Anyone who knows me knows that I am a huge proponent of the ideas that: a) credit, when used properly can be a tremendous financial tool and b) people (and companies) would be best served learning to take responsibility for their own actions and the resulting consequences. That being said, I am a little tired of the consumers taking all of the heat for the mess that they are in. Yes, I have said it myself that people need to be held accountable for where they end up, but at the same time, the companies that seduce them and make it too tempting for some of these people to resist getting in over their heads to “live the dream” need to bear some of the brunt of the backlash. Not all of the blame mind you, since everyone has the ability to make their own decisions of course, but both parties need to take responsibility. The following is my line of questioning for the credit industry as I wonder where they come up with some of their practices.
Dear credit provider,
In light of the housing and credit crises of the past few years, I am left wondering about some of your practices in regard to the way you choose how to extend credit lines and how you deem certain applicants to be worthy of receiving a line of credit. In the past, I have been a very big proponent of using credit as a financial tool, and of people taking responsibility for their financial situation, not blaming credit providers. While I haven’t necessarily changed my views entirely, I have begun to question whether or not the credit industry deserves the support it has been receiving from not only myself, but others as well.
Seeing as there are so many homeowners in foreclosure proceedings or facing the inevitable event of being foreclosed upon, one has to wonder how you chose the recipients of the funds you lend and the mortgages you underwrite. Did you not think that anyone who needed 100% percent financing or more–up to 125% in some instances as I have seen–was going to struggle keeping their loan repayments current, or even being able to make the payments at all? How about those people who were so risky that they were required to accept double-digit interest rates in order to secure a loan while standard rates were no where near such figures? And what about the potential home buyers whose mortgage payments figured to be more than half (or even a greater percentage) of their gross incomes, let alone home much of their net income it would consume considering net income is a much more accurate figure to use? All of these situations were contributing factors to both the housing and credit problems facing the American public, yet seem to be almost entirely born out of short-term vision, with a blind eye toward the long-term effects of such deals.
I am also curious about how you go about choosing who you market your products and services to such as credit cards. Is it simply sending out pre-approval letters to anyone whose name appears on a purchased marketing list? It’s pretty interesting how many people report receiving pre-approval letters in the names of children (particularly babies), family pets, and even the deceased! I mean, really, do you verify any of the information you purchase from data collection firms say, by doing credit checks or some other verification method? Perhaps if the focus were to shift from the quantity of pre-approvals you can send out to the quality of the recipients, the risk involved in extending credit to these people would be reduced significantly. By shifting that focus, maybe, just maybe, you would be able to bring about a rebirth of credit as a beneficial tool rather than an abused and overused component of the financial landscape.
Speaking of credit cards, perhaps you can also enlighten me as to why it is that you would simply increase a card holder’s credit limit out of the blue. Actually, how do you even come up with credit card limits to begin with? Wouldn’t it make more sense to start cardholders off with a reasonably low credit line, thereby putting the onus on the card holder to prove their creditworthiness and make them ask for an increase should the so desire? I cannot even begin to recall the number of times I have read or heard about people in financial distress who said that they got deeper in the red because of the additional credit that was extended to them unrequested, and which they used simply because it was there. Why not follow this strategy to avoid such further stories, and save yourself quite a bit of trouble all while leaving no one for the credit abusers to point fingers at other than themselves? I mean, seriously, how are you going to get paid from people who don’t have the money to pay? Even if you only expect to collect a fraction of the outstanding debts, a fraction of $0 (which is what many troubled people have) is still $0.
As I have stated, I am a staunch supporter of credit as a financial tool, but you are making it difficult to continually defend you from all of the detractors. Most businesses find it beneficial to be consumer-friendly and provide value to their customers, but in recent years you have only shown a propensity for greed and disregard for the consumers. All that has been displayed is an interest in increasing profits and padding your bottom line, no matter what the end result of your reckless actions may be or who gets stepped on in the process, as long as you benefit. Hopefully, you have seen the error of our ways and are prepared to start putting the consumers first, considering that without people to borrow money, you would be out of business.
Thank you for your time and I hope you have learned a valuable lesson from all of this, as I know many individuals have.