Financial Responsibility

by FrugalBabe on August 25, 2007

We watched Maxed Out last weekend.  They did a good job of portraying the credit card companies as money-hungry and predatory, which theyare.  The movie tended to show the consumers as victims of the credit industry, with stories of ailing,uneducated, down-on-their-luck people who have been snagged in the web that the credit industry spins.  I did feel bad for the people in the movie, especially the poor family who was convinced to refinance their government subsidized home loan into a high-interest private loan, and was facing losing their home. 

But we need to stop pointing the finger so much at the credit card industry.  They’re in it for the money – they’re not charitable, or concerned with the welfare of the people.  We’re not talking about Habitat for Humanity or the Salvation Army here.  They’re money-grubbers, and yet they thrive because people are willing to go into debt.  In some situations, the debt isn’t a matter of choice – medical bills are a perfect example, especially for people who can only afford a high deductible insurance policy.  And yet hospitals and doctor’s offices will often agree to very low payment plans with no interest.  These are not the loans where people are paying 30% interest and $45 late fees. 

The credit mess in this country has come about over the last generation – our parents and grandparents did not have this problem.  If you peeked into my mother’s closet in 1970, you would not have seen 25 pairs of shoes and 8 feet of clothes hanging so close together that they had to be pushed aside to see what was there. 

We’ve fooled ourselves into thinking that much of what we want is necessary in order to be happy, when actually the opposite is true.  I have heard the statistics about how a good number of bankruptcies are filed because of medical bills, but I have to wonder how many people filing bankruptcy truly know the difference between a want and a need?

The movie vilifies the new tightened bankruptcy laws.  And yet if we really stop and think about it, shouldn’t bankruptcy be hard to get?  The movie deems it a “second chance” but what it really means is that a person is cheating someone out of money owed.  If you get a service or a product, you have an obligation to pay for it.  I see bankruptcy as stealing.  I’m sure that there are going to be people laying into me for that comment, but that’s how I feel.  Being on a payment plan for 35 years to pay off debt that you knowingly incurred is a pain in the ass, but it’s more honorable than walking away.  There are tons of blogs written by people who have gotten themselves into tens of thousands of dollars of debt, and they are digging out, little by little, month by month.  Does it suck?  Of course, but it’s the right thing to do. 

Yes, there needs to be more regulation in the credit industry in terms of caps on interest rates and late fees, but people need to take more responsibility for the messes they get into.  Just because the credit card company offers you a card, doesn’t mean you have to max it out.

I have a friend whose sister is about to declare bankruptcy.  She and her husband are splitting up, and she is behind on all her payments.  They refinanced their house so many times (and took out extra cash every time) that their mortgage payment is almost $2000/month on a house valued at under $200,000.  They’re upside down on their house and cars, and have a good deal of credit card debt.  My friend was hanging out with her sister in a little mountain town for the weekend when her sister told her all of this.  The next day, they were walking along the main street in town and the sister went into a tourist shop and bought cowboy boots for herself ($100) and shirts and hats for all three of her kids (about $60 total).  My friend was amazed at this, and asked her sister what in the world she was doing spending all that money if she was in so much trouble already.  Her response?  “it doesn’t matter, because I’m going to file for bankruptcy anyway so it will all get written off.”

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  • Bellen

    Had a business associate that also was ready to file bankruptcy so went out and put on credit cards: a new high end computer, TV, DVD system, and several ‘gifts for weddings, etc coming up’. Total about $6000. Her reasoning -it will all be written off and so it won’t matter. What about the rest of us who will ultimately pay for it? I asked. She had no answer because she didn’t care – it was all about her.

  • V

    There are always individuals that will get over on the system. The fact remains that your mother may not have been able to get a credit card in her name in the early 70s (or a mortgage for that matter, credit was for men). The world has changed since then. The truth of the matter is credit companies have engaged in predatory practices they have dangled a carrot and more. I agree that people have to take responsibility for their own actions but the very same applies to the credit companies. They have gone the extra mile to create this mess, they should be accountable in cleaning it up.

    (Also congratulations on your low loan rate with your doctor, you’ll find that most people owe institutions that seek restitution and don’t provide 0 interest rate loans)

  • MB

    I agree that everyone is responsible for what they get themselves into. But there is no reason AT ALL that credit card companies should be offering lines of credit to teenagers. Credit cards should be treated the same way as loans. Why does a college student not bring in any income allowed to have a line of credit? I received my first credit card at 16 because I worked for a department store. There company policy was to automatically give all employees a store credit card. My parents were never contacted on this at that time. It’s like putting a pack of cigarettes in front of a smoker and saying you can look but don’t use. What the credit company does is set most people up for failure. Because the bottom line is everyone, there is many fellow Americans that don’t know anything about finance. Their parents didn’t know and they were never taught the basics. Schools are making it mandatory to take Phs. Ed and a foreign langauage(that is forgotten after graduation) but they don’t have a mandatory finance class before they head off to college. And asking young people to learn on their own is like asking them not to drink alcohol at college. Ain’t going to happen.

    Like I said, everyone should take responsibility for their actions. I stand by that statement firmly. But when people get on others for not having the resources in first place is not fair. We all need to be in on this together. As Americans, we have to worry about our fellow neighbors because it will affect my future and our future generations.

  • http://concernedconservationist.blogspot.com/ Liz

    I recommend to all you personal finance types, “The Mystery of Capital” by Hernando de Soto. The book is very readable and thought provoking. One of the important points is that credit allows you to use your money twice. When you borrow for a house, you can live in a nicer house than you could afford if you had to pay up front. That is one of the major differences between the economy in the US and in some developing countries (de Soto is from Peru). Likewise with other purchases. So your quality of life can go up, just because people know that you will pay the money. Of course we all know the other side of that, people going into debt with no intention of paying it off, or without paying attention to the terms. Disclaimer–I don’t have any debt, although I did borrow for school. And I think people should think long and hard before taking on debt. But even so, it isn’t a simple story of evil people who want to lend you money.

  • Angela

    Actually, bankruptcy courts carefully scrutinize bills run up right before a bankruptcy filing. And unless you’re below a certain threshhold of poverty, you’re required to do a payment plan under the new law. As a legal aid attorney, I see the most predatory practices you can imagine by creditors–collection agencies that buy debts for pennies on the dollar that they know are barred by the statute of limitations (which they then try to collect on), companies who give credit cards to people on fixed incomes (like social security disability), etc. This is not to dismiss personal responsibility, but the deck is stacked in favor of large creditors, every time.
    I’m also largely against “easy credit” such as no doc credit cards, car loans, home loans, etc. Proper documentation will force some responsibility on both sides.

  • Anon

    People should pay off their debt, but I don’t feel sorry for the creditors in the least when they also prey on the poor and on the uneducated (and even the borderline mentally-handicapped). The creditors make a very significant part of their profits from extending credit to the poor who can rarely afford to pay it all back. I don’t expect for these companies to be in business to help anyone out, but extending credit to people who do not qualify (such as a college student with zero credit history and not so much as a part-time job) is predatory and I do think they should be held accountable for that. You need to prove you can handle the credit before it should be given to you, so maybe they should have to prove that their customers qualify.

    I have gotten myself into debt, but I also think that I am intelligent enough to have known better, and now I’ve learned my lesson and won’t repeat the same mistakes. But I feel sorry for people who just don’t have the mental capacity to see what they are doing long-term. If no one has taught them how to handle money, they seem very vulnerable to credit card companies. For me, the revelation came when I owed thousands on a card and could even tell you what I had bought. Happily, it will all be paid off Oct. 1 of this year, and I’ll never carry a balance again.

  • Anon

    Err…meant to say that “I COULD NOT even tell you what I bought.” Sad, I know.

  • im4peace

    My ex-brother in law and sister in law did the same thing. They were planning to file bankruptcy on their medical bills. Well since they were filing anyway, they went crazy shopping. They did their Christmas shopping and bought tons of stuff for themselves. I guess they don’t realize that they are cheating the companies and employees and ultimately themselves. Stealing is stealing!!!

  • http://neatokimmo.blogspot.com/ Kim

    I totally disagree with this “They did a good job of portraying the credit card companies as money-hungry and predatory, which they are. ”

    People get into debt for various reasons. They choose to charge the amounts they do, they aren’t forced.

    I guess I have a different view since I work for a credit card company. When I first started I worked in the collections department, I was collecting on jewelry accounts. Here I was, taking 21 hours in college, working 40 hours a week listening to people whine about not being able to pay off a diamond ring they bought. I was killing myself to pay for the repairs my fixer upper house needed and to not accumulate too much student loan debt. Give me a break.

    Most people take the easy way out and just blame the corporations. I think THAT is the main issue with people these days – accountability…where did it go?

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