In late November I talked about how credit cards specifically, and the consumer financial system more generally, was fee and ‘trick and traps’ based and how that amounted to a transfer from the poorest to the richest in our country. I found this to be a really bad thing, one that gave terrible incentives to financial firms to find innovations that would make prices and information more opaque and less transparent for consumers.
Instead of challenging the argument itself, or arguing that this system was a necessary evil to get the poorest in our country access to financial markets, I was amazed at the amount of feedback I got that argued this was a great system, because instead of ripping off the poor to give benefits to the rich, it really transferred “from the ignorant and foolish to the informed and prudent”, or as one emailer put it, in a manner representative of many other emails: “It’s the irresponsible borrowers – who are often poor – that are penalized and the ultra-responsible borrowers that are rewarded. I fail to see the problem there.” The argument is that the system works to punish those who are cognitively weak and financially irresponsible and reward those with good cognition and a sense of responsibility. Perhaps you agree, or perhaps you are on the fence but leaning towards agreement.
Maybe it is because I’ve binged on Michael Sandel’s Justice series on youtube over the holidays, but I want to create a moral dilemma to see how far you are willing to go in thinking this justification works for our current financial system. But first I’ll need to go into Evil Financial Rortybomb mode. Ever see that Star Trek where in the Mirror Universe everyone is evil and has a goatee? It’s like that.
< EVIL >
Evil Rortybomb! Beware!
I want to pitch to the credit card and financial industry a new innovative online survey. It is targeted for older, more mature long-time users of our services. We’ll give a $10 credit for anyone who completes it. Here is a sense of what the questions will look like:
– 1) What is your age?
– 2) What day of the week are you taking this survey?
– 3) Many rewards offered are for people with more active lifestyles: vacations, flights, hotels, rental cars. Do you find that your rewards programs aren’t well suited for your lifestyle?
– 4) What is the current season where you live? Are any seasons harder for you in getting to a branch or ATM machine?
– 5) Would rewards that could be given as gifts to others, especially younger people, be helpful for what you’d like to do with your benefits?
– 6) Would replacing your rewards program with a savings account redeemable for education for your grandchildren be something you’d be interested in?
– 7) Write a sentence you’d like us to hear about anything, good or bad!
– 8 ) How worried are you you’ll leave legal and financial problems for your next-of-kin after your passing?
Did you catch it? Questions 1,2,4,7 are taken from the ‘Mini-mental State Examination’ which is a quick test given by medical professionals to see if a patient is suffering from dementia. (It’s a little blunt, but we can always hire some psychologist and marketers for the final version. They’re cheap to hire.) We can use this test to subtly increase limits, and break out the best automated tricks and traps mechanisms, on those whose dementia lights up in our surveys. Anyone who flags all four can get a giant increase in balance and get their due dates moved to holidays where the Post Office is slowest! We’d have to be very subtle about it, because there are many nanny-staters out there who’d want to coddle citizens here.
Here’s the important thing. I hate to write this right before lunch, because it’s going to make your mouth water, but check out this article, “Dementia threatens aging boomers’ portfolios”:
David Laibson, a professor at Harvard University, Cambridge, Mass., and noted expert in behavioral economics, found the prevalence of dementia among Americans “explodes” after age 60, doubling every five years to more than 30% of the population over age 85.
Worse yet, many adults without dementia still experience “substantial cognitive impairment,” making it difficult for them to manage their portfolios.
“This is a huge problem, and we’re really doing nothing to prepare for the large number of wealthy Americans nearing retirement,” Mr. Laibson said in an interview. “In fact, we’ve really gone the opposite way, by encouraging and liberating people to take care of their own finances.”
There’s certainly a lot of wealth at stake. According to the paper, for households with a head age 65-74, the median net worth — including net home equity and excluding public and private defined benefit assets — was $239,400 in 2007.
I smell money – it’s like walking down a sidewalk and turning a corner and then there is suddenly money all over the sidewalk. One problem with hitting up sick people, single mothers, college kids who didn’t plan well and the cash-constrained poor with fees and traps is that they’re poor. Hitting up people with a lifetime of savings suffering from dementia is some real, serious money we can tap as a revenue source. Indeed someone who forgets what they were doing between reading “Bullshit Surcharge: $40” on their statement and calling the customer support number to complain is our ideal customer – it’s the person who will be most profitable to us going forward.
< NOT EVIL >
There’s a lot of bad stuff in me. (That Laibson paper is fantastic, and we’ll talk about it more in 2010.) Isn’t it a too perfect fit though, in terms of how our consumer financial industry does a disservice to customers, and the forthcoming major health crisis of dementia in this country?
So to get back on point: The people in at the beginning of this post who are excited about how the current financial service industry excels because it punishes the ignorant and irresponsible: on what specific grounds could you not have to embrace, much less oppose, the Evil Rortybomb Plan above? I got a sense of proportionality in those arguments, that the most ignorant should have to pay the most. I don’t think anyone would argue against the idea that those suffering from dementia will be the most ignorant of their actual situations and most irresponsible in the sense that they aren’t capable of being responsible. The extra fees and traps they pay will in part also go to those enjoying extra bonuses and continued free financial services. It’s a win-win from this point of view, no? One must be consistent.
I assume that they would argue that there’s a difference in ignorance here: one the one hand they are happy with punishing what they consider sloth and laziness but unhappy with punishing what is essentially old age. I think that’s a self-interested dodge though; it would strike me that the person can’t see themselves in situations where a $40 surcharge makes a big difference in the monthly budget, but can easily see themselves in a situation where mentally he or she starts to slip. How are these not made of the same thing, of the same bad draws in life fortunes? It’s like taking a quick peek at one’s situation in life before determining what kind of financial service sector best meets our purposes. Either you can manage your situation or you can’t, and if you are fair hunting season if you can’t in one form of poor cognition or life situations then you are fair hunting season in all states of poor cognition and life situations. And all the current incentives are to go further in this direction.
When I was much younger, an elderly family member who was starting to show signs of dementia was ripped off by a stranger. My extended family, mostly law enforcement who all loved serving stories about crimes at holiday dinners with the turkey and thus were largely inoculated to the idea that people can do terrible things to one another, was caught off guard by this. It seemed to contain an extra level of inhumanity to take advantage of someone like that. It worries me that that one strand of our consumer financial system works on much of the same level. I understand those who think technology will be the driver of changing this for the better rather than legislation, but before any of that, we all agree it is a problem, right?
UPDATE: I added a follow-up here, discussing vanilla options as a solution to this particular problem.
Rortybomb 
Now that you’ve outed yourself as a ‘FMU listener I don’t think it’s too obscure to bring up Andy Breckman’s method of dealing with telemarketers: pretend you’ve got Down syndrome (“I’m not supposed to talk to strangers on the phone but you sound nice”), see just how immoral the people on the other end are, and stay on the phone as long as possible.
Dealing with the demented is a serious social concern–not a “problem,” because there is no solution. Someone who has gone completely gaga can formally be declared incompetent, and assigned a guardian to make decisions for him. But many people on the way to such dementia pass through a borderline area of incompetence. If they recognize their situation they can usually get help from a relative, church, etc.; but that sort of self-awareness is rare. It would be nice to come up with social policies that would protect such people without unduly hampering the activities of people who are competent to manage their own affairs, but that’s too much to ask; protecting the semi-competent will almost certainly involve fettering the competent. Rortybomb offers no useful suggestions.
Another thought: People used to be more suspicious, at least of people and organizations they didn’t know–and especially of for-profit corporations, which obviously had objectives that did not include the well-being of the individual (except perhaps incidentally, as a means to their end). But now everyone expects the government to protect him, to act as his “nanny.” We’d be better off if people trained themselves in self-reliance: they might retain a suspicious attitude even as they sank into dementia. That would help them protect themselves, at least slightly.
A final thought: There may be a market niche for a service in which the semi-competent could be enrolled to handle their financial transactions. But delicate judgment by the service-provider would be required, and (the main drawback) the semi-competent person would have to enroll *himself*.
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If you’d throw in the dementia equivalent of an obligatory road test for drivers over a certain age, it could be pretty powerful:
If you don’t pass your dementia test, financial service providers should be prohibited from selling you anything but a vanilla option once you’re over 70 or so . . . with full return of any losses/outrageous fees required for those who do not verify a client’s status.
And the rest of us would benefit from those vanilla options, too.
Just keep hammering away at this (the vanilla options thing) however you can – as one of the imprudent and frequently clueless poor, I truly appreciate what you’re doing.
This is a sales strategy, and not a new one of course.
A friend’s wife developed MS and eventually developed associated mild dementia. “…Dementia, as we understand it … is really quite rarely seen in multiple sclerosis. […] Less severe dysfunction is estimated to occur in 54 to 65% of people with MS.” [interesting link here: http://www.mult-sclerosis.org/cognitivedysfunction.html ]
He struggled (and succeeded, bless him) to do two things at once — maintain his job and the associated health benefits, and also keep her home as long as he could. This worked for years, but there was a space of 4 years or so before she had to go into care, when she was home alone most of the day, together with a telephone and a credit card. She must have gotten on some lists, because her husband was constantly sending stuff back and canceling subscriptions. Bastards.
Noni
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Of course “profiting off the ignorance of others” is a legitimate business model. I pay money to receive X-rays from a hospital, and to have them explained to me. College students give me money to explain mathematics to them. In each case, one party is prepared to give the other money precisely because of that party’s ignorance. Information is a valuable commodity, and ignorance is the merely absence of information.
And (unless you are a communist) it is not always wrong to profit off the ignorance of others, even if what you are selling is not information. Suppose that I develop a new, superior form of ABS brake. While I respect those who chose to make their designs public or open source, it doesn’t seem illegitimate to wish to profit from this, even though my profits come exclusively from the fact that I know how to make this device, and my competitors do not. In other words, I am benefiting from my competitors’ ignorance.
I guess that the gray areas start when you are trying to profit, not from others’ ignorance in general, but from their ignorance of their ignorance – when they do not know how much you know, or how little they know – or from their poor cognitive function. But even then, I can imagine some legitimate cases.
Actually, if you want to make any money off your brake, you would let your competitors know how you make it. You would do so by informing the government of your design, so that it would prevent others from using it without your permission.
The problem with all the examples you list is that they are good-faith transactions. You get something of value for your money, a radiologist’s report, an education. But you don’t enter into financial transactions hoping to find someone with the necessary expertise to rip you off.
Of course, your online survey thought-experiment is unrealistic: demented people don’t take online surveys (for the most part, they don’t use the internet at all).
“Of course, your online survey thought-experiment is unrealistic: demented people don’t take online surveys (for the most part, they don’t use the internet at all).”
What makes you think that? In my experience, taking an online survey and giving out personal information is exactly the type thing that someone with dementia would do.
Its not that difficult to get internet access. My father, who suffers from dementia, signed up for internet access as part of a bundle with the phone company. They provided him with a “free” netbook and wireless router.
Seriously? Seriously? You consider that a valid response?
OK, ignoring the eventual point of this post, I would like to note that giving financial services clients the mushroom treatment is not isolated to credit cards or credit cards and sub-prime mortgages, or credit cards, sub-prime mortgages, refund-anticipation and payday loans.
THE business model for foreign exchange trade, for a very long time, was to make sure the client didn’t know where the bid and ask were, so that the bank could get rich on the spread at very little risk. That was also the business model for dealing in Treasury securities, corporate bonds, stocks, munis…you name it. It wasn’t until pricing transparency forced competition that clients had a fighting chance. You should hear brokers bellyache now when their clients demand ever narrower spreads. Clients are so mean.
Nowadays, hedge funds “exploit pricing anomalies” (take advantage of the opacity of markets to take advantage of counterparties – up to and including insider trading), mutual funds apply hidden fees to avoid letting clients compare costs between funds, banks charge for any activity they think clients will need to engage in but may not price-check before opening the account. Phone companies offer “plans” that capture money left unused by clients.
The treatment of credit cards users is more blatant, but otherwise no different than any other part of finance. Your commenters who think that skinning borrowers is good because they are ignorant and so deserve skinning are: a) utterly selfish and just a bit self-congratulating, and b) just repeating propaganda they picked up watching Kudlow and reading Rand. The reality is that financial service providers actively work to deny information to clients, and lobby to avoid transparency.
“Of course, your online survey thought-experiment is unrealistic: demented people don’t take online surveys (for the most part, they don’t use the internet at all).”
They most certainly take telemarketing calls.
In a recent job I managed the fee based product marketing for several channels for a company with a massive market share in the evil industry you reference. We were strictly prohibited from using age in any marketing targeting because it is discriminatory… funny thing is that the biggest gift to the elderly would be to restrict it. If you look at the distribution of response and length before cancellation the older you are the more likely we are to make inexcusable amounts of money on you from things like credit insurance.
Here is the thing though – I work with a lot of smart people (believe me not all of them – but there are some amazingly talented people). If we were not given the right to steal from people who did not know better then we would figure out another way to make money – maybe even one that has some remote possibility of economic value to the consumer.
Honestly – the entire time I have worked in the industry I have been blown away by how much profit we leave on the table at the end of the day by booking poor quality accounts that help meet some volume goal – it is shameful – much of our business is managed to the average rather than the marginally profitable acquisition. But it always works out – all we have to do is raise some fees and reprice some accounts.
Of course, since free will does not exist (unless someone has any evidence for it?), and most of our abilities come from a combination of our genetic make-up and our educational upbringing, in what sense can anyone (with or without dementia) be said to deserve what they get? All there is is Rawlsian luck at the end of the day.
Whoops, meant to add this:
So really, those who argued with you by saying that somehow the outcomes of capitalism and the financial system are somehow “just” because the talented supposedly win out and the ignorant lose out (I don’t think that’s necessarily the case, there are many I’m sure who have lost money but have been talented, and vice versa) are making a bad argument from a Rawlsian point of view. If you want to justify capitalism, it shouldn’t be done from a “it works best” argument (and had socialism worked better economically, would these people be calling for socialism? I doubt it), but a freedoms and rights basis i.e. the freedom to produce and sell my wares in a free market. And of course, if you want the best result, then capitalism has to be regulated somewhat.
By making an analogy between “sloth and laziness” and dementia, you’re skipping over a key part of your opponents’ argument here, Rorty.
If someone is physically/mentally able to figure out what’s going on with their personal finances, its acceptable from a libertarian perspective to let Visa charge this person whatever they want.
If, however, someone has dementia and is not fully capable of understanding their personal finances, then they need help (perhaps from the government).
The crux of the libertarian argument is that its OK to have a system that transfers wealth from people who are irresponsible to people who are responsible because the people engaged in the system are, well, responsible for their own actions and the consequences. That doesn’t remove the moral imperative to care for people who can’t care for themselves, it just deals with people who can.
You briefly allude to the idea that people who don’t manage their finances well can’t help it when you say “the system works to punish those who are cognitively weak and financially irresponsible”, but that’s the part of the argument that you need to elaborate on. Everyone already understands that preying on people who can’t make their own financial decisions is reprehensible.
The difference is very simply, elementary really. If you’re ignorant, you have normal cognitive abilities (in the sense of within the range of what’s normal). You’re a functioning adult and there’s no reason to protect you from agreements that you willingly contracted.
If you’re suffering from dementia, you’re incapable of forming the intent to contract. There is therefore no basis for enforcing an agreement that you’ve entered into. It’s the same reason we don’t enforce agreements signed by, say, six-year olds.
@ Adam – And how are functioning adults with normal cognitive abilities supposed to detect outright lies and deception when delivered with a straight face from the representatives of a bank? Correct me if I’m wrong, but I tend to assume a card-carrying banker from a major chain has performed well enough to represent their bank.
I always read the literature when I sign up for anything, but when the terms of the contract can be completely changed without properly informing me, it’s rather hard to keep up. Also, I’ve had bank employees lie to me too many times to count. Silly me, expecting Chase and Capital One and Bank of America to actually have representatives that know what they’re talking about. (Or talk about what they know. Whichever.)
I’m attentive and marginally intelligent, and I keep falling for the banker BS. They always say it’s a mistake, and then it happens five more times. (Last fun incident: I was supposed to have free checking with Chase. Chase started charging me monthly service fees for my checking account. I told them I wasn’t going to pay $12 a month when I could go somewhere else or stuff it in my mattress; the banker I talked to said she could change the class of my checking account so there’d be no service fees for the checking account. There was a month’s break, then the service fees continued, I stormed into the office, and I was told that she didn’t promise what she’d promised because they don’t even offer free checking. Next time a banker makes a promise, I guess I’ll have to get it on video with fingerprints and blood samples.
And then there’s the issue of being forced to use banks–how many anti-“nanny-state” libertarian types are against “aggressive recruiting” of the “under-banked”? I was forced to sign up for direct deposit with a particular bank, or accept a “pay check card” aimed at the “under-banked” at a prior job. No other options. The pay check card was touted as being ever-so-much-better than dealing with the hassle of cashing your check out at the customer service, but as it turns out, the whole concept of receiving wages via a corporate card was completely unregulated, federally.
I read every single line of the original literature distributed via the company itself, and then checked it against state and federal laws–in Louisiana, it is completely legal to refuse to pay an employee in cash or by check.
So, said employer was legally able to force us to sign up for direct deposit–it didn’t have to be that bank, but they went all out and parked agents of that bank and only that bank in our break room for a week. No mention of, let alone endorsement of, any other financial institutions. Sweetheart deal, no competitors allowed. We had to eat lunch in the same room as the agents trying to nail us as opened accounts under their name. (The break room was nasty enough without being pestered while you were trying to eat.)
And if said employees didn’t qualify for any bank account at all, there were no exceptions. They’d be forced to go with the pay card. There are (were, less than three years ago, at least) absolutely no federal regulations what-so-damned-ever that apply to that situation (circa fall ’07). Said pay cards my unlamented late employer planned to shove down our throats came with a limited amount of withdrawals and charges one could make on them per month. Exceed your limit, use the wrong ATM, and you’re on the hook for $3 per card swipe. Minimum. Bare minimum.
We’re talking about workers being stuck with *finance charges* to access their *wages*. For the record, most employees had their own private bank accounts, but preferred to receive a check and then cash it. (To the corporation’s credit, after I’d pored through the list of charges that would be charged to the non-direct-depositees and gone to a high-level manager, those terms were quashed promptly–at least, that’s what the note from corporate said–but whoever put them in, in the first place, should be rotting in hell.)
I was the only employee who bothered to agitate about it. I was working about 45 hours a week, which was a very light load at that place. Other folks were working more hours, with other jobs and kids and sometimes school on top, and had no place to crash if they couldn’t make rent. Not one single person approved of the new policy–even before they realized they’d be charged to use their wage card… but not one of them was willing to voice their concerns to management.
And this was before the economy took a total nose-dive.
Adam… you have no idea what it’s like.
DB, your point seems to be that an employer was treating its employees badly. And that banks sometimes lie. No disputing either of those. But if you think that the answer is to increase the cost of business, decrease competition and create business for lawyers then I don’t know what to say. Not to mention special favours for the most powerful interests (which can take any number of forms, whether by tailoring regulation to disproportionately burden their competitors, by giving them outright financial preferences, or whatever else).
No reasonable person claims that economic freedom leads to perfect outcomes, we simply point out that the problems that exist in a free market are only compounded when you get state coercion involved. If an all-wise, all-powerful and all-knowing being (let’s call her God) was making the rules, it might be different. But it’s not God, it’s a bunch of venal, corrupt, power-hungry scumbags who make the rules, within a system that gives them every incentive to be venal, corrupt and power-hungry. Meaning that there’s no such thing as “the right people” to run the system.
Freedom is far from perfect, but as far as I can tell it’s far better than the alternatives.
I’d just specify that the more options that are out there, the more likely we are to avoid situations like yours. More employers, more banks, more competition. It’s not the existence of the lousy job or the lousy bank that’s the problem, it’s the lack of alternatives. The easier it is to find another job or find another bank, the more the employers and banks have to make an effort to attract you as an employee or a client. It’s not a panacea, but it’s the best way to promote desirable outcomes.
The notion that we don’t have enough banks is one that I find rather silly. We have plenty of banks. The trouble is that they all do the same things.
For example, banks will order the transactions of the day to their best advantage. With one ordering of transactions on my daughters account, she never overdrafted. But that’s not the one the bank chose, is it? No, they chose the one that generated $100 in fees for them.
That’s outrageous. But I can’t do much about it, because all banks do this.
And there’s a good reason for that. Several, in fact. It’s kind of like the old saying, “Bad money forces out good.” Competition between banks is intense, and “fair practices” might mean the difference between profitability and unprofitability. It might even mean that a bank gets sued by “stockholders” for not maximizing the return to shareholders, with the claim that “this is standard practice, why aren’t you doing it”. Lastly, human beings are imitators of a high order. “Monkey see, monkey do” really should go “human see, human do”, since research has pretty well established that humans are far more imitative than chimpanzees.
If I could find a bank that wouldn’t do this to me, I would use it. I don’t have that option. Yes, you can do things to manage the account so that doesn’t happen, but that’s another straw on the cognitive camel’s back. I’d rather be thinking about the software that I develop than my bank accounts.
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I don’t think you’ll make money giving away $10 for that survey.
Here’s follow-up Evil Rorty. Great piece, by the way.
Change your scenario ever so slightly and you have an even greater moral dilemma than you propose.
Rather than Credit Card Companies, insert Federal Government or Congressman.
Run you’re moral dilemma against Social Security, Minimum Wage, Medicare, Licensing, heck…just about any wealth transfer policy.
Social Security quite simply takes from the poorer segments of society (the young and still working) and gives to the richest segments of society (the retired). By way of reference, if you are to look at where the wealth is concentrated in society it is vastly overweighted in the seniors hands.
Medicare, says to the poorest segments of society, it is your RESPONSIBILIITY to pay for the health care of the richest older members of society — our seniors.
Minimum Wage prevents the poor and uneducated from getting work so that the educated and skilled can protect their jobs. Look at the unemployment amongst our youth — approaching 50%.
Licensing and Regualtions — Protects the powerful, established and educated against upstarts and uneducated trying to get their foot in the door and compete by making it cost prohibitive and confusing with all of the various regulations.
At least the Credit Card company has to pull some sort of scam to steal from the ignorant… the Federal Government simply just takes it from the ignorant.
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This explains why the most transparent scams advertised on the radio repeat the phone number several dozen times.
@Eric,
I’ll feed the troll. In the reality based world, my projected SS benefits represent my 39 years of payments in, plus about a 2% IRR. No wealth transfer there. Medicare? That’s an accidental wealth transfer, from the taxpayers to overpaid providers (2X developed world reimbursement averages for care providers, 3-4X for Pharma). That’s the product of rent-seeking wearing Free Marketer clothing. And your minimum wage argument is straight out of Thank You for Smoking.
Get some facts. Then come back.
Dollared, it’s unfortunate that a cogent argument is dismissed with “I’ll feed the troll.” The minimum wage is a barrier to employment for unskilled workers. If that irritates you, so be it, but that’s the way it is. If the goal to help the poor, the minimum wage is an epic failure. However, if the goal is to make people like you feel better about yourselves, then I suppose it’s a success. It’s just a shame that assuaging your guilty conscience has to come at the cost of throwing an army of poor people out of work.
Hi Adam,
Your position is simply not accurate, based on empirically based research (as opposed to classical economic theory, Chamber of Commerce and National Restaurant Association-based research).
Period. No matter how much business and its bought and paid for researchers and media types argue, there is no proof of substantial employment effects, and dramatic proof of improved well being for workers, from a strong minimum wage regime.
A good, balanced survey of sources can be found here: http://en.wikipedia.org/wiki/Minimum_wage.
Read it all, please.
Dollared, I have read it, before I’d ever posted here. And your claim that all the empirical evidence shows the contrary is just not true. Obviously the lower the minimum wage, the small the effect. But if what you say is true and labour is immune from the laws of supply and demand, I can’t understand why social democrats want such a pitiful minimum wage. Surely something like $30/hr would allow people to have a much better standard of living and dignity.
This is a ridiculous thought experiment for a myriad of reasons, none of which has to do with “proving” that libertarians are stupid. As been mentioned there is nothing in libertarian philosophy which allows for the enforcement between a non-competent individual and another party. Period. This is not even a strawman argument because it can’t stand up on it’s own long enough to get a swing at it. In the actual reality-based community if a company administered a MMSE (even a hidden one) and DOCUMENTED an individual’s incapacity and then signed a contract with that individual the attorneys would be flocking to start the class-action. Just because a person has not been declared incompetent does not mean that the legal system would recognize that incompetence retroactively especially when presented with the evidence thereof.
2.
My late wife’s stepfather got a new store credit card three months before he died. None of the bills on the new card were ever paid, though they were sent to the correct address. The card never showed up and the actual purchases were consumer items suitable for a younger person like music systems and such.
Our theory was that the card was generated and handed to a friend of the person setting up the account. He was in no condition to be given a card, and probably never knew that he’d agreed to have a card issued.
The store refused to rescind anything when asked by the estate. Without a sworn statement by the person whose signature appeared there was nothing that they could do.
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This USC prof and Yale Law grad apparently does a fair amount of research into the issue of ability vs rights, and how to measure it.
She’s also a diagnosed schizophrenic.
http://www.scientificamerican.com/article.cfm?id=diary-of-a-high-function
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Le sigh. The stronger argument is that these criticisms are based on something empirically testable: are people of lesser means more or less trustworthy with money?
AP Giannini got incredibly wealthy (and, by the way, created the modern mortgage banking system) betting that the poor are equally trustworthy to the rich–and it turned out he was mistaken, because the poor are *more* trustworthy than the rich. In other words, they make better economic decisions, not worse ones. Seriously. Shockingly, Paul Feldman got the exact same results with his bagel study.
The poor philosophy and psychology of the libertarian position here is mind-boggling.
Great Post, Rortybomb!
When young and healthy, unstressed, of course, we all can recognize and avoid the various scams banks and credit card companies try to foist on us. But we need a bank account and a credit card, to function in this society (Ever tried to rent a car without a credit card?), so we sign up for the one with no fees, hoping to always have more than the minimum balance to avoid fees, and pay off the cards on time. But the trap has been set: Sooner or later, no matter how clever you are, how responsible you are, there will be a problem; sudden loss of job, taking care of an elderly parent or sick child, …. and you both lack the money and the attention to your accounts, and the fees will be charged.
So, more regulation and availability of ‘vanilla’ options definitely profits all; it is like health (or any other) insurance: you normally don’t need it, but sooner or later you’ll be glad it is there.–
Then, for those trumpeting the great variety of ‘consumer choices'(including those ripping off the uninformed):’ What is there real cost, per minute, of your cell-phone plan? By offering a plethora of plans, with separate add-ons and fees, companies in the U.S. have largely succeeded in making their product’s pricing un-comparable and efficiently eliminated rational consumer choice. Free market – my @ss.
The social darwinists who smugly believe that they can lie, cheat and steal their way through life are in for one nasty surprise.
The reality is: if you lend money to an incompetant, you will lose that money. It has been part of the common law since time immemorial that contracts with incompetants are voidable — and cannot be enforced. Now certain greedy types may not like this legal fact, but it is not about to change.
Second, collecting money is extremely difficult. This means that payment is a voluntary act. Commercial litigation is expensive — very expensive. If someone fights you, you can expect to pay upwards of $100,000 in attorneys fees And overly complex and opague contracts actually work against a lender in litigation because any ambiguity will be construed against them.
Finally, you cannot collect blood from a turnip. Social security benefits cannot be touched by creditors. Pension payments also are exempt in most states. Court are going to be highly protective of other assets. Most people with alzheimers do not have jobs and do not have wages which can be attached.
This suggests a very different strategy. The informed and prudent borrower borrows money from the ingnorant and foolish lender, then refuses to pay it back. The lender (credit card companies) pleas about the morality of repaying debts go unheeded because everyone knows the lender was engaged in predatory lending.