How Sweet It Is
I can’t deny it. I got an inordinate amount of glee from a story in the Oct. 25 New York Times about how credit card issuers expected to take a hit to earnings in the area of $1 billion by year-end because of the spate of bankruptcy filings before the new law took effect on Oct. 17.
If there was ever a case of ‘what goes around comes around,’ this is it. Never mind that once this initial bloodletting is over the card companies will make up for it in spades. My feeling was that this usurious lot deserves everything they’re losing now–and more.
I want to state that I have no personal stake in how much credit card companies make or lose. I’m not filing for bankruptcy and I haven’t paid any credit card interest since Congress lopped the deduction for such interest back in the 90s.
So, why the glee?
The fact is that these card companies deserve to take this hit. They supply money all too easily and seemingly without restraint to people who are well-equipped with the gamut of all-American upscale desires but ill-equipped to afford even Wal-Mart.
Look at it this way: Money is a drug and too many people are addicted. Our society goes after drug dealers with assiduity, but when it comes to those supplying financial drugs, a slap on the wrist (if that) is all that happens. In fact, this law gets harsher with the addicts while abetting the suppliers.
Too many people are in financial quicksand and going under before they know it–and that’s when the screws really begin to tighten. There are all too many people making minimum payments on their credit cards and paying interest rates of 20% and more. And many of these cases arose because people who shouldn’t have been given so much credit in the first place got it with nary an eyebrow raised. In fact the credit card companies were more than happy to oblige. And in many cases it was the financial equivalent of the old potato chip slogan: Can’t stop with just one card.
Yes, I know that people have a personal responsibility to make sure their financial situations don’t get out of control. But what about the responsibility of those who supply financial drugs to those least able and/or willing to resist?
The card companies pushed for the new law that would make it tougher for people to get out of paying their credit card debt if they declared bankruptcy. Much tougher. And that’s why people were flocking to file petitions before Oct. 17.
According to the Times, over 500,000 people filed for bankruptcy in the 10 days before the law took effect. This, the paper said, was about a third of all who filed in 2004. A photo in the paper showed a long line of people standing in the rain a couple of days before the new law took effect, waiting to get into a building to start the process of filing their petitions.
What this shows is that people may be spendthrift, but they’re not stupid. They saw the writing on the wall in the new law and flew to file under the more lenient provisions of the old law.
What it also shows is that we need some serious financial education in this country–preferably starting in grade school. That education would focus on the dangers of runaway debt.
And wouldn’t it be nice to have some role models for financial prudence? But don’t look to this Congress or the Bush administration. Come to think of it, where is Bill Clinton when you need him?
The fact is that these credit card companies deserve to take this hit. They supply money all too easily and seemingly without restraint to people who are well-equipped with the gamut of all-American upscale desires but ill-equipped to afford even Wal-Mart.”