"The Optics Are Bad"

by hilzoy

From the NYT:

"Banks and mortgage lenders are placing top priority on killing President Obama's proposal to create a new consumer protection agency that would regulate home loans, credit card fees, payday loans and other forms of consumer finance.

The Obama administration fired an opening shot on Tuesday, sending Congress a detailed, 150-page proposal for an agency that would set new standards for ordinary mortgages, restrict or prohibit risky loans, investigate financial institutions and enforce new laws aimed at protecting credit card customers.

"This agency will have only one mission -- to protect consumers," said Timothy F. Geithner, the Treasury secretary, in a written statement on Tuesday.

But industry executives vowed on Tuesday to fight Mr. Obama's plan with everything they have, even though banks are still heavily dependent on many taxpayer-supported loans and loan guarantees to get through the crisis. (...)

Bank executives said they knew they faced a difficult political fight, given the soaring number of homeowners facing foreclosure.

"We know the optics are bad," said Scott Talbott, vice president for government affairs for the Financial Services Roundtable, a trade association in Washington. "If you are against a consumer regulatory agency, then everybody will say you're against consumer regulation.""

I suppose that when your industry has come up with such gems as the liar loan, helped bring the entire financial system to the brink of ruin, and helped bankrupt not just the people who took out those loans but people who had nothing to do with them -- people were laid off because of the crisis you helped create -- and when, after all that, you decide to oppose regulation of consumer financial products, you might say that "the optics are bad". 

Here's some more bad optics:

"Gabby Ornelas, a former teller at the giant Bank of America Corp., remembers the training sessions. And she remembers her marching orders: "Sell, sell, sell."

Ornelas was instructed to use her Spanish language skills and Latina heritage to sign up customers for as many kinds of banking services as possible, she said -- services that led to lucrative fees for the bank and financial entanglement for many customers.

"We were coached every day to push multiple checking accounts, credit cards and debit cards even when the customer didn't understand how to use them," said Ornelas, who lives in Landover Hills, Md., a town with a large immigrant population and a per-capita income of less than $19,000.

In one case, she described a Central American mother of three who came back to see her at the bank, distressed about $300 in overdraft fees incurred after Ornelas persuaded the woman to open a second checking account. (...)

The former workers said they were going public to lay out what they saw as a little-known side of BofA's business model: encouraging working-class customers to sign up for high-interest-rate credit and cash advance services and structuring an array of check and debit card services to maximize overdraft fees and other charges."

I can see why people who engage in those kinds of practices -- or these, or these -- might be leery of a consumer protection agency. What I can't see is why the rest of us should listen to them. They had their shot at policing themselves. If they wanted to avoid regulation, they should have taken it. They didn't. To my mind, they have long since forfeited the right to complain.

Comments

[Linkmeister]

""If you are against a consumer regulatory agency, then everybody will say you're against consumer regulation.""

Well, yeah. Mr. Talbott, how could it be otherwise?

Besides, you are against consumer regulation. If it eats into your fees, you're against it.

[Redhand]

On NPR yesterday I heard a shill for the financial industry claiming that the bill would kill the ability of lenders to come up with (I kid you not) "innovative products" and force consumers to choose between "plain vanilla" loans. He was oblivious to the irony. I can't think of a better reason for such regulation.

[Marty]

This one, despite a reasonable arguement over the structure of a consumer regulating body, I agree with. Bad business practice has in fact ceded their right to complain.

[Slartibartfast]

I wish people would stop saying things like "the optics are bad", which means something completely different to me than "this looks bad". "The optics are bad" could be bad design, or it could be damaged coatings. The "this looks bad" implication has an eye-of-the-beholder placement of fault that really doesn't sit well with me.

[Russell Abbott]

I find this totally unsurprising. If the last year has taught me anything, it's that a good operating assumption for the financial industry is that they will take the path most likely to destroy themselves and everyone else, while paving that path with the cruelly-exploited remnants of as many poor people as possible. Of course they want their gajillion dollar bonuses back, and of course they would sell whole continents into slavery to get them back.

/rant

The question for us now is whether or not our political system can muster up the guts to break the elites badly enough that we won't see another crisis like this for a generation. My guess is more like 10 years.

[Peter K.]

Well I guess this shows those ultra lefites who say Obama and Geithner are tools of Wall Street are wrong.

It's not just that these companies are screwing over consumers for profits, it's that they're causing systemic risk which almost brought down the global economy.

[John Thullen]

What is required is a massive ethical unionization of the working stiffs in both the healthcare and the financial industries.

These are the people who should be able to link figurative arms and refuse to carry out directives (and respond to bonus systems)that drop lymphoma sufferers from the healthcare rolls and subject financial consumers to marketing blitzes which separate them from their money on behalf of high-margin financial products.

Another suggestion: Let's no longer refer to the stuff we sell and buy as "products". That word is so abstract but somehow hypnotic that folks will load their grandmothers onto boxcars for shipment to processing plants because somehow it will lead to "getting product out the door".

Marketing and accounting: just business school words for lying and cheating.

[Gary Farber]

I wish people would stop saying things like "the optics are bad", which means something completely different to me than "this looks bad".

And I still wish people would remember that "affected" better describes what they mean in most cases than "impacted," but both these battles are lost, alas.

(The former isn't helped by the fact that a large proportion of the population confuse "affect" with "effect.")

"I find this totally unsurprising. If the last year has taught me anything, it's that a good operating assumption for the financial industry is that they will take the path most likely to destroy themselves and everyone else, while paving that path with the cruelly-exploited remnants of as many poor people as possible."

I think capitalism is well and good in many areas of our economy, but it's my observation that most centralized huge corporations have these tendencies. They tend to suffer, basically, from the some of the same flaws of communism, ironically enough: centralized decision-making with insufficient responsiveness to their base sellers and points of contact with customers, as well as insufficient awareness of what customers actually want, while meanwhile abusing their employees to, and often past, the absolute limit of the law, which they've usually managed to get rewriten to allow far greater abuses than they should be allowed.

And, yes, lying and cheating are, if not downright mandated in many cases by central management, at least highly encouraged and winked at.

These all don't tend to be winning strategies in the long run, rather than perhaps in the next quarter or two.

[Gary Farber]

Another suggestion: Let's no longer refer to the stuff we sell and buy as "products". That word is so abstract but somehow hypnotic that folks will load their grandmothers onto boxcars for shipment to processing plants because somehow it will lead to "getting product out the door".

In the publishing industry, books are commonly referred to as "units."

[mds]

That word is so abstract but somehow hypnotic that folks will load their grandmothers onto boxcars for shipment to processing plants because somehow it will lead to "getting product out the door".

Coincidentally, this is what Fox News is repeatedly claiming describes the Democratic Party's plans for health care reform.

[J. Michael Neal]

Marketing and accounting: just business school words for lying and cheating.

Actually, the accounting parts of the business school aren't so bad. I have a number of problems with the program I'm in (Masters of Accountancy at the University of Minnesota), but my *accounting* professors teaching unethical behavior isn't one of them. They are as openly derisive of a lot of these business practices as anyone here.

The *rest* of the business school, though, is every bit as sleazy as you describe, with the exception of a couple of finance professors, and one IT management instructor I had. It's the ethos in the Marketing, and Management, and Operations departments that teaches accounting students to misuse what they are taught. I'm proud of the C- I got in Management Communications, because it means I just barely passed, and didn't have to take it again, but that I did the minimum amount of whoring myself to the teacher necessary.

I'd really like to blow up all the business schools. Even aside from the ethical problems involved, which are quite a bit more extensive than just this, I think that they provide a substandard education. They aren't rigorous, and the grade inflation is worse there than anywhere else. The thing I like about my program is that I get to skip most of the truly useless, offensive parts of a MBA curriculum, and just learn the accounting. That I'm sitting in the same classes as MBA students (aside from three core courses just for the MAcc) and paying 2/3 of the tuition that they d is just a bonus.

Of course, I just allowed Thullen to bait me into a defensive response, so he wins.

[Slartibartfast]

My wife is a financial analyst with a very strong accounting background, and she would rip John Thullen's still-beating heart from his chest if he suggested to her that she was unethical.

Figuratively speaking, of course.

[mds]

"It's accountancy that makes the world go 'round."

As Mr. Neal observes, there's plenty of lying and cheating in business, but it is not concentrated in accounting. It's still unglamorous, if nothing else. By the time your company has accountants fixing the books, the rot is already pervasive. And certainly not driven by the accountants trying to cover up their own criminal deeds. Usually.

Marketing folk? Arbitrageurs? Have at them.

she would rip John Thullen's still-beating heart from his chest

Mr. Thullen's heart stopped beating sometime back in mid-1992, and was replaced with a pump dispensing a varying admixture of bile, espresso, mescaline, and beet sugar. And God bless him for it.

[Cyrus]

My wife is a financial analyst with a very strong accounting background, and she would rip John Thullen's still-beating heart from his chest if he suggested to her that she was unethical.

Figuratively speaking, of course.

She was a whistleblower, then? Congratulations! That must have taken a lot of bravery on her part, to go against her co-workers like that.

[Slartibartfast]

She was a whistleblower, then?

WTF?

[togolosh]

If we're dropping MBA-speak words I suggest "consumer" is a much better candidate than "product."

I never want to hear a politician talk about the interests of consumers. If it's not good for citizens and constituents it's not good, and consumption has nothing to do with it.

[Dave C (the uppity newcomer)]

In my darker moments, I tend to believe that Bill Hicks had the
definitive take on marketing.

[John Thullen]

I would never suggest without evidence that specific individuals might be unethical, particularly not Slart's wife, who sounds like a formidably ethical woman with a good figur(ative).

Only that the transactions in the buy-sell parts of our lives (particularly in abstract service areas like healthcare and finance) have become as deracinated as the connection between a chicken and a McNugget -- that is, there is very little if any chicken changing hands despite the fact (read somewhere, maybe "The Omnivore's Dilemma")that maybe 47 chicken extracts, by-products, constituents, probably some bile, expresso, mescaline, and certainly beet sugar, too etc can be found in a McNugget (formerly -- apparently McDonald's has been forced to put some chicken in there).

I can understand Slart's wife wanting to rip my heart out of my chest, and I'm sure she wouldn't mean anything personal by it and we could remain friends, but somewhere down the line there is an accountant or an adjustor or some such person at a health insurance company who will "rule" that the heart damage was a pre-existing condition and I would be out of luck and the accountant in question would receive a bonus for the ruling.

[Eric Martin]

I can understand Slart's wife wanting to rip my heart out of my chest, and I'm sure she wouldn't mean anything personal by it and we could remain friends, but somewhere down the line there is an accountant or an adjustor or some such person at a health insurance company who will "rule" that the heart damage was a pre-existing condition and I would be out of luck and the accountant in question would receive a bonus for the ruling.

Heh.

[Gary Farber]

"...can be found in a McNugget (formerly -- apparently McDonald's has been forced to put some chicken in there)."

Hey, KFC's new secret ingredient in their chicken is... beef.

[skeptonomist]

Unfortunately whether the rest of us listen to the bankers or whether what they do looks bad is turning out to be irrelevant. Congress and Obama and his appointees listen to them and that's all that counts.

[ral]

It's a meat process.

[byrningman]

"We were coached every day to push multiple checking accounts, credit cards and debit cards even when the customer didn't understand how to use them," said Ornelas,

I'm sorry, but how is anyone supposed to help this kind of person, by which I mean the customer? You cannot con an honest man -- none of this overselling of banking products would work if the customers didn't try to spend money they didn't have (more credit cards? oh yes please!) or didn't sign up for things they didn't understand.

Do we need a government bureaucracy to stop computer salesman from selling people more expensive computers with more bells and whistles than they need?

Certainly the 'finance industry', broadly defined, has much to answer for. But am I the only person who doesn't feel especially sorry for people who walked into a showroom, ie a bank branch, and signed up for whatever the salesman was hawking, even when they admit to not understanding what they were signing?

I'm sorry, but it does actually suck a little bit if those of us who show a minimum level of responsibility and common sense are denied potentially useful financial products because millions of voters can't be trusted to make their own decisions, and basically want elected officials to retroactively make it all ok for them again.

[russell]

"I'm sorry, but how is anyone supposed to help this kind of person, by which I mean the customer?"

You could start by not trying to rip them the f**k off.

Dig?

Check this out byrningman. People who can utter statements like the following with something approaching a straight face:

"If you are against a consumer regulatory agency, then everybody will say you're against consumer regulation."

are, ipso facto, full of shit. They should not be allowed to sell girl scout cookies, let alone financial products.

If that deprives you of the opportunity to purchase a potentially useful financial product, you'll just have to suck it up.

I can't believe how freaking stupid this whole conversation has become. In a sane society these m*****f****rs would be in jail.

For crying out loud in a god damned bathtub.

[Mr Furious]

byrningman--

I suspect in many, many cases, these "salespeople" made things seem perfectly clear and people thought they understood what they were getting.

[byrningman]

I suspect in many, many cases, these "salespeople" made things seem perfectly clear and people thought they understood what they were getting.

If there was actual deceit or fraud, by all means let's prosecute them. Otherwise, the customer only has himself or herself to blame really.

Some of these businesses practices were certainly immoral, but I happen to think that a whole bunch of ways of making a living are immoral that are nevertheless legal. Ultimately, I don't see how these companies are any more responsible for their customers signing up for stuff they couldn't afford than a beer brewery is for their customers becoming raging alcoholics. In fact, I'm pretty sure that the paperwork that accompanies anything the bank sells you is much more substantive and contains many more disclaimers than a tin of beer.

[byrningman]

"I'm sorry, but how is anyone supposed to help this kind of person, by which I mean the customer?"

You could start by not trying to rip them the f**k off.

Dig?

I'm sorry, Russell, but what you don't seem to dig is that companies exist to relieve you of your money. That is their purpose. When you walk in the door looking to buy, don't expect them to be reluctant to sell. It's YOUR responsibility to decide what you can afford to buy, NOT THEIRS.

Nobody can be ripped up, absent outright fraud, so long as they read the details of what they are signing up for, and if they don't understand the details THEY SHOULDN'T SIGN. Your life can be complete without signing up for multiple credit cards, multiple current accounts, overdraft facilities etc. It really can. I find it all ridiculous to be honest.

[Anarch]

Nobody can be ripped up, absent outright fraud, so long as they read the details of what they are signing up for, and if they don't understand the details THEY SHOULDN'T SIGN.

And what of the people who thought they understood the details? Or were convinced they didn't matter, which is much the same thing. It's not like there's some magic neon sign that flashes whenever you don't know what's going on -- although I wish to god there were, it would've made my life as a teacher so much easier.

[mythago]

You cannot con an honest man

This is what we, in the legal industry, refer to in technical language as "complete horseshit".

Of course you can con an honest person. You do so by lying to them, by playing on their willingness to believe that most people are honest and fair, by letting them believe that a portion of their agreement means A when it really means B, by skilfully answering their questions with misleading nonanswers.....and so on.

byrningman's arguments are simply defensive attribution. If consumers are only ripped off when they are stupid, then we, the smart, careful consumers, need never worry about being ripped off or cheated.\

[ral]

You Can't Cheat an Honest Man

Seemed like an obvious association to me. Apt, too.

[Tony P.]

Let's compromise. Let's just require every branch office of a "finncial services" company to post a big sign on its door:

YOU MUST BE THIS SMART
[insert photo of byrningman]
TO DO BUSINESS WITH US

That ought to satisfy everybody.

--TP

[byrningman]

Of course you can con an honest person. You do so by lying to them, by playing on their willingness to believe that most people are honest and fair, by letting them believe that a portion of their agreement means A when it really means B, by skilfully answering their questions with misleading nonanswers.....and so on.

Yup. No evidence any of that happened here though. Any business I've done with any bank, which includes several American banks, such as opening accounts, getting credit cards etc., has the necessary information presented in a reasonably clear and concise fashion.

Sure, it's a drag to have to read through all that stuff, but then again, you are giving the bank your money, I would have thought that sufficient incentive.

Obviously, if there is evidence of actual fraud, I'm all in favour of punishment. But I think we all know that for the most part what we are talking about here is simply very aggressive selling, with very few instances of bank employees actually lying to customers or somehow failing to give them the necessary paperwork.

If these would-be customers are so hard up, why on earth are they looking for anything remotely complicated in their banking needs? The answer of course is that they are seduced by the promise of credit, overdrafts, etc., the idea that they are somehow getting purchasing power they don't objectively have. Hence, you cannot cheat an honest man.

Face it, this all a sop to the dumb and lazy constituency of voters, who are numerous. It's not much better than "Caution: contents hot" labels on coffee cups.

[AndYnot?]

If there was actual deceit or fraud, by all means let's prosecute them...

...absent outright fraud...

...Obviously, if there is evidence of actual fraud, I'm all in favour of punishment....

Maybe it would help if we had an agency responsible to determine if such fraud occurred. And more protective regulations to clear up the blurry areas. And much stiffer penalties so a lender couldn't just assume the rare small fine to be just another cost of doing business.

But I think we all know that for the most part what we are talking about here is simply very aggressive selling, with very few instances of bank employees actually lying to customers or somehow failing to give them the necessary paperwork.

"We" know no such thing. You believe it to be so. You also seem to believe in some bright shiny line between "fraud" and "agressive selling." I don't share your belief and I don't trust the banksters to regulate themselves and not step happily across that line whenever they think they can get away with it.

"You f---ked up; you trusted us," is a good enough response for you, I guess.

[byrningman]

Maybe it would help if we had an agency responsible to determine if such fraud occurred.

Oh, I didn't realise that was the argument. In that case, you lose the argument.

[Nate]

"You can't cheat an honest man" is actually not true, from what I've read of and by con men, as well. It's just a saying parroted by people who want to find some moral failing in victims so therefore it's the victim's own fault. Which ignores the fact that EVERYONE has flaws that can be exploited like that, but hey, it's not about logic, it's about being able to say "Well, they deserved it."

[russell]

"I'm sorry, Russell, but what you don't seem to dig is that companies exist to relieve you of your money. That is their purpose."

You seem to have mistaken "companies" for "thieves". Not an uncommon error, some of the companies seem to have made the same mistake.

Commercial enterprises exist to provide useful goods and services. Folks may wish to buy them, or not, depending on the value of those goods and services to them.

When those enterprises misrepresent the substance or value of what they're offering, that's called "lying". Not "selling", not "marketing", not "polishing up the optics to a fine gleam".

Lying.

In many cases it's not actually illegal, it's just wrong.

Sadly, there are enough liars in the world that it behooves us all to watch our backs. That doesn't amount to a defense of lying, nor does it make lying any less crappy.

These people are liars and cheats, and they are perfectly happy to lead other people into financial ruin in order to make a few bucks. In a sane world they'd be in jail.

Standing up for liars and cheats is a peculiar and thankless position to stake out. I'm not sure what's in it for you, but I hope you're getting something useful out of it. You couldn't pay me to do it.

[tariqata]

As a happily soon-to-be-ex financial service worker (though for a Canadian bank and not in a position that requires me to sell anything), this rings very true:

Another suggestion: Let's no longer refer to the stuff we sell and buy as "products". That word is so abstract but somehow hypnotic that folks will load their grandmothers onto boxcars for shipment to processing plants because somehow it will lead to "getting product out the door".

The bank for which I work refers to chequeing accounts, lines of credit, etc., as "widgets" and I am the only one who seems to think that term is hilarious.

To byrningman, I strongly disagree with placing most of the responsibility on consumers for their banking choices. People do make bad decisions, but there is a trend in the financial services industry toward ever-increasing sales, and that gives financial services workers an incentive to sell products that consumers don't need. I see this happening on a regular basis. Fortunately, it is generally a situation where people were convinced to switch to an expensive account service fee schedule, and it is simple to switch them to a cheaper one, but this is something I deal with daily, and more complicated problems do turn up.

One reason that I'm happy to be leaving is that I simply do not understand how it is possible for us to double our profit, every year, which is the current expectation, without massively over-selling expensive services.

[russell]

"I simply do not understand how it is possible for us to double our profit, every year, which is the current expectation"

AKA "batsh*t insanity".

You're wise to get out. As soon it becomes apparent to your employer that they're not going to make their numbers, they will attempt to solve that problem by firing people to cut costs.

Voila! Problem solved.

Don't work for crazy people, it only encourages them.

[byrningman]

People do make bad decisions, but there is a trend in the financial services industry toward ever-increasing sales, and that gives financial services workers an incentive to sell products that consumers don't need.

Absolutely, I've experienced it myself just in the past week. I wasn't convinced, and didn't sign up for extras that I didn't feel like I needed. Just like I don't believe the Best Buy guy when he tries to tell me that I need to pay for a special Best Buy guarantee for whatever piece of electronics I buy for them. Just like I don't believe the car salesman that I really need this or that extra that all goes on their profit margin.

I've explicitly said I think that financial companies trying to milk their customers is immoral, but I haven't seen anything to indicate that outright fraud is widespread. I've also made clear that I'd be the first to demand serious penalties when fraud occurs.

Russell, you can keep screaming "liars, liars, thieves, liars" all you want, but you'll never get within earshot of a reasoned analysis that way.

Does the financial industry accept a huge amount of blame for what's happened in the past few years/months? Of course. I'll I'm saying is that every single one of us has the choice to *not* sign up for every debt mechanism offered to us, just as we have the choice to *not* line around the block to see the latest dumb movie on the day it opens, or to *not* line around the block to buy the latest cellphone the day it goes on sale. People try to sell you stuff all the time, you don't have to buy it.

And while the financial industry for the most part deserves all the criticism it's getting, there aren't nearly enough people pointing out that it is the American public who, buy and large, stopped saving any money and jumped enthusiastically into unmanageable debt, with predictable consequences.

You say a special agency is needed to police consumer finance. Maybe. But it's sort of getting things backward, if the consumer's reckless disregard for his own financial means and exposure is going to continue unabated.

[ScentOfViolets]

Yup. No evidence any of that happened here though. Any business I've done with any bank, which includes several American banks, such as opening accounts, getting credit cards etc., has the necessary information presented in a reasonably clear and concise fashion.

But there is evidence - the woman's testimony itself:

"We were coached every day to push multiple checking accounts, credit cards and debit cards even when the customer didn't understand how to use them," said Ornelas, who lives in Landover Hills, Md., a town with a large immigrant population and a per-capita income of less than $19,000.

In one case, she described a Central American mother of three who came back to see her at the bank, distressed about $300 in overdraft fees incurred after Ornelas persuaded the woman to open a second checking account. (...)

And it's quite easy to lie in these situations. For example, the customer could have asked if there were extra charges for opening a second and been told, 'No, absolutely not'. And when she did get the statement with the additional charges and complained about it, she could have been told with a straight face that there were no 'extra charges . . . just the regular charges associated with opening a second account. Oh, you meant would you be charged more if you opened a second account. You should have said so, your bad; we assumed you were asking if there would be charges on top of the regular ones.'

The same with the Bush/Cheney denials about Saddam and 9/11: 'We never said that Saddam was responsible for the terrorist attack on the World Trade Center. Check the transcripts.' And yet, oddly enough, many millions of people came away with exactly that impression.

In short, byrmingham, you've got no juice here. In fact, your 'analysis' sort of suggests that salesmen serve no useful purpose. So why do so many firms employ them:?

[ScentOfViolets]

Russell, you can keep screaming "liars, liars, thieves, liars" all you want, but you'll never get within earshot of a reasoned analysis that way.

Is that a misrepresentation of what russell said . . . or lie? And what's the difference? As one poster said above:

I suspect in many, many cases, these "salespeople" made things seem perfectly clear and people thought they understood what they were getting.

Posted by: Mr Furious

We saw this happening time and again, where people thought that a lender giving them a mortgage meant that they would be able to afford it - otherwise why would they get one? In reality, unlike in the times of their parents, their grandparents, their great-grandparents, and great-great-grandparents, all it meant was that entity holding their paper was kiting it out the back door rather than holding on to it as in the days of yore.

But that's on these poor saps, right?

[byrningman]

For example, the customer could have asked if there were extra charges for opening a second and been told, 'No, absolutely not'. And when she did get the statement with the additional charges and complained about it, she could have been told with a straight face that there were no 'extra charges

Ok, this is getting silly, there's no point in going any further. All you are saying is "coulda this", "maybe that". Gosh, I'm convinced, lock them all up based on your wild speculations.

The people arguing with me here just keep repeating the same mantra over and over. "People thought this, they believed that". So what? That's my point -- they thought wrong. The only people totally on your side in this world, especially the USA, are your lawyer and your momma, certainly not the guy trying to *sell* you something.

The law is pretty straightforward. If they lied, book 'em. If the documentation they provided was deceitful, book 'em. If they didn't lie, buyer beware, as always in avenue aspect of life.

[ScentOfViolets]

Ok, this is getting silly, there's no point in going any further. All you are saying is "coulda this", "maybe that". Gosh, I'm convinced, lock them all up based on your wild speculations.

Um, no, that's not what's happening here; that's you moving the goalposts. Remember when you said this:

Ultimately, I don't see how these companies are any more responsible for their customers signing up for stuff they couldn't afford than a beer brewery is for their customers becoming raging alcoholics.

All I've done is give an example of how companies can indeed be responsible; I don't have to point to a specific instance. And it looks like the example I gave did enable you to see how companies can be responsible for customers signing up for stuff they can't afford.

So now you've fallen back on the old tried and true tactic of claiming that various people have got to convince you, byrningham. Uh-uh. What you're expressing is a world-view, not a commentary on the situation as it stands.

And you are, to be quite blunt, not convincing. Not as convincing as my own lying eyeballs anyway.

Try dealing with what is actually happening, not the way people 'should' behave . . . which as I've already pointed out, obviates the need for any extensive sales force. That this isn't the case in the real world should suggest something to you. I know your evidence-free assertions suggest something to me.

[russell]

"but you'll never get within earshot of a reasoned analysis that way."

It's far from clear to me that an "analysis" is required.

Sez Ornelas:

"We were coached every day to push multiple checking accounts, credit cards and debit cards even when the customer didn't understand how to use them"

Any decent person might mention, "by the way, there is some risk here for you, let me explain what it is".

Anyone whose interest is in providing a useful product or service, and who gives a rat's behind about the customer, same deal.

To not do that is unscrupulous.

If we've gotten to the point where major financial institutions are not expected to rise to the bar of "not unscrupulous" then we are well and truly screwed.

I heard a comment from one of Madoff's investors on the radio this week. He didn't really give a crap whether Madoff got 150 years or 150 minutes, as far as he was concerned the damage was done and beating up on Madoff wasn't going to make much difference one way or the other.

The observation he made was: Where the hell was the SEC? Madoff was investigated EIGHT TIMES by the SEC, and given a pass.

Who, this gentleman asked, is going to want to invest a dime if this kind of crap can go on?

The point of view you are espousing here is profoundly cynical, and basically gives a pass to deeply harmful and antisocial behavior. It was the victim's fault because they didn't vet the offer to a sufficient degree, and in fact it's doubly their fault because they're guilty of wanting an advantageous financial deal.

Those dishonest greedy bastards!

People who sell financial goods and services should disclose the risks those things incur, as well as the advantages. If they're selling to unsophisticated buyers, even more so.

If they don't have the basic human decency to do so of their own accord, then they should be compelled to do so by law.

I'm not sure you have a realistic grasp of the full range of consequences of allowing predatory behavior on the part of the financial sector to continue. People will simply stop making their money available to the financial system. It's happened before, there's no reason it wouldn't happen again.

More than that, it's profoundly damaging to the society at large when wealthy people and institutions are not held to basic standards of accountability and responsibility.

Institutions that can't meet their goals without deliberately causing other folks harm are antisocial and toxic to society at large. They should be dissolved, period.

Enough of this crap.

[russell]

"Gosh, I'm convinced, lock them all up based on your wild speculations."

Look dude, here was your question:

"I'm sorry, but how is anyone supposed to help this kind of person, by which I mean the customer?"

The answer is dead simple: quit trying to rip them off.

What's not clear?

[Hartmut]

Actually, there is legally mandated deceptive accounting. Companies have to maintain three balance sheets, one for the shareholders/public, one for the purpose of taxes, one (the genuine one) for the actual internal accounting. To oversimplify it, the first says "Be happy! We made lots of money for you", the second says "Help! We didn't make any profit and thus can't pay any taxes" and the third tries to give a realist view of the actual state of affairs.
---
An old definition of fraud is "using/exploiting somebody's lack of knowledge to do him harm".

[byrningman]

I've no idea what you're talking about, ScentofViolets. Show me evidence of pervasive fraud that warrants structural change in the consumer finance market, it's that simple.

Salesperson testifying that their bosses told them to sell stuff is not evidence of fraud, unless essentially every sales pitch is fraud.

[byrningman]

People who sell financial goods and services should disclose the risks those things incur, as well as the advantages. If they're selling to unsophisticated buyers, even more so.

If they don't have the basic human decency to do so of their own accord, then they should be compelled to do so by law.

Russell, I completely agree. Luckily, these companies *are* compelled to disclose the risks by law. If they are not, that would indeed be a problem. Please show me evidence of pervasive fraud and failure to disclose the relevant risks/caveats/transaction charges etc.

The point of view you are espousing here is profoundly cynical,

Uh, yes it is, and appropriately so. We are talking about finance here.

[byrningman]

I don't really understand the confusion here. Has no one on this thread ever signed up for a bank account or a credit card? There's plenty of paperwork you given, it's mandated by law.

Unless these supposedly-scammed customers can show that they were provided with false or deceptive information, I honestly don't see the issue. If people already don't read their own paperwork, what more can regulation do?

You talk as if there aren't already plenty of laws and regulatory bodies in place. You might argue that they aren't working, but no one has made that argument yet, people just keep telling me over and over and over that banks *might* lie to people, *might* scam people, whatever. If they are, then tell a damn prosecutor already. This is getting absurd.

[liberal japonicus]

Here is the testimony of Robert Manning at the Hearing on Examining the Billing, Marketing, and Disclosure Practices of the Credit Card Industry, and Their Impact on Consumers.

The passage of the Financial Services Modernization Act of 1999, which
consecrated the Citibank and Traveler’s Group merger, marks the end of Depression-era regulation of retail banking as separate from commercial banking/insurance services. It is the emergence of financial services conglomerates such as Citigroup that was the catalyst for the plethora of recent Wall Street financial scandals. Moreover, the ability to acquire companies across financial services sectors and share client information with corporate subsidiaries underlies the rise of “cross-selling” financial products such as investment services to credit card clients. This explains Citibank’s 1997 purchase of AT&T’s unprofitable credit card company (8th largest), at a substantial premium, with its large number of high income customers. For Citigroup, this corporate synergy produces multiple revenue flows by originating high interest loans through its credit card 12 (Citibank) and subprime lending (First Capital Associates was acquired in 2000) subsidiaries which are then resold through its investment division of Solomon Smith Barney (cf. Hudson, 2003; Manning 2003a).

Not incidentally, access to personal consumer credit information enables predatory lenders to identify highly indebted households that are susceptible to duplicitous debt consolidation solicitations. In Acorn v Household Finance Corporation, a California suit filed in 2002, lists of prospective clients were obtained from affiliated retailers including Best Buy, Wickes Furniture, K-Mart, Costco, and Home Base. Homeowners with high credit card and other consumer debts were identified from these lists and contacted by account executives at nearby branches. Potential customers were promised that their debt consolidation loans would save them money after the refinancing of their credit card, consumer loan, and mortgage debts. In the process, the objective of this ‘target practice’ was to deliberately ‘upsell’ loans in amounts so high in relation to the value of the borrowers’ homes that it would be nearly impossible to sell or refinance them in the future. By misrepresenting the total cost of these debt consolidation loans (origination fees, mandatory insurance, high interest rates), Household Finance Corporation generates high profits from the initiation of these loans as well as from their resale in secondary mortgage and securitarized bond markets.

...

As for future statutory regulation and other consumer protections, local and state attempts have been aggressively thwarted through the creative use of Federal Preemption. That is, the U.S. Constitution specifies that public efforts to regulate the operation of a national banking system can only be legislated by the U.S. Congress to the exclusion of local and state jurisdictions. The tremendous political influence of the banking industry on both the Executive Branch (MBNA was the largest contributor to George Bush’s Presidential campaign) and the U.S. Congress (especially Senate Banking and House Financial Services Committees) ensures that there will not be any significant pro- consumer bills enacted in the next couple of years. In addition, the credit card industry’s recent imposition of binding arbitration is designed to drastically curtail class action lawsuits. The legality of mandatory arbitration and thus the future of consumer litigation against unfair lending policies by the credit card industry is being challenged with varying degrees of success by several ongoing lawsuits.

More testimony is here. There are any number of examples of misleading claims here. Perhaps they don't rise to the level of 'lies', but many of the tactics seem purposefully obsfucatory and should be regulated.

[wonkie]

Here's an example: banks around my area offer "insurance" for over drafts on checking accounts. Every time I go to my bank they try to sell me one. I decline on the grounds that the best insurance against over drafts is to keep track of my expenditures and stop spending when I run out of money.

But not everybody is as skeptical as I am. The son of a friend of mine is pretty naive and just starting out, fresh out of high school and working as a carpennter's helper. He got one of those "insurance" accounts because he thought the bank folks must be giving good advice. The problem with the "insurance " is two fold: they cover your bounced check but they charge a very hefty fee for doing so and they don't notify you that you had an overdraft. They keep on charging interest for the "loan" they gave your account to cover the bounced check. My friend's son owed the bank seven hundred dollars before he even knew he had had an overdraft.

The thing is I heard the sales pitch for this"insurance" a bunch of times and never once did anyone explain that they were going to charge me for covering an over draft or that they were going to treat the coverage as a loan and charge interest for it. They presented the "insurance" as a service. Anybody could get taken by their sales pitch and I'm sure that lots of limited income people who have to bottom out their checking accounts every month do get taken.

[wonkie]

Over on the They Gave us a Republic site Blue Girl wrote about the house building industry in her area which in her perception is largley a fraud: houses which are supposedly upscale, topdrawer dwellings are in fact built substandard so that within a few years major problems occur and major repairs are required.
We have the problem of preditory lending practices, of banks giving loans which they bank officers knew the applicant couldn't afford, and now we are discussing bank "services" designed to screw the naive.

Has our culture always been this corrupt? It kind of reminds me of the snake oil sales days, pre-Sinclair Lewis.

Social Darwinism seems to be making a comeback.

[Fraud Guy]

I don't really understand the confusion here. Has no one on this thread ever signed up for a bank account or a credit card? There's plenty of paperwork you given, it's mandated by law.

Unless these supposedly-scammed customers can show that they were provided with false or deceptive information, I honestly don't see the issue. If people already don't read their own paperwork, what more can regulation do?

I am a relatively honest man. I have to be, as I work in fraud prevention. I have vetted contracts, done compliance work, and investigated many scams.

But I can still get taken.

It's called trust. Perhaps you live in a world where you trust no one; no friend, family member, business associate, or acquaintance (though it is true that paranoids do have enemies). Therefore, you read every document, check every punctuation mark, and research your associates to verify their veracity.

However, most people do not do this. They will trust the person they are talking with, the bank with the "good" reputation, or their attorney when they tell them that, despite some questionable appearances, that what they are doing is fine. But it can turn out that it is not fine.

And sometimes the people who are the most informed about the frauds are the most easily taken, so long as the appearance matches their expectation.

Companies spend millions to create an image that resonates trust, acceptance, or familiarity. Why did Nationsbank take on the Bank of America name when they bought out that institution? Why did SBC become AT&T?

I did receive a invitation for a Black card. My credit is currently horrid thanks to a foreclosure, so I though someone at Amex had gone haywire to send one. But it was a Visa bank (name disclosed nowhere except in the small print), for a $500 limit card, with a $300 activation fee required, a $96 annual fee, a $58 program fee, and a $36 card fee, with 31% interest accruing from the issuance date. That's all disclosed, but it's still fraud.

I have relied on verbal disclosures while waiting for written confirmation from banks, and found out that they weren't backing the verbal instructions--"oops, sorry, they shouldn't have told you that, and we can't waive the fee". "sorry, that's not what was in the notes, and we can't recover the recording of that conversation, you're still responsible for the overdraft". The problem is, the majority of the time, you can take verbal representations as valid, and the institution will back them up, but when they don't, it will cost you.

I could always take them to court, but most of the agreements require arbitration, and even if I could get past that to get to court, for the amounts involved, I would be paying an attorney more to show up than I would recover. Plus, as I noted before, I don't have the finances to cover that cost until I (hopefully) win and recover damages. So I have to deal with it and move on, taking it as a lesson learned.

But you still have to trust, and you can't always prove deception, and many people have made the argument that the regulatory bodies aren't working (i.e., SEC with Madoff; Fed with bank oversight), and they face the same constraint as consumers--the cost to prosecute is so high, and with white-collar crimes the evidence to sift through is so large, that unless there is iron-clad (if such a thing is possible) evidence, they won't go forward, or get the institution to pay a fine incommensurate with the actions, and not admit to their wrongdoing.

This is absurd, but not in the way you meant

[byrningman]

Here's an example: banks around my area offer "insurance" for over drafts on checking accounts. Every time I go to my bank they try to sell me one. I decline on the grounds that the best insurance against over drafts is to keep track of my expenditures and stop spending when I run out of money.

Well, that's basically my entire argument.

[Nate]

And you completely ignored the rest of the comment, where he mentioned the complete LACK of disclosure on their sales pitches and advertising, where it might only be mentioned in small print on the back of page 8 that they're going to treat this 'insurance' as a loan, which they will charge you interest on, on top of other fees, and probably a monthly fee for this "insurance".

That's not insurance. It's a line of credit (at best), but the bank deliberately called it 'insurance' to decieve people into thinking it's something it's not.

Which is exactly what everyone else is talking about, and you said nobody's 'shown', then ignored the part that showed it.

[wonkie]

Byrningman, you are expressing the Social Darwinism to which I referred.

There are many ways to run a businees. One is to produce a quality product, functin in a responsibhle way that is respecrtful of the costomer, and to go home at the end of the day thinking,"I earned my money well!"

Another is to do whatever the business can get away with, screw people over for shortterm financial benfit, and go home at the end of the day thining,"Hey, suckers! I got mine!

So which kind of behavior do you think makes the better cultural norm?

BTW when I was a teen and got my first checking account the bank covered. wiothout charge, the first tow or three overdrafts for every cutomer just as a matter of routine busness practice.

[russell]

"You might argue that they aren't working, but no one has made that argument yet"

Consider it so argued.

[byrningman]

the complete LACK of disclosure on their sales pitches and advertising, where it might only be mentioned in small print on the back of page 8 that they're going to treat this 'insurance' as a loan, which they will charge you interest on, on top of other fees, and probably a monthly fee for this "insurance".

Um, that's not lack of disclosure.

I have never defended these businesses practices. In this thread I have called them immoral, or denounced them in other ways, several times. My point is that your common sense is the best, and probably the only defense against this kind of nonsense. And just because they are essentially 'scams' in the colloquial sense, it's far from clear that they are scams in a literal, legal sense.

I'm not 'advocating' social darwinism, I'm acknowledging reality.

[byrningman]

My last point on the matter is this: if you think some new government agency is going to protect you and cuddle you, you're only going to get scammed again. People are already complaining that the SEC etc. didn't stop Madoff, so why put your faith in some hypothetical new body? Smells like the DHS nonsense all over again. Acronyms to the rescue!

[John Thullen]

I had a better, funnier comment, but it is not being accepted ....

... but I'll go along with byrningman's comment that the buyer should exercise common sense.

Now, may we stipulate that the seller (including the lower level employees who hawk this stuff) exercise common sense, and that their employers not fire them for exercising common sense, when they refuse to sell non-sensical stuff to otherwise sensible people.

Or is it stipulated that wolves exercise common wolf-sense when it is in their interest to be wolves and that sheep exercise common-sheep-sense when it is in their interest to be sheep?

[Gary Farber]

"My last point on the matter is this: if you think some new government agency is going to protect you and cuddle you, you're only going to get scammed again."

Also, let's disband the FDA, FTC, OSHA, and the Consumer Product Safety Commission, the Commodity Futures Trading Commission, the National Labor Relations Board, the National Transportation Safety Board, and the Federal Energy Regulatory Commission , while we're getting rid of the obviously unnecessary SEC. These agencies clearly all have done no good whatever. Coddlers, all of them.

[John Thullen]

"The optics are bad".

I don't think they mean the buyer should have his eyes checked at the door and his eyeglass prescription upgraded.

More likely, they mean the small print is still too large, the hands holding the cards require more sleight-of training (now tomorrow, we'll talk about how the customer doesn't really mean "no" when she says "no"), and can we drape the bikinied blonde over the car hood a little more seductively because this customer keeps asking about safety features and mpg?

A professional salesperson can sell just about anything from annuities to Corvettes to elixirs without telling an outright lie, but he can adjust the optics (stand over here, where the light is better, now is that what you had in mind? .... or stand over here, in Hawaii, now is that the new pharmaceutical you were hoping for?) just enough to make it sound convincing to the buyer's wants and needs.

Band uniforms.

Rarely does a saleperson take you aside and say "Sir or Madam, do you really think it wise to buy this item in your current financial state? Just between you and me, I'd save my money for a rainy day and stick with the white bread checking account and the Valiant."

No, they might ask what price range you're thinking about and then begin the upselling, buppy. And then, oddly enough, you feel badly for THEM as you either blurt out "No" and flee, or give in just to get the stupid conversation over with.

See, we'rer lectured and hectored incessantly in this culture about two things by certain people (not Slart's wife) who call themselves a movement --- there are absolutes and they must be observed to the letter and, by God you will burn if you swerve from those absolutes when tempted by snakes .... and .. just about anything goes in commerce ... prevaricating, lying by omission, obfuscation, lowballing ... all of the usual snake training.

The perfect union of the two, of course, is Amway, wherein you ae misled upfront as to what the little presentation at the neighbor's house is all about by the nicest go--amndest righteous people you'd ever want to meet.

I wonder if the small print in the lymphoma sufferer's 80-page health insurance contract has a line that stated "If you are diagnosed with lymphoma, we're canceling your health insurance."

I expect not, but yet the problem is diagnosed as one of reading comprehension.

[russell]

"Or is it stipulated that wolves exercise common wolf-sense when it is in their interest to be wolves and that sheep exercise common-sheep-sense when it is in their interest to be sheep?"

The thing is, we're not talking about wolves or sheep. We're talking about people.

I agree that folks should exercise common sense, but some folks aren't particularly clever. Some folks don't have that much information. Some folks didn't grow up here, and/or didn't grow up in families where folks had a lot of money or owned property.

Some folks don't know what questions they should ask, or that they're entitled to some kinds of information, or that the banks would even think of ripping them off in the first place. Some folks just take stuff at face value, for whatever reason.

Those people shouldn't be viewed as prey, either by the folks selling financial products, or by any of the rest of us.

This isn't something that's going to change as long as the regulatory functions of government are more or less captive to the financial sector. As they apparently are now.

We all talk about this like it's inevitable. It's not. In my own lifetime, the financial sector was subject to much stricter regulation than it is now. And people got loans, bought houses, and banks made enough money to keep any normal, sane, non-pathological collection of investors and managers well fed and happy.

This kind of stuff is crap, and it's not necessary. Seriously, why should we put up with it?

[John Thullen]

"talking about people"

Agreed, Russell. But my point is that we were talking about some absolute called "common sense".

Which, of course, is not absolute. It's relative (beware of relatives, especially, who try to sell you insurance).

In fact, a single person can function as a wolf AND aheep in the normal course of a single day, depending on whether that person is buying or selling (and wolves can be buyers and sheep can be sellers, too, given that every transaction is a compromise (ideally,if all information is known to both parties) between two liars.

The sheep this morning can be the wolf this afternoon who finds it entirely commonsensical to dine on lamb.

What I am saying is that there is no such thing as "common sense" in commerce since people's "interests" work against it at all times.

What's the point in having common sense when the entire edifice of marketing works overtime trying to deflect, deny, and defeat common sense?

[Nate]

Because then you can blame the sheep for being eaten.

[Marty]

Just to chime in, is there a reason we assume that all the people are so stupid as to be "scammed" by this stuff? Are we talking socioeconomic classes that are stupid? Are we talking parts of the country? Everyone here seems to be intelligent enough to understand the risks of these "products"? So is it just really uneducated people? Should we specifically just protect them?

I am pretty sure I don't need this protection, so I was wondering if someone would define who does we believe does.

[Gary Farber]

"This kind of stuff is crap, and it's not necessary. Seriously, why should we put up with it?"

Damn straight. (Ignore -- speaking of that sort of thing -- ten second commercial at the start.)

[Nate]

There's no way for any person to be educated enough in everything to tell what's a good deal and what's not, not even Batman. That's the entire point of having regulatory agencies, so people can be assured that what they're getting is what it says on the tin. They make sure that the gas you get is really the quality it says, the food you buy at restaraunts and supermarkets really is food, the car you get really does what it says, etc.

The same concept applies to "innovative financial products" designed to separate you from your money. Except for the last several years, it hasn't at all, as the companies have innovated their way into better and better ways to baffle people with bull@$!# while sneaking two hands into your wallet. Such as the "overdraft insurance" that isn't really insurance, and doesn't really protect you from overdrafts anyway.

Financial transactions with banks are not Platonic perfect free-market transactions where both sides have complete information, all the information is on the side of the bank, except for stuff they don't really understand, like how the black box computers make your credit score. Or who's supposed to be the wolf when it's two sheep trying to fleece a family of sheep to keep the wolves away from their own door.

Any individual person who's got to work and live and work with financial stuff in the time they have remaining is going to be at a definite disadvantage working against a corporation with departments full of people who are paid to work full time on making more ways to innovate into your wallet, then go home and have to deal with their handiwork themselves. Though the guys in charge have enough money to pay somebody else to deal with the full-time bull@$!# they create. Which is how Batman manages it.

[russell]

"What I am saying is that there is no such thing as "common sense" in commerce since people's "interests" work against it at all times."

Hey John, I see what you're saying now. Thanks for laying it out for me. Sometimes I need help.

"I am pretty sure I don't need this protection, so I was wondering if someone would define who does we believe does."

I'm a 52 year old white suburban householder with a 25 year professional career writing software, a mortgage, a secured credit line, and a couple of credit cards. My wife is a subchapter S corporation who operates a couple of design and marketing businesses, and is a former partner in a marketing consultancy that had annual revenues in the millions.

We just refinanced our house. Before we did the deal, we talked at length with the mortgage broker, our personal financial advisor, and my brother-in-law, who is a medium-sized business owner in OH and who is generally savvy about money, more so than we are.

Every one of those three folks gave us information we were not aware of, and would not have known to ask about.

We're not financial whiz kids, but we're also reasonably sophisticated and experienced consumers of financial goods and services. And we needed a bit of help to understand all of the potential ramifications of doing the deal.

So I'd say the range of people who are vulnerable to financial hornswoggling is pretty broad.

[Marty]

"There's no way for any person to be educated enough in everything to tell what's a good deal and what's not, not even Batman. That's the entire point of having regulatory agencies, so people can be assured that what they're getting is what it says on the tin. They make sure that the gas you get is really the quality it says, the food you buy at restaraunts and supermarkets really is food, the car you get really does what it says, etc"

None of the things you mention make sure it's a good deal. Regulatory agencies don't keep people from marketing, selling, making nonfactual claims(we think this is the best car we ever had). They make sure the facts are available and truthful.
Even today no industry has more laws ensuring truth in disclosure than the financial industry, the regulatory agency will not stop people from buying things that are a bad deal.

Hopefully everyone has a brother in law.

[John Thullen]

Bernie Madoff was someone's brother-in-law.

[Old Soldier]

The government should protect the consumer as much as it does the lender. Right now there are many more protections for the lender. I should be able to mislead the lender, not lie, just mislead. When they want to sue me, I declare bankruptcy- no restrictions. I think you see where I'm going. Oh yeah, penalties for errors in your credit score.

[Turbulence]

Regulatory agencies don't keep people from marketing, selling, making nonfactual claims(we think this is the best car we ever had). They make sure the facts are available and truthful.

In other industries, regulatory agencies do all those things. Try selling a cancer cure that consists of nothing but distilled water if you don't believe me. In many countries, drug companies are legally forbidden from advertising directly to consumers and in this country, they are forbidden from selling most drugs directly to consumers. Try buying vicodin without a prescription if you don't believe me.

We've decided that many people are never going to be competent enough to assess medical claims well enough to permit an unfettered market in pharmaceuticals. Given that most people are functionally innumerate, I see no reason why a similar regulatory regime isn't applied to financial products.

Even today no industry has more laws ensuring truth in disclosure than the financial industry, the regulatory agency will not stop people from buying things that are a bad deal.

There are many financial instruments that are banned. Consider the classic pyramid scheme. Moreover, disclosure matters less than effective disclosure. If I give a 30 page document written at a grade 12 level to a man reading at a grade 8 level, have I really disclosed anything to him meaningfully? Of course not.

In other domains, we recognize how ridiculous this is. If a surgeon dropped off a dozen pages of dense legalese explaining the risks of a procedure he recommended to his patient rather than talking with him, we revoke his license to practice because dense legalese does not constitute "informed consent" in any meaningful way.

[Gary Farber]

"Try buying vicodin without a prescription if you don't believe me."

Don't expect to get it with a prescription very much longer.

[consumer card debt]

Whether you are scheduling to seek out a credit declaration program or debt consolidation, the two systems are basically the same. But, before you take action to go forth with either one, it's best to take with a qualified financial consultant first. It will recommend you from all the debt with lilt advisory. It is better expend some time to accomplish this commission and get consequences over debt free life.

[Janie]

There does exist a viable, profitable middle ground between plain vanilla loan options and blood-sucking leeches.

I used to work at a small bank that for many years (believe it or not) didn't do the above described sort of aggressive marketing of awful products. Then the board (wanting more profit) fired the CEO and replaced him with one who they deemed more ambitious. The first new "product" he bought and implemented was a $300 overdraft protection policy attached to all checking accts. The attitude of the lower level employees was still in line with the old management, so in addition to the mailed explanations of the new product we posted signs everywhere and went out of our way to explain to everyone how it worked, so they did not get fees from it by surprise. This worked very well, yet the bank made a FORTUNE from it anyway. Why? Because so many people were willing to pay $25 next week in order to access $50 (from their line of credit) today. I would ask them, "Are you SURE you'd rather get the $25 fee than wait two more days ('til payday)?" and they would always say yes. If they did this but then didn't pay their fees, when they came back to do it again I clearly explained our collections system and what the consequences would be if their credit score plummeted. I reminded them that the bank made more profit if they went ahead and cashed another check, that I was acting as their advocate, not the bank's, and I just wanted to make sure they fully understood what they were risking. They still wanted the $50.

It's quite possible to thoroughly educate customers (even the not-so-intelligent ones and the ones with language difficulties) and still turn an impressive profit from the ever-increasing numbers of people who choose immediate gratification even when it's self-destructive.

Ideally, of course, these people would be better protected as well. But how far should we extend consumer protection? Help with language difficulties... help with low intelligence... help with impatience and bad judgment... what's next--help with laziness? Too much of this and we could help ourselves into authoritarianism.

I think the proposed regulations are necessary and long overdue. I'm just sayin', I think championing personal responsibility is important too. If we don't do it, the other side will, and then it will be all the more associated with secret gambling addictions, secret Oxycontin stashes, and secret jaunts to spend Father's Day with the mistress in Argentina. Just because our two richest political parties treat government regulation and personal responsibility as though they're mutually exclusive doesn't mean they actually are.

[russell]

"But how far should we extend consumer protection?"

Far enough so that people can readily understand both the benefits and risks of a financial product or service without having to go out of their way to do so.

Multi-page applications for credit cards or consumer loans where significant terms are buried deep in the document in less-than-10-point type counts as 'having to go out of their way' in my book.

If the instrument or service is too complex to be understood by a typical retail customer, it shouldn't be offered to typical retail customers.

This is not rocket science.

Some people are still going to shoot themselves in the foot. Banks should be required to make it clear that what they're selling is, in fact, a gun.

[Janie]

If bad loans are guns, what are bad political candidates? Following this reasoning, shouldn't we require that everyone read and understand a concise explanation of the benefits and risks of each candidate's proposed policies before voting?

[ScentOfViolets]

This worked very well, yet the bank made a FORTUNE from it anyway. Why? Because so many people were willing to pay $25 next week in order to access $50 (from their line of credit) today. I would ask them, "Are you SURE you'd rather get the $25 fee than wait two more days ('til payday)?" and they would always say yes. If they did this but then didn't pay their fees, when they came back to do it again I clearly explained our collections system and what the consequences would be if their credit score plummeted. I reminded them that the bank made more profit if they went ahead and cashed another check, that I was acting as their advocate, not the bank's, and I just wanted to make sure they fully understood what they were risking. They still wanted the $50.

I don't think anyone is arguing that those types of people don't exist. But you haven't given any indication of the proportion of the relevant population these people comprise. What - one percent? Five percent? Twenty-five percent? Yes, it's true that you can't protect some people from their willful folly - nor should you. But that's no excuse not to offer some sort of protection to people who are induced to make bad decisions through bad representation of the facts on the ground.

The other part of this formulation is that I see no reason why I should bear the consequences of others bad decisions. It seems that this will happen in an era of finance Titans.

[Turbulence]

Following this reasoning, shouldn't we require that everyone read and understand a concise explanation of the benefits and risks of each candidate's proposed policies before voting?

I actually think this would be a good idea if it could be done in a way that wasn't deliberately designed to exclude certain classes of people.

[russell]

"Following this reasoning, shouldn't we require that everyone read and understand a concise explanation of the benefits and risks of each candidate's proposed policies before voting?"

That's an interesting proposal on its own merits, with Turb's caveats noted.

But I'm not sure the analogy holds. Casting a vote is not entering into a contract.

[Gary Farber]

"I actually think this would be a good idea if it could be done in a way that wasn't deliberately designed to exclude certain classes of people."

"That's an interesting proposal on its own merits, with Turb's caveats noted."

Setting aside history. (Thus both your caveats; I'm just being explicit here.)

The basic element is that our system doesn't restrict the franchise to people are perceptive, or smart, or literate. We have a democracy, not a meritocracy.

Which is, despite my inclinations towards being a snot, almost certainly a good thing, in the end, I think, since if we were in any way more of a meritocracy, or technocracy, or restricted voting only to people who were provably not very dumb, all those dumb people without the vote would understandably feel little or no investment in the legitimacy of the system. (That's setting aside the basic issue of whether it's right to rule over people and not give them a vote, however dopey they are.)

[russell]

"The basic element is that our system doesn't restrict the franchise to people are perceptive, or smart, or literate. We have a democracy, not a meritocracy."

You, sir, are correct.

Kindly allow me to withdraw my limited endorsement of a requirement for voters to read and understand a statement of candidates' positions.

It would be nothing but trouble.

[Marty]

"The basic element is that our system doesn't restrict the franchise to people are perceptive, or smart, or literate. We have a democracy, not a meritocracy."

I like Thomas Jeffersons view here:

“I know of no safe depository of the ultimate powers of the society but the people themselves; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them but to inform their discretion.”

[Turbulence]

We have a democracy, not a meritocracy.

We're a democracy with lots and lots of absurd anti-majoritarian institutions. People in most states have no effective vote when it comes to the Presidency because of the electoral college and the fact people in large states have so little representation in the Senate that it is absurd. And yet these millions of people don't seem to complain much about their lack of political voice and the vast majority of Americans aren't particularly concerned with the ethics of ruling over them disproportionately.

I'd be perfectly happy with a system that gave reduced voting rights to people that couldn't demonstrate a reasonable understanding of the issues and candidates. After all, nothing is more American than diluting people's votes for no reason and this dilution would at least accomplish something useful.

[mythago]

The only people totally on your side in this world, especially the USA, are your lawyer and your momma, certainly not the guy trying to *sell* you something.

So, again, we're back to insisting that anyone who is not as clever, suspicious, cynical and well-read as you is probably dishonest and is, at a minimum, so stupid as to deserve to be lied to.

And certainly you've portrayed yourself as proudly having resisted actual lying. If the Best Buy salesman says 'you need X warranty' when you don't, that's a lie; if the salesman says you need certain features that you do not in fact need, that too is a lie.

"You can't cheat an honest man," "buyer beware" and so on are platitudes uttered by those in love with defensive attribution. After all, what's the fun in preening about how clever I am in a world where there are actually mechanisms in place to protect those less clever?

[supra shoes]

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