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Friday, December 19, 2008

Restore Bad Credit Through Local Bank and Hard Work, Not Credit Cards or Payday Lenders

Governor Rounds characterizes the new federal regulations on credit cards as "totally backwards." He frets the regulations will "make it more difficult for people with bad credit to get a card" [paraphrase from AP].

(Never mind the job losses Rounds fears: corporate propaganda from Total Card and Premier Bankcard says they foresee no staffing changes.)

Might I suggest that making it difficult for people with bad credit to get credit cards might actually be common sense? Maybe instead of opening up avenues for predatory lending, we should cut off more sources of easy money for folks with a demonstrated history of bad money management.

If Governor Rounds and other friends of Premier Bankcard are worried that stiffer credit card regulations will drive folks with bad credit to the payday lenders, maybe they should get on board with Rep. Joni Cutler's proposals to regulate the payday lenders (she tried last session, and she's ready to try again).

While I heed Mr. Schoenbeck's warning that the new regulations might hurt "distressed consumers that need credit," it would seem that neither credit card companies nor payday lenders are the best judges of who needs credit. If folks are in bad financial straits, either through bad decisions or bad luck, their credit "needs" might best be determined by their community banks, by real neighbors with a little more interest in their community's welfare. If those community banks decide, under the practices of responsible banking, that a neighbor just doesn't qualify for a line of credit, then that person may just have to live with not getting that new house or new car. That person will then be that much more motivated to work hard, pay off old debts, and save for the future.

Isn't that the personal responsibility my Republican neighbors preach?


  1. Not to sound too smug, but it has been my experience that people with bad credit are typically self saboteurs. A credit card with a high interest rate does not help such individuals reestablish their credit, it just provides them with a shovel to dig the hole a little deeper.

    Pawn shops are a great way to see this life style in action. People go out and buy an expensive TV that they can't afford on credit. When the credit is due they go to the pawn shop, turn it in and grab some cash to pay the debt. Then, over the course of many months they slowly buy back the TV at ridiculous interest rates. They then make another self sabotaging decision that requires money to fix and off goes the TV to the pawn shop again.

    Now, there is the occasional exception that just had a string of unbelievably bad luck, but they are so self motivated that they buckle down and refuse to take on any more debt and go to a cash only system until they are financially solvent again. In the end, those that are motivated to get out of debt don't need or benefit from this loan shark crap the credit card companies are pulling.

  2. Cory, you have hit on the main reason (in my opinion) that the Republican Party has taken such a beating recently. They've abandoned traditional Republican economic values: personal responsibility, thrift, and hard work.

    Most Democrats didn't fully exploit this vacuum (again, in my opinion). If they had, their victories in November would have been more sweeping.

    Heck, this old red dog Republican voted for Stephanie Herseth Sandlin because she's a fiscal conservative. Will wonders ever cease?

  3. Many families struggle following unexpected medical expenses, and if you've ever tried to deal with ruthless medical firms who send their bills to collections right away, instead of waiting for insurance to cover the cost, you'll know how quickly a credit rating can plummet. Not everyone is a loser with money, some are victims of our system and need the credit.

  4. Anon 5:44

    I have no doubt that there are individuals that hit some bad luck such as unforeseen medical expenditures. Luckily there are many options beyond the use of credit cards which have far better interest rates.

    The problem with credit cards that CAH is talking about is the non-emergency use and the further self sabotaging.

  5. My personal experience with a Citibank credit card was a couple of years ago when I missed my payment by one day because they changed the due date by three days and their online system was down when I tried to make my payment. The interest rate shot from 10.99% to 26.99% and they added a $39 late payment fee. Luckily, after talking to customer service and a supervisor, I was able to get those items changed back, but it wasn't easy, and if their online payment system hadn't been down, I don't think they would have helped me. Predatory is correct when describing those practices. They love to mix up the due dates each month trying to prompt late fees and interest hikes. It's all about their bottom line at the expense of the public.

  6. Anon 5:44: You are a good example of why we also need serious health care reform. The solution for you is not credit cards (as Tony said, they don't rebuild credit, just reinforce debt slavery). The solution for you and the far too numerous Americans going bankrupt from medical expenses is some Kucinich-style single-payer not-for-profit health insurance.

  7. I'm not saying Universal Health Care couldn't work, but I really believe it has to be a privately created program, overseen by the government. As an example, Medicare Part D (Prescription Drug Plan) for retirees is a huge mess and it is government health care. On the other hand, NFIP (National Flood Insurance Program) seems to work, but the activity level of NFIP is nothing compared to the consumer activity level of Medicare Part D, and the government simply can't keep up or get it right. It must be a partnership of private and govt to work, which is how NFIP is operated.

  8. Anon 9:17

    I highly encourage you to watch:


    to see how socialized forms of medical care can easily succeed. If we would simply model our system on say the Japanese for example I think the transition would be simple and everyone would have peace of mind. Over the last 15 years many countries that were privatized have gone socialized with only great benefits to be had.


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