The Fed is Considering Credit Controls

In a recent blog post, I saw that the Federal Reserve Board is considering a response to credit card holder complaints. It is the first time since 1980.

It is about time that the Federal Reserve Board does something. When we apply for a credit card, we are required to disclose a lot of personal and private information. That information is kept in the bank's database and used for marketing and other purposes. We are not compensated for that disclosure because it is simply provided on an account application. Banks and credit card companies have little regard for privacy, especially after the recent Financial Services Modernization Act was passed. This law essentially dismantled the protections put in place by the Glass-Steagal Act of 1933 that prevented banks from doing both wholesale and retail banking. Now that the likes of Citibank have become financial conglomerates, in every area of financial services, privacy no longer exists as this information is shared across all areas of bank operations. Instead of this leading to lower costs that are passed on to consumers, prices for financial services have gone up in financial and legal terms.

Signing Unseen Contracts
Consumers are signing contracts that don't disclose their content until after the contract is made. The industry is using the disclosure laws as a substitute for the actual contract. There is simply one line in the disclosure that defers to a yet unseen agreement, that you are agreeing to with your application. You are not allowed to see the contract until it comes in the mail with your credit card. This would be considered dishonest in every other industry. It is simply wrong to sign a contract you haven't seen, yet we are expected to "take personal responsibility" for what we agreed to. What is worse, those contracts are so carefully crafted that it is difficult for even an attorney to completely assess the implications of the agreement. I hope the Fed puts a stop to this practice.

Illusory Contract
Black's Law Dictionary defines an illusory contract as "An agreement in which one party gives as consideration a promise that is so insubstantial as to impose no obligation. The insubstantial promise renders that contract unenforceable." I would make the argument that credit card agreements qualify under that definition. The agreements are virtually unenforceable by the consumer and the credit card company can change the terms at any time to their benefit. It is especially illusory now that "mandatory arbitration" clauses have been added. It is a well known fact that these arbitration arrangements are giving lopsided justice, and keeping credit card abuses private, as arbitration proceedings are kept out of the public record. This type of clause included in an Adhesion contract, which credit card agreements also qualify, should make the clause unenforceable, but consumers have little power to fight the force of highly paid credit card company attorneys. It is a waiving of a constitutional right, and should not be taken so lightly as it is slipped in under the radar of credit card holders and considered applicable to retroactive purchases. I hope the Fed puts a stop to this.

Consumer Abuses
The media has documented abuses quite well. These abuses are made legal by the careful crafting of deceptive and unfair credit card agreements that are slipped into envelopes with the credit card as it is issued, taking advantage of human nature. There is clearly intent to decieve. Credit card companies treat their customers as if they are simply objects in which they extract money. If they don't comply, and submit to abuse, they are punished using the credit reporting bureaus. Even when they try to comply, the credit bureaus are used as a means of extracting more money. We have been programmed to believe credit cards are a necessary form of payment, and that we have little choice but to sign their agreements. If these abuses do not stop, things will only get worse. It is killing the financial health of our country, and will eventually cause us to lose our position of strength in the world. I hope the Fed does something to stop this.

Irresponsible Lending

If you would like to see a report that shows poor stewardship go here. It seems like there should be a law against binding minors into contracts, especially without their parent's knowledge. Can somebody get mad about this and organize to stop it? It seems a bill in congress that addressed this failed to pass. I guess this just goes to show how corrupt our leadership has become.

Using What You Have

One day we will all stand before God and give an account for what we did with what He gave us. Romans 14:12 and 2 Corinthians 5:10 make it clear. In Matthew 25:14-30, Jesus tells a parable that illustrates what He expects us to do with what He gives us. This parable is referred to as the Parable of the Talents. Talents in biblical times were actually money. Today the word is used to describe our abilities. Both meanings are revelant, because both represent wealth.

The first thing to notice is that what we had during our life was really loaned to us for a short time while we were on earth. In verse 14 he is telling us that God entrusts certain "property" to us to use for Him. We are stewards for what He has given us. We often think we own what we have, but we really only have it on loan. He has given us gifts (Ephesians 4:8).

In verse 15, we see that He is giving us these "talents" according to what we can handle. We all have different gifts according to the grace He has given us (Romans 12:6). If He didn't do it this way He would cause us trouble. This also means that if we are envious of what others have, we are not appreciative of what He has given us, and we are ignorant of the trouble we would have if we were given those things.

In verses 16-19 and the Master's response to the 3rd man in the parable in verse 26,27, it is evident what He expects from us. If we did not have enough trust in God to do something besides keep His gifts safe, we are lazy and wicked. God expects us to try even if we are going to fail. If we are doing His will, He will bless our efforts. So we need to deal with our fears and move forward. In verse 25 we see that the 3rd man was afraid to lose the talent he was given, and buried it. Don't bury what God has given you, and don't squander it. Use it for what the real owner would want done with it. Remember, you are just the steward.

In verse 28, the Master gave the one talent from the 3rd man and gave it to the one who had the most, because he had made the most with what God gave him. We are expected to do God's will with what we have. If we do well, we will get more. This is evident by the statement in verse 23 of the parable.

So God does expect us to be productive with what we have. If we pass the money test, He will give us more. As long as we are good stewards of it. If we use it to oppress others, or otherwise misuse it, it will eventually be taken away. If we do foolish things like spend it on selfish things, and borrow more money to get bigger and better things, we will lose it quickly. God's will for our use of money is found in 1 Timothy 6:17-19. We are to be willing to help others with it. In Matthew 6:21, we see the principle where looking at how you use your money, reveals what you love. If you are storing it up, and have much wealth, that you'll never use, you are materialistic and put your trust in money. If you use your excess wealth to help others, you are probably being a better steward for God's wealth. The same goes with your talents, they are wealth as well. A good book on stewardship, for further study is God & Your Stuff

Who's Fault is it?

I encountered an interesting blog post on placing blame for the bankruptcy problem in our society today. There are some good comments. See it here.