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Scapegoating the Credit Card Industry

While the review itself is on the later side, I’m happy at this review I found for the movie “Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders” because it deals with an important aspect of psychology and finances.

For those of you who don’t know, MaxedOut is one of the many documentaries that came out over the last few years. If you’re interested in reading the review, you can click here to see it.

By the use of “predatory lenders” in the title, it’s pretty clear that MaxedOut describes the darker side of the credit card industry. Now, up front, I want to honestly say that I haven’t seen this movie, it just provides a wonderful introduction to my concept.

Having worked in the financial industry, I’ve seen from experience that customers often blame the industry for their problems. I’ll be the first to say, banks, credit card companies and check cashing stores are industries that can often maximize their profit at the expense of their customers. However, I don’t think that they are the biggest problem. I think our fundamental failing as a society is the lack of basic financial education that we provide. The biggest issue with scapegoating a particular financial industry is that we then avoid attacking the real problem.

Essentially, what we’re doing when we create negative stereotypes of financial institutions is undergoing the “Texas sharpshooter fallacy” (Texas sharpshooter fallacy — the fallacy of selecting or adjusting a hypothesis after the data is collected, making it impossible to test the hypothesis fairly.). We make our judgments on these industries based on the fact that people have bad experiences with them.

The other issue we encounter is a vast social ignorance when it comes to the damages that can be caused by something as simple as a credit card. We require licenses to drive cars and training to operate heavy machinery, but on the scale of human suffering, that small piece of plastic is just as dangerous and can ruin lives just as easily. For as long as there has been money, there have been people who didn’t handle it well. This isn’t new. However, as we’ve made the monetary system more complex we haven’t taught people how to properly use it.

Feel free to watch MaxedOut. I’m a big fan of documentaries myself and might look it up. There are indeed some genuine tragedies in the credit card industry. People down on their luck with no where to turn, who were brought there through no fault of their own will always exist, and they should be helped as much as possible. However, a great number of people with credit problems are people who make mistakes that eventually snowballed on them, or are just victims of poor choices.