is taking advantage of it, though it may not make the news. Many people will never recover as the credit card companies siphon off their future wealth. If we stepped up as a country (not the government, the people) in a bigger way, we could protect the victims of the hurricane from these predators. Relying on the government to do so is foolish, it is corrupted with greed and in financial partnership with the banks through the Federal Reserve (a public/private partnership in a corporation).
September 15, 2005 8:26 AM | Reply | Permalink