I found this article amusing for some reason. The strikethrough is from the original article, too.
http://business.theatlantic.com/2009/05/why_credit_card_companies_are_so_mean.php (http://business.theatlantic.com/2009/05/why_credit_card_companies_are_so_mean.php)
Quote
Why Credit Card Companies Are So Mean
Tuesday, Ryan Avent wrote about credit cards, so I don't want to oversaturate people's interest, but I thought it might be helpful to understand just where credit card companies are coming from. And why those in Congress would really benefit from a class or two in basic economics. I'm talking to you Maxine Waters. Okay, she probably requires a brain transplant more than a class or two.
An example might help to better understand credit card companies.
Let's say you're a kid and have two brothers: Jake and Howard. Jake is unreliable and irresponsible. Howard is reliable and responsible. Each asks you to borrow money. What do you do?
If you understand economics, you'd know that the risk involved in loaning each money is different. There is significantly more risk in loaning Jake money than Howard. That means that if you charge Jake more interest, you are likely to have a lower loss based on that risk. So that's what you do. You charge Jake 20 percent interest, but only charge Howard 5 percent.
The following month, you decide that, for some external reason that has nothing to do with the loan - maybe Jake lost his lawn mowing job or crashed his bike - you are more worried about Jake paying you back than before. You now tell him if he wants to borrow more money, he needs to pay 25 percent interest.
Jake feels persecuted, so he complains to mom. Mom says you are mean and can't take advantage of Jake that way. She says you can't increase his interest rate.
How would you react?
If you said, "Easy, I would choose not to loan Jake any money because I can't be sure that I'll earn a high enough return to get my money back," then congratulations, you understand credit card companies and probably basic economics.
If you said, "Mom is right. He's my brother, so I should treat him more fairly," then congratulations, you might be a member of Congress someday.
The interest rate increases that Congress calls "arbitrary" are anything but. Credit card companies have complex models that include dozens of variables consisting of different customer characteristics. After everything is taken into account, a rigorous, highly tested credit recommendation pops out of their risk management engine. They literally have math and statistics PhDs who are in charge of this stuff. Congress seeks to prevent such complex analysis.
Ironically, denying credit to riskier customers is the only way that credit card companies really can respond. By increasing regulation on how they manage riskier borrowers, Congress is forcing the companies' hand, and they will be forced to tighten credit on the very people Congress intends to help. If they cannot be compensated for the risk they're taking, then they won't take the risk.
Ultimately, Congress must make peace with their presumably unintended proclamation that those with poor credit are better off without credit cards than with credit cards that have aggressive terms and conditions. Right now, those consumers have the freedom to choose, but instead, Congress' "credit card bill of rights," will take that right away when the credit card companies are forced to tighten or deny credit to many of them in the days to come.
Christ, this shit is so fucking stupid - right up there with Congress, including the "smartest guy in the house" deciding that it would make good economic sense to pass laws encouraging banks to lend money to people who cannot pay it back in order for them to buy houses they cannot afford.
I simply do not understand the credit card problem being "solved". The bank offers you money at some interest rate. If you think the rate is unfuckingfair THEN DON"T BORROW THE MONEY FROM THEM!!!
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them
Are you sure about that?
Quote from: ulmont on May 20, 2009, 09:13:13 AM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them
Are you sure about that?
Yes.
The only way they can raise your rate on money you have already borrowed is if you have defaulted onteh terms of it being borrowed.
The only other way I could imagine is if you were stupid enough to sign up for a CC with a variable interest rate - but who would do that? I don't even know if they exist. And if they do, they are pegged to some standard rate, presumably.
Quote from: Berkut on May 20, 2009, 09:15:35 AM
Quote from: ulmont on May 20, 2009, 09:13:13 AM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them
Are you sure about that?
Yes.
The only way they can raise your rate on money you have already borrowed is if you have defaulted onteh terms of it being borrowed.
The only other way I could imagine is if you were stupid enough to sign up for a CC with a variable interest rate - but who would do that? I don't even know if they exist. And if they do, they are pegged to some standard rate, presumably.
Rather foolishly, I think I have open about 15 credit cards (though I only use a couple) and it seems recently I get letters every few weeks changing the terms and telling me that if I don't like the change I need to call them.
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
Hmm. You're not concerned at all with the fact that credit card companies are basically an oligopoly?
Quote from: Berkut on May 20, 2009, 09:15:35 AM
Yes.
The only way they can raise your rate on money you have already borrowed is if you have defaulted onteh terms of it being borrowed.
The only other way I could imagine is if you were stupid enough to sign up for a CC with a variable interest rate - but who would do that? I don't even know if they exist. And if they do, they are pegged to some standard rate, presumably.
They're out there. I used to process a lot of variable rate card apps for Juniper Bank that tried to catch people with "introductory APR" offers. You end up paying back about 170% of what you borrowed under a lot of those cards, though; we used to pick a project and amuse ourselves in the office by actually sifting through the terms and conditions and figuring out what the actual obligation was.
This whole thing is pretty ridiculous, though. Congress has managed to completely ignore what happened the
last time they "lobbied" for lower-income/higher-risk borrowers (oh yeah, it's a large part of what got us into this mess!).
The more I'm hearing about these new credit card plans by Congress, the more doubts I have. Changes/fixes are needed though, just depends what else goes along with it too.
Follow the money trail. I wonder how many pork items will have to get tacked onto this legislation in order to get it passed?
I realized a while ago, since last Autumn, that I haven't received any new solicitations to apply for credit cards. About the time the financial sector melted down. I used to get them every week, all the time.
Quote from: alfred russel on May 20, 2009, 09:18:54 AM
Quote from: Berkut on May 20, 2009, 09:15:35 AM
Quote from: ulmont on May 20, 2009, 09:13:13 AM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them
Are you sure about that?
Yes.
The only way they can raise your rate on money you have already borrowed is if you have defaulted onteh terms of it being borrowed.
The only other way I could imagine is if you were stupid enough to sign up for a CC with a variable interest rate - but who would do that? I don't even know if they exist. And if they do, they are pegged to some standard rate, presumably.
Rather foolishly, I think I have open about 15 credit cards (though I only use a couple) and it seems recently I get letters every few weeks changing the terms and telling me that if I don't like the change I need to call them.
Of course - they can change the terms all they like. And you can elect not to borrow form them under the new terms.
Just because someone made a deal with you at some point does not obligate them to never make any deal with you again. Hell, send them a letter back saying you are changing the terms, and if they want to loan you money it will have to be on yours, rather than theirs.
I imagine they will choose not to loan you money. The same choice you have.
Quote from: Faeelin on May 20, 2009, 09:19:50 AM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
Hmm. You're not concerned at all with the fact that credit card companies are basically an oligopoly?
They really aren't. There are a lot of institutions offering credit cards.
Quote from: Berkut on May 20, 2009, 09:09:01 AM
Christ, this shit is so fucking stupid - right up there with Congress, including the "smartest guy in the house" deciding that it would make good economic sense to pass laws encouraging banks to lend money to people who cannot pay it back in order for them to buy houses they cannot afford.
I simply do not understand the credit card problem being "solved". The bank offers you money at some interest rate. If you think the rate is unfuckingfair THEN DON"T BORROW THE MONEY FROM THEM!!!
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
The problem is that so many people did this it threatens the stability of the entire international financial market.
Obviously if a few fools did something stupid nobody would care.
Quote from: Faeelin on May 20, 2009, 09:19:50 AM
Hmm. You're not concerned at all with the fact that credit card companies are basically an oligopoly?
They're not. All VISA, Mastercard, etc. really do is provide the networks for processing transactions. It's up to the financial institutions to decide whether or not to extend you the credit.
It's a bit like Cisco networking. You have a LinkSys router set up along Cisco lines, but you don't call Cicsco if you have trouble with it- you call LinkSys. Same with computers. You don't call Microsoft for every hardware issue with your Dell, HP, or eMachines computer, even though they all run Windows out of the box.
Actually, from what I've read the big problem with the credit card business model is that it relies for its profit margins on those who do not pay it off promptly - essentially, on bad credit risks.
From what I've seen, Credit cards perform really two functions: first, as a handy substitute to carrying around large amounts of cash, and a way to make purchases and security deposits; and second, as a way of borrowing money. The first is a real convenience, modern life is annoying without access to credit cards for car rentals and hotels - the second is a really foolish way to borrow money, given the high interest rates charged.
Ideally, one would only use the card in the first sense, instantly paying off any balance oustanding. Card companies offer all sorts of points and perks for using them, so you can actually make money doing this (or at least, the card company doesn't get much profit).
Way it seems to work is that, in order to make a profit, the card companies rely on consumers attempting to use the card in the first sense, failing or forgetting to pay, and running up interest charges (that is, using the card in the second sense). In short, in the above little parable about Jake and Howard, the card companies LOVE unreliable Jake and hate Howard - Jake earns them money (assuming he doesn't default totally - he has to be unreliable but not too unreliable) and Howard isn't earning them anything much.
Thing is, this business model seems to rely on foolish financial behaviour. Dunno what the import of this is, but I can see why this can cause problems.
Well, I think there is some happy medium in there.
I have a 821 credit rating - mainly because we are a credit card companies nemesis. We use our card often, but *always* pay it off every month, and never, ever pay interest.
Between this extreme and the guy defaulting all the time is the people who are a perfectly safe risk, but do pay interest. They are the target audience, of course.
No doubt that the credit card industry is largely a shit deal for the consumer - but so is McDonalds. I don't think the solution is to tell McDonalds they aren't allowed to sell cheap, high quality, incredibly unhealthy food though.
Quote from: Berkut on May 20, 2009, 09:28:29 AM
Quote from: alfred russel on May 20, 2009, 09:18:54 AM
Quote from: Berkut on May 20, 2009, 09:15:35 AM
Quote from: ulmont on May 20, 2009, 09:13:13 AM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
They cannot raise you rates on the money you already owe them
Are you sure about that?
Yes.
The only way they can raise your rate on money you have already borrowed is if you have defaulted onteh terms of it being borrowed.
The only other way I could imagine is if you were stupid enough to sign up for a CC with a variable interest rate - but who would do that? I don't even know if they exist. And if they do, they are pegged to some standard rate, presumably.
Rather foolishly, I think I have open about 15 credit cards (though I only use a couple) and it seems recently I get letters every few weeks changing the terms and telling me that if I don't like the change I need to call them.
Of course - they can change the terms all they like. And you can elect not to borrow form them under the new terms.
Just because someone made a deal with you at some point does not obligate them to never make any deal with you again. Hell, send them a letter back saying you are changing the terms, and if they want to loan you money it will have to be on yours, rather than theirs.
I imagine they will choose not to loan you money. The same choice you have.
The end result is that I have no idea what my terms are, really on any of my cards. That isn't a big deal for me as I pay my cards off every month, but if I ever started carrying a balance who knows what interest rate I'd be stuck with (probably something ugly).
Quote from: Malthus on May 20, 2009, 09:39:09 AM
Actually, from what I've read the big problem with the credit card business model is that it relies for its profit margins on those who do not pay it off promptly - essentially, on bad credit risks.
From what I've seen, Credit cards perform really two functions: first, as a handy substitute to carrying around large amounts of cash, and a way to make purchases and security deposits; and second, as a way of borrowing money. The first is a real convenience, modern life is annoying without access to credit cards for car rentals and hotels - the second is a really foolish way to borrow money, given the high interest rates charged.
Ideally, one would only use the card in the first sense, instantly paying off any balance oustanding. Card companies offer all sorts of points and perks for using them, so you can actually make money doing this (or at least, the card company doesn't get much profit).
Way it seems to work is that, in order to make a profit, the card companies rely on consumers attempting to use the card in the first sense, failing or forgetting to pay, and running up interest charges (that is, using the card in the second sense). In short, in the above little parable about Jake and Howard, the card companies LOVE unreliable Jake and hate Howard - Jake earns them money (assuming he doesn't default totally - he has to be unreliable but not too unreliable) and Howard isn't earning them anything much.
Thing is, this business model seems to rely on foolish financial behaviour. Dunno what the import of this is, but I can see why this can cause problems.
People that pay off their cards every month get a good deal when they get airline miles and other rewards: essentially they are being subsidized by the people who don't pay off every month.
Lotteries, cigarrette taxes, and credit cards: three ways less educated poor people subsidize the wealthy.
Quote from: alfred russel on May 20, 2009, 09:51:19 AM
The end result is that I have no idea what my terms are, really on any of my cards. That isn't a big deal for me as I pay my cards off every month, but if I ever started carrying a balance who knows what interest rate I'd be stuck with (probably something ugly).
That is the end result of you not paying attention though, not the end result of some injustice that Congress needs to fix.
Quote from: Berkut on May 20, 2009, 09:55:49 AM
Quote from: alfred russel on May 20, 2009, 09:51:19 AM
The end result is that I have no idea what my terms are, really on any of my cards. That isn't a big deal for me as I pay my cards off every month, but if I ever started carrying a balance who knows what interest rate I'd be stuck with (probably something ugly).
That is the end result of you not paying attention though, not the end result of some injustice that Congress needs to fix.
I'd be happy if Congress passed the law that any significant change in terms that could be considered adverse to the consumer required the card to be canceled and a new one issued.
Quote from: alfred russel on May 20, 2009, 09:58:11 AM
Quote from: Berkut on May 20, 2009, 09:55:49 AM
Quote from: alfred russel on May 20, 2009, 09:51:19 AM
The end result is that I have no idea what my terms are, really on any of my cards. That isn't a big deal for me as I pay my cards off every month, but if I ever started carrying a balance who knows what interest rate I'd be stuck with (probably something ugly).
That is the end result of you not paying attention though, not the end result of some injustice that Congress needs to fix.
I'd be happy if Congress passed the law that any significant change in terms that could be considered adverse to the consumer required the card to be canceled and a new one issued.
So you are in favor of a just "fixing" an non-existent problem by increasing the costs for everyone while not actually accomplishing anything?
I don't want a new card every time the terms change. Why should I have to change my account numbers, some of which may be setup for automatic payments and such?
What is "adverse" for the consumer? Who gets to define that happy little term in a financial and legal sense?
I'd be happy if Congress passed a lot less laws that are supposed to "protect" me from myself, but just end up costing everyone more money.
Quote from: alfred russel on May 20, 2009, 09:55:19 AM
People that pay off their cards every month get a good deal when they get airline miles and other rewards: essentially they are being subsidized by the people who don't pay off every month.
Lotteries, cigarrette taxes, and credit cards: three ways less educated poor people subsidize the wealthy.
And I for one would like to thank all those people who do not pay off their balances every month. Without you the cost of the convenience of my credit card might be higher. Also, the bonus benefits such as airline miles might not be so generous.
Again, I thank you!
Quote
So you are in favor of a just "fixing" an non-existent problem by increasing the costs for everyone while not actually accomplishing anything?
I don't want a new card every time the terms change. Why should I have to change my account numbers, some of which may be setup for automatic payments and such?
What is "adverse" for the consumer? Who gets to define that happy little term in a financial and legal sense?
I'd be happy if Congress passed a lot less laws that are supposed to "protect" me from myself, but just end up costing everyone more money.
Credit card debt is not a nonexistant problem--if you don't believe me do a search for "US consumer debt economic impact".
What is going on right now is a bit of bait and switch. A few years ago there was an offer for a card with 5% back on restaurant purchases. I travel a lot and take people out for business--with 5% back I could make a decent amount off the card. They got me to sign up, and a couple months later I got a notice that they were changing the terms and I didn't get 5% back anymore. But I still have the card, though I haven't used it in years, but I guess if I ever get in financial distress they may get some interest payments out of me.
It is deceptive marketing. This wasn't the only example something like this happened.
Quote from: Berkut on May 20, 2009, 10:01:10 AM
I'd be happy if Congress passed a lot less laws that are supposed to "protect" me from myself, but just end up costing everyone more money.
Unfortunately there are a lot of areas where laws are required to protect consumers - even from themselves. One example of that is the mandatory cooling off periods that most jurisdictions have that allow consumers to return products within 48 hours or so in order to protect the consumer from high pressure sales.
However, I think I am agreement with you on this particular issue. Malthus is quite right in that people who use credit cards as debt devices are simply misusing them. Any legislation that protects people from that risk will unfairly spread the cost of that risk to merchants who already pay a lot of money in transaction fees to give their customers the convenience of using credit cards and of course to other consumers.
Quote from: alfred russel on May 20, 2009, 10:10:27 AM
Credit card debt is not a nonexistant problem--if you don't believe me do a search for "US consumer debt economic impact".
Obesity is not a nonexistant problem either - does that mean the US Congress should pass laws in a useless effort to force people to quit being fat by targetting people who sell them food?
Just because a problem exists does not mean that the government should go and "fix" it. They suck at fixing problems, and excel at creating new and more complicated ones.
It is not the job of congress to protect you from yourself.
Quote
What is going on right now is a bit of bait and switch.
So don't fall for it.
If Congress MUST get involved, let them spend some money educating people.
Quote
A few years ago there was an offer for a card with 5% back on restaurant purchases. I travel a lot and take people out for business--with 5% back I could make a decent amount off the card. They got me to sign up, and a couple months later I got a notice that they were changing the terms and I didn't get 5% back anymore.
Oh noes!
Quote
But I still have the card, though I haven't used it in years, but I guess if I ever get in financial distress they may get some interest payments out of me.
So what should Congress do to protect you from yourself?
Under your plan, the CC company would have canceled your card, right?
If you want the card canceled, why not just cancel it yourself?
Quote
It is deceptive marketing. This wasn't the only example something like this happened.
Deceptive marketing? What other kind of marketing is there?
Quote from: alfred russel on May 20, 2009, 10:10:27 AM
It is deceptive marketing. This wasn't the only example something like this happened.
No, it is deceptive if they didnt actually provide you with the service or if they did not give you notice that the service would stop. They did give you the service and they did send you a notice that it would no longer continue. At that point you were able to make a choice.
Quote from: Berkut on May 20, 2009, 10:15:32 AM
Obesity is not a nonexistant problem either - does that mean the US Congress should pass laws in a useless effort to force people to quit being fat by targetting people who sell them food?
Regulating the sale of junk food actually makes more sense.
Quote from: crazy canuck on May 20, 2009, 10:14:53 AM
Quote from: Berkut on May 20, 2009, 10:01:10 AM
I'd be happy if Congress passed a lot less laws that are supposed to "protect" me from myself, but just end up costing everyone more money.
Unfortunately there are a lot of areas where laws are required to protect consumers - even from themselves.
I think there are a lot fewer areas where this is actually the case than there are laws, to be honest. And most of the laws there are there to "protect" consumers are mostly there to fuck consumers under the guise of "protecting" them.
QuoteOne example of that is the mandatory cooling off periods that most jurisdictions have that allow consumers to return products within 48 hours or so in order to protect the consumer from high pressure sales.
Meh. I guess. Another solution without a real problem, and another "law" that likely does more harm than good. At least this one doesn't really effect me though.
Quote
However, I think I am agreement with you on this particular issue. Malthus is quite right in that people who use credit cards as debt devices are simply misusing them. Any legislation that protects people from that risk will unfairly spread the cost of that risk to merchants who already pay a lot of money in transaction fees to give their customers the convenience of using credit cards and of course to other consumers.
The laws Congress should be concerned about as far as protecting consumers should mostly be limited to disclosure laws - making certain that business arrangements are made with full disclosure and in good faith. Those I can support.
Quote from: crazy canuck on May 20, 2009, 10:19:24 AM
Regulating the sale of junk food actually makes more sense.
I think if you decide to use government backed health care you should be required to eat right. Otherwise you are asking the country to subsidize your junk-food assisted suicide.
But I am not particularly interested in having the government regulate people who do NOT use government backed health care, because who cares what they eat? But maybe there are no longer such people anymore.
Quote from: Valmy on May 20, 2009, 10:21:55 AM
Quote from: crazy canuck on May 20, 2009, 10:19:24 AM
Regulating the sale of junk food actually makes more sense.
I think if you decide to use government backed health care you should be required to eat right. Otherwise you are asking the country to subsidize your junk-food assisted suicide.
But I am not particularly interested in having the government regulate people who do NOT use government backed health care, because who cares what they eat? But maybe there are no longer such people anymore.
Ahh, thanks for illustrating yet another reason Big Government sucks ass.
Why, if the government is apying for your (insert service we just cannot live without Nancy Pelosi running it), then they have the right to tell you what you can and cannot do as it relates to that service!
Hmmmm....I never hear that argument from the nationalize dhealth care crowd.
"We should have the state pay for health care so that the State can tell people what they can and cannot eat!"
Who gives a fuck about individual liberty! Big Brother will let you know what is healthy for you! After all, he is the one paying for it all!
:x x infinity.
Quote from: Berkut on May 20, 2009, 09:43:02 AM
I have a 821 credit rating - mainly because we are a credit card companies nemesis. We use our card often, but *always* pay it off every month, and never, ever pay interest.
Same (I dunno my exact score but it's 800-plus). The funny thing is that I had frequently gotten credit limit increases automatically from Citi, even though I didn't ask for them, presumably in an attempt to encourage me to charge more to get me out of my thrifty habits. That seemed to have stopped about a year ago... I assume there's some connection to the financial problems.
Quote from: Valmy on May 20, 2009, 10:21:55 AM
Otherwise you are asking the country to subsidize your junk-food assisted suicide.
And the government should do exactly that. Anything else is totalitarian crap.
Quote from: Berkut on May 20, 2009, 10:15:32 AM
Quote from: alfred russel on May 20, 2009, 10:10:27 AM
Credit card debt is not a nonexistant problem--if you don't believe me do a search for "US consumer debt economic impact".
Obesity is not a nonexistant problem either - does that mean the US Congress should pass laws in a useless effort to force people to quit being fat by targetting people who sell them food?
Just because a problem exists does not mean that the government should go and "fix" it. They suck at fixing problems, and excel at creating new and more complicated ones.
It is not the job of congress to protect you from yourself.
Quote
What is going on right now is a bit of bait and switch.
So don't fall for it.
If Congress MUST get involved, let them spend some money educating people.
Quote
A few years ago there was an offer for a card with 5% back on restaurant purchases. I travel a lot and take people out for business--with 5% back I could make a decent amount off the card. They got me to sign up, and a couple months later I got a notice that they were changing the terms and I didn't get 5% back anymore.
Oh noes!
Quote
But I still have the card, though I haven't used it in years, but I guess if I ever get in financial distress they may get some interest payments out of me.
So what should Congress do to protect you from yourself?
Under your plan, the CC company would have canceled your card, right?
If you want the card canceled, why not just cancel it yourself?
Quote
It is deceptive marketing. This wasn't the only example something like this happened.
Deceptive marketing? What other kind of marketing is there?
I'm susceptible to the argument that people need to look out for themselves and we don't need predatory lending laws. Someone takes on credit card debt in excess of their annual income, at 30%? Someone takes a mortgage with monthly payments they can't make? In either case I have a tough time seeing the person taking on the debt as a victim. But what the real world is making abundantly clear is that a lot of people will do those things, and when they do they have real world impacts that affect everyone in adverse ways.
Quote from: Neil on May 20, 2009, 10:27:14 AM
And the government should do exactly that. Anything else is totalitarian crap.
Then the health care system would break down and not be sustainable.
The problem is you just removed a big reason alot of people have to care for their health: fear of health care costs.
It is the effect of government programs. People are going to fuck with them so you have to attach strings to protect the integrity of the system. It is the reason we put in Welfare Reform to try to cut back on abuse.
You never get something for nothing. There is no such thing as 'Free Health Care'.
Quote from: Berkut on May 20, 2009, 10:20:13 AM
The laws Congress should be concerned about as far as protecting consumers should mostly be limited to disclosure laws - making certain that business arrangements are made with full disclosure and in good faith. Those I can support.
While I would generally agree, I think a main concern (and not an unjustified one) is that consumers are not really capable of knowing what to make of the flood of information they get - particularly financial information concerning such things as credit cards, insurance, mortgages, and investments - the really important financial transactions of everyday life that affect everyone.
MORE disclosure may make the situation worse and not better, producing yet more details that the consumer is likely to neither read nor understand. While in perfect world where people had infinite time to read disclosure statements and the ability to master the often quite complex terms and conditions contained in them it would make total sense to have a perfectly free market combined with mandated disclosure, in reality such a system is likely to run up against the inability of the cosumer to undestand the choices he or she is presented with.
Quote from: Berkut on May 20, 2009, 10:25:45 AM
Who gives a fuck about individual liberty! Big Brother will let you know what is healthy for you! After all, he is the one paying for it all!
:x x infinity.
If big brother gives you money he has power over you.
It is something to consider if the government is going to have compulsory universal health care. Then they will have the right to regulate everybody's health.
Insurance companies do it by charging higher premiums to those who are overweight or smoke or whatever...but the government cannot do that. So they will use the law.
Quote from: Valmy on May 20, 2009, 10:31:55 AM
Quote from: Berkut on May 20, 2009, 10:25:45 AM
Who gives a fuck about individual liberty! Big Brother will let you know what is healthy for you! After all, he is the one paying for it all!
:x x infinity.
If big brother gives you money he has power over you.
It is something to consider if the government is going to have compulsory universal health care. Then they will have the right to regulate everybody's health.
Insurance companies do it by charging higher premiums to those who are overweight or smoke or whatever...but the government cannot do that. So they will use the law.
I so far have failed to notice the government of Canada sending Tim Hortons diners to re-education camps, in spite of socialized healthcare ... maybe that is still to come. :unsure:
Quote from: crazy canuck on May 20, 2009, 10:17:17 AM
Quote from: alfred russel on May 20, 2009, 10:10:27 AM
It is deceptive marketing. This wasn't the only example something like this happened.
No, it is deceptive if they didnt actually provide you with the service or if they did not give you notice that the service would stop. They did give you the service and they did send you a notice that it would no longer continue. At that point you were able to make a choice.
I'm sure you are correct from a legal point of view. The problem is that I strongly suspect that someone issuing the cards had the idea, "we'll give 5% cash back on this activity, watch the first few months of customer behavior, and reevaluate whether we want to continue that reward for the customer." So they give me the card, see a few catered lunches go through, and cancel my reward.
That is fine, but I'd rather have cards that are more steady, even if they offer lower rewards at the outset. Berkut complained about the nuisance of a canceled card: but what about the nuisance and hazard of getting a card at a low rate, having the rate jacked up by a change in terms?
Quote from: Valmy on May 20, 2009, 10:21:55 AM
Quote from: crazy canuck on May 20, 2009, 10:19:24 AM
Regulating the sale of junk food actually makes more sense.
I think if you decide to use government backed health care you should be required to eat right. Otherwise you are asking the country to subsidize your junk-food assisted suicide.
But I am not particularly interested in having the government regulate people who do NOT use government backed health care, because who cares what they eat? But maybe there are no longer such people anymore.
That reasoning doesnt make much sense to me. The Business of government is to legislate for the good of all its citizens. If regulation junk food makes sense because it improves health then surely it would be immoral to protect some segments of society but not others.
In other words, why do you think the protection of society needs to boil down to an economic benefit to the government?
Quote from: Malthus on May 20, 2009, 10:30:14 AM
Quote from: Berkut on May 20, 2009, 10:20:13 AM
The laws Congress should be concerned about as far as protecting consumers should mostly be limited to disclosure laws - making certain that business arrangements are made with full disclosure and in good faith. Those I can support.
While I would generally agree, I think a main concern (and not an unjustified one) is that consumers are not really capable of knowing what to make of the flood of information they get - particularly financial information concerning such things as credit cards, insurance, mortgages, and investments - the really important financial transactions of everyday life that affect everyone.
MORE disclosure may make the situation worse and not better, producing yet more details that the consumer is likely to neither read nor understand. While in perfect world where people had infinite time to read disclosure statements and the ability to master the often quite complex terms and conditions contained in them it would make total sense to have a perfectly free market combined with mandated disclosure, in reality such a system is likely to run up against the inability of the cosumer to undestand the choices he or she is presented with.
This is a good point.
Quote from: Malthus on May 20, 2009, 10:35:13 AM
I so far have failed to notice the government of Canada sending Tim Hortons diners to re-education camps, in spite of socialized healthcare ... maybe that is still to come. :unsure:
Well Canada does that by ruthlessly regulating health care costs, my understanding is that is only feasible because of the high prices down there.
I have my doubts we could do the same. But I could be wrong.
Quote from: Valmy on May 20, 2009, 10:31:55 AM
Quote from: Berkut on May 20, 2009, 10:25:45 AM
Who gives a fuck about individual liberty! Big Brother will let you know what is healthy for you! After all, he is the one paying for it all!
:x x infinity.
If big brother gives you money he has power over you.
It is something to consider if the government is going to have compulsory universal health care. Then they will have the right to regulate everybody's health.
Insurance companies do it by charging higher premiums to those who are overweight or smoke or whatever...but the government cannot do that. So they will use the law.
What a terrible concept.
Why should junk food be regulated, when I can still hang glide, mountain climb, and watch TV all day?
Health care reform doesn't mean that the government has a vested interest in every health related aspect of your life, and thus gains a measure of control over it.
Quote from: crazy canuck on May 20, 2009, 10:36:21 AM
That reasoning doesnt make much sense to me. The Business of government is to legislate for the good of all its citizens. If regulation junk food makes sense because it improves health then surely it would be immoral to protect some segments of society but not others.
In other words, why do you think the protection of society needs to boil down to an economic benefit to the government?
I am not that comfortable with limiting freedom.
I suppose what they might actually do is put a tax on unhealthy food (like they have enormous ones on cigarettes..but I think those are State Taxes and vary by State and not Federal ones) and use that to fund the health care system. They are already talking about that for soft drinks. In some way or another regulation of what we eat is coming.
Quote from: Valmy on May 20, 2009, 10:29:43 AM
The problem is you just removed a big reason alot of people have to care for their health: fear of health care costs.
If the only reason Americans have for caring for their health is the "fear of health care costs" then you have big problems. B.C. has one of the healthiest populations around and there is no fear of health costs. I wonder why that is.
Quote from: crazy canuck on May 20, 2009, 10:40:35 AM
Quote from: Valmy on May 20, 2009, 10:29:43 AM
The problem is you just removed a big reason alot of people have to care for their health: fear of health care costs.
If the only reason Americans have for caring for their health is the "fear of health care costs" then you have big problems. B.C. has one of the healthiest populations around and there is no fear of health costs. I wonder why that is.
CC makes a good point - Canucks aren't more overweight and unhealthy than Yanks, in spite of a lack of fear of health care costs.
Quote from: crazy canuck on May 20, 2009, 10:40:35 AM
If the only reason Americans have for caring for their health is the "fear of health care costs" then you have big problems. B.C. has one of the healthiest populations around and there is no fear of health costs. I wonder why that is.
Intersting, you took my saying 'big reason' and changed to 'only reason' and then attacked that instead. Congrats on BC and its healthiness. I think our Pacific Northwest is similar.
Yes we do have big health care and health problems if you hadn't noticed.
Quote from: Valmy on May 20, 2009, 10:40:30 AM
I am not that comfortable with limiting freedom.
I really dont understand the argument that limiting freedom is always bad. In lots of ways unlimited freedom is the worst possible world. Surely there is reasonable middle ground. If food x is known to be unhealthy what is the possible downside of regulating its sale.
QuoteI suppose what they might actually do is put a tax on unhealthy food (like they have enormous ones on cigarettes..but I think those are State Taxes and vary by State and not Federal ones) and use that to fund the health care system. They are already talking about that for soft drinks. In some way or another regulation of what we eat is coming.
Taxation has always been a method governments have to discourage some behaviour and encourage others. Another method is simply to ban certain ingredients that are known to be unhealthy or hazardous to health. Another is to force full disclosure of ingredients and health risks if the product is consumed. All these options limit freedom but they are not necessarily evil. ;)
Quote from: Malthus on May 20, 2009, 10:45:02 AM
CC makes a good point - Canucks aren't more overweight and unhealthy than Yanks, in spite of a lack of fear of health care costs.
Perhaps I am making the incorrect assumption that most people have the forsight to consider health care costs when making lifestyle choices.
CC hates trans fats. He is why my KFC tastes inferior now. :mad:
I just hope that if Democrats roll out a soda tax, Barney Frank makes the announcement.
Quote from: Valmy on May 20, 2009, 10:46:38 AM
Quote from: Malthus on May 20, 2009, 10:45:02 AM
CC makes a good point - Canucks aren't more overweight and unhealthy than Yanks, in spite of a lack of fear of health care costs.
Perhaps I am making the incorrect assumption that most people have the forsight to consider health care costs when making lifestyle choices.
When people make the decision to eat a salad instead of a bag of cheetos for lunch, I'd say that 99% are thinking about how fat their butt would look in jeans if they ate the junk and only 1% about the financial costs of Type 2 Diabeties. ;)
Quote from: Valmy on May 20, 2009, 10:29:43 AM
Quote from: Neil on May 20, 2009, 10:27:14 AM
And the government should do exactly that. Anything else is totalitarian crap.
Then the health care system would break down and not be sustainable.
Everywhere else in the civilized world manages just fine, thank you very much. Canada has the same culture regarding food as the US, and yet socialized medicine works here.
Quote from: Valmy on May 20, 2009, 10:46:38 AM
Quote from: Malthus on May 20, 2009, 10:45:02 AM
CC makes a good point - Canucks aren't more overweight and unhealthy than Yanks, in spite of a lack of fear of health care costs.
Perhaps I am making the incorrect assumption that most people have the forsight to consider health care costs when making lifestyle choices.
You are missing the point. No sane person would choose to be unhealthy. Fear of health care costs has nothing to do with their decisions. Unfortunately the reality for many Americans is that they do have that fear which may in and of itself result in poorer health outcomes.
Quote from: Malthus on May 20, 2009, 10:50:01 AM
When people make the decision to eat a salad instead of a bag of cheetos for lunch, I'd say that 99% are thinking about how fat their butt would look in jeans if they ate the junk and only 1% about the financial costs of Type 2 Diabeties. ;)
Probably true.
Oh well in any case fatty foods are about to get alot more pricey.
Quote from: Neil on May 20, 2009, 10:51:01 AM
Everywhere else in the civilized world manages just fine, thank you very much. Canada has the same culture regarding food as the US, and yet socialized medicine works here.
Only because the US indirectly subsidizes it through our higher costs.
Or so I hear :whistle:
Quote from: Ed Anger on May 20, 2009, 10:48:37 AM
CC hates trans fats. He is why my KFC tastes inferior now. :mad:
:lol:
I apologize.
Quote from: Valmy on May 20, 2009, 10:51:57 AM
Oh well in any case fatty foods are about to get alot more pricey.
:huh:
Quote from: Caliga on May 20, 2009, 10:53:34 AM
:huh:
My prediction is that the proposed tax on soft drinks is a harbinger on taxes on all 'unhealthy' foods -_-
But that is hardly a bold prediction.
Quote from: Valmy on May 20, 2009, 10:58:13 AM
Quote from: Caliga on May 20, 2009, 10:53:34 AM
:huh:
My prediction is that the proposed tax on soft drinks is a harbinger on taxes on all 'unhealthy' foods -_-
But that is hardly a bold prediction.
Oh, I don't care about soft drinks. I drink diet soda only and just as often I drink water or tea. BUT DON'T YOU DARE TOUCH MY SAUSAGE GRAVY. :mad:
edit: I fail at comprehending your post. :(
Quote from: alfred russel on May 20, 2009, 09:29:39 AM
They really aren't. There are a lot of institutions offering credit cards.
With the caveat I know little about this topic...
If this is so, then what's the incentive for the companies to all pursue a policy that actively screws consumers? Somebody should have broken with the pack, offered more equitable terms, and then made a killing by grabbing an enormous market share, no?
Quote from: Faeelin on May 20, 2009, 11:02:44 AM
Quote from: alfred russel on May 20, 2009, 09:29:39 AM
They really aren't. There are a lot of institutions offering credit cards.
With the caveat I know little about this topic...
If this is so, then what's the incentive for the companies to all pursue a policy that actively screws consumers? Somebody should have broken with the pack, offered more equitable terms, and then made a killing by grabbing an enormous market share, no?
A few reasons:
1) current terms banking hasn't been the most profitable industry recently. Apparently giving people credit without any security really is risky. Lowering profit margins doesn't seem very attractive at the moment.
2) the subset of people that don't pay their card off regularly aren't necessarily focused on the impact of minimum payments to their personal cash flows
3) because market share is competitive and the industry largeley unregulated, it makes sense to grab market share with very good offers that may be marginally profitable, and then jack up the rates or ratchet down the terms. Sure you will lose customers doing that, but some will stay and be your cash cows.
Quote from: Valmy on May 20, 2009, 10:52:58 AM
Quote from: Neil on May 20, 2009, 10:51:01 AM
Everywhere else in the civilized world manages just fine, thank you very much. Canada has the same culture regarding food as the US, and yet socialized medicine works here.
Only because the US indirectly subsidizes it through our higher costs.
Or so I hear :whistle:
You would be wrong.
Quote from: Malthus on May 20, 2009, 10:30:14 AM
Quote from: Berkut on May 20, 2009, 10:20:13 AM
The laws Congress should be concerned about as far as protecting consumers should mostly be limited to disclosure laws - making certain that business arrangements are made with full disclosure and in good faith. Those I can support.
While I would generally agree, I think a main concern (and not an unjustified one) is that consumers are not really capable of knowing what to make of the flood of information they get - particularly financial information concerning such things as credit cards, insurance, mortgages, and investments - the really important financial transactions of everyday life that affect everyone.
MORE disclosure may make the situation worse and not better, producing yet more details that the consumer is likely to neither read nor understand. While in perfect world where people had infinite time to read disclosure statements and the ability to master the often quite complex terms and conditions contained in them it would make total sense to have a perfectly free market combined with mandated disclosure, in reality such a system is likely to run up against the inability of the cosumer to undestand the choices he or she is presented with.
That's a very good point. Sometimes it helps to think in terms of reality, and not libertarian ideal.
Once you have become a "Jake" like me and have spent years and years paying off those huge debts of interest etc, don't expect to ever get treated better, unless you win the lotto.
I haven't missed a bill in 5 years, and paid off my consolidation early. I have a solid rrsp... but can't get a credit card, I'm assuming ever... I gave up trying.
They miss me paying all that interest, and would rather not deal with me at all as a good bill payer.
They actually despise all you people who pay off every month and would steal your shoes if you let them.
I'm with Tyler Durden re: Credit card companies.
Quote from: alfred russel on May 20, 2009, 10:35:33 AM
I'm sure you are correct from a legal point of view. The problem is that I strongly suspect that someone issuing the cards had the idea, "we'll give 5% cash back on this activity, watch the first few months of customer behavior, and reevaluate whether we want to continue that reward for the customer." So they give me the card, see a few catered lunches go through, and cancel my reward.
That is fine, but I'd rather have cards that are more steady, even if they offer lower rewards at the outset. Berkut complained about the nuisance of a canceled card: but what about the nuisance and hazard of getting a card at a low rate, having the rate jacked up by a change in terms?
Sorry I missed this before.
To your first point, I don't think that is a problem. The company promoted their card with an advertising campaign offering really nice rewards. They got you as a customer. Then then made the business jusgment that keeping the those rewards in place was not in their interest and they would risk losing you as a customer if they reduced or removed those rewards.
I find the alternative of requiring companies to never change their terms more repugnant as that would create large inefficiencies and would reduce the value of terms offered to customers since companies would be very conservative as to what they might offer without the chance to amend their terms from time to time.
QuoteThat is fine, but I'd rather have cards that are more steady, even if they offer lower rewards at the outset. Berkut complained about the nuisance of a canceled card: but what about the nuisance and hazard of getting a card at a low rate, having the rate jacked up by a change in terms?
What about it?
Since when it is the job of Congress to protect you from a nuisance?
Quote from: DGuller on May 20, 2009, 11:53:17 AM
That's a very good point. Sometimes it helps to think in terms of reality, and not libertarian ideal.
The reality is that laws forcing businesses to act in a manner that politicians think will win them votes amongst from masses are almost always terrible. Populism sucks.
Quote from: Berkut on May 20, 2009, 01:04:05 PM
Quote from: DGuller on May 20, 2009, 11:53:17 AM
That's a very good point. Sometimes it helps to think in terms of reality, and not libertarian ideal.
The reality is that laws forcing businesses to act in a manner that politicians think will win them votes amongst from masses are almost always terrible. Populism sucks.
You know what also sucks? A bunch of foreclosures in your neighborhood.
Quote from: alfred russel on May 20, 2009, 01:13:15 PM
Quote from: Berkut on May 20, 2009, 01:04:05 PM
Quote from: DGuller on May 20, 2009, 11:53:17 AM
That's a very good point. Sometimes it helps to think in terms of reality, and not libertarian ideal.
The reality is that laws forcing businesses to act in a manner that politicians think will win them votes amongst from masses are almost always terrible. Populism sucks.
You know what also sucks? A bunch of foreclosures in your neighborhood.
Yeah, yet another example of what happens when politicians feel the need to "protect" people - in this case, the desire to make sure that even people who cannot afford them can buy a home anyway.
Government is not the solution, they are the problem, in most cases. No sane economist is going to tell you that these new restrictions on credit card companies make any damn sense at all.
Quote from: Berkut on May 20, 2009, 09:09:01 AM
Christ, this shit is so fucking stupid - right up there with Congress, including the "smartest guy in the house" deciding that it would make good economic sense to pass laws encouraging banks to lend money to people who cannot pay it back in order for them to buy houses they cannot afford.
I simply do not understand the credit card problem being "solved". The bank offers you money at some interest rate. If you think the rate is unfuckingfair THEN DON"T BORROW THE MONEY FROM THEM!!!
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
they could use some cleanup, for example, to give interest rates that are the real stuff you pay. 6.5% introductory rate paid on day 0 is not the same as 6.5% paid on day 30.
Quote from: KRonn on May 20, 2009, 09:25:09 AM
Changes/fixes are needed though, just depends what else goes along with it too.
that's probably the real problem there.
Quote from: viper37 on May 20, 2009, 01:15:08 PM
Quote from: Berkut on May 20, 2009, 09:09:01 AM
Christ, this shit is so fucking stupid - right up there with Congress, including the "smartest guy in the house" deciding that it would make good economic sense to pass laws encouraging banks to lend money to people who cannot pay it back in order for them to buy houses they cannot afford.
I simply do not understand the credit card problem being "solved". The bank offers you money at some interest rate. If you think the rate is unfuckingfair THEN DON"T BORROW THE MONEY FROM THEM!!!
They cannot raise you rates on the money you already owe them, barring some default on YOUR part (which you agreed to when you borrowed the money in the first place, btw), so what is the problem that needs this solution?
they could use some cleanup, for example, to give interest rates that are the real stuff you pay. 6.5% introductory rate paid on day 0 is not the same as 6.5% paid on day 30.
Like I said, I am a big fan of full disclosure laws.
Not so much a fan of laws designed to make sure that stupid people will ahve to figure out some other stupid way to lose all their money, while passing the cost for the stupid on to me.
Quote from: Berkut on May 20, 2009, 01:15:08 PM
Yeah, yet another example of what happens when politicians feel the need to "protect" people - in this case, the desire to make sure that even people who cannot afford them can buy a home anyway.
Government is not the solution, they are the problem, in most cases. No sane economist is going to tell you that these new restrictions on credit card companies make any damn sense at all.
paul krugman has been beating a drum about credit card reform for a while. I don't know what he thinks about the new restrictions, but I bet he supports them.
Quote from: Malthus on May 20, 2009, 09:39:09 AM
Way it seems to work is that, in order to make a profit, the card companies rely on consumers attempting to use the card in the first sense, failing or forgetting to pay, and running up interest charges (that is, using the card in the second sense). In short, in the above little parable about Jake and Howard, the card companies LOVE unreliable Jake and hate Howard - Jake earns them money (assuming he doesn't default totally - he has to be unreliable but not too unreliable) and Howard isn't earning them anything much.
Thing is, this business model seems to rely on foolish financial behaviour. Dunno what the import of this is, but I can see why this can cause problems.
they need both of them actually.
They need Howard to pay back the cash he owes so they don't go bankrupt.
They need the store (lan intermediary between the borrowing brothers and the lending one) to pay them fees so they can make profit.
They need Howard to talk Jake into getting a credit card.
They need Jake to pay enough interests to cover potential defaults he could make, and to cover all potential Jakes out there.
But really, if there were only Howard out there, they wouldn't complain, because just with the stores, they are making enough profits already.
However, having Jakes all around will let them give AirMiles, Aeroplan, cash reward, gold points and other dumb stuff we love to the Howards out there so they can get one of their credit card and rake in money from the stores.
Quote from: Valmy on May 20, 2009, 10:46:38 AM
Perhaps I am making the incorrect assumption that most people have the forsight to consider health care costs when making lifestyle choices.
It is an incorrect assumption.
Quote from: Berkut on May 20, 2009, 01:16:19 PM
Like I said, I am a big fan of full disclosure laws.
Not so much a fan of laws designed to make sure that stupid people will ahve to figure out some other stupid way to lose all their money, while passing the cost for the stupid on to me.
yeah, we're probably close in our line of thought, but I haven't seen the final proposal from Obama, so I've really no idea if it's Nanny State at work or simply a full disclosure law.
Quote from: Berkut on May 20, 2009, 01:15:08 PM
Yeah, yet another example of what happens when politicians feel the need to "protect" people - in this case, the desire to make sure that even people who cannot afford them can buy a home anyway.
Government is not the solution, they are the problem, in most cases. No sane economist is going to tell you that these new restrictions on credit card companies make any damn sense at all.
:yes: :hug:
Quote from: viper37 on May 20, 2009, 01:31:10 PM
Quote from: Valmy on May 20, 2009, 10:46:38 AM
Perhaps I am making the incorrect assumption that most people have the forsight to consider health care costs when making lifestyle choices.
It is an incorrect assumption.
That's more of a la-la-land assumption. First of all, humans still have an extremely imperfect understanding of cause and effect in health. Second of all, once you're sick, good luck finding out the cost of your medical problem, that's very well hidden from you. Third of all, good luck accurately calculating the change in net present of value of medical treatments due to consumption of one more burger. Last time I was in Burger King, I didn't see anyone doing that.
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
Quote from: Malthus on May 20, 2009, 01:47:53 PM
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
Why in the world would you assume that people who think the government is the problem are us uninformed as you are about something they are discussing?
This has been talked about ad naseum for the last several weeks.
QuoteAbility to pay
Card issuers must consider the consumer's ability to make the required payments under the credit card's terms before raising limits or issuing a new card.
So card issuers have to consider the consumers ability to pay
before they issue the card - isn't that the consumers job?
QuoteYoung consumers
* Before issuing a card to a person under 21, the issuer must obtain an application which contains either the signature of a co-signer over 21 or information indicating an independent means of repaying any credit extended.
* Card issuers may not raise the credit limit on accounts held by a person under 21 who has a co-signer without written permission from the co-signer.
* No prescreened card offers can be made to people under 21 unless they have consented to receive such offers.
* Card issuers cannot provide tangible gifts to students on campus in exchange for filling out a credit card application.
* Colleges must publicly disclose any marketing contracts made with a card issuer.
What a load of horseshit. Mostly.
Young people are too stupid to think for themselves, so lets make sure that even those who CAN think for themselves are hamstrung!
QuoteCredit card agreements will be posted online and the Fed must keep a public Web site providing them to the public.
:lmfao: Oh my, another pork barrel project, coming through! I wonder who gets that little multi-million dollar deal?
Quote from: Malthus on May 20, 2009, 01:47:53 PM
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
I fail to see anything remotely shocking, except for maybe requiring the credit card company to lower the hiked interest rate due to default back down after 6 months of on-time payments. I do see a lot of common sense regulations that are designed to combat "gotcha fees", predatory behavior, or other behavior designed to keep the cardholders from making informed or rational decisions.
QuoteExisting balances
Credit card issuers cannot raise interest rates on existing balances unless:
* The increase is under a variable interest rate.
* It is the end of a promised time period for a promotional rate.
* The required minimum payment is not received within 60 days after the due date.
This, I think is the meat of the bill.
It seems pretty reasonable, but think about this.
The agreement you made with the CC provider when you signed up is binding. So its not like they can come along and raise your rates on the money you already borrowed anyway.
What this is "protecting" you from is them coming along, telling you your rates are going to go up, and if you don't like it, you can cancel the card and pay off your balance under the agreed upon re-payment schedule.
Now, we agree that they can certainly come along and say "Hey, we don't want to loan you any more money, so we are canceling your account - please pay off the balance under the agreed upon payment terms", right? After all, they can hardly be obligated to keep loaning you money.
So what this does, in effect, is ban them from saying instead "Hey, you have a choice: Either we close your account, or you agree to raise the rates". So it is effectively telling the credit card company that they CANNOT give you such a choice.
How does that make any sense at all? Right now, if you don't want to pay any higher interest rates than those you agreed upon, you can exercise that right whenever you wish. The only thing this bill is going to do is shift the burden of paying for deadbeats from themselves to everyone else, since we are all going to have to subsidize the high risk borrowers.
Quote from: DGuller on May 20, 2009, 02:07:20 PM
Quote from: Malthus on May 20, 2009, 01:47:53 PM
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/ (http://www.msnbc.msn.com/id/30846334/)
I fail to see anything remotely shocking, except for maybe requiring the credit card company to lower the hiked interest rate due to default back down after 6 months of on-time payments. I do see a lot of common sense regulations that are designed to combat "gotcha fees", predatory behavior, or other behavior designed to keep the cardholders from making informed or rational decisions.
Oh please, what a bleeding heart bunch of nonsense. What are these "predatory behaviors"? how is it predatory to offer someone a deal different from what they have now, when they can simply refuse that deal whenever they wish?
It is only predatory if you buy into the assumption that people MUST HAVE MORE CREDIT ALWAYS. Like it is some kind of Constitutional Right to borrow money.
How can a law that restricts the ability of credit card companies to make business deals with their customers be spun as a way to ensure full disclosure? If you want better disclosure, you do not need to pass a law restricting anything, by definition. You just need a law demanding the disclosure.
Quote from: Malthus on May 20, 2009, 01:47:53 PM
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
With the exception of the "young consumers" section, those all seem sound to me. If you are an adult at 18, you should be subject to the same irritating junk mail that everyone else is.
Quote from: Berkut on May 20, 2009, 02:02:28 PM
Quote from: Malthus on May 20, 2009, 01:47:53 PM
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
Why in the world would you assume that people who think the government is the problem are us uninformed as you are about something they are discussing?
This has been talked about ad naseum for the last several weeks.
Well, for one, until I posted this link, you hadn't bothered to actually mention any specifics in this particular thread, other than to launch into a screed about the evils of government. :huh:
Quote from: alfred russel on May 20, 2009, 02:14:25 PM
Quote from: Malthus on May 20, 2009, 01:47:53 PM
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
With the exception of the "young consumers" section, those all seem sound to me. If you are an adult at 18, you should be subject to the same irritating junk mail that everyone else is.
Maybe we can just borrow the money straight from Uncle Sam, he knows what is best for us anyway!
Amazing how people are so willing to embrace the Nanny state.
Quote from: Berkut on May 20, 2009, 02:06:25 PM
:lmfao: Oh my, another pork barrel project, coming through! I wonder who gets that little multi-million dollar deal?
Yeah, that seems like a waste of money. Who wants to read a bunch of credit card agreements?
The only purpose I can see for it is to be an easy reference guide for lawsuits.
Quote from: Malthus on May 20, 2009, 02:16:13 PM
Quote from: Berkut on May 20, 2009, 02:02:28 PM
Quote from: Malthus on May 20, 2009, 01:47:53 PM
So far, no one has bothered to mention any specifics concerning the actual proposal. It is all very well for those of us who automatically assume any government regulation is "the problem", and so I assume don't need to know specifics, but for the rest of us - what exactly is it that is under consideration?
Is this a fair summary? http://www.msnbc.msn.com/id/30846334/
Why in the world would you assume that people who think the government is the problem are us uninformed as you are about something they are discussing?
This has been talked about ad naseum for the last several weeks.
Well, for one, until I posted this link, you hadn't bothered to actually mention any specifics in this particular thread, other than to launch into a screed about the evils of government. :huh:
Cheap shot Malthus - I've been talking about teh evils of government in the context of this particular issue the entire thread, and nothing I have said has been off base or incorrect in regards to the particulars. It's not like I've been going off and bitching about something that wasn't even happening, just because I didn't post a link to a summary of the law - which I thought we all understood already.
Just because you want to argue before you know the facts doesn't mean you should assume everyone else does the same.
Quote from: alfred russel on May 20, 2009, 02:18:36 PM
Quote from: Berkut on May 20, 2009, 02:06:25 PM
:lmfao: Oh my, another pork barrel project, coming through! I wonder who gets that little multi-million dollar deal?
Yeah, that seems like a waste of money.
Don't be launching into screeds about the evil of government!
Quote from: Malthus on May 20, 2009, 02:16:13 PM
Well, for one, until I posted this link, you hadn't bothered to actually mention any specifics in this particular thread, other than to launch into a screed about the evils of government. :huh:
I didn't know what was in the bill, so I'm glad you posted it. However, I knew that the government was taking steps to protect me, and I am for things that keep me safe. So I knew that I would be for this legislation.
Quote from: Berkut on May 20, 2009, 02:06:25 PM
Quote
So card issuers have to consider the consumers ability to pay before they issue the card - isn't that the consumers job?
Don't lenders usually measure the credit-worthiness of people they lend cash to? I fail to see the objection.
QuoteYoung consumers
* Before issuing a card to a person under 21, the issuer must obtain an application which contains either the signature of a co-signer over 21 or information indicating an independent means of repaying any credit extended.
* Card issuers may not raise the credit limit on accounts held by a person under 21 who has a co-signer without written permission from the co-signer.
* No prescreened card offers can be made to people under 21 unless they have consented to receive such offers.
* Card issuers cannot provide tangible gifts to students on campus in exchange for filling out a credit card application.
* Colleges must publicly disclose any marketing contracts made with a card issuer.
What a load of horseshit. Mostly.
Young people are too stupid to think for themselves, so lets make sure that even those who CAN think for themselves are hamstrung!
Requiring a co-signer is horseshit, agreed.
Disclosure of marketing contracts and restrictions on gifts and marketing initiatives I could live with.
QuoteCredit card agreements will be posted online and the Fed must keep a public Web site providing them to the public.
:lmfao: Oh my, another pork barrel project, coming through! I wonder who gets that little multi-million dollar deal?
[/quote]
Disclosure of card agreements is unobjectionable; a some form of centralized repository makes sense; a gove't website is likely to be a pork barrel project.
Quote from: Berkut on May 20, 2009, 02:18:50 PM
Cheap shot Malthus - I've been talking about teh evils of government in the context of this particular issue the entire thread, and nothing I have said has been off base or incorrect in regards to the particulars. It's not like I've been going off and bitching about something that wasn't even happening, just because I didn't post a link to a summary of the law - which I thought we all understood already.
Just because you want to argue before you know the facts doesn't mean you should assume everyone else does the same.
Maybe you don't realize how you sound - like Ayn Rand on PCP.
And I partly *agree* with you, which is the funny part.
The changes would make the creditors eat a lot of interest rate risk. They'll respond by either going to variable rate or by increasing the premium on fixed rate accounts.
I can live with disclousre of course (although I am not sure what the point is - is there some kind of problem with schools not disclosing that they have marketing agreements?).
Why restrictions on gifts? I like free T-shirts, so why should it be illegal for a company to give me one?
What about other companies - why aren't they restricted from giving me free stuff? What about a really low priced t-shirt?
I find this kind of crap objectionable just because it is so fucking petty and stupid. Who freaking cares? Are 20 year olds really in dire danger because MBNA gives them a free t-shirt, so Congress needs to step in to protect them from free t-shirts?
Whew, our long national nightmare of college students getting free things is finally over! Thank god Nanny Dodd is there to protect our adults from making bad choices and getting free stuff!
Quote from: Malthus on May 20, 2009, 02:27:15 PM
Quote from: Berkut on May 20, 2009, 02:18:50 PM
Cheap shot Malthus - I've been talking about teh evils of government in the context of this particular issue the entire thread, and nothing I have said has been off base or incorrect in regards to the particulars. It's not like I've been going off and bitching about something that wasn't even happening, just because I didn't post a link to a summary of the law - which I thought we all understood already.
Just because you want to argue before you know the facts doesn't mean you should assume everyone else does the same.
Maybe you don't realize how you sound - like Ayn Rand on PCP.
And I partly *agree* with you, which is the funny part.
Around ehre anyone who doesn't drink the Nanny State kool-aid is labeled as Ayn Rand. Congrats.
Quote from: Admiral Yi on May 20, 2009, 02:28:35 PM
The changes would make the creditors eat a lot of interest rate risk. They'll respond by either going to variable rate or by increasing the premium on fixed rate accounts.
Or just figure out some other loophole to screw the stupid.
Quote from: Admiral Yi on May 20, 2009, 02:28:35 PM
The changes would make the creditors eat a lot of interest rate risk. They'll respond by either going to variable rate or by increasing the premium on fixed rate accounts.
You mean the companies that now give a fixed rate, and use their flexibility to change the fixed rate upward if interest rates rise?
How does that really differ from a variable rate card anyway?
Quote from: Berkut on May 20, 2009, 02:31:45 PM
Quote from: Malthus on May 20, 2009, 02:27:15 PM
Quote from: Berkut on May 20, 2009, 02:18:50 PM
Cheap shot Malthus - I've been talking about teh evils of government in the context of this particular issue the entire thread, and nothing I have said has been off base or incorrect in regards to the particulars. It's not like I've been going off and bitching about something that wasn't even happening, just because I didn't post a link to a summary of the law - which I thought we all understood already.
Just because you want to argue before you know the facts doesn't mean you should assume everyone else does the same.
Maybe you don't realize how you sound - like Ayn Rand on PCP.
And I partly *agree* with you, which is the funny part.
Around ehre anyone who doesn't drink the Nanny State kool-aid is labeled as Ayn Rand. Congrats.
I guess you missed my second sentence. :lol:
Quote from: Berkut on May 20, 2009, 02:32:10 PM
Or just figure out some other loophole to screw the stupid.
Are you suggesting increasing rates is a loophole to screw the stupid? Credit card companies don't get their money for free.
Quote from: alfred russel on May 20, 2009, 02:33:43 PM
You mean the companies that now give a fixed rate, and use their flexibility to change the fixed rate upward if interest rates rise?
How does that really differ from a variable rate card anyway?
Frequency of and warning needed for resets I would think.
Quote from: alfred russel on May 20, 2009, 02:33:43 PM
Quote from: Admiral Yi on May 20, 2009, 02:28:35 PM
The changes would make the creditors eat a lot of interest rate risk. They'll respond by either going to variable rate or by increasing the premium on fixed rate accounts.
You mean the companies that now give a fixed rate, and use their flexibility to change the fixed rate upward if interest rates rise?
How does that really differ from a variable rate card anyway?
So as long as a company gives you creit at a given rate, they must continue to do so forever? even if the agreement you signed
specifically said they could increase those rates and you signed said agreement stating that they could?
That is what I don't get about all this faux outrage. If the deal they are offering is so terrible, just don't accept it. You don't need Congress for that. If the deal sucks, then pass on it.
It is pathetic that people are actually arguing that they should not be allowed to make business arrangements that are to their own satisfaction. And when Congress passes a law limiting the ability of a credit card company to extend you credit, they are also passing a law limiting YOUR ability to make that same deal.
Regret already forthcoming.
Quote from: Berkut on May 20, 2009, 02:14:00 PM
Oh please, what a bleeding heart bunch of nonsense. What are these "predatory behaviors"? how is it predatory to offer someone a deal different from what they have now, when they can simply refuse that deal whenever they wish?
I think credit card companies scouring colleges to sign up students is predatory. Free market or not, they are in effect crack dealers getting people prone to addiction hooked.
QuoteIt is only predatory if you buy into the assumption that people MUST HAVE MORE CREDIT ALWAYS. Like it is some kind of Constitutional Right to borrow money.
Where am I making an argument for more credit? I'm closer to the opposite, in fact.
Quote
How can a law that restricts the ability of credit card companies to make business deals with their customers be spun as a way to ensure full disclosure? If you want better disclosure, you do not need to pass a law restricting anything, by definition. You just need a law demanding the disclosure.
Actual disclosure, and effective disclosure, are two different things. Just because information is out there, somewhere in the middle of large tomes of fine print, does not make for disclosure. I'm more concerned about people actually understanding the terms. Sometimes having less things to disclose about ensures better overall understanding of what people are getting into.
Quote from: Berkut on May 20, 2009, 02:06:25 PM
Young people are too stupid to think for themselves, so lets make sure that even those who CAN think for themselves are hamstrung!
well, actually, that's the reason we forbid a whole lot of things to underaged people, or ask for parental consent for some other things.
I disagree with the last two points, and we could argue on the 21 years old majority instead of 18, but basically, I think it's allright. You can't drink before 21, you can't smoke before 18, you can't have sex with someone of 17 y.o. when you're 19, so really, why should you be mature enough to have a credit card? Because you can own a machine gun at 12? I'm not sure that's a good reason... ;)
Now onto the rest of it...
First year of new card
I disagree with all of it...
Existing balancesI agree with everything there.
Notice of future rate hikes
seems sensible enough, even for the first year.
Paying off on old terms
Agree with the general principle, can argue about the details
Limits on fees and penalties
No over-the-limit fees may be charged unless the consumer has asked for the account to be set up to allow transactions that will exceed the credit limit.This I agree with totally. It's fucking unfair that they charge you for going over the limit when you don't want to. Ask it on the initial form or something, but don't fucking charge me for something I did not ask for. Giving the customer an option to sign out would be nice.Two-cycle billing is prohibited. An issuer cannot reach back to an earlier billing cycle when calculating the amount of interest charged in the current cycle.
Sensible due dates, time to pay
1- Credit card issuers cannot set early deadlines for payments. Payments must be received by 5 p.m. at a location set by the issuer.
2- Due dates will be on the same day each month.
3- Card issuers must deliver the bill at least 21 days before the due date.
#1 Isn't that a problem with the bank, more the credit card issuer? I recently discovered that my bank with always consider a withdrawal at the ATM before a deposit I make, no matter the time at wich I do it... I was really pissed off...
#2, yes, I agree, the 31st or each month
:D
#3 I kinda agree with this. I have a corporate credit card with a fuel company and the due date is already passed by the time I receive my bill... That's sort of... unfair practice imho.
Credit reports
Disagree with this. It's up to people to find their info. It's like saying Microsoft should avertise "A free OS is available at www.ubuntu.com (http://www.ubuntu.com)". Duh.
Issuance fees
Issuers cannot finance fees and charges for opening a credit card where the fees and charges total more than 25 percent of the credit limit.
I think it should be told/written clearly to the customer, but not forbidden. If I want that über special Amex card with these nice shiny gift they offer me and I'm willing to pay 500$ a year for this and 1000$ upfront, it's my fault if I'm stupid.
Credit card agreements will be posted online and the Fed must keep a public Web site providing them to the public.
Bullshit... I'm glad to see the US Congress people have so much times on their hands :) They must work extra fast to solve all your other problems before this minor issue :)
EDIT: The formattingis all fucked up!
Quote from: Berkut on May 20, 2009, 02:37:22 PM
Quote from: alfred russel on May 20, 2009, 02:33:43 PM
Quote from: Admiral Yi on May 20, 2009, 02:28:35 PM
The changes would make the creditors eat a lot of interest rate risk. They'll respond by either going to variable rate or by increasing the premium on fixed rate accounts.
You mean the companies that now give a fixed rate, and use their flexibility to change the fixed rate upward if interest rates rise?
How does that really differ from a variable rate card anyway?
So as long as a company gives you creit at a given rate, they must continue to do so forever? even if the agreement you signed specifically said they could increase those rates and you signed said agreement stating that they could?
That is what I don't get about all this faux outrage. If the deal they are offering is so terrible, just don't accept it. You don't need Congress for that. If the deal sucks, then pass on it.
It is pathetic that people are actually arguing that they should not be allowed to make business arrangements that are to their own satisfaction. And when Congress passes a law limiting the ability of a credit card company to extend you credit, they are also passing a law limiting YOUR ability to make that same deal.
Congress is responsible for passing reasonable consumer laws. These make sense because 1) monitoring credit card rates is a pain in the ass, and it isn't unreasonable for congress to lessen that burden since changing the rates can be lucrative for the banks (and a failure to notice ruinous for consumers), 2) consumers can't negotiate credit card terms, and 3) there is a sizeable segment of the population that is unfortunately unable to manage their credit card debt and are financially breaking because of it.
Quote from: alfred russel on May 20, 2009, 02:45:18 PM
Congress is responsible for passing reasonable consumer laws.
it goes beyong reasonable...
Quote
These make sense because 1) monitoring credit card rates is a pain in the ass, and it isn't unreasonable for congress to lessen that burden since changing the rates can be lucrative for the banks (and a failure to notice ruinous for consumers),
Why get 300 credit cards, then? Having only 1 or 2 is more than enough.
Quote
3) there is a sizeable segment of the population that is unfortunately unable to manage their credit card debt and are financially breaking because of it.
But it's not the responsibility of the State to nurse such people.
Otherwise, you can extend that very far. All adults are presumed to willingly enter a contract verbal or written, unless proven otherwise. They are presumed to be able to make such choices. If they are not able to make such choices, then there are a lot of things they can't do...
At the end of the day, credit cards are products, and in this country we decided some time ago that we want to have some product safety laws. We decided that saw manufacturers disclosing that the use of saw results in loss of operator's limbs is not enough, and that the saws should have reasonable idiot-proofing equipment on them.
Quote from: viper37 on May 20, 2009, 02:53:36 PM
But it's not the responsibility of the State to nurse such people.
Otherwise, you can extend that very far. All adults are presumed to willingly enter a contract verbal or written, unless proven otherwise. They are presumed to be able to make such choices. If they are not able to make such choices, then there are a lot of things they can't do...
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
Quote from: DGuller on May 20, 2009, 02:41:09 PM
Regret already forthcoming.
Why am I not surprised you set up the ad hom as your FIRST step in the argument?
Quote
Quote from: Berkut on May 20, 2009, 02:14:00 PM
Oh please, what a bleeding heart bunch of nonsense. What are these "predatory behaviors"? how is it predatory to offer someone a deal different from what they have now, when they can simply refuse that deal whenever they wish?
I think credit card companies scouring colleges to sign up students is predatory. Free market or not, they are in effect crack dealers getting people prone to addiction hooked.
So college students are "prone to addiction"? Even moreso than others?
Crack, last I checked was illegal. If credit is like crack, then perhaps we should just make it illegal altogether to loan people money. After all, its not like you get to buy crack once you are 22.
I can't really disagree with you here - this is too fundamental to your view of governments as having as its job protecting consumers from themselves. I certainly do not think offering adults credit is by definition "predatory", nor do I want the government "protecting" me from my own decisions.
But I do understand that a lot of people feel that the government is best at making choices for consumers.
Quote
QuoteIt is only predatory if you buy into the assumption that people MUST HAVE MORE CREDIT ALWAYS. Like it is some kind of Constitutional Right to borrow money.
Where am I making an argument for more credit? I'm closer to the opposite, in fact.
But the law is saying that they MUST continue to give people credit, and more credit, and MORE credit. The companies are not allowed to say "No thanks, don't want to loan to you anymore at the previous rates".
Quote
Quote
How can a law that restricts the ability of credit card companies to make business deals with their customers be spun as a way to ensure full disclosure? If you want better disclosure, you do not need to pass a law restricting anything, by definition. You just need a law demanding the disclosure.
Actual disclosure, and effective disclosure, are two different things.
Not really, unless you operate under the assumption that others cannot possibly read for themselves, so that "disclosure" isn't really disclosure, because the people involved are too stupid or lazy to understand.
We passed a bunch of laws demanding that credit card companies fully disclose ALL the terms. So now they do, and the bitch is that they are disclosing too much, and it is confusing, so teh way to get them to disclose more is to not let them do things. That is some fine doublegoodspeak right there.
QuoteJust because information is out there, somewhere in the middle of large tomes of fine print, does not make for disclosure.
You are really arguing that just because the information is available, it isn't actually available?
Financial agreements are, by definition, complex. We make them so because we want to protect and be protected. That is the very definition of disclosure. If you think there is a problem with companies not engaging in disclosure in good faith, than that can be addressed without banning companies and consumers from entering into any agreements that some politician decides is too complicate for the consumer to understand.
Quote
I'm more concerned about people actually understanding the terms. Sometimes having less things to disclose about ensures better overall understanding of what people are getting into.
Ahh, so in order to disclose things, we cannot actually disclose things, because that would be too confusing for people, so we have to restrict their ability to enter into good faith agreements because if we give them choices, why, they won't be able to understand the choices, because there are too many choices.
So lets keep it so simple that they don't have any choice, and this is what we mean by "disclosure".
Gotcha.
Quote from: DGuller on May 20, 2009, 02:54:20 PM
At the end of the day, credit cards are products, and in this country we decided some time ago that we want to have some product safety laws. We decided that saw manufacturers disclosing that the use of saw results in loss of operator's limbs is not enough, and that the saws should have reasonable idiot-proofing equipment on them.
Repeal those laws too! If the people demand chainsaws that don't kick back, the market will provide them with options!
I wouldnt mind my children having to obtain my signature before they get a credit card. I am going to be the one paying if they cant after all.
Quote from: ulmont on May 20, 2009, 02:58:40 PM
Repeal those laws too! If the people demand chainsaws that don't kick back, the market will provide them with options!
^_^ Actually you can turn off the clutch thingy that is supposed to protect against chainsaw kickback. :smarty:
I read a story about a lumberjack who did that once, and then his chainsaw kicked and cut through his neck so far that his head almost fell off. Amazingly, he didn't die even though he had to walk like 3 miles for help. :)
Quote from: alfred russel on May 20, 2009, 02:45:18 PM
Congress is responsible for passing reasonable consumer laws.
Yeah, they will tell you that all the time. They are responsible for making sure you Do The Right Thing, as THEY decide.
Quote
These make sense because 1) monitoring credit card rates is a pain in the ass,
It is? I never monitor them, at all. I simply don't care.
And how is it such a pain in the ass to pay attention to what people are charging you for credit?
I apy attention to mortgage rates, for example, since I have a mortgage. It doesn't seem all that terribly annoying.
Quote
and it isn't unreasonable for congress to lessen that burden since changing the rates can be lucrative for the banks (and a failure to notice ruinous for consumers)
It is unreasonable for Congress to restrict the ability of consumers to enter into good faitha greemetns with banks because some of them are too lazy or clueless to pay attention to the fully disclosed terms of their agreements.
Quote
, 2) consumers can't negotiate credit card terms, and
Of course they can.
Quote
3) there is a sizeable segment of the population that is unfortunately unable to manage their credit card debt and are financially breaking because of it.
There is a "sizeable portion" of the population that suffers from a variety of self inflicted problems. It is not the job of the state to protect them from their own problems, especially when that protection involves infringing upon other peoples rights.
the alternative is truly the Nanny State.
Quote from: DGuller on May 20, 2009, 02:54:20 PM
At the end of the day, credit cards are products, and in this country we decided some time ago that we want to have some product safety laws. We decided that saw manufacturers disclosing that the use of saw results in loss of operator's limbs is not enough, and that the saws should have reasonable idiot-proofing equipment on them.
I thought credit was like crack - now it is like a saw?
Marty?
Quote from: DGuller on May 20, 2009, 02:56:15 PM
Quote from: viper37 on May 20, 2009, 02:53:36 PM
But it's not the responsibility of the State to nurse such people.
Otherwise, you can extend that very far. All adults are presumed to willingly enter a contract verbal or written, unless proven otherwise. They are presumed to be able to make such choices. If they are not able to make such choices, then there are a lot of things they can't do...
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
Please share this data with us. A "lot" of people? Is that 1000? One billion? How many people have to be "broken" to justify the State restricting the rights of others?
Would 3000 be enough?
Quote from: crazy canuck on May 20, 2009, 02:59:19 PM
I wouldnt mind my children having to obtain my signature before they get a credit card. I am going to be the one paying if they cant after all.
Even when they are no longer children?
Why end it at 21?
Ok, experiment over. I don't know what got into me.
Quote from: Berkut on May 20, 2009, 03:04:54 PM
Please share this data with us. A "lot" of people? Is that 1000? One billion? How many people have to be "broken" to justify the State restricting the rights of others?
Would 3000 be enough?
If it affects you, it "affects a lot of people". -_-
Quote from: ulmont on May 20, 2009, 02:58:40 PM
Quote from: DGuller on May 20, 2009, 02:54:20 PM
At the end of the day, credit cards are products, and in this country we decided some time ago that we want to have some product safety laws. We decided that saw manufacturers disclosing that the use of saw results in loss of operator's limbs is not enough, and that the saws should have reasonable idiot-proofing equipment on them.
Repeal those laws too! If the people demand chainsaws that don't kick back, the market will provide them with options!
The flaw in this argument is that you are assuming that credit cards, right now, "kick back" and that if only the State would set up the rules properly, people would not borrow themselves into debt.
I don't think that is the case - people get into trouble with credit cards because they borrow money to pay for things they cannot afford. Then they blame their lack of control on the credit card companies for loaning them the money under the terms they agreed to from the start.
it isn't the credit card companies fault that Americans borrow way more than they make or can possibly pay back. And all the laws in the world shuffling around the deck chairs as the ship sinks isn't going to change anything - but it will make the Nanny Staters feel good about 'doing something" and it makes great political grist - standing up for the little man against the Evil Corporations!
it is pure, grade-A populism.
Quote from: DGuller on May 20, 2009, 03:05:40 PM
Ok, experiment over. I don't know what got into me.
:lmfao: Nice one DG - sling some ad homs, then run away. Truly a stand up guy.
:huh: What has Berkut said that justifies that sort of snarky response?
Quote from: Caliga on May 20, 2009, 03:01:49 PM
Quote from: ulmont on May 20, 2009, 02:58:40 PM
Repeal those laws too! If the people demand chainsaws that don't kick back, the market will provide them with options!
^_^ Actually you can turn off the clutch thingy that is supposed to protect against chainsaw kickback. :smarty:
I read a story about a lumberjack who did that once, and then his chainsaw kicked and cut through his neck so far that his head almost fell off. Amazingly, he didn't die even though he had to walk like 3 miles for help. :)
The chainsaw went through his neck, and he could still walk 3 miles after that? Good thing for the saw manufacturer that there are no product effectiveness laws.
Quote from: Caliga on May 20, 2009, 03:17:48 PM
:huh: What has Berkut said that justifies that sort of snarky response?
As is usually the case with Berkut, it's not what, it's how. He's just not worth tolerating.
Quote from: DGuller on May 20, 2009, 03:19:06 PM
Quote from: Caliga on May 20, 2009, 03:17:48 PM
:huh: What has Berkut said that justifies that sort of snarky response?
As is usually the case with Berkut, it's not what, it's how. He's just not worth tolerating.
is this the part where you go back to pretending to ignore me, and wait until someone responds to me, then respond to them, because of "how" I shot down your arguments and refused to engage in your infantile personal bitching matches?
Quote from: Berkut on May 20, 2009, 03:12:11 PM
The flaw in this argument is that you are assuming that credit cards, right now, "kick back" and that if only the State would set up the rules properly, people would not borrow themselves into debt.
Yup.
Quote from: Berkut on May 20, 2009, 03:12:11 PM
I don't think that is the case
And we disagree on this point.
Do you think marketing and advertising work, in the sense of increasing the amount of purchases of a particular product?
Do you think the credit card companies are advertising?
Why do you then not think that there are people who would not borrow themselves into uncontrollable debt if the credit card companies were not marketing to them / producing confusing products?
(my apologies for the number of negatives in that previous sentence. Rephrased only positively: The credit card companies, through advertising and confusing products, are causing more people to borrow themselves into uncontrollable debt.)
Quote from: Berkut on May 20, 2009, 03:12:11 PM
it is pure, grade-A populism.
"You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold!"
ulmont, maybe then the issue is deceptive advertising, rather than the actual terms of the loans? If so, why isn't Congress addressing this? After all, there are already plenty of truth-in-advertising laws.
Quote from: ulmont on May 20, 2009, 03:20:43 PM
Quote from: Berkut on May 20, 2009, 03:12:11 PM
The flaw in this argument is that you are assuming that credit cards, right now, "kick back" and that if only the State would set up the rules properly, people would not borrow themselves into debt.
Yup.
Quote from: Berkut on May 20, 2009, 03:12:11 PM
I don't think that is the case
And we disagree on this point.
Do you think marketing and advertising work, in the sense of increasing the amount of purchases of a particular product?
Do you think the credit card companies are advertising?
Why do you then not think that there are people who would not borrow themselves into debt if the credit card companies were not marketing to them / producing confusing products?
Credit card companies market because they want you to borrow money from them instead of someone elsemoreso than because they want you to borrow so much you cannot pay it back.
As a general rule, there has historically been much more money available for an individual to borrow than they really ought to borrow. This is true for all kinds of credit though, and even more so when you consider how much credit is available to people in aggregate.
If Congress *really* wants to address the core problem with credit card debt, they would pass laws restricting how much people can borrow, rather than restricting the terms under which it can be lent and borrowed.
But they aren't really interested in solving the problem - in fact, there is no way they would touch that with a ten foot pole.
This is like saying that we can make fat people not be fat anymore if only we tell McDonalds they have to sell a double cheeseburger for a little less, or make the combo meal more affordable. It makes no sense - if anything, making the terms for borrowing money more beneficial to the borrower is going to make the overall problem worse, not better.
The problem is not the terms - the problem is the amount that people are borrowing. People are not "breaking" because the bank changes their rates on them. That cannot be the case since they can simply refuse the new rate,
but only as long as they are willing to lose additional credit. The problem is that they are NOT willing to lose the ability to borrow more and more and more money.
They are "breaking" because they borrow more money than they can afford to repay. It is just that simple. The average American carries over $10 grand in unsecured debt. That is insane, and it is the fault of the consumer, not the banks loaning them the money.
Quote from: Caliga on May 20, 2009, 03:23:43 PM
ulmont, maybe then the issue is deceptive advertising, rather than the actual terms of the loans?
Perhaps. No matter the advertising, though, when you have an industry that can only maximize revenue by having a customer on the perpetual edge of bankruptcy, it's an inherently predatory industry and so should be carefully watched.
Much like the insurance industry...
Quote from: Caliga on May 20, 2009, 03:17:48 PM
:huh: What has Berkut said that justifies that sort of snarky response?
Berkut's crimes are manifold.
Quote from: ulmont on May 20, 2009, 03:28:04 PM
Quote from: Caliga on May 20, 2009, 03:23:43 PM
ulmont, maybe then the issue is deceptive advertising, rather than the actual terms of the loans?
Perhaps. No matter the advertising, though, when you have an industry that can only maximize revenue by having a customer on the perpetual edge of bankruptcy, it's an inherently predatory industry and so should be carefully watched.
Much like the insurance industry...
How is insurance industry predatory?
Quote from: DGuller on May 20, 2009, 04:05:54 PM
Quote from: ulmont on May 20, 2009, 03:28:04 PM
Quote from: Caliga on May 20, 2009, 03:23:43 PM
ulmont, maybe then the issue is deceptive advertising, rather than the actual terms of the loans?
Perhaps. No matter the advertising, though, when you have an industry that can only maximize revenue by having a customer on the perpetual edge of bankruptcy, it's an inherently predatory industry and so should be carefully watched.
Much like the insurance industry...
How is insurance industry predatory?
Uh oh, don't go after the insurance companies, DG is an actuary, after all!
Is this going to be like Strix and his union?
State Farm did give me a free coaster at Canal Days this year...hmmm...do they sell "insurance" to college students???
Quote from: DGuller on May 20, 2009, 04:05:54 PM
Quote from: ulmont on May 20, 2009, 03:28:04 PM
Quote from: Caliga on May 20, 2009, 03:23:43 PM
ulmont, maybe then the issue is deceptive advertising, rather than the actual terms of the loans?
Perhaps. No matter the advertising, though, when you have an industry that can only maximize revenue by having a customer on the perpetual edge of bankruptcy, it's an inherently predatory industry and so should be carefully watched.
Much like the insurance industry...
How is insurance industry predatory?
Why don't we investigate who is purchasing life insurance, for whom, and what are the commissions paid? :P
Quote from: alfred russel on May 20, 2009, 04:12:00 PM
Why don't we investigate who is purchasing life insurance, for whom, and what are the commissions paid? :P
Seriously, though, I'm having a hard time seeing how insurance industry is maximizing its revenue when its clients are in hardship. It seems like most of the time it works the opposite way. I guess the annuity departments of the life insurance companies could be hiring the hit men to mitigate their claims, I don't know how things are done over there.
Quote from: DGuller on May 20, 2009, 04:05:54 PM
How is insurance industry predatory?
The insurance company maximizes revenue by collecting premiums and then never paying claims. They accomplish this by writing confusing exceptions to coverage that turn out to make your coverage worthless. When that doesn't work, they just deny your claim and stonewall in the hopes that you'll go away.
Quote from: ulmont on May 20, 2009, 04:31:37 PM
The insurance company maximizes revenue by collecting premiums and then never paying claims. They accomplish this by writing confusing exceptions to coverage that turn out to make your coverage worthless. When that doesn't work, they just deny your claim and stonewall in the hopes that you'll go away.
Ok, that's not really the same thing at all, and I fail to see the parallels with credit cards. Bad faith insurance is a valid concern, however, and it's the primary reason why insurance is so heavily regulated.
Quote from: DGuller on May 20, 2009, 04:35:39 PM
I fail to see the parallels with credit cards.
In both cases, the industry can make the most money by actively screwing the consumer.
The fact that both are intangible products may be what leads to this...
Quote from: viper37 on May 20, 2009, 02:43:20 PM
3- Card issuers must deliver the bill at least 21 days before the due date.
What utter nonsense.
Quote from: ulmont on May 20, 2009, 04:47:18 PM
Quote from: DGuller on May 20, 2009, 04:35:39 PM
I fail to see the parallels with credit cards.
In both cases, the industry can make the most money by actively screwing the consumer.
The fact that both are intangible products may be what leads to this...
Ok, gotcha. Well, the insurance industry is heavily regulated, and in cases where insurance is sold to individuals, it is assumed they are not sophisticated consumers. Therefore regulations require policies to be written clearly (there is actually a way to measure that), and any possible ambiguity in the language is resolved in favor of the policy holder. It doesn't work perfectly, of course, but at least there is an acknowledgement of the limitations of the lay people in making informed decisions.
Quote from: Neil on May 20, 2009, 04:57:59 PM
Quote from: viper37 on May 20, 2009, 02:43:20 PM
3- Card issuers must deliver the bill at least 21 days before the due date.
What utter nonsense.
IMO that's one of the best parts. For my first credit card, the company liked sending the bill just a week before it was due, to make it easy to accidentally be late on it. At that point they would charge the late fee with no grace period at all. It was obviously designed to facilitate the late payments.
Quote from: Berkut on May 20, 2009, 03:05:29 PM
Quote from: crazy canuck on May 20, 2009, 02:59:19 PM
I wouldnt mind my children having to obtain my signature before they get a credit card. I am going to be the one paying if they cant after all.
Even when they are no longer children?
Why end it at 21?
Good point. Parents are always potentially on the hook. :P
Quote from: DGuller on May 20, 2009, 05:05:30 PM
Quote from: Neil on May 20, 2009, 04:57:59 PM
Quote from: viper37 on May 20, 2009, 02:43:20 PM
3- Card issuers must deliver the bill at least 21 days before the due date.
What utter nonsense.
IMO that's one of the best parts. For my first credit card, the company liked sending the bill just a week before it was due, to make it easy to accidentally be late on it. At that point they would charge the late fee with no grace period at all. It was obviously designed to facilitate the late payments.
So you think that consumers should get at least 21 days of free credit? Interest is only charged on late charges so all this does is increase the total cost of carrying a card which will be put on the backs of others. Likely the merchants who pay the facility fees which will in turn increase the cost of all goods and services.
Just peachy.
Quote from: crazy canuck on May 20, 2009, 05:10:48 PM
Quote from: DGuller on May 20, 2009, 05:05:30 PM
Quote from: Neil on May 20, 2009, 04:57:59 PM
Quote from: viper37 on May 20, 2009, 02:43:20 PM
3- Card issuers must deliver the bill at least 21 days before the due date.
What utter nonsense.
IMO that's one of the best parts. For my first credit card, the company liked sending the bill just a week before it was due, to make it easy to accidentally be late on it. At that point they would charge the late fee with no grace period at all. It was obviously designed to facilitate the late payments.
So you think that consumers should get at least 21 days of free credit? Interest is only charged on late charges so all this does is increase the total cost of carrying a card which will be put on the backs of others. Likely the merchants who pay the facility fees which will in turn increase the cost of all goods and services.
Just peachy.
My card already sends the bill about 3 weeks early.
Quote from: crazy canuck on May 20, 2009, 05:10:48 PM
So you think that consumers should get at least 21 days of free credit? Interest is only charged on late charges so all this does is increase the total cost of carrying a card which will be put on the backs of others. Likely the merchants who pay the facility fees which will in turn increase the cost of all goods and services.
Just peachy.
Compared to the alternative? Yes.
Quote from: jimmy olsen on May 20, 2009, 05:14:02 PM
My card already sends the bill about 3 weeks early.
[/quote]
Then this is good evidence that this kind of regulation is not necessary. DGuller and others are concerned about getting notices with relatively quick response requirments then they have another alternative in the market.
Quote from: DGuller on May 20, 2009, 05:15:04 PM
Compared to the alternative? Yes.
What alternative. People are not organized enough to pay their bills as they come in. I have little patience for that kind of excuse. Especially since people can now easily check their balances and payment dates online and pay online. If you are really concerned that you might miss a payment you can even prepay.
Remember its not your money. You borrowed it the second you made that purchase.
Adding CC and berkut to kick in nuts list-check
Quote from: crazy canuck on May 20, 2009, 05:17:45 PM
Then this is good evidence that this kind of regulation is not necessary. DGuller and others are concerned about getting notices with relatively quick response requirments then they have another alternative in the market.
Just because there are reputable alternatives doesn't mean that disreputable practices shouldn't be clamped down upon. Another reason that the kinds of issuers that do such dirty tricks typically have consumers who don't have a lot of alternatives. Typically it's the low end providers that engage in the most disreputable practices, regardless of the industry.
Quote from: jimmy olsen on May 20, 2009, 05:14:02 PMMy card already sends the bill about 3 weeks early.
My card never sends a bill at all, because I pay the bill online and usually 3-4 times a month. I don't know or care what my actual billing cycle is. Internets = WIN. Stop failing at the Internets, Amerikkka. :(
Quote from: Caliga on May 20, 2009, 05:42:48 PM
Quote from: jimmy olsen on May 20, 2009, 05:14:02 PMMy card already sends the bill about 3 weeks early.
My card never sends a bill at all, because I pay the bill online and usually 3-4 times a month. I don't know or care what my actual billing cycle is. Internets = WIN. Stop failing at the Internets, Amerikkka. :(
I wish the Internet would crash and burn
Quote from: DGuller on May 20, 2009, 05:05:30 PM
Quote from: Neil on May 20, 2009, 04:57:59 PM
Quote from: viper37 on May 20, 2009, 02:43:20 PM
3- Card issuers must deliver the bill at least 21 days before the due date.
What utter nonsense.
IMO that's one of the best parts. For my first credit card, the company liked sending the bill just a week before it was due, to make it easy to accidentally be late on it. At that point they would charge the late fee with no grace period at all. It was obviously designed to facilitate the late payments.
In that case, guarantee that a bill will be mailed by a certain date. Let's remember: People who don't make their payments are deadbeat scum, whether they got a bill or not. Even a late payment is a sign of foolishness. It's not like they don't know that they spent the money. The creditor should not be responsible for the delivery of a bill, merely the sending of it.
Quote from: Neil on May 20, 2009, 06:55:58 PM
In that case, guarantee that a bill will be mailed by a certain date. Let's remember: People who don't make their payments are deadbeat scum, whether they got a bill or not. Even a late payment is a sign of foolishness. It's not like they don't know that they spent the money. The creditor should not be responsible for the delivery of a bill, merely the sending of it.
That's probably what the requirement that the bill be sent on the same day every month is for.
DG, I am still waiting for that data you mentioned showing all those people who are being broken by the shady credit practices - as opposed to simply having borrowed more than they could afford.
Quote from: Neil on May 20, 2009, 06:55:58 PM
In that case, guarantee that a bill will be mailed by a certain date. Let's remember: People who don't make their payments are deadbeat scum, whether they got a bill or not. Even a late payment is a sign of foolishness. It's not like they don't know that they spent the money. The creditor should not be responsible for the delivery of a bill, merely the sending of it.
You should watch repo man videos on YouTube. They'd warm your heart.
Disclosure is great and wonderful, Berk, but most consumers don't have either the schooling or the spare time to suddenly get up-to-speed on the vast amounts of seemingly-sparsely-connected numbers they would find themselves flooded with. Risk management is like any other science; before you can dabble in it, you need to learn to understand it.
Personally, I'm for middle ground. Currently, the rights are almost exclusively in the hands of the card issuers, and if/when this gets pushed through, they'll be almost exclusively in the hands of the cardholders. There needs to be more of a balance- for example, a cardholder has in his or her contract that they can only renegotiate once a year, while the company can change the terms whenever it sees fits. That kind of restriction should be bidirectional, especially as a card issuer's sudden decision based on one month's performance might be a mistake and just a "bad month" for the cardholder.
Shortly, terms need to be more fixed for consumers (especially as cardholders don't have the benefit of whole accounting departments to deal with massive changes on a daily basis), and card issuers need to have less of a hassle in dropping proven nonperformers.
Quote from: DGuller on May 20, 2009, 05:24:54 PM
Just because there are reputable alternatives doesn't mean that disreputable practices shouldn't be clamped down upon. Another reason that the kinds of issuers that do such dirty tricks typically have consumers who don't have a lot of alternatives. Typically it's the low end providers that engage in the most disreputable practices, regardless of the industry.
If you assume something is disreputable then of course taking action makes sense. But you have not convinced me that asking people to pay money they owe in less then three weeks is disreputable. On the contrary I see this kind of legislation as potentially more harmful since it enables bad habits. People should not be turning to credit cards as debt devices. They should not using credit cards to make purchases unless they have the money to pay the debt. If they do that then shorter time periods to pay should not matter.
In other news from the Monkey See, Monkey Do department, the Canadian Minister of Finance is going to announce similar legislation today.
Quote from: Caliga on May 20, 2009, 08:33:55 PM
Quote from: Neil on May 20, 2009, 06:55:58 PM
In that case, guarantee that a bill will be mailed by a certain date. Let's remember: People who don't make their payments are deadbeat scum, whether they got a bill or not. Even a late payment is a sign of foolishness. It's not like they don't know that they spent the money. The creditor should not be responsible for the delivery of a bill, merely the sending of it.
You should watch repo man videos on YouTube. They'd warm your heart.
I can tell you some repo stories if you want.
Quote from: crazy canuck on May 21, 2009, 10:30:33 AM
If you assume something is disreputable then of course taking action makes sense. But you have not convinced me that asking people to pay money they owe in less then three weeks is disreputable. On the contrary I see this kind of legislation as potentially more harmful since it enables bad habits. People should not be turning to credit cards as debt devices. They should not using credit cards to make purchases unless they have the money to pay the debt. If they do that then shorter time periods to pay should not matter.
I paid my balance in full every month (actually my mom did), but it still mattered to me. I remember getting socked twice with the late fee, when the check got to them one or two days late. Obviously I dumped that POS credit card as fast as I could get another credit card, but back then people like me (young with no income) couldn't easily get credit cards.
Quote from: DGuller on May 20, 2009, 02:56:15 PM
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
so are drugs, tobacco, disease, lack of healthcare, alcohol, etc.
Fundamentally, the problem that the "lots" of people DG and Alfred are talking about have with credit has little or nothing to do with the terms of their loans. I do not believe that there are that many people who are in serious trouble with credit debt who would not be in serious trouble if only the bank did not change their rates or give them a free t-shirt.
They are in trouble because they have borrowed way more than they can afford. It is just that simple.
This is band-aid, populist, feel good legislation. It is everything that is wrong about the liberal view of government, business, and individuals, wrapped up in one tidy little abortion of a bill.
Are you grossly in debt and have no way to pay for all the shiny toys in your house?
Well, it isn't YOUR fault, gosh no. It is those nasty Big Banks and their Predatory Practices that have got you into such dire straits! And of course you, as a ignorant consumer cannot possibly protect yourself from Big Business, so The Government shall come in and save you from them - and save you from yourself, because we know best. Vote for me! *I* can protect you!
Quote from: dguller
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
Still waiting for this "actual data" that shows that these people being broken are NOT in trouble due to their own choices about how much debt they should have, but rather because of the kinds of actions taken by banks that this bill will address.
I think this is why you had your little fake temper tantrum and refused to respond to me anymore - you know you cannot actually provide any such "actual data".
Quote from: Berkut on May 21, 2009, 11:58:17 AM
Well, it isn't YOUR fault, gosh no. It is those nasty Big Banks and their Predatory Practices that have got you into such dire straits!
So you are now denying the effectiveness of the advertising industry, and that the credit card industry's economic incentives are directly opposed to the economic incentives of their customers?
Quote from: Berkut on May 21, 2009, 11:58:17 AM
This is band-aid, populist, feel good legislation.
You shall (still) not crucify mankind upon a cross of gold!
Quote from: viper37 on May 21, 2009, 11:57:47 AM
Quote from: DGuller on May 20, 2009, 02:56:15 PM
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
so are drugs, tobacco, disease, lack of healthcare, alcohol, etc.
Not a good response though, since he almost certainly feels that Nancy Pelosi can make all those decisions for you better than you can as well.
Quote from: Berkut on May 20, 2009, 03:05:29 PM
Even when they are no longer children?
Why end it at 21?
21 is the age of majority for many US states and you can't get a drink until you're 21.
Imho, in your case, the provision for having paren't permission before 21 is justified. It wouldn't be in Canada, as the legal age of majority is 18, and anyway, parents consider their children to be infant until they start taking care of them at the nursing home.
Quote from: ulmont on May 21, 2009, 12:00:27 PM
Quote from: Berkut on May 21, 2009, 11:58:17 AM
Well, it isn't YOUR fault, gosh no. It is those nasty Big Banks and their Predatory Practices that have got you into such dire straits!
So you are now denying the effectiveness of the advertising industry, and that the credit card industry's economic incentives are directly opposed to the economic incentives of their customers?
I think it is pretty clear what I am denying.
I am denyong the completely unfounded assertion that the reason people are "breaking" from credit card debt is teh "predatory practices" of banks, rather than their own choices.
In America, companies are in fact allowed to sell you things - even things that are arguably not very good for you. And they are allowed to market those things. McDonalds is allowed to show me pictures of juicy cheeseburgers, and if I buy one, it is not THEIR fault then if I become fat and unhealthy.
If you have this elusive "actual data" that shows that people in over their heads with credit card debt are not actually responsible for buying things they cannot afford, please share it with us.
Quote from: Berkut on May 21, 2009, 12:04:00 PM
Quote from: ulmont on May 21, 2009, 12:00:27 PM
Quote from: Berkut on May 21, 2009, 11:58:17 AM
Well, it isn't YOUR fault, gosh no. It is those nasty Big Banks and their Predatory Practices that have got you into such dire straits!
So you are now denying the effectiveness of the advertising industry, and that the credit card industry's economic incentives are directly opposed to the economic incentives of their customers?
I think it is pretty clear what I am denying.
Yup. That anything the credit card industry does works to induce customers to run higher balances.
Quote from: viper37 on May 21, 2009, 12:01:40 PM
Quote from: Berkut on May 20, 2009, 03:05:29 PM
Even when they are no longer children?
Why end it at 21?
21 is the age of majority for many US states and you can't get a drink until you're 21.
Imho, in your case, the provision for having paren't permission before 21 is justified. It wouldn't be in Canada, as the legal age of majority is 18, and anyway, parents consider their children to be infant until they start taking care of them at the nursing home.
The age of majority in the US is 18. At that point you can enter into contracts, get drafted, get married, etc., etc., etc. The only thing you cannot do is buy booze in some places.
And apparently, now, get a credit card. You can enter into every OTHER kind of legal contract though.
I gleefully anticipate how much this article will make Berkut froth.
http://www.thebigmoney.com/articles/money-trail/2009/05/19/their-own-interest
Quote
In Their Own Interest
Government is saving the credit card industry from itself.
By Mark Gimein
Posted Tuesday, May 19, 2009 - 3:15pm
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Has there ever been an industry so relentlessly at war with its customers as the credit card industry is now? Watching new credit card legislation sail through Congress this week is the industry's reward for giving even its most responsible customers the overwhelming sense that they are getting ripped off. Indeed they are, and there is no more compelling, incontrovertible proof than the flimflammery of "over the limit" charges.
Last week, in a town-hall-style anti-credit card rally, President Obama shared his stage with a woman who had accidentally charged a payment to the wrong credit card, which let the payment go through, then turned around and said she was "over the limit" and raised her rate to 30 percent. This neatly encapsulates the worst practices of the credit card industry. Credit card companies can easily just turn down a charge that put a card over its maximum. No harm, no foul.
Instead they happily let their customers go over their limit (raising the question of why it's called a "limit" in the first place), then say that those customers are in default on their agreements and raise their rates. Pulling out the wrong card to pay for light bulbs at the hardware store turns into a mistake that results in hundreds of dollars of extra interest charges. The credit card companies claim, amazingly, that they do this to spare their customers the embarrassment of having the card turned down.
Over-the-limit rate hikes are the most indefensible example of rate changes—for being late on a payment, for having a lower credit score, or for no reason at all—that give credit card holders the sense that they have fallen into a Queen of Hearts world where the price of credit is whatever the banks say it is. For credit card issuers this is a customer relations disaster. But even setting aside the obvious problem of having customers who hate you, it is also terrible business.
Preventing card issuers from arbitrarily ratcheting up rates—as the legislation now on the table does—isn't just a way of protecting consumers. It is also, just as importantly, a way of saving the banks from themselves.
The most telling example of just how shortsighted the worst practices of the credit card industry really are is a company called Advanta (ADVNB), the country's 11th-biggest credit card issuer. A walk through a site such as Ripoff Report will yield several bushels of stories of customers who saw Advanta raise their rates, often to 34.99 percent, for the flimsiest of reasons or no reason at all. Among credit card issuers, Advanta stands out for the number and rancor of the complaints.
You'd think that this kind of customer-gouging would at least be profitable. It is not. On the contrary, it has been an unmitigated disaster. Last week, Advanta announced that it would shut down all of its customers' credit lines in June and close down its credit card business. Advanta's losses have already hit 20 percent—the worst-case scenario envisioned in the government's bank stress tests—and are certain to rise. Advanta, which two years ago actually issued a press release bragging about its "stellar" results, is now nearly worthless, with a share price at about $1.
What makes Advanta a telling and important example for the banking industry is that what happens when credit card issuers raise their rates to sky-high levels is largely uncharted territory. In general, the experience of credit card issuers that focused on marginal customers (such as Household Bank, bought by HSBC (HBC) and dragging down HSBC's results) is not promising. The difference with Advanta is that its customers were not "subprime": A look at a typical pool of Advanta cards shows that 80 percent of its customers had prime credit, and another 11 percent are what the industry classifies as "near prime." Half its customers have credit scores of 720 and above, the upper end of the prime range. What Advanta shows is that the strategy of starting off by offering attractive rates—Advanta focused on small-business customers—and then gouging your way to profitability may be even more ill-advised.
Bad as this is, this isn't the whole story. In addition to the reliable customers that banks rip off and alienate with arbitrary rate increases, there is another set of customers facing higher rates: the ones whom the banks want to alienate. These are people with overextended credit and declining credit scores. For these customers, the banks' fondest hope is that they will be ticked off enough by the new rates to pay off their balances.
Quantcast
For a single bank to raise rates to a sky-high level is a dangerous strategy. When many banks adopt it, however, it gets much worse. Customers who see the rates on all of their credit cards rise become much less able to pay any of them. If banks try to one-up one another's rate increases to get paid the fastest, the likelihood is that in the end fewer will get paid.
Do banks see this? I would guess they do. One reason I think this is the evidence of my own credit cards. Several of them have a "universal default" clause in their contracts, which lets them raise my rates if I'm late on any loan or credit card. None of them, however, have exercised that option: I suspect their data crunching tells them (correctly) that if all my rates were to suddenly rise, the likelihood is not that I would magically repay my debts but that I would no longer be able to afford to pay even the minimum.
For every bank to raise rates at once hoping to be first in line to be repaid—essentially what many customers are facing now—amounts to a bankers' suicide pact. Yet, pressed to deliver short-term results to prove that they are back on their feet and desperate to push risky borrowers into repaying credit cards while they still have money available, banks persist in playing the rate-increase game.
I spoke last week with Richard Vague, a onetime banker who was the founder and longtime chief executive of First USA, a major credit card issuer. Vague made the point that credit card issuers are under tremendous pressure to increase their short-term profits right now. "What's changed," Vague says, "is the time horizon." Bank chiefs right now, says Vague, are probably a lot more concerned about the next quarter's earnings than about the years ahead.
Over the long run, charging what amounts to an undefined "market price" is just as bad for banks as for their customers. The Mafia can keep putting the screws on its clients because it has the option of breaking their legs and taking over their businesses. Even the least-scrupulous credit card issuer can't take advantage of these extralegal options. For them, the endgame of arbitrary and outsize rate increases holds not extravagant profits but an epidemic of default. Just look at Advanta.
This is why when all the Sturm und Drang is over, a new set of credit card rules will turn out to be not the death knell for the credit card industry but a lifesaver. The competition to squeeze the last bit of profit from overextended customers is one that the banks should be desperately trying to avoid and are clearly unable to on their own. New rules are the best way to curb the banks' own dangerous short-term impulses. The industry's lobbyists have tried to paint credit card reform on as a declaration of war on the banks. Actually, it's the banks' best chance to end the war with their own clients.
Hehe, so banks that engage in predatory practices and try to gouge their customers go out of business?
And this is a bad thing, that needs fixing?
Quote from: Ed Anger on May 21, 2009, 10:45:04 AM
I can tell you some repo stories if you want.
Ed the Repo Man? :huh:
Quote from: Berkut on May 21, 2009, 12:24:42 PM
Hehe, so banks that engage in predatory practices and try to gouge their customers go out of business?
And this is a bad thing, that needs fixing?
Yep. It seems like the system works.
Quote from: jimmy olsen on May 21, 2009, 12:19:32 PM
I gleefully anticipate how much this article will make Berkut froth.
http://www.thebigmoney.com/articles/money-trail/2009/05/19/their-own-interest
The article's point seems somewhat split, IMO. On the one hand, it talks about a terrible card issuer going out of business because of its terrible practices. On the other hand, it tries to make a rat race argument, where the government intervention actually benefits the industry by preventing destructive competition. Those two are different and somewhat opposing arguments. I'm also not sold on the rat race argument, he doesn't make a convincing case for it.
Quote from: DGuller on May 20, 2009, 02:56:15 PM
Assumptions and presumptions are useful, but only until you have actual data. The actual data, reflecting real life rather than ideals, shows that credit cards are breaking a lot of people.
oh, but I do have data.
Just look at the law of any country. It will tell you who can and who can not enter into a contract.
Quote from: ulmont on May 20, 2009, 04:47:18 PM
Quote from: DGuller on May 20, 2009, 04:35:39 PM
I fail to see the parallels with credit cards.
In both cases, the industry can make the most money by actively screwing the consumer.
The fact that both are intangible products may be what leads to this...
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Depends on how much a name change costs.
Quote from: crazy canuck on January 02, 1970, 05:31:25 AM
So you think that consumers should get at least 21 days of free credit? Interest is only charged on late charges so all this does is increase the total cost of carrying a card which will be put on the backs of others. Likely the merchants who pay the facility fees which will in turn increase the cost of all goods and services.
Just peachy.
They do get 21 days of free credit from major CC companies. But some companies will simply ship you the bill a tad late, so you end up paying interest rates because you're left with only 1 or 2 business days and you bank takes at least 48hrs to process your payment via the internet, even worst if you mail a check.
You could make it 15 days, I don't really care, but as I said, oil companies are notoriously bad for this.
Quote from: ulmont on May 21, 2009, 01:20:54 PM
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Depends on how much a name change costs.
quite a lot for an insurance company. It's not a potato stand, you can't just start a new insurance company like that, in 24hrs. The process is rather lenghty and must meet with various governmental offices approval, and the shareholders who are not 'unique'.
Quote from: Berkut on May 21, 2009, 11:58:17 AM
Fundamentally, the problem that the "lots" of people DG and Alfred are talking about have with credit has little or nothing to do with the terms of their loans. I do not believe that there are that many people who are in serious trouble with credit debt who would not be in serious trouble if only the bank did not change their rates or give them a free t-shirt.
They are in trouble because they have borrowed way more than they can afford. It is just that simple.
This is band-aid, populist, feel good legislation. It is everything that is wrong about the liberal view of government, business, and individuals, wrapped up in one tidy little abortion of a bill.
Are you grossly in debt and have no way to pay for all the shiny toys in your house?
Well, it isn't YOUR fault, gosh no. It is those nasty Big Banks and their Predatory Practices that have got you into such dire straits! And of course you, as a ignorant consumer cannot possibly protect yourself from Big Business, so The Government shall come in and save you from them - and save you from yourself, because we know best. Vote for me! *I* can protect you!
With the exception of the third paragraph, which editorializes against the bill, I agree completely with your post.
I still favor the legislation.
Will it solve our problems? No. Will the culture of taking out too much debt still persist, and create economic problems down the road? Yes. But in a country that has a significant number of people that are unable to understand the basic financial decisions they must make and their ignorance is dragging down not only themselves but the rest of us, I think it is a good thing to make the credit process a bit more straightforward and less punative.
Our local utility company pulls that shit on us all the time. -_-
(i.e. sending the bill extremely late)
Quote from: viper37 on May 21, 2009, 01:27:59 PM
quite a lot for an insurance company. It's not a potato stand, you can't just start a new insurance company like that, in 24hrs. The process is rather lenghty and must meet with various governmental offices approval, and the shareholders who are not 'unique'.
Yes, government regulation does make it less likely for modern insurance companies to screw customers. ;)
Quote from: Caliga on May 21, 2009, 12:25:46 PM
Quote from: Ed Anger on May 21, 2009, 10:45:04 AM
I can tell you some repo stories if you want.
Ed the Repo Man? :huh:
I am: talented
I drove the van with the spare drivers on a few runs for somebody I know.
The side shit I've done would pad my resume nicely.
Quote from: Berkut on May 21, 2009, 12:05:06 PM
Quote from: viper37 on May 21, 2009, 12:01:40 PM
Quote from: Berkut on May 20, 2009, 03:05:29 PM
Even when they are no longer children?
Why end it at 21?
21 is the age of majority for many US states and you can't get a drink until you're 21.
Imho, in your case, the provision for having paren't permission before 21 is justified. It wouldn't be in Canada, as the legal age of majority is 18, and anyway, parents consider their children to be infant until they start taking care of them at the nursing home.
The age of majority in the US is 18. At that point you can enter into contracts, get drafted, get married, etc., etc., etc. The only thing you cannot do is buy booze in some places.
And apparently, now, get a credit card. You can enter into every OTHER kind of legal contract though.
then Obama should reduce the legal drinking age to 18, and let credit card companies make regular offers to 18y.o.
Quote from: Ed Anger on May 21, 2009, 01:47:08 PM
I am: talented
I drove the van with the spare drivers on a few runs for somebody I know.
The side shit I've done would pad my resume nicely.
So y'all had duplicate keys or something?
Quote from: Caliga on May 21, 2009, 01:50:25 PM
Quote from: Ed Anger on May 21, 2009, 01:47:08 PM
I am: talented
I drove the van with the spare drivers on a few runs for somebody I know.
The side shit I've done would pad my resume nicely.
So y'all had duplicate keys or something?
Not that I know of. The deadbeats usually give up the keys, especially once they realize their car is going no matter what. They gots the notices, they knew it was coming. If they don't, the truck comes and gets it.
Would I want to do that full time? Not a chance.
Man, I'd be afraid of being shot or otherwise attacked in some manner.
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Doesn't work like that. First of all, you won't know you're dealing with crooks until you need your claim paid, at which point it'll be too late. Second of all, insurance as a product is based on trust. Crooked companies undermine the concept of insurance, and hurt every insurance company.
Quote from: Caliga on May 21, 2009, 02:03:05 PM
Man, I'd be afraid of being shot or otherwise attacked in some manner.
Worst I saw was crazy bat guy, and after the cops came and smacked him around, the car was repoed.
Quote from: Ed Anger on May 21, 2009, 02:07:31 PM
Quote from: Caliga on May 21, 2009, 02:03:05 PM
Man, I'd be afraid of being shot or otherwise attacked in some manner.
Worst I saw was crazy bat guy, and after the cops came and smacked him around, the car was repoed.
Bat boy moved to Ohio after he grew up? I guess West Virginia was just too civilized for him. :P
Quote from: jimmy olsen on May 21, 2009, 02:11:45 PM
Quote from: Ed Anger on May 21, 2009, 02:07:31 PM
Quote from: Caliga on May 21, 2009, 02:03:05 PM
Man, I'd be afraid of being shot or otherwise attacked in some manner.
Worst I saw was crazy bat guy, and after the cops came and smacked him around, the car was repoed.
Bat boy moved to Ohio after he grew up? I guess West Virginia was just too civilized for him. :P
*groan*
Quote from: DGuller on May 21, 2009, 02:05:05 PM
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Doesn't work like that. First of all, you won't know you're dealing with crooks until you need your claim paid, at which point it'll be too late. Second of all, insurance as a product is based on trust. Crooked companies undermine the concept of insurance, and hurt every insurance company.
Agreed. Insurance is a different animal. Hopefully most of us will never have to test whether our insurance policy will be honoured or not. Its not like credit card companies where we have a lot of interactions to inform us whether we are getting screwed or not.
As a result of this special kind of relationship insurance companies have with their customers the law imposes a very high duty of fairness on insurance companies when they deal with people making claims.
Quote from: crazy canuck on May 21, 2009, 02:28:27 PM
Quote from: DGuller on May 21, 2009, 02:05:05 PM
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Doesn't work like that. First of all, you won't know you're dealing with crooks until you need your claim paid, at which point it'll be too late. Second of all, insurance as a product is based on trust. Crooked companies undermine the concept of insurance, and hurt every insurance company.
Agreed. Insurance is a different animal. Hopefully most of us will never have to test whether our insurance policy will be honoured or not. Its not like credit card companies where we have a lot of interactions to inform us whether we are getting screwed or not.
As a result of this special kind of relationship insurance companies have with their customers the law imposes a very high duty of fairness on insurance companies when they deal with people making claims.
The weird thing about this debate is that there seems to be this presumption that the credit card industry NOW is somehow unregulated - like this would be the very first regulations ever imposed on the businesses.
Of course it is already very regulated.
Which I don't have a problem with, to be honest. My libertarianism has always been pretty weak and ready to bow to simple practicality. But none of these proposed changes will solve any of the problems people keep citing, and there has not even been a token effort made to show how each specific change will somehow reduce the "lots" of people being "broken" that the "actual data" has shown is a result of the practices the legislation is supposed to counter.
My opinion is that the consumer "abuses" with insurance primarily come from the sales side, not claims adjusting. The potential for abuse is well known and heavily regulated.
There are a number of life insurance policies that are written on children or for young adults with no dependents that a sales person talked someone into that are clearly not in that person's interest. Plus life insurance often contains a very large commission--often 50% of the policy. What is happening is sales people are capitalizing on an ignorant public and a vague notion that "life insurance is good" to push as much product as they can.
Quote from: crazy canuck on May 21, 2009, 02:28:27 PM
Quote from: DGuller on May 21, 2009, 02:05:05 PM
Quote from: viper37 on May 21, 2009, 01:01:35 PM
over the long term, they will simply lose their customer base as they shift to an honest insurance company.
Doesn't work like that. First of all, you won't know you're dealing with crooks until you need your claim paid, at which point it'll be too late. Second of all, insurance as a product is based on trust. Crooked companies undermine the concept of insurance, and hurt every insurance company.
Agreed. Insurance is a different animal. Hopefully most of us will never have to test whether our insurance policy will be honoured or not. Its not like credit card companies where we have a lot of interactions to inform us whether we are getting screwed or not.
As a result of this special kind of relationship insurance companies have with their customers the law imposes a very high duty of fairness on insurance companies when they deal with people making claims.
Come on - you *know* you want to use the Latin tag - just let it out. :lol:
Uberrimae fides
Quote from: alfred russel on May 21, 2009, 02:39:30 PM
My opinion is that the consumer "abuses" with insurance primarily come from the sales side, not claims adjusting. The potential for abuse is well known and heavily regulated.
You're almost certainly correct. Most sales organizations are staffed with people who are incredibly greedy and unscrupulous. That's the only type of person drawn to sales, really.
Quote from: alfred russel on May 21, 2009, 02:39:30 PM
My opinion is that the consumer "abuses" with insurance primarily come from the sales side, not claims adjusting. The potential for abuse is well known and heavily regulated.
There are a number of life insurance policies that are written on children or for young adults with no dependents that a sales person talked someone into that are clearly not in that person's interest. Plus life insurance often contains a very large commission--often 50% of the policy. What is happening is sales people are capitalizing on an ignorant public and a vague notion that "life insurance is good" to push as much product as they can.
Assuming the worst case scenario, how do you regulate against that kind of stupidity? How do you stop people from buying products they dont really need or more importantly should the State regulate against that kind of stupidity. If so where do you draw the line. I see lots of people buying lots of things they dont need. Our modern economy is built on such excesses.
Quote from: Malthus on May 21, 2009, 02:47:05 PM
Uberrimae fides
I save the big words for demand letters. :menace:
Quote from: crazy canuck on May 21, 2009, 03:11:59 PM
Assuming the worst case scenario, how do you regulate against that kind of stupidity?
IMO you don't. If you do that, they never learn and become ever-dependent upon the government, which is the opposite of what ought to be happening.
Quote from: crazy canuck on May 21, 2009, 03:11:59 PM
Assuming the worst case scenario, how do you regulate against that kind of stupidity? How do you stop people from buying products they dont really need or more importantly should the State regulate against that kind of stupidity. If so where do you draw the line. I see lots of people buying lots of things they dont need. Our modern economy is built on such excesses.
Christ CC, you certainly are stupid.
*You* don't make those decisions - you are just another ignorant masses peasant, incapable of deciding for yourself what is best for you! The fact that you cannot see how the line can be drawn, or what decisions ought to be made for you is simply evidence that in fact you are too stupid to be allowed to make decisions, including these kinds of meta-decisions.
Just sit there and drool a bit, and Nancy and Barney will be along to tell you what you need to know. Maybe. You know, Barney Frank is like the smartest man on the planet. Or at least in the US Congress, which is pretty much the same thing.
Quote from: Caliga on May 21, 2009, 03:09:55 PM
Quote from: alfred russel on May 21, 2009, 02:39:30 PM
My opinion is that the consumer "abuses" with insurance primarily come from the sales side, not claims adjusting. The potential for abuse is well known and heavily regulated.
You're almost certainly correct. Most sales organizations are staffed with people who are incredibly greedy and unscrupulous. That's the only type of person drawn to sales, really.
It's even worse when the sales people are disguised as "financial advisors" or some other crap like that, and sell you on stuff that makes them commissions while pretending to be an expert taking care of your interests. In my mind that's nothing more than legalized fraud.
Quote from: crazy canuck on May 21, 2009, 03:11:59 PM
Quote from: alfred russel on May 21, 2009, 02:39:30 PM
My opinion is that the consumer "abuses" with insurance primarily come from the sales side, not claims adjusting. The potential for abuse is well known and heavily regulated.
There are a number of life insurance policies that are written on children or for young adults with no dependents that a sales person talked someone into that are clearly not in that person's interest. Plus life insurance often contains a very large commission--often 50% of the policy. What is happening is sales people are capitalizing on an ignorant public and a vague notion that "life insurance is good" to push as much product as they can.
Assuming the worst case scenario, how do you regulate against that kind of stupidity? How do you stop people from buying products they dont really need or more importantly should the State regulate against that kind of stupidity. If so where do you draw the line. I see lots of people buying lots of things they dont need. Our modern economy is built on such excesses.
You could require a one page letter, plainly written by a regulatory agency, to be signed along with life insurance policies by the customer explaining the basics of life insurance.
Quote from: DGuller on May 21, 2009, 03:18:41 PM
It's even worse when the sales people are disguised as "financial advisors" or some other crap like that, and sell you on stuff that makes them commissions while pretending to be an expert taking care of your interests. In my mind that's nothing more than legalized fraud.
Yeah, I had a guy from Northwestern Mutual Life try to pull that shit on me last year. Since he was buying me lunch, I was happy to let him make his little spiel. I then ignored all further emails and phone calls from him.
LOL THANKS FOR THE FREE FAZOLI'S BUDDY
Quote from: alfred russel on May 21, 2009, 03:18:51 PM
You could require a one page letter, plainly written by a regulatory agency, to be signed along with life insurance policies by the customer explaining the basics of life insurance.
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
"WARNING. LIFE INSURANCE IS JUST THAT. INSURANCE ON YOUR LIFE. YOU WILL NOT PERSONALLY RECIEVE ANY MONEY FROM THIS POLICY. THE INSURANCE COMPANY WILL ONLY PAY OUT MONEY OVER YOUR DEAD BODY"
edit: also I have never seen anything written by a regulalory agency that is even remotely plain and simple to understand. The reason why there are regulatory agencies is because the thing they are regulating is usually complex - like insurance products. You and I have been talking about the worst case scenario. But given other facts it might make sense for a young person without dependants to buy life insurance if that life insurance product has a good investment component. Most dont but that doesnt mean that it isnt possible. Would you really have regulatory agency advising the public on such matters? I can see a lot more harm there then good.
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Quote from: alfred russel on May 21, 2009, 03:18:51 PM
You could require a one page letter, plainly written by a regulatory agency, to be signed along with life insurance policies by the customer explaining the basics of life insurance.
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
"WARNING. LIFE INSURANCE IS JUST THAT. INSURANCE ON YOUR LIFE. YOU WILL NOT PERSONALLY RECIEVE ANY MONEY FROM THIS POLICY. THE INSURANCE COMPANY WILL ONLY PAY OUT MONEY OVER YOUR DEAD BODY"
You could say that life insurance is mainly for protecting the family against the sudden death of the breadwinner, AND IS NOT MEANT TO BE AN INVESTMENT VEHICLE. It might be a bit too editorial, though.
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
Yes, because over here at least many people have their "life insurance" paid out when they retire (many insurances offer a combined life insurance/pension fund).
Quote from: Syt on May 22, 2009, 10:12:27 AM
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
Yes, because over here at least many people have their "life insurance" paid out when they retire (many insurances offer a combined life insurance/pension fund).
More evidence the Germans are weird.
Quote from: DGuller on May 22, 2009, 10:11:54 AM
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Quote from: alfred russel on May 21, 2009, 03:18:51 PM
You could require a one page letter, plainly written by a regulatory agency, to be signed along with life insurance policies by the customer explaining the basics of life insurance.
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
"WARNING. LIFE INSURANCE IS JUST THAT. INSURANCE ON YOUR LIFE. YOU WILL NOT PERSONALLY RECIEVE ANY MONEY FROM THIS POLICY. THE INSURANCE COMPANY WILL ONLY PAY OUT MONEY OVER YOUR DEAD BODY"
You could say that life insurance is mainly for protecting the family against the sudden death of the breadwinner, AND IS NOT MEANT TO BE AN INVESTMENT VEHICLE. It might be a bit too editorial, though.
see my edit above. We were posting at the same time.
Quote from: crazy canuck on May 22, 2009, 10:15:37 AM
We were posting at the same time.
The internet is such a thing of wonder! :o
Quote from: crazy canuck on May 22, 2009, 10:14:39 AM
Quote from: Syt on May 22, 2009, 10:12:27 AM
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
Yes, because over here at least many people have their "life insurance" paid out when they retire (many insurances offer a combined life insurance/pension fund).
More evidence the Germans are weird.
Nothing weird about it. Pension is just an annuity, and annuity is just a form of life insurance.
DGuller, have you had a chance to find a link to that actual data that shows that people are breaking under credit card debt that is a result of these predatory practices, rather than them simply borrowing more money than they can afford?
Quote from: crazy canuck on May 22, 2009, 10:07:52 AM
Surely people dont have to be told that a term life insurance policy pays money *after* death. I ask this somewhat sarcastically but do you really think it is necessary for there to be something like:
"WARNING. LIFE INSURANCE IS JUST THAT. INSURANCE ON YOUR LIFE. YOU WILL NOT PERSONALLY RECIEVE ANY MONEY FROM THIS POLICY. THE INSURANCE COMPANY WILL ONLY PAY OUT MONEY OVER YOUR DEAD BODY"
edit: also I have never seen anything written by a regulalory agency that is even remotely plain and simple to understand. The reason why there are regulatory agencies is because the thing they are regulating is usually complex - like insurance products. You and I have been talking about the worst case scenario. But given other facts it might make sense for a young person without dependants to buy life insurance if that life insurance product has a good investment component. Most dont but that doesnt mean that it isnt possible. Would you really have regulatory agency advising the public on such matters? I can see a lot more harm there then good.
I would be in favor of a piece of paper that must be signed with every life insurance sale stating something along the lines of: "The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Would it really be so hard to do this? It isn't as though we would need a new regulatory agency--not only do we have many insurance agencies as it stands, this would just be a few sentences that need to be signed before a policy can become active.
And btw, the investment components of life insurance policies are notoriously awful. I see no reason a young person without financial obligations should ever purchase life insurance (at least in excess of funeral costs).
The problem with these sorts of proposals, as sensible as they sound, is that marketing people would find some way of twisting the statements and sales people would be trained on how to talk past them.
Quote from: Caliga on May 22, 2009, 10:52:37 AM
The problem with these sorts of proposals, as sensible as they sound, is that marketing people would find some way of twisting the statements and sales people would be trained on how to talk past them.
Absolutely. And insurance industry lobbyists would want additional qualifiers around all sorts of statements and terms more specifically defined, other groups would want the statement to also appear in Spanish, and before it was said and done the disclosure would probably fill up at least a page in small print and be just another form to sign without reading.
I'm under no illusion that there is a magic cure all that is going to solve all the problems in the credit card industry (or life insurance, as we are now discussing). That doesn't mean some reform won't help at the margins.
Quote from: alfred russel on May 22, 2009, 10:57:57 AM
I'm under no illusion that there is a magic cure all that is going to solve all the problems in the credit card industry (or life insurance, as we are now discussing). That doesn't mean some reform won't help at the margins.
Isn't that a truism though?
Couldn't you *always* say about anything that "some reform would help at the margins"?
I think the bar for enacting legislation that will reduce choice and increase costs for every single person involved should be higher than a theoretical "it will help at the margins".
I think whatever help this legislation creates, it will create many more problems than it solves. So far we have seen zero data that shows that it will solve anything at all.
This vague and subjective justification is WHY we have a legal code that requires us to spend billions upon billions on lawyers to figure it all out. A series of seemingly "well, it can't hurt to enact just a little more 'at the margins' legislation..." well meaning acts that just end up doing precisely the opposite of what they intend - creating more complication, more confusion, more pages of dense print to justify why this deal doesn't violate that law, etc., etc., etc.
One can oppose regulation either because one believes that economic freedom is a good in and of itself (libertarianism), or because one believes that free markets tend to give much more efficient outcomes than regulation. I am not a libertarian but I am firmly in the second camp. However well-intentioned a regulation, there is always a real danger of unintended consequences, and thus absent a very strong justification for the regulation, the default position should be not to regulate.
That said, there are differences between different kind of markets. Many markets when left to operate relatively freely are competitive, open, and transparent, and offer useful goods or services to the general public. But some are opaque, confusing, prone to monopoly or collusion, and/or offer goods or services of questionable merit. The mere fact that a market can be characterized in the latter sense doesn't mean that it ought to be heavily regulated. But it may push the justification bar a little lower.
Which brings us to the subject at hand. I tend to agree with AR that financial services markets (and the market for credit cards in particular) often tend to the second group than the first. The credit card market, for example, is a bit of a mess -- i consider myself a pretty sophisticated consumer and knowledgable in legal matters as compared with the average person, but comparing the relative mertis of credit card offers and their obtusely written agreements is a giant headache. I suppose if I dedicated serious time and effort to the question I could come to a reasonable conclusion but I don't have the time or energy to do so. Nor should I have to do so.
I also think we have to keep in mind that although it may be tempting to say cavaet emptor and take the position that if people abuse their credit it is their problem, the plain fact is that position is not really tenable. If the experience of the last two years has taught us anything, it has taught us that the bad credit decision of individuals can have very serious negative economic and social impacts on the national (and even the world) economy. It would be foolish not to take that reality in account in thinking about policy.
That said, I haven't seriously reviewed or thought about this particular law, nor am I taking any position on it.
Quote from: Syt on May 22, 2009, 10:12:27 AM
Yes, because over here at least many people have their "life insurance" paid out when they retire (many insurances offer a combined life insurance/pension fund).
We have both kinds as well.
Quote from: alfred russel on May 22, 2009, 10:50:34 AM
I would be in favor of a piece of paper that must be signed with every life insurance sale stating something along the lines of: "The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Would it really be so hard to do this? It isn't as though we would need a new regulatory agency--not only do we have many insurance agencies as it stands, this would just be a few sentences that need to be signed before a policy can become active.
And btw, the investment components of life insurance policies are notoriously awful. I see no reason a young person without financial obligations should ever purchase life insurance (at least in excess of funeral costs).
But that only assumes one kind of life insurance product. The wording you propose is actually quite misleading. There are other ways that life insurance products can benefit people. I know you say that they don't but do you really want regulators to make those kinds of judgments? As an anecdote, one of my partners bought life insurance investments vehicles for his children years ago when interest rates were high. The product turned out to be a wonderful investment - certainy much better then his stock portfolio atm. It matures when his kids hit 65 and when they do mature his children will be wealthy enough that they will have no financial concerns.
The point is that regulating what people should buy is a very tricky game for the State to play. No one knows enough to predict all the unintended consequences. Your proposed wording is a great example. Your wording assumes that all life insurance investments are crap and so you would want the regulator to take that kind of choice away when in fact it can be a good investment in particular circumstances.
Quote from: The Minsky Moment on May 22, 2009, 11:10:02 AM
Which brings us to the subject at hand. I tend to agree with AR that financial services markets (and the market for credit cards in particular) often tend to the second group than the first. The credit card market, for example, is a bit of a mess -- i consider myself a pretty sophisticated consumer and knowledgable in legal matters as compared with the average person, but comparing the relative mertis of credit card offers and their obtusely written agreements is a giant headache. I suppose if I dedicated serious time and effort to the question I could come to a reasonable conclusion but I don't have the time or energy to do so. Nor should I have to do so.
Actually it sounds like you are more in Berk's camp. No one is arguing against the requirement that there be clear disclosure of the terms. What I think the push back is about is dictating what those terms ought to be.
Quote from: crazy canuck on May 22, 2009, 12:30:10 PM
Quote from: The Minsky Moment on May 22, 2009, 11:10:02 AM
Which brings us to the subject at hand. I tend to agree with AR that financial services markets (and the market for credit cards in particular) often tend to the second group than the first. The credit card market, for example, is a bit of a mess -- i consider myself a pretty sophisticated consumer and knowledgable in legal matters as compared with the average person, but comparing the relative mertis of credit card offers and their obtusely written agreements is a giant headache. I suppose if I dedicated serious time and effort to the question I could come to a reasonable conclusion but I don't have the time or energy to do so. Nor should I have to do so.
Actually it sounds like you are more in Berk's camp. No one is arguing against the requirement that there be clear disclosure of the terms. What I think the push back is about is dictating what those terms ought to be.
The problem arises when the terms are complex. It may well be the case that the terms are not difficult to understand due to a deliberate attempt to confuse and deceive, but simply because the subject matter is one which is reasonably complex. In that case, cavaet emptor may not be sufficient - again, more disclosure obligations may make the situation worse and not better when the disclosure adds details that the average person does not understand, or is more material than they can be expected to absorb.
That is a consideration that competes with the other general consideration, that state-nannyism is basically a bad idea, and outcomes are more efficient if only people are allowed to do what they want, freeing human ingenuity - that didn't work so well in other lending situations such as mortgages.
Quote from: Malthus on May 22, 2009, 01:04:25 PM
That is a consideration that competes with the other general consideration, that state-nannyism is basically a bad idea, and outcomes are more efficient if only people are allowed to do what they want, freeing human ingenuity - that didn't work so well in other lending situations such as mortgages.
Actually, I would conclude the opposite - banks have been loaning people money for houses for a long time before we had this housing crisis, so I think the conclusion that there is some fundamental problem that must be addressed via more legislation is not really supported. It's not like there was a dearth of rules about loaning money for houses. They just weren't the right rules, and had the wrong motivation behind them.
Rather, I think the lesson should be that the government should stay out of the money lending business, and decisions about who to loan money to should not be based on political considerations, and government directed lending institutions directed or allowed to respond accordingly - even if that means that poor people who vote Democrat may not be able to buy a McMansion.
Quote from: Malthus on May 22, 2009, 01:04:25 PM
That is a consideration that competes with the other general consideration, that state-nannyism is basically a bad idea, and outcomes are more efficient if only people are allowed to do what they want, freeing human ingenuity - that didn't work so well in other lending situations such as mortgages.
Leaving aside the other government regulations and policies which contributed to the subprime bubble, one of the culprits in both that and the credit card market is soft monetary policy. Presumably after the economy is back on track the Fed will take a look and try to target money supply better. New restrictions on credit cards which looked sound and sensible in a time of easy money might not look so good when the taps are tightened.
Quote from: DGuller on May 22, 2009, 10:11:54 AM
You could say that life insurance is mainly for protecting the family against the sudden death of the breadwinner, AND IS NOT MEANT TO BE AN INVESTMENT VEHICLE. It might be a bit too editorial, though.
some insurance policies are investment vehicles.
Quote from: alfred russel on May 22, 2009, 10:50:34 AM
I would be in favor of a piece of paper that must be signed with every life insurance sale stating something along the lines of: "The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Would it really be so hard to do this? It isn't as though we would need a new regulatory agency--not only do we have many insurance agencies as it stands, this would just be a few sentences that need to be signed before a policy can become active.
And btw, the investment components of life insurance policies are notoriously awful. I see no reason a young person without financial obligations should ever purchase life insurance (at least in excess of funeral costs).
that's stupid. Parents could be in serious financial trouble if they don't have a small insurance to pay for the costs of the funerals. Funerals don't come cheap. They don't drain resources, they offer you a choice: pay now by small increments, or pay later in one big sum. Most people can't put their money aside for such important things.
Quote from: viper37 on May 22, 2009, 01:29:29 PM
that's stupid. Parents could be in serious financial trouble if they don't have a small insurance to pay for the costs of the funerals. Funerals don't come cheap. They don't drain resources, they offer you a choice: pay now by small increments, or pay later in one big sum. Most people can't put their money aside for such important things.
Do people still do that? I thought taking out a life insurance policy to pay for a funeral went out with the Great Depression.
Quote from: crazy canuck on May 22, 2009, 12:27:03 PM
Quote from: alfred russel on May 22, 2009, 10:50:34 AM
I would be in favor of a piece of paper that must be signed with every life insurance sale stating something along the lines of: "The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Would it really be so hard to do this? It isn't as though we would need a new regulatory agency--not only do we have many insurance agencies as it stands, this would just be a few sentences that need to be signed before a policy can become active.
And btw, the investment components of life insurance policies are notoriously awful. I see no reason a young person without financial obligations should ever purchase life insurance (at least in excess of funeral costs).
But that only assumes one kind of life insurance product. The wording you propose is actually quite misleading. There are other ways that life insurance products can benefit people. I know you say that they don't but do you really want regulators to make those kinds of judgments? As an anecdote, one of my partners bought life insurance investments vehicles for his children years ago when interest rates were high. The product turned out to be a wonderful investment - certainy much better then his stock portfolio atm. It matures when his kids hit 65 and when they do mature his children will be wealthy enough that they will have no financial concerns.
The point is that regulating what people should buy is a very tricky game for the State to play. No one knows enough to predict all the unintended consequences. Your proposed wording is a great example. Your wording assumes that all life insurance investments are crap and so you would want the regulator to take that kind of choice away when in fact it can be a good investment in particular circumstances.
Not a fair characterization: a disclosure takes away choice from no one.
The issue is not that in certain circumstances life insurance can't produce financial windfalls: as you said, the returns were linked to interest rates, which turned out to fall. If you bet on red in roulette and it comes up red for you, that is a great incident, but roulette is still a terrible investment. A better point of comparison would be whether you can earn better returns on similar investments outside of a life insurance policy, and in most cases you can. My guess is that when your partner entered the policy, he did not necessarily want an investment product speculating on interest rate declines.
There are certain tax and compensation circumstances that can make life insurance attractive: but those are complex enough that anyone knowledgeable of them will not be deterred by a few sentences from a regulator.
Quote from: viper37 on May 22, 2009, 01:29:29 PM
that's stupid. Parents could be in serious financial trouble if they don't have a small insurance to pay for the costs of the funerals. Funerals don't come cheap. They don't drain resources, they offer you a choice: pay now by small increments, or pay later in one big sum. Most people can't put their money aside for such important things.
While I dont agree with the fininacial wisdom of this statement it is a good indication of why we should not be regulating what people should buy. Judgments about what is good and bad differ.
Quote from: Malthus on May 22, 2009, 01:04:25 PM
The problem arises when the terms are complex. It may well be the case that the terms are not difficult to understand due to a deliberate attempt to confuse and deceive, but simply because the subject matter is one which is reasonably complex.
that argument could be madfor just about anything, you know, including lawyers... It seems many people don't clearly understand what their lawyer is gonna charge them and end up with huge bills. Got caught once like that; 20 000$ for the lawyer and still had to pay 40 000$ for a problem that was clearly the fault of the client (analogy: a restaurant telling a client that his coffee his hot, then proceeds to voluntarily spill the coffee on him and sues the restaurant for serving coffee too hot and the restaurant has to pay through a settlement).
I could make the same arguments about computers where many people feel the salesman is delibaretely trying to confuse them with ambiguous terms such as "megahertz", "megabits", "megabytes", "modem", "refreshment rate", "OEM OS", etc, etc,.
I understand all about that, some people may not. I understand everything about finance, some may not.
I have no idea where my liver is. Before having problems with one of them, I never knew how to exactly place my kidneys.
I'm supposed to buy some kind of strap for my car and it's supposedly easy to change. Truth is, I'm gonna have it done by a mechanic 'cause I don't know shit about cars. He's gonna charge me maybe 50$ for something that takes 15 min.
Some people would say it's fraud. The mean garage guy did not explain me in details how to do the job myself and did not give me the exact part# I need. Should we require by law that all doctors teach their patient about biology? That all mechanics teach you how to repair your car? Are they dishonest because they do stuff you could maybe do yourself but are scared too? I never had a computer tech come into my house, I always repair my stuff. Some people have paid me 40-60$ to repair simple problems. Computer stores charge 80$ to wipe your hard drive and reinstall Windows. Are they evil like the insurance companies, the lawyers, the credit card companies, etc? Should lawyer have to write in advance how much they will charge their client for each case they take and put that in writing on a contract that takes less than a 8.5x11 page?
How far do we need to go to regulate industry practice because not everyone knows everything?
Quote from: viper37 on May 22, 2009, 01:29:29 PM
Quote from: alfred russel on May 22, 2009, 10:50:34 AM
I would be in favor of a piece of paper that must be signed with every life insurance sale stating something along the lines of: "The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Would it really be so hard to do this? It isn't as though we would need a new regulatory agency--not only do we have many insurance agencies as it stands, this would just be a few sentences that need to be signed before a policy can become active.
And btw, the investment components of life insurance policies are notoriously awful. I see no reason a young person without financial obligations should ever purchase life insurance (at least in excess of funeral costs).
that's stupid. Parents could be in serious financial trouble if they don't have a small insurance to pay for the costs of the funerals. Funerals don't come cheap. They don't drain resources, they offer you a choice: pay now by small increments, or pay later in one big sum. Most people can't put their money aside for such important things.
The last sentence of my post that you quoted discusses funeral costs--but if the family has money to put aside for life insurance on a child, it has money to put aside for funerals as well. But while this may sound crass, children are a major financial drain, and the loss of a financial drain is not a risk that needs to be protected against, even if there is an upfront cost associated.
Quote from: alfred russel on May 22, 2009, 01:36:24 PM
Not a fair characterization: a disclosure takes away choice from no one.
The issue is not that in certain circumstances life insurance can't produce financial windfalls: as you said, the returns were linked to interest rates, which turned out to fall. If you bet on red in roulette and it comes up red for you, that is a great incident, but roulette is still a terrible investment. A better point of comparison would be whether you can earn better returns on similar investments outside of a life insurance policy, and in most cases you can. My guess is that when your partner entered the policy, he did not necessarily want an investment product speculating on interest rate declines.
There are certain tax and compensation circumstances that can make life insurance attractive: but those are complex enough that anyone knowledgeable of them will not be deterred by a few sentences from a regulator.
Actually he purchased the product specifically has an investment vehicle. He didnt need the money if his kids died ;).
Also, the wording you suggested initially would rule out Life Insurance investment vehicles because people are not smart enough to know better. But then you take the elitist view that in fact there are a small few who might understand well enough to actually recognize that what the regulator says is not entirely accurate.
That is highly problematic. Is it ethical for the government to be regulating in a way that is misleading in the hopes that some people will be smart enough to disregard the warnings if the warnings are not accurate in their particular circumstances?
Quote from: alfred russel on May 22, 2009, 01:36:24 PM
The issue is not that in certain circumstances life insurance can't produce financial windfalls: as you said, the returns were linked to interest rates, which turned out to fall. If you bet on red in roulette and it comes up red for you, that is a great incident, but roulette is still a terrible investment. A better point of comparison would be whether you can earn better returns on similar investments outside of a life insurance policy, and in most cases you can. My guess is that when your partner entered the policy, he did not necessarily want an investment product speculating on interest rate declines.
I was about to say the same thing. In poker, that kind of thinking is called results-oriented (it's actually meant to be derisive, believe it or not). That's when you attribute good luck to good decision. In investment world, I guess the analogy would be "Fooled by Randomness".
Quote from: alfred russel on May 22, 2009, 01:42:35 PM
The last sentence of my post that you quoted discusses funeral costs--but if the family has money to put aside for life insurance on a child, it has money to put aside for funerals as well. But while this may sound crass, children are a major financial drain, and the loss of a financial drain is not a risk that needs to be protected against, even if there is an upfront cost associated.
I agree, but you see that not everyone shares our view. Should we really take that choice away from them. Is our view so much more superior to theirs?
Quote from: Berkut on May 22, 2009, 01:10:08 PM
Actually, I would conclude the opposite - banks have been loaning people money for houses for a long time before we had this housing crisis, so I think the conclusion that there is some fundamental problem that must be addressed via more legislation is not really supported. It's not like there was a dearth of rules about loaning money for houses. They just weren't the right rules, and had the wrong motivation behind them.
Rather, I think the lesson should be that the government should stay out of the money lending business, and decisions about who to loan money to should not be based on political considerations, and government directed lending institutions directed or allowed to respond accordingly - even if that means that poor people who vote Democrat may not be able to buy a McMansion.
Not sure what legislation you are referring to. If the claim is that CRA or Fair Lending laws were a significant contributor to the mortgage crisis, that isn't correct. If what you are referring to was the effective subsidization of moderate income mortgages via Fannie and Freddie, I would agree that was a very big factor. But it was a big factor because the way in which that effective subsidy interacted with the very powerful profit motive of private enterprise when literally trillions of dollars of business was up for grabs. That led to a number of dysfunctional market outcomes and behaviors including: (1) a big jump in outright fraud in the mortgage underwriting business, (2) a big rise in the presence of arguably legal but somewhat shady operators using high pressure sales tactics to push mortgage products on which they could earn lucrative fees, and (3) a near total loss of disciplined risk assessment at the wholesale level where mortgages were packaged and traded - a loss which caused a highly distortive feedback effect back into the origination market.
Seems to me one can argue that one solution is to either reform or get rid of Fannie and Freddie (and the interest deduction while we are at it). Another solution is to identify institutional weakness in the market mechanisms underlying the private mortgage market. Another is to crack down hard on fraud and do a better job of preventing it from occurring.
But the best is to do all three.
Quote from: The Minsky Moment on May 22, 2009, 01:50:15 PM
Seems to me one can argue that one solution is to either reform or get rid of Fannie and Freddie (and the interest deduction while we are at it). Another solution is to identify institutional weakness in the market mechanisms underlying the private mortgage market. Another is to crack down hard on fraud and do a better job of preventing it from occurring.
But the best is to do all three.
Amen.
Quote from: viper37 on May 22, 2009, 01:42:25 PM
Quote from: Malthus on May 22, 2009, 01:04:25 PM
The problem arises when the terms are complex. It may well be the case that the terms are not difficult to understand due to a deliberate attempt to confuse and deceive, but simply because the subject matter is one which is reasonably complex.
that argument could be madfor just about anything, you know, including lawyers... It seems many people don't clearly understand what their lawyer is gonna charge them and end up with huge bills. Got caught once like that; 20 000$ for the lawyer and still had to pay 40 000$ for a problem that was clearly the fault of the client (analogy: a restaurant telling a client that his coffee his hot, then proceeds to voluntarily spill the coffee on him and sues the restaurant for serving coffee too hot and the restaurant has to pay through a settlement).
I could make the same arguments about computers where many people feel the salesman is delibaretely trying to confuse them with ambiguous terms such as "megahertz", "megabits", "megabytes", "modem", "refreshment rate", "OEM OS", etc, etc,.
I understand all about that, some people may not. I understand everything about finance, some may not.
I have no idea where my liver is. Before having problems with one of them, I never knew how to exactly place my kidneys.
I'm supposed to buy some kind of strap for my car and it's supposedly easy to change. Truth is, I'm gonna have it done by a mechanic 'cause I don't know shit about cars. He's gonna charge me maybe 50$ for something that takes 15 min.
Some people would say it's fraud. The mean garage guy did not explain me in details how to do the job myself and did not give me the exact part# I need. Should we require by law that all doctors teach their patient about biology? That all mechanics teach you how to repair your car? Are they dishonest because they do stuff you could maybe do yourself but are scared too? I never had a computer tech come into my house, I always repair my stuff. Some people have paid me 40-60$ to repair simple problems. Computer stores charge 80$ to wipe your hard drive and reinstall Windows. Are they evil like the insurance companies, the lawyers, the credit card companies, etc? Should lawyer have to write in advance how much they will charge their client for each case they take and put that in writing on a contract that takes less than a 8.5x11 page?
How far do we need to go to regulate industry practice because not everyone knows everything?
Combining a requirement for full disclosure with caveat emptor ("buyer beware") in effect means that the average person is
required to be an expert in these matters, and if they get shafted after reciving all of their mandatory disclosure (but, not being experts, did not understand it), it is their own damn fault.
This position has advantages - it allows for innovation etc. - but it also has disadvantages.
BTW, many of my particular clients insist on up-front budgets for my work.
Quote from: crazy canuck on May 22, 2009, 01:44:55 PM
Quote from: alfred russel on May 22, 2009, 01:36:24 PM
Not a fair characterization: a disclosure takes away choice from no one.
The issue is not that in certain circumstances life insurance can't produce financial windfalls: as you said, the returns were linked to interest rates, which turned out to fall. If you bet on red in roulette and it comes up red for you, that is a great incident, but roulette is still a terrible investment. A better point of comparison would be whether you can earn better returns on similar investments outside of a life insurance policy, and in most cases you can. My guess is that when your partner entered the policy, he did not necessarily want an investment product speculating on interest rate declines.
There are certain tax and compensation circumstances that can make life insurance attractive: but those are complex enough that anyone knowledgeable of them will not be deterred by a few sentences from a regulator.
Actually he purchased the product specifically has an investment vehicle. He didnt need the money if his kids died ;).
Also, the wording you suggested initially would rule out Life Insurance investment vehicles because people are not smart enough to know better. But then you take the elitist view that in fact there are a small few who might understand well enough to actually recognize that what the regulator says is not entirely accurate.
That is highly problematic. Is it ethical for the government to be regulating in a way that is misleading in the hopes that some people will be smart enough to disregard the warnings if the warnings are not accurate in their particular circumstances?
Then add in the words "generally" and "typically" and then any ethical conundrum will be abated.
Your partner is a highly compensated individual who apparently wanted to bet on a decline in interest rates. By locking in interest rates and gaining tax advantages, he was willing to give up expenses higher than most other investments (not only was he stuck with ordinary investment expenses to the insurance company, he also was stuck with actual life insurance he didn't need). In his circumstances, that may have made sense--I can't dismiss it out of hand.
But especially today with all the investment options out there, I'd challenge anyone to find a life insurance product that offers terms to an investor that I could not reproduce at less cost outside of a life insurance product.
Quote from: crazy canuck on May 22, 2009, 01:46:02 PM
Quote from: alfred russel on May 22, 2009, 01:42:35 PM
The last sentence of my post that you quoted discusses funeral costs--but if the family has money to put aside for life insurance on a child, it has money to put aside for funerals as well. But while this may sound crass, children are a major financial drain, and the loss of a financial drain is not a risk that needs to be protected against, even if there is an upfront cost associated.
I agree, but you see that not everyone shares our view. Should we really take that choice away from them. Is our view so much more superior to theirs?
Again, a completely unfair characterization. I'm not in favor of taking choice away from anyone.
Quote from: Malthus on May 22, 2009, 01:04:25 PM
The problem arises when the terms are complex. It may well be the case that the terms are not difficult to understand due to a deliberate attempt to confuse and deceive, but simply because the subject matter is one which is reasonably complex. In that case, cavaet emptor may not be sufficient - again, more disclosure obligations may make the situation worse and not better when the disclosure adds details that the average person does not understand, or is more material than they can be expected to absorb.
That is a consideration that competes with the other general consideration, that state-nannyism is basically a bad idea, and outcomes are more efficient if only people are allowed to do what they want, freeing human ingenuity - that didn't work so well in other lending situations such as mortgages.
I agree. I am not sure what can be done about transactions that by their very nature have the potential to be complex and difficult to understand. One possible solution is to create higher standards of duty perhaps akin to the broker requirements to know their client. But then that of course would likely take away access to credit cards from the very people this legislation is aimed at helping.
Quote from: alfred russel on May 22, 2009, 02:00:27 PM
Quote from: crazy canuck on May 22, 2009, 01:46:02 PM
Quote from: alfred russel on May 22, 2009, 01:42:35 PM
The last sentence of my post that you quoted discusses funeral costs--but if the family has money to put aside for life insurance on a child, it has money to put aside for funerals as well. But while this may sound crass, children are a major financial drain, and the loss of a financial drain is not a risk that needs to be protected against, even if there is an upfront cost associated.
I agree, but you see that not everyone shares our view. Should we really take that choice away from them. Is our view so much more superior to theirs?
Again, a completely unfair characterization. I'm not in favor of taking choice away from anyone.
You keep saying that but you are being a bit misleading in your protestations. You want a regulator to circulate information that says that people should not buy it for reasons that are in fact incorrect in some cases.
Quote from: alfred russel on May 22, 2009, 01:57:07 PM
Then add in the words "generally" and "typically" and then any ethical conundrum will be abated.
The problem is that when people read the word "generally" they will always think it applies to them. Why would they think otherwise. You assume people are too stupid to know what life insurance is. Why do you now assumpe people are smart enough to know the government is actually meaning to say the warning is overbroad and can in fact be competely wrong.
Quote from: crazy canuck on May 22, 2009, 02:06:41 PM
Quote from: alfred russel on May 22, 2009, 02:00:27 PM
Quote from: crazy canuck on May 22, 2009, 01:46:02 PM
Quote from: alfred russel on May 22, 2009, 01:42:35 PM
The last sentence of my post that you quoted discusses funeral costs--but if the family has money to put aside for life insurance on a child, it has money to put aside for funerals as well. But while this may sound crass, children are a major financial drain, and the loss of a financial drain is not a risk that needs to be protected against, even if there is an upfront cost associated.
I agree, but you see that not everyone shares our view. Should we really take that choice away from them. Is our view so much more superior to theirs?
Again, a completely unfair characterization. I'm not in favor of taking choice away from anyone.
You keep saying that but you are being a bit misleading in your protestations. You want a regulator to circulate information that says that people should not buy it for reasons that are in fact incorrect in some cases.
Which does not take away choice from anyone.
What part of the below, which is what I originally posted, is incorrect?
"The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
Quote from: crazy canuck on May 22, 2009, 02:09:10 PM
Quote from: alfred russel on May 22, 2009, 01:57:07 PM
Then add in the words "generally" and "typically" and then any ethical conundrum will be abated.
The problem is that when people read the word "generally" they will always think it applies to them. Why would they think otherwise. You assume people are too stupid to know what life insurance is. Why do you now assumpe people are smart enough to know the government is actually meaning to say the warning is overbroad and can in fact be competely wrong.
Actually, you don't even need to add those words--based on what you wrote I figured I had left the modifiers off, but when I went back and read it, they were there to begin with.
I am incredulous that there are a rash of single people that are buying complex life insurance policies that shield their income from taxation (after they have maxed out there other retirement accounts) that would then be dissuaded from doing so because a disclosure form says it is "generally" a bad idea. If they are sophisticated enough that they are seeking out the investment alternative, they understand they aren't the "general" case.
What is much more likely--and in fact more common--is a bunch of single people that vaguely know responsible people should have life insurance buy policies even though they don't have any dependents.
Quote from: alfred russel on May 22, 2009, 02:13:26 PM
Which does not take away choice from anyone.
What part of the below, which is what I originally posted, is incorrect?
"The primary purpose of life insurance is to replace income that was lost due to death. Life insurance can protect dependents and others relying your income in the event that you die.
However, life insurance policies should rarely be taken out on children, or adults without dependents. In these cases, life insurance can drain your financial resources without providing significant financial protection against loss for your family."
The last paragraph is misleading at best. For all the reasons we discussed the government should not be in the business of dissuading people from purchasing products which might actually be beneficial to them. The only reason you see no problem is that you have concluded that other insurance products are a bad investment and you feel so confident in your belief that you would have the government actively perpetuate that view.
Quote from: alfred russel on May 22, 2009, 02:20:40 PM
Actually, you don't even need to add those words--based on what you wrote I figured I had left the modifiers off, but when I went back and read it, they were there to begin with.
I am incredulous that there are a rash of single people that are buying complex life insurance policies that shield their income from taxation (after they have maxed out there other retirement accounts) that would then be dissuaded from doing so because a disclosure form says it is "generally" a bad idea. If they are sophisticated enough that they are seeking out the investment alternative, they understand they aren't the "general" case.
What is much more likely--and in fact more common--is a bunch of single people that vaguely know responsible people should have life insurance buy policies even though they don't have any dependents.
So. Should the government be circulating information which is not accurate in an effort to regulate choice of product?
Quote from: crazy canuck on May 22, 2009, 02:04:25 PM
Quote from: Malthus on May 22, 2009, 01:04:25 PM
The problem arises when the terms are complex. It may well be the case that the terms are not difficult to understand due to a deliberate attempt to confuse and deceive, but simply because the subject matter is one which is reasonably complex. In that case, cavaet emptor may not be sufficient - again, more disclosure obligations may make the situation worse and not better when the disclosure adds details that the average person does not understand, or is more material than they can be expected to absorb.
That is a consideration that competes with the other general consideration, that state-nannyism is basically a bad idea, and outcomes are more efficient if only people are allowed to do what they want, freeing human ingenuity - that didn't work so well in other lending situations such as mortgages.
I agree. I am not sure what can be done about transactions that by their very nature have the potential to be complex and difficult to understand. One possible solution is to create higher standards of duty perhaps akin to the broker requirements to know their client. But then that of course would likely take away access to credit cards from the very people this legislation is aimed at helping.
From the summary article:
QuoteAbility to pay
Card issuers must consider the consumer's ability to make the required payments under the credit card's terms before raising limits or issuing a new card.
Agreed that this will likely mean poor credit risks will have less access to credit cards. Not yet sure whether this is a good thing or a bad thing.
Quote from: crazy canuck on May 22, 2009, 03:02:00 PM
Quote from: alfred russel on May 22, 2009, 02:20:40 PM
Actually, you don't even need to add those words--based on what you wrote I figured I had left the modifiers off, but when I went back and read it, they were there to begin with.
I am incredulous that there are a rash of single people that are buying complex life insurance policies that shield their income from taxation (after they have maxed out there other retirement accounts) that would then be dissuaded from doing so because a disclosure form says it is "generally" a bad idea. If they are sophisticated enough that they are seeking out the investment alternative, they understand they aren't the "general" case.
What is much more likely--and in fact more common--is a bunch of single people that vaguely know responsible people should have life insurance buy policies even though they don't have any dependents.
So. Should the government be circulating information which is not accurate in an effort to regulate choice of product?
Sorry I went away for a while.
No it should not. However, what I wrote is accurate. If a majority or significant minority of certified financial planners disagree with that, then I'd agree it should be amended in a way that is accurate but still gets across the point of what life insurance protects against and that children typically don't need to be insured.