Debtors Revolt

[LuxLiving]

wincrasher I found your comment to be compelling.

Why do I personally feel a moral obligation to pay my debts?

I guess at this point until I've had more time to contemplate I'd just have to say...because that's what my parents taught me. If I agree to a set of rules, then I attempt heartily to abide by them.

Because of your comment I will do more reading to firm my convictions or revise my stand. Here's a place that caught my interest: Book II.

Online Library of Liberty - Book II: Moral Obligation - The Principles of Moral and Political Philosophy

[disneysteve]

I'm so sick of these comments about it being "moral" to pay your debts.

I'm never one to make that comment as I prefer to keep religion out of the conversation but I do understand how folks feel this way. "Thou shalt not steal" certainly comes to mind. If you borrow money and don't repay it, that is stealing.

I prefer to focus on the legal aspect, not the moral aspect. If I borrow money, I enter into a legally binding agreement to repay it. That is true of a credit card, a mortgage, a student loan, an auto loan, whatever. If I don't repay it, I would fully expect to be punished accordingly. I, personally, would never voluntarily not repay money I owed. Only if my circumstances were such that I was absolutely unable to repay it would the money never be returned to the lender.

[maat55]

What debtors' revolt? I haven't noticed any revolt. You mean that video some woman had on YouTube griping about her credit card bill? Has that inspired a revolt of some sort? Tell me about it. Sorry I don't have cable TV so don't view Suze Orman or hear any cable tv news reporting, which to a non-viewer sometimes seems peculiarly to drive and make the news as much as it reports, analyzes, and editorializes about it.

I do agree with EconoMutt that banks have advertised using credit to obtain things that are beyond one's grasp.

I cannot tell you if there is an increase in CC defaults due to the video, I can say that nearly half a million people have viewed the video and it has gotten Suzies attention. I've seen many of the comments in her favor, but do not think it has influenced many to follow.

My observation is that Suzie was sympathetic to her cause. I don't think DR would have been as sympathetic.

[maat55]

[QUOTE]

Actually she did say at the beginning of the Can I afford it segment that there would be no need for a debtors revolt if people didn't buy things they couldn't afford.

I did not catch her next segment due to I was here posting my thread. I'm sure that Suzie's overall advice on CC's is more conservative, but she made no mention of it during the revolt segment. She appeared to be in agreement with the lady.

For the record, I am not at all sympathetic to the debtor's revolt lady either. If you don't want to be at the mercy of the CC companies, then don't borrow money from them.

This is what I wish she had touched on during the segment. It's understandable to be mad at the CC company, but personal responsibility is very important to better finances.

[maat55]

It couldn't have been from America's creditors.

There is plenty of unethical behavior from creditors, no doubt. In fact, we used to have laws about "loan sharking". Creditors should not be allowed to run amok and tack on whatever fees, interest rate, without this being clearly disclosed to the borrower. In addition, creditors who make high risk loans should be made to suffer the consequences of having borrowers in default not getting bailed out. It used to be that you couldn't even get a loan of any type without having some collateral or real ability to repay the loan. Giving people home loans that are 5x their income is just absurd unless there are other assets with the real ability to pay.
And, I can see many instances where young borrowers really had no idea how much they could "afford" and some stupid bank swooped in to take advantage. That is plain wrong and if they default, the bank should pay the loan.
Having said all that, every person has a MORAL responsibility to pay what they owe and borrowed. Of course, we all know there are plenty of people who don't want to own up to their responsibilites.
And, yes, there are some instances where people cannot pay due to illness, etc so spare the flames because that isn't what I am talking about. I am sure every person here can name someone living well above their means.

I fully agree that we need regulation in the financial industry. The industry is finding new ways to package products that are not very understandable to the public. Same goes for the investing industry. Common people need common financial products they can understand. Limiting risky products would be good for the whole of society.

[maat55]

I am usually one who defends the credit card companies as not being evil or predatory but one thing that I have always felt should be banned was changing the interest rate and terms AFTER the money was borrowed. If you make charges when your rate is 5%, your rate on that money should remain 5% until you pay it off (unless it was stated as a promotional rate for a set period of time). Banks should not be allowed to up the rate from 5% to 30% after the fact, no matter what happens to the borrower's credit score. I know the new CC rules address this and eliminate the "universal default" that lets CC #1 jack up your rate if you are late on a payment to CC #2, for example.

If they want to hike the rate on new charges, that's fine, but don't change the rate on the money that is already gone.

I fully agree with you. To me, people cannot handle this type of chaos with CC's anymore than they could with their mortgage skyrocketing up without notice.

Limiting the predatory practices of the lending industry is one of the few powers I believe the government should have. We would have much less need for government safety nets if they would regulate instead of allow predators to cause much worse personal finance issues.

There should be very basic loans for cars, homes etc. People can get more of what they want and need with less risky financial products.

[disneysteve]

Limiting the predatory practices of the lending industry is one of the few powers I believe the government should have. We would have much less need for government safety nets if they would regulate instead of allow predators to cause much worse personal finance issues.

Unfortunately, the government had usury rules in effect for many years and then, in 1994 I think, they eliminated them. That's when all hell broke loose and we saw the introduction of every form of predatory lending that exists today: payday loans, tax refund anticipation loans, universal default on CCs, etc. Those things weren't around until Congress repealed the usury laws. Really, all of this mess is the government's fault for allowing lenders to do whatever the hell they wanted.

Yes, personal responsibility is critical, but if someone has a credit card balance at 5% and is perfectly comfortable making the payments and suddenly the rate goes to 29.99%, that can screw up even the most responsible person. Then if the CC also increases the minimum payment from 2% to 4%, it is pretty easy to see how even someone with a good financial head on their shoulders could quickly end up in trouble.

How many of us would be ok if our mortgage rate or auto loan rate suddenly jumped from 6% to 30%?

[cicy33]

I tried to watch her show once but just couldn't continue. It is so boring. I think the Can I afford it? thing is just plain dumb. Come on, you know if you can or can not afford something. You have 400 a week coming in, the payment for the house is 900 a month. That will leave you 700 for a full month to pay all your other bills, buy gas and buy food. unless you have no other bills at all you cannot afford that house! I know that I have made major mistakes in financial decisions in my life but at least I can say I am learning.

[disneysteve]

I tried to watch her show once but just couldn't continue. It is so boring. I think the Can I afford it? thing is just plain dumb. Come on, you know if you can or can not afford something. You have 400 a week coming in, the payment for the house is 900 a month. That will leave you 700 for a full month to pay all your other bills, buy gas and buy food. unless you have no other bills at all you cannot afford that house! I know that I have made major mistakes in financial decisions in my life but at least I can say I am learning.

We love the Suze Orman show, especially the Can I Afford It? segment. We like it largely for the entertainment value as we marvel at how many clueless people there are out there. Though to be fair, I actually know one person who called in for that segment. She knew she would be denied but just wanted to be on TV and talk to Suze, so not everyone calling in is that dense.

I can't say that I regularly learn anything new from her show, but I do occasionally. I just like hearing her advice and reasoning because it often differs from that of the rest of the talking heads on TV.

[cicy33]

We love the Suze Orman show, especially the Can I Afford It? segment. We like it largely for the entertainment value as we marvel at how many clueless people there are out there. Though to be fair, I actually know one person who called in for that segment. She knew she would be denied but just wanted to be on TV and talk to Suze, so not everyone calling in is that dense.

I can't say that I regularly learn anything new from her show, but I do occasionally. I just like hearing her advice and reasoning because it often differs from that of the rest of the talking heads on TV.

Thank goodness they are not all that dense. I really was beginning to wonder. For the most part I think people do know what they can and cannot afford to do or buy but do it anyway regardless of what the cost is.

[maat55]

Unfortunately, the government had usury rules in effect for many years and then, in 1994 I think, they eliminated them. That's when all hell broke loose and we saw the introduction of every form of predatory lending that exists today: payday loans, tax refund anticipation loans, universal default on CCs, etc. Those things weren't around until Congress repealed the usury laws. Really, all of this mess is the government's fault for allowing lenders to do whatever the hell they wanted.

Yes, personal responsibility is critical, but if someone has a credit card balance at 5% and is perfectly comfortable making the payments and suddenly the rate goes to 29.99%, that can screw up even the most responsible person. Then if the CC also increases the minimum payment from 2% to 4%, it is pretty easy to see how even someone with a good financial head on their shoulders could quickly end up in trouble.

How many of us would be ok if our mortgage rate or auto loan rate suddenly jumped from 6% to 30%?

I'm wondering why they haven't reinstated the Glass/Steagall Act. This kept banks from engaging in risky investments using depositors funds through fractional banking. This is how the mega banks got formed. IMO, in the long run, we would have been better off had they failed.

Most of these changes by the CC companies are an desperate measure by the banks to limit the damage of the recession. I hope this is a wake up call to all of those who have too much faith in them.

[jasonnoguchi]

It is weird in this time and age that people think its moral to default on debts and immoral to pursue loans owing with all legal rights. Weird.

Someday I should start borrowing money from some of you and then only pay back when I "absolutely can afford to" and that you guys should "morally stay off my back and not want your money back". Very nice.

[LuxLiving]

I don't make personal loans Jason - so, nothing to be gained here! Mainly because I'm a cranky creditor, believe it or not, I actually expect to be top of the list when debtors have money to pass around! Personal lending is not the game for me.

[disneysteve]

immoral to pursue loans owing with all legal rights.

What does this mean?

[Inkstain82]

It is weird in this time and age that people think its moral to default on debts and immoral to pursue loans owing with all legal rights. Weird.

Someday I should start borrowing money from some of you and then only pay back when I "absolutely can afford to" and that you guys should "morally stay off my back and not want your money back". Very nice.

I don't think it's moral or immoral to pay or not pay debts, unless you enter into the debt with the intention to not pay or you lie about your circumstances in order to obtain the credit.

The contract and the law outline the situation for both parties: These are your options, and these are the consequences of choosing those options.

Our society is built around the idea that people will make the choices that are in their best interest, even if that means accepting the consequences of not paying back a debt.

That said, there's also absolutely nothing immoral about pursuing a debt to the best of your ability either.