08 September, 2006

Jesus, Compounded Daily

Lydia has a really good entry about credit cards from Family Christian Bookstore. Like her, I wonder how Christian it is to exploit the needy. Perhaps I've been living in Ramsey world too long, but to my mind unless the creditor accepts a very low interest rate which it is also willing to extend to those with poor credit it would strike me as exploitative.

I realise that credit cards are little more than active debt futures. You bet on a high rate of return based upon the likelihood that you be repayed. The low-interest cards are for the blue chip debtors, folks who are deemed a better credit risk, while the higher interest cards are for the ones you think won't pay you back.

While I can wrap my head around these facts easily, I have a really difficult time understanding the Christian aspect of it all. Surely the people who are in more need of help should receive it more readily and with fewer strings? Of course this makes no business sense and I realise that. But the older I get the more I realise that "business sense" doesn't always make sense when you're talking about a family of five who just had to rush the three-year-old to the ER for an asthma attack. Mom can't work because daycare for three would cost more than she'd make anywhere. Dad not only works one job, but he also has a lawncare business on the side. He needs to pull seventy hours a week to keep their heads above water and this little trip to save #3's life will carve another five hours a week out of his flesh for the foreseeable future.

We do a lot of talk in the Conservative camp about family values. From what I can tell, this largely means "don't be gay and don't get divorced." Yet when we have a lot of families--the family I described is very real, and is played out in variations all over America, I'm sure--whom we don't seem to value. How is it supporting the Family to burden them with punitive interest on debt? How was it supporting the family to allow the credit card companies to railroad through a set of Bankruptcy Reform Laws which serve only to punish those who have already been pretty heavily punished by life?

If we want Conservatism to be about more than bottom line dollars and cents, if we want our Conservatism to be about "The Family" and God-centered values perhaps we should consider some of the God-centered values like doing unto others. We could start with pushing through some Credit Reform Laws which would cap the interest rates on credit card spending used for medical debt at no more than the Fed plus .5. We could make predatory lenders illegal.

Because until we start acting like we're interested in fixing the number one cause of divorce, I don't see Conservatism as putting its money where its mouth is on family values.

Update If you get a chance, please read the very well-done comment from Thoughtful Codger.

9 Comments:

At 9:24 AM, September 08, 2006, Blogger grandefille said...

Well said, Ms. C. Well said.

Pity more folks don't understand that conservatism (*and* liberalism, and all those other 'isms) must mean "practice what you preach," not "point at other people and tell them how to live."

Brava. I'd vote for ya. On the Common-Sense ticket.

 
At 9:26 AM, September 08, 2006, Blogger dolphin said...

Are you turning into a liberal Kat?

 
At 10:43 AM, September 08, 2006, Blogger Amy said...

great post.

and I love the title.

 
At 1:17 PM, September 08, 2006, Anonymous Thoughtful codger said...

As someone who is been involved with debt relief and the credit system for the last 35 years, I would like to add a few comments to your post.
The extension of credit to people who are not creditworthy dates from the 1960s, when the bleeding hearts felt that not letting a person have a credit card was discrimination. Couple that with the brainwashing that has been going on for years, promoting instant gratification with such catchphrases as “You want it! - You deserve it!” and you get to where we have an absurdly high interest rates being charged by the credit granting industry. While I’m not in love with that industry, I do believe that interest rates should be pegged to creditworthiness.
Much has been made concerning the bankruptcy Reform Act, and the means test so touted by the credit granting industry. Interestingly, however, 96% of the bankruptcies filed after the amended act went into effect past the means test. There of also been studies of previous bankruptcies, indicating that 96% of those previous bankruptcies studied would not have been effected by the means test. In other words, the all solving means test, does nothing. As one judge opined: “It is administered too late. It should be given when the credit is granted.”
The credit granting industry’s true objective behind the bankruptcy amendments is not so publicly palatable as the means test. The public-relations campaign successfully obscured the real intent, which is to limit bankruptcy filings by increasing the complexity and thereby the cost, while at the same time reducing the number of bankruptcy practitioners willing to provide service to those needing debt relief. I am not accusing the President or the Congress of being aware of the true objectives, because the general public not involved with the bankruptcy system lacks the sophistication to pierce the public relations coupled to the means test.
I believe that putting unrealistic limits on interest regardless of the purpose will not address the objective that you speak about it in your post. It does not help the prodigal to grant him credit at any price. I liken it to giving a gun to someone who is suicidal. The true economic impact of your proposal would be to make credit, virtually unobtainable. The principle is the same result that we saw with fixed gas prices, diminishing supply in the 70s.
I believe the best approach would be to restore the usury laws, which put realistic ceilings on interest. The usury laws passed by the wayside with the runaway inflation of the 70s and in attempt to grease the wheels of commerce. during that period.
Coupled with bankruptcy relief, which has its roots in the year of jubilee established in Leviticus with the periodic debt forgiveness instituted in that set of laws, we provide the honest debtor with a reasonable escape from such things as catastrophic medical expense. In fact, even today, the three leading causes of bankruptcy are divorce, catastrophic medical expense, and job loss. Excessive credit card debt, comes in about fourth. Re-adopting usury limits would probably mean that fewer people would be driven to desperation with the other three causes and would have some impact on number of bankruptcies; but we would see the credit industry restored to Judeo-Christian principles. Without the massive profits generated by unrestricted interest rates, I would like to believe the credit granting industry would back off its instant gratification binge.
For the next link in the process, we would need to see much more effective practical economic education for all young people about the dangers of credit and reeducation of the uncreditworthy who would have to live without credit. Basic principles such as planning shopping lists, limiting trips to stores and budgeting are concepts of which many of these people are not aware. I see this as a job for churches, charitable agencies and public education. I know many bankruptcy judges and practitioners would like to assist in such training. I believe the true Christian approach to the problem is not a simple one; but one that requires massive commitment, true concern and patience for the long haul.

 
At 1:19 PM, September 08, 2006, Anonymous Thoughtful codger said...

As someone who is been involved with debt relief and the credit system for the last 35 years, I would like to add a few comments to your post.
The extension of credit to people who are not creditworthy dates from the 1960s, when the bleeding hearts felt that not letting a person have a credit card was discrimination. Couple that with the brainwashing that has been going on for years, promoting instant gratification with such catchphrases as “You want it! - You deserve it!” and you get to where we have an absurdly high interest rates being charged by the credit granting industry. While I’m not in love with that industry, I do believe that interest rates should be pegged to creditworthiness.
Much has been made concerning the bankruptcy Reform Act, and the means test so touted by the credit granting industry. Interestingly, however, 96% of the bankruptcies filed after the amended act went into effect past the means test. There of also been studies of previous bankruptcies, indicating that 96% of those previous bankruptcies studied would not have been effected by the means test. In other words, the all solving means test, does nothing. As one judge opined: “It is administered too late. It should be given when the credit is granted.”
The credit granting industry’s true objective behind the bankruptcy amendments is not so publicly palatable as the means test. The public-relations campaign successfully obscured the real intent, which is to limit bankruptcy filings by increasing the complexity and thereby the cost, while at the same time reducing the number of bankruptcy practitioners willing to provide service to those needing debt relief. I am not accusing the President or the Congress of being aware of the true objectives, because the general public not involved with the bankruptcy system lacks the sophistication to pierce the public relations coupled to the means test.
I believe that putting unrealistic limits on interest regardless of the purpose will not address the objective that you speak about it in your post. It does not help the prodigal to grant him credit at any price. I liken it to giving a gun to someone who is suicidal. The true economic impact of your proposal would be to make credit, virtually unobtainable. The principle is the same result that we saw with fixed gas prices, diminishing supply in the 70s.
I believe the best approach would be to restore the usury laws, which put realistic ceilings on interest. The usury laws passed by the wayside with the runaway inflation of the 70s and in attempt to grease the wheels of commerce. during that period.
Coupled with bankruptcy relief, which has its roots in the year of jubilee established in Leviticus with the periodic debt forgiveness instituted in that set of laws, we provide the honest debtor with a reasonable escape from such things as catastrophic medical expense. In fact, even today, the three leading causes of bankruptcy are the divorce, catastrophic medical expense, and job loss. Excessive credit card debt, comes in about fourth. Re-adopting usury limits would probably mean that fewer people would be driven to desperation with the other three causes and would have some impact on number of bankruptcies; but we would see the credit industry restored to Judeo-Christian principles. Without the massive profits generated by unrestricted interest rates, I would like to believe the credit granting industry would back off its instant gratification binge.
For the next link in the process, we would need to see much more effective practical economic education for all young people about the dangers of credit and reeducation of the uncreditworthy who would have to live without credit. Basic principles such as planning shopping lists, limiting trips to stores and budgeting are concepts of which many of these people are not aware. I see this as a job for churches, charitable agencies and public education. I know many bankruptcy judges and practitioners would like to assist in such training. I believe the true Christian approach to the problem is not a simple one; but one that requires massive commitment, true concern and patience for the long haul.

 
At 1:37 PM, September 08, 2006, Blogger John H said...

kudos for this post. Compassion really shouldn't be a 'political' word.

 
At 1:38 PM, September 08, 2006, Blogger Kat Coble said...

Dolphin, I don't think so. At least I've never seen "caring for your fellow man" to be solely a liberal action.

TC--Thanks for your comments. It's obvious that you have far more experience and have put far more thought into this than I did at 6:30 this morning. I think that the "means test" sounds very interesting, but I'm afraid that I agree with the judge who thinks that it's given too late.

I also like what you have to say about bankruptcy having its roots in the OT practice of Jubilee.

 
At 4:38 PM, September 08, 2006, Blogger grandefille said...

Basic principles such as planning shopping lists, limiting trips to stores and budgeting are concepts of which many of these people are not aware. I see this as a job for churches, charitable agencies and public education.

I agree with your post entirely, codger, with the exception mentioned above. Basic financial principles, just like morals, values, manners and faith, need to start with the family. Outside-the-home education on these topics is an excellent reinforcement system, but it shouldn't be the first time people have heard about them or seen them practiced.

I know it isn't realistic to presume that every child will be taught at home how to balance a checkbook or make a family budget, but my word, we're already depending on schools, churches and charitable agencies to teach our kids right and wrong because we're too dang busy. Can we not encourage the grown-ups to take advantage of this kind of training for themselves and then practice it at home so their kids will learn it? I think if we give public education one more should-have-been-learned-at-home thing to teach our kids, they'll walk out.

 
At 10:44 PM, September 10, 2006, Anonymous tom said...

I have worked at a credit union for eight years. The wonderful aspect about it is the opportunity for better financial education.

Our branch managers go to schools to do financial education such as reconciling a statement and balancing a checkbook, and some would even go to the women's shelter at the YWCA to teach single women about financial independence.

Since credit unions are non-profits, they tend to make smaller loans with more reasonable terms, so if you have, say a $2000 doctor bill, you could get a small signature loan at a low rate and pay it off over a couple of years.

I don't want to advertise my company, but there are good national resources for educational tools like the Credit Union National Association (www.cuna.org) that have helpful tools and publications for consumers.

 

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