I Worked at Capital One for Five Years. This Is How We Justified Piling Debt on

[Texacon]

https://www.democraticunderground.com/100212539656

Demovictory9 (8,242 posts)


I Worked at Capital One for Five Years. This Is How We Justified Piling Debt on Poor Customers.

 
https://newrepublic.com/article/155212/worked-capital-one-five-years-justified-piling-debt-poor-customers

I Worked at Capital One for Five Years. This Is How We Justified Piling Debt on Poor Customers.

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Annie and I worked together at Capital One for three years. For a few months, I was her boss. I oversaw the bank’s “secured card” product—a credit card marketed to people whose credit is so bad they can’t get a credit limit of $300 at a 27 percent interest rate without putting down a security deposit. Ironically, at Capital One, the more of a positive-energy type you were, the more likely it was that you’d work in the subprime division. There, people like Annie and myself reasoned, the choices you made could, hypothetically, make things easier for struggling families. We told ourselves that such families likely didn’t have any better lending options. And for poor, under-banked households, many lending options are far worse than Capital One.

The real question, of course, isn’t whether a credit card with a 27 percent interest rate and a $39 late fee is better than a payday loan. It’s whether Capital One’s marketing campaigns push people into debt who would have otherwise avoided it; whether it is actually in a person’s best interest, desperate though they may be, to borrow money at an exorbitant rate; and whether this enterprise is ethically defensible—in particular, for the decent, hard-working employees who toil every day to make Capital One’s mercenary strategy a reality. Because the ugly truth is that subprime credit is all about profiting from other people’s misery.


In 2012, the year I started my first Capital One internship, the company’s acquisition of HSBC’s credit card business went through, making it one of the largest subprime credit card issuers in the U.S. The decision to double down on those Americans struggling to get by has paid off handsomely.

The credit card titan’s newly-constructed 31-story glass headquarters in McLean, Virginia, is but one lavish testimonial to the success of its bottom-feeding business model. Capital One collects $23 billion in interest per year—an average that works out to $181 from each family in America. Of course, not every family has a Capital One account, and most public surveys say roughly half of people with credit cards pay them in full and accrue no interest. So simple math tells you that many families are paying Capital One at least $800 in interest every year.



Capital One’s decision to double down on those Americans struggling to get by has paid off handsomely.
And most of that interest gets paid by the families who can least afford it. According to data from a 2018 Federal Reserve survey, people who report an unpaid credit card balance “most or all of the time” were nearly five times as likely to describe themselves as “struggling to get by” or “just getting by” than the people who paid their credit card bills in full every month. They were nearly 50 percent more likely to have an income under $50,000, 2.5 times as likely to describe the economic conditions in their community as “poor,” and three times as likely to have skipped prescription medicine or doctor’s visits because of cost.

Maybe you should talk to the democrats who made it not only legal, but the LAW that you must loan money to these people.  It was the democrats who created the sub prime home lending market and the democrats who caused the huge foreclosure boom in the 2000's.  I remember it well.  They made it against the law to 'discriminate' against those who couldn't afford to buy a home ... remember?

3Hotdogs (2,957 posts)

6. I ain't poor and I am in credit card debt: 29K. Net take-home, $68k. House paid off.

But the credit cards will all be paid off by December of next year. I figure I am paying around $5,500 per year on interest -- on stupid shit.

I got inspired by Dave Ramsey's stuff. I don't subscribe to the Jesus part of his program but I am inspired by people who overcome debt. I let this get to where it is by inertia -- not thinking about it.

What's this?  A DUmmie who admits their financial woes are theirs and theirs alone??  Wow!  Whose mole?

FBaggins (19,244 posts)

8. You sound like someone who should ignore Ramsey

Don’t get me wrong. For people who are badly in debt from making bad choices... his advice can be the very best way to recover - and the discipline can be life-changing.

But if your home is paid off and you owe almost $30k on credit cards... it’s time to get a mortgage or at least a home-equity product. Feel free to pay it off just as fast, but you’ll save thousands in interest.

Wrong.  You'll end up borrowing for your closing costs to be rolled in, and a higher rate of interest for the HELOC.  The guy following Dave Ramsey should just stay the course.

And I'm betting if he's $30k in CC debt he's probably paying more than $5,500/year in interest.

3Hotdogs (2,957 posts)

9. You're right.

Again, inertia, the aggravation of applying for home equity.... I have not made a credit card purchase in 7 months. Sissored them and threw them away.

But yeah, home eq does make more sense.

Hi, my name is 3Hotdogs and I've been sober for 7 months ...

Good for him!  Wonder just how much of a democrat this guy is?  Owning his problems and getting out of debt?  Wow.

KC

[USA4ME]

Wrong.  You'll end up borrowing for your closing costs to be rolled in, and a higher rate of interest for the HELOC.  The guy following Dave Ramsey should just stay the course.

And I'm betting if he's $30k in CC debt he's probably paying more than $5,500/year in interest.

I will agree if this primitive is actually following the Dave Ramsey model, which I believe entails cutting up your credit cards and getting with the credit card company to get them to stop charging interest and to work out a principle-only payment plan.

But if this primitive is still paying $5,500/yr in interest, and it's going to take him 3 or more years to pay off the $30K debt, he might actually be better off with a HELOC.

My mortgage/finance company used to work with people trying to do debt consolidation all the time. Working the math, setting a budget, and making a plan was never the issue. It was always getting the customer to follow the plan where the problems came in.

But as far as high risk credit cards for people who have ruined their credit, it's a no win as far as PR. Offer it and the people go into more debt and the credit card company gets blamed. Don't offer it, and they get blamed for not being willing to help. The general public starts clamoring for these credit card company's to offer the poor very low rates, like 1/2% or 1% interest. First of all, the market isn't built that way. But even if you were to defy the market, the problem isn't the rate, the problem is the spending habits of those who are in that position by, as the primitive said, "not thinking about it."

.

[SVPete]

Annie and I worked together at Capital One for three years. For a few months, I was her boss. I oversaw the bank’s “secured card” product—a credit card marketed to people whose credit is so bad they can’t get a credit limit of $300 at a 27 percent interest rate without putting down a security deposit.

A secured credit card is prepaid at 100%-200% of the card's limit. So the cardholder is not in debt, even if they max out their card. But here's things DU-Prevaricator Demovictory9 could not admit:

* There is no "right" to get a loan or credit card;

* The one who gets a credit card is not forced to do so, it is their choice;

* The cardholder chooses what and when to purchase with their card; IOW, the cardholder chose to make the purchase and chose not to use cash.

Banks and credit cards do not "Pile Debt on Poor Customers". Other than uncommon situations like true emergencies or long-term layoffs, being in debt is the accumulated choices of the one in debt.

[Texacon]

My mortgage/finance company used to work with people trying to do debt consolidation all the time. Working the math, setting a budget, and making a plan was never the issue. It was always getting the customer to follow the plan where the problems came in.

.

Which is exactly why they are where they are in the first place.

I know, because I was that guy once upon a time.  Wandering through life without a clue.  I finally woke up in my early 30's and set on a path of fixing my money problems and did it.  It wasn't easy and it wasn't fast, but in a couple of years I was doing great! 

Once you learn that money doesn't solve money problems you are set free!

KC

[Old n Grumpy]

3Hotdogs (2,957 posts)

6. I ain't poor and I am in credit card debt: 29K. Net take-home, $68k. House paid off.

But the credit cards will all be paid off by December of next year. I figure I am paying around $5,500 per year on interest -- on stupid shit.

So, being a STUPID SHIT you pissed away almost 30K on stupid shit, see where being stupid gets you?

[Wineslob]

Once you learn that money doesn't solve money problems you are set free!

You assume DUmmies learn from their mistakes, not turn it into a political grievance.