Consumers and credit seem to be a major issue right now. Perhaps it is time to admit that legal changes made in the early 1980s were a BAD MISTAKE and see what we can do to rectify things. If you remember back that long, that is when you could no longer go to your neighborhood bank and ask for a small loan. You were told that you needed to put such things on a credit card. I ran into that when I wanted to buy a used car to drive to work when my vintage Pinto station wagon’s engine blew up.
Sure, there is plenty of guilt to go around. Big Money should have not put so much pressure on the government. And politicians should have resisted more. Consumers should have been more careful, although they were subjected to some very intense marketing efforts to do otherwise. Should the academic economists have been more forceful in stating that trying to build an economy based on consumer debt was not good? That is water under the bridge or over the dam depending on your favorite metaphor.
I think a good place to start is to decide just how much punishment is fair for people who made foolish purchases on credit. Bear in mind, not all this was frivolity. Many of us have put things like medical insurance premiums, medication, or other serious things on a credit card. Not sure if we can do anything about this injustice, but working hard on reforming health care might be a good start.
So here is the proposal. All those transactions are on computers, so can be traced. How about deciding that once a debtor has paid the equivalent of the item’s purchase price (or some multiple of that) in interest it is enough punishment? They would then be given credit for any interest paid beyond that limit. That will get a lot of people out of debt and maybe there would be enough of a surplus that they feel confident to make a few and perhaps wiser purchases. With a realistic limit on the amount of interest that can be charged, hopefully people won’t be so likely to get so deeply in debt.
There will be people who have passed away or gone bust and are in homeless shelters or otherwise not reachable. Their excessive interest paid should be put into a fund to provide programs for credit counseling or other social programs.
I think at this point the taxpayers have done plenty, now it is time to send a message that greed is not to be rewarded and everyone needs to pitch in.
