In all honesty I have been torn by this bit of legislation. On one hand I understand the concept of TANSTAFL, that letting people off the hook for debt is a bad precedent. There was a time when going bankrupt myself would have dramatically increased my quality of life…but so would have gotten away with bank robbery. I muddled through.
On the other hand I think the Credit Card companies are being less than ethical in how they handle credit. They give people manifestly unable to manage their money credit lines. They then charge rates which mean that consumers with maxed out accounts completely repay the debt in four years or less and still owe the entire balance. Most of these people are the aforementioned folks that can’t handle money.
On the gripping hand there are people who truly encounter misfortune in their lives and simply cannot repay the debt. And that’s what leads me to the final conclusion. It’s called capitalism and this bill is anti-capitalist
Credit Cards Companies charge high interest rates on unsecured loans because of the risk. The key to success in such a free market is balancing the risk against the profit. Huge profits can be made, huge sums lost if poor practices are used. That’s how the game is supposed to be played.
With this bill the Credit Card industry is using governmental force to prevent a high risk venture, the high rate unsecured loan, from failing. We don’t think that preventing a person from declaring bankruptcy is going to have the effect of lowering interest rates…do we? No this smacks very much of Debtor’s prison. The reasons that Andy Jackson fought such actions are still true today.
The argument that allowing people to declare bankruptcy puts the burden on other, more responsible consumers is nonsense. The reason a person gets a high rate is the likelihood that they might not pay! That’s the whole point.
Clearly there are problems with the bankruptcy laws as they currently stand. The right way to do this is to force people into programs before they are totally discharged from debt. Paying back the principal plus prime would be a good starter; it gets the debt paid and punishes the predatory lending practices that so many Credit Card Companies use.
America’s economy allows people to make fortunes…it also allows them to fail miserably. Holding them down in penurious misery isn’t good for anyone. In effect it may actually stifle the risk taking mentality that is the reason that America has so many small businesses. America’s economy, what allows so many to get so wealthy, is based on risk taking by both lender and borrower. Taking the risk out of one side of the equation is bad because it must necessarily push that additional risk onto the other side. In this case it will result in people who fail being forced to stay in failure. And that ain’t the American Ideal.
Shoving risk onto the borrower isn’t new, QM. I recall the time that ChromaColour (old employer) wanted to borrow about five grand for a piece of new equipment.
Borrower was a small corporation. One bank that was approached wanted the stockholders of the corporation to sign personally for the loan and wanted a lien on the equipment.
Needless to say, CCL went elsewhere for financing.
Good stuff, Quilly.
Keep it up!