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Metaphorical Rocks



October 28, 2011 – Comments (6)

Men's words are bullets, that their enemies take up and make use of against them."
(George Savile, Maxims)

So the credit card industry says ... "We provide the credit, in many cases, for people to start businesses ... to buy more, to live a better life, to do things that they could never do any other way." So what's the problem?

There is no problem if they would do it on terms that are fair and if they would make their contracts transparent so that the person who's borrowing the money is borrowing it in a way that he or she understands and appreciates the risks.

 I believe in free markets. I teach contract law; I believe that value is created when two people come together, and they understand a contract, and they say, "I think if I borrow this much money at this interest rate, I can do better than that; I can start a business; I can buy something I want to buy that's going to be important to me, and I can make money out of this proposition." That is a good use of credit. It's a use of credit we've had in the United States since colonial times.

What's changed is [that] when credit was deregulated in the early 1980s, the contracts began to shift. And what happens is that the big issuers, the credit card companies who have the team of lawyers, started writing contracts that effectively said, "Here are some of the terms, and the rest of the terms will be whatever we want them to be." And so they would loan to someone at 9.9 percent interest. That's what it said on the front of the envelope. But it was 9.9 percent interest ... unless you lost your job, or 9.9 percent interest unless you applied for a couple of other credit cards, or 9.9 percent interest unless you defaulted on some other obligation somewhere else that doesn't cost me a nickel. And at that moment, that 9.9 percent interest credit suddenly morphs to 24.9 percent interest, 29.9 percent interest, 36.9 percent interest. Well, you know, ... nobody signs contracts to buy things that say, "I'm going to pay you $1,200 for the big-screen TV unless you decide, in another month or two months, that it should really be $3,600 or $4,200 or $4,800." But that's precisely how credit card contracts are written today.

But they would say they're just making capital or money available to people in a convenient way.

Well, in a convenient way, and changing the price after people borrow it. You know, that's a heck of a deal. I don't know any merchant in America who can change the price after you've bought the item except a credit card company. After you have borrowed the $5,000, they can change the interest rate from 9.9 percent to 29.9 percent. I just don't know anyone else who can do that.

Hey, listen ... you make exactly the point that the credit card companies keep trying to make: "Hey, ... we don't make anybody take the money." And they're right; they don't hold a gun to anybody's head when they borrowed that money. But they did the much, much slicker way, and that is, they just put it all into contract papers. They put it all in clauses that people can't read. They put it all in things like "universal default terms" and "15 days to change the terms of this contract" and arbitration agreements that [say] "We will hold the arbitrator to see if we have abided by the terms of the contract." ... They have teams of lawyers to figure out just the way to write the contracts that will maximize the profits for the credit card companies and minimize the likelihood that any customer will quite figure out what has happened when he or she uses that credit card.

 - Elizabeth Warren, 2004

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"Every single day that goes by I read another news report about . . . how large financial institutions have figured out ways to lie to people, to squeeze them for money, to make profits by tricking and trapping people rather than by offering a better product," - Elizabeth Warren, 2009



Best wishes,


6 Comments – Post Your Own

#1) On October 28, 2011 at 7:53 PM, chk999 (99.96) wrote:

Believe it or not, I agree with you on this. I think credit card contracts should fit on about one page of ordinary sized type and clearly spell out the interest rates and terms. They should be written so that the average high school student can understand what the benefits and responsiblities are. I also think mortgages should be held to similar standards. Do this would let people make better choices about how they handle credit.

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#2) On October 28, 2011 at 9:39 PM, HarryCaraysGhost (86.66) wrote:

Just want to point out that the two largest credit card companys, V and MA do not lend money, they make their cash by every swipe of the card, it's the bank that issues your CC that sets rates, fees..ect. They hold the loan. And make all terms applied.

Now American Express on the other hand, well they're just shady bastards :)

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#3) On October 28, 2011 at 10:13 PM, whereaminow (< 20) wrote:

I just want to get something straight.

A credit card company is evil for filling a bunch of b.s. legalese on impossible to read print that no one would ever read.

But people who propose shorter legislation, like bills of one page in length, so we're not forced to read understand 9,000 page bills written in legalese that no one would ever read, are hopeless idiots.

Is it possible, and just bear with me here, that both credit card agreements and government legislation..... are actually the same thing?

And is it possible, that the people who want easier to understand credit card agreements want the same thing as people who want easier to understand legislation?

So now, for saying that he wants shorter legislation, is Herman Cain an idiot?  Or is he saying the same exact thing that the left says about credit card agreements?

(Caveat 1:  Keep in mind, that for many other reasons, he is still an idiot. But I'm talking about this one idea only.)

(Caveat 2:  Herman didn't actually think of that idea by himself, etiher.)


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#4) On October 29, 2011 at 12:24 AM, devoish (63.65) wrote:


We both find agreement with a well grounded, common sense conservative.


Yours is a fair observation.


You are equating cc agreements with legislation suggesting that both are intentionally misleading. It is to bad your solution will be off the charts worse. Did Ron Paul support the consumer fiinancial protection bureau and Miss Warren as its head?

Best wishes,


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#5) On October 29, 2011 at 12:47 AM, whereaminow (< 20) wrote:

You are equating cc agreements with legislation suggesting that both are intentionally misleading.

LOL, uh yeah. You don't?

Did Ron Paul support the consumer fiinancial protection bureau and Miss Warren as its head?

You mean the bureau that was created in the 2,300 page long Dodd-Frank bill right?

You're not very good at following along with these very simple arguments.



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#6) On October 29, 2011 at 2:31 PM, devoish (63.65) wrote:



Best wishes,


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