The New York Times points out this morning that people who file for bankruptcy are inundated with credit card offers (it's always been this way, but is especially the case now, due to the new bankruptcy law that helps protect credit card companies). Excerpt:
Under the new law, which the banking industry spent more than $100 million lobbying for, they may be even more attractive because it makes it harder for them to escape new credit card debt and extends to eight years from six the time before which they could liquidate their debts through bankruptcy again.
"The theory is that people who have just declared bankruptcy are a good credit risk because their old debts are clean and now they won't be able to get a new discharge for eight years," said John D. Penn, president of the American Bankruptcy Institute, a nonprofit clearinghouse for information on the subject.
Credit card companies have long solicited bankrupt people, on a calculated risk that income from the higher interest rates and late fees paid by those who are trying to get their credit back will outweigh the losses from those who fail to make payments altogether. The companies also directed many of those customers toward so-called secured cards, which require a cash deposit.
I'll need to do some cogitatin' on this one, but a system that encourages banks to give credit to people who can't manage credit must be broken. Yeah, yeah, I know: "It's a good system because it lets people who can't get credit to get credit." But at what cost? A country's wealth is built by making things--accumulating material things--not by spending money (see "Broken Window Fallacy"). How much of our country's time, money, and energy is diverted to dealing with bad credit issues? Then again, how much does easy credit help provide the resources for making material goods? I simply don't know, but even if the system works for now, nothing that is fundamentally twisted--and a system that gives credit to poor credit risks is twisted--can last forever. Call it a mystical belief of mine, but truth "will out."
