I sat in on a talk show discussing money, credit management, predatory lending and shady car deals with ridiculously high interest rates. As I listened to the way the questions were composed and the answers by the other participating guest, it became clear to me that my perspective was a wee bit different from the norm. I’m one of those people who believe in taking responsibility for my actions.
As my mother use to tell me, “You made your bed hard, so go lay in it!” Trust me, I have made several bad decisions in my life—many of which were extremely costly. I believed that when faced with the guilt, shame, regret and oftentimes—costly expenses associated with making bad decisions you can wallow in self-pity and blame others for your demise. Or you can pick yourself up, brush your shoulders off, learn from your mistake and strive to make better decisions in the future.
When I graduated from high school, I just had to have a car. Against my mother’s wishes I took the cash I received at my graduation party and sought out looking for a car. My mother warned me that I should have someone that knows a thing or two about cars with me so that I don’t buy a lemon. I was stubborn. I took my money and found a car being sold by a private seller and sealed the deal—shelling out all of my graduation money. The person who sold me the car told me that I needed to get the brakes fixed. I was so exited with my new car, I remembered him saying something about the brakes but the details escaped me. It was not even 5 minutes that past, when I was driving my car from the previous owner’s place of business, down a steep hill cluttered with traffic in all directions that the brakes went out. It appears that God was on my side because the flow of traffic opened up and I was able to courageously steer the car into a telephone pole. I managed to walk away without injury but the car was damaged beyond repair. I was furious. I went back to the seller trying to explain what had happened and demanding my money back. The seller offered his apologies, mentioned that he knew the brakes were bad but thought they had more life in them. He then reminded me that the car was sold As-is. I felt victimized—no money and no car. Was I a victim or was I a volunteer?
“Caveat Emptor” is an Old Latin term that means, “Let the buyer beware”. Its basic meaning is that as a buyer, you should fully understand the product, terms, conditions and cost before you make the purchase. Otherwise you may end up with what is known as buyer’s remorse—regret, shame, and guilt after you’ve made the purchase. Today we live in a consumer advocate society. There are several laws aimed at penalizing and outlawing companies and individuals that are unscrupulously exploiting consumers for maximum gain and profit. I would admit that there are definitely wolves in sheep clothing seeking to rip-off consumers for every dollar they can get. To those of you who have been truly victimized, I sincerely understand your pain and I hope that you get proper help and reap compensation for your wrongful experience.
During this talk show, I got an opportunity to listen to some gifted knowledgeable people whose heart was in the right place. They were seeking to expose, weed out and in some cases sue unscrupulous companies and individuals seeking to maximize profits at the consumer’s expense. Since we were dealing with money and credit, they talked primarily about how various consumers who were being unfairly targeted by predatory lenders that offer high interest rate, high closing cost and negative equity type loans. They talked about shady car deals with ridiculously high rates and payday loan companies charging skyrocket fees. Now here’s where I differ just a wee bit. While they rightly blast on these lending institutions—I’ve done my fair share of blasting as well—they totally ignore the consumer’s involvement. Is it possible that some of these consumers made themselves vulnerable to high cost lending products? Did these lending institutions put a gun to their head and make them sign the loan documents?
The lending business is a very competitive industry. If you quote rates, terms and payments to a consumer that seems unreasonable, there’s a high probability that the consumer will shop around for a better deal. So if a lending institution can get away with selling a consumer on a loan product with a high interest rate, high fees and payments they cannot afford in this competitive market place, shouldn’t we wonder what would make a consumer vulnerable to this product? It’s not about race, age or gender. These are people who are having money problems—be it too much debt and bad credit, not enough income, or not properly managing the money they have. They are spending out of control. They have no savings and they have no financial plan. They are broke, desperate, and hopeless. They tried regular banks first but they were turned down. In most cases they sought out these high cost loan products, thinking it will fix the problems of today without considering the downside risk and negative consequences of tomorrow. Although there are some victims, I submit that many people willingly signed high cost loan documents. They volunteered. I understand their pain and I hope they learned from their mistakes. If you get your financial house in order, I assure you that you will be insulated from high cost loan products.
Here’s the truth! All companies are seeking to make a profit at the consumer’s expense, even the companies of those who participated on the talk show—including those companies that label themselves as non-profit. How else do non-profits pay rent, light, telephone, advertisement, and employee salaries? Hopefully in return, we as a consumer get something of equal value for our money spent. Consumers beware for no one cares about your money or your well being more than you do.
(Damon is owner of ACE Financial. He can be reached at 412-856-1183.)