Getting Rid of Predatory Lending

Ezekiel 22:12 In you they take bribes to shed blood; you take interest and profit and make gain of your neighbors by extortion; but me you have forgotten, declares the Lord God.(ESV)

At this point in time, Ezekiel was prophesying some hard words to the nation of Israel. I can see how some of these could apply today to America. There are many banks today charging incredible rates for borrowing money, and utilizing a practice called “universal default”. I recently got caught in that trap. Let me explain.

I got a letter in the mail, from Chase Manhattan, a company that I’ve had a card with for about 7 years. They have always given me great rates to borrow money (less than 10%). My credit is good, and I only have one late payment recorded on it, and that was really due to the incompetence of the company doing the billing.

Anyways, I got a letter in the mail stating that I could opt-out of changes in my rate. My interest rate was about 9.49% or 9.9%, and they were going to raise it to 20.24%. I nearly fell over. I called them up, and found out that I was considered in universal default. The reason stated was that I had “too many inquiries” on my credit report. Now, I had opened a couple of accounts in the past few months, but they were department store accounts, and I only opened them to get the discount they give when you apply. I don’t like the idea of universal default, but I really don’t like the idea of them claiming this because of too many inquiries. I can understand if I had other accounts on my report that were late, but this was not the case. I inquired as to what would happen if my identity were stolen, and an account was opened without my knowledge, was late, and then Chase decided that I had universally defaulted because of that. The person said something to the effect of “providing documentation”, etc. Nice. So the burden of proof is on me, but I’m guilty and have to prove myself innocent. There is something very wrong with this picture.

So I tried to negotiate with Chase, and even though I didn’t have any late payments on my report recently, they said that they could raise my APR just because of inquiries. I mentioned that I had used their cards for 7 years. That didn’t matter to them. In the end, I just told them that I wanted to opt-out. This means that I get to keep my 9% rate, but the card is closed for new charges, and once the balance is paid, the card is closed. I wasn’t exactly happy, because I was looking to use it to finance my education.

Now, I do not believe that debt is evil. In fact, it has helped me leverage getting my business going, and accomplishing many goals that I’ve had. The problem comes when lenders are allowed to change the terms of the agreement, just because they feel like it. Would you do business with someone who reserved the right to change the terms of your agreement? And to charge an excessive interest rate is not right. It is interesting that the Bible forbids charging usury to poor people, which is exactly what is done in America today. I’m not poor at all, but I think that the charging of usury rates should stop. It is not uncommon today to hear of people being charged 30% APR for defaulting.

I’m a capitalist, but I believe that we need to restore morals into capitalism. There is too much greed, and too many decisions that are being made to put profit in the hands of just a few people.
In my line of work, there are decisions to outsource, simply because someone thinks its a good idea, or wants to get a bonus. At my day job, there are unionized workers, and they are upset now, because their health care is going up by double digit percentage, yet the company’s profit, not revenue, went up by $15billion. I’m not really for unions, but I think that they are making a good point. All that seems to matter nowadays is making enough money to satisfy the shareholders.

One way I’m fighting back is to close out all my credit accounts as quickly as possible. Now, I am able to do so in a relatively short period of time. What I fear is that many others who are not as blessed financially may not be able to do so. Another way I took action was to call (888) 5-OPTOUT, and have my name removed from the database. This way, I receive less offers in the mail.

Since doing that, I’ve almost been disappointed when I check the mailbox. There is no longer a pile of mail like before. I realized that “predatory lending” is probably a true statement about what is going on in this country. Until I stopped receiving all the offers in the mail,
I didn’t realize how targeted I was by the lending industry. Some of the offers I received were for very bad mortgages, like “pay only $600 on a $300,000 mortgage”. Of course, the fine print is that the rate can adjust. We really have got to help others understand the problem with getting a mortgage that adjusts into payments that are not affordable.

Another way I’m fighting back is to try and run my company with as much values as possible. I don’t consider my business a “Christian” company, but I do try to conduct myself with Christian values and principles. For instance, I had an employee that worked for me a few summers ago. I didn’t have to do it, but I gave her a bonus for her work at the end of the summer. I think it is little things like that, where we value our employees and their contributions, which show our commitment to capitalism with morals.

Elizabeth Warren has what I believe to be a very good expose’ on the credit card industry.