There was a great episode from The Diane Rehm Show the other day “New Concerns Over Credit Card Debt Collection” (Tuesday, August 21, 2012 – 10:06 a.m.), in which credit card collection practices are discussed. According to the episode summary “Banks are increasingly taking borrowers to court, suing them for payments owed. In many cases, these lawsuits rely on false documents, incomplete records and generic testimony from witnesses… Banks defend their procedures and insist their court filings are accurate. But consumer groups warn these cases are reminiscent of the mortgage foreclosure crisis with outcomes just as devastating.”
I was particularly impressed by the artful dodging and tap-dancing performed by the industry representative (I think it was Steve Bartlett.) I love it when he pulled out the Personal Responsibility®* cudgel to justify the credit card collection companies treatment of defaulted borrowers. Let’s think a little bit about this. The credit card company made loan, right? And then the borrower couldn’t or didn’t repay it. Whose fault is it?
The quick and easy response is to say “That dirty no-good filthy rassum-frassum borrower said they’d pay me back, but didn’t. It’s all their fault!” I would like to challenge you with little thought.
First, imagine the lending process of a friendly, fictionalized neighborhood banker. We’ll call him Mr. Bailey. A customer moseys into the bank and requests an old-timey personal loan. Mr. Baily then takes an application and gets some evidence that his loan is likely to be repaid. He looks for proof of income, he looks at past payments and gets references. He does something we call “due diligence.” He wants to make sure he makes a responsible loan, that is paid back on time.
Let’s imagine the common lending process of the average credit card company. They hose out thousands and thousands of pre-approved credit card offers across the country. They then take applications and maybe check the applicant’s credit. It’s obvious that they don’t always check credit, since credit cards are issued again and again to pets and deceased people. Also, do you remember the last time a card application asked how much money you made? Thought not. So long as the group meets their mysterious lending model’s requirements, they’re in! So, the card company does no real due diligence.
Now, is it any wonder that a significant portion of their loans aren’t repaid?
Now the credit card companies are whining that their loans aren’t getting repaid. You know what? They can just go into a corner and cry, because I don’t want to hear it. You make boatloads of stupid loans, you have to take Personal Responsibility® for your bad decisions. My sympathy for a lender who doesn’t get paid is directly to scale with the efforts they made when they did the due diligence before they made a loan. I have no sympathy for credit card companies, because I never see them doing any reasonable due diligence.
Who do you support – Team Consumer or Team Credit Card? Sound off in the comments.
* Did you notice the sarcasm? It’s there. While I have no problem with encouraging people to be aware that sometimes there are negative consequences that are a direct result of making bad decisions; I notice that Personal Responsibility® is usually used to condemn and silence legitimate complaints – as a blame shifting technique. After all, it takes two to tango.
PS – Kudos to Chris (sp?) from Massachusetts on calling out Steve Bartlett on his dodge of a question earlier in the show. Unfortunately, he got away with glossing over it again.