April 21,2009
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Antiquity of Credit Card Debt, Pt.3
Who's to blame?Who's to blame for what's happening in the credit card world remains an ongoing controversy. The financial industry continues to blame the consumer. They believe the consumers are at the helm and driving the ship. Financial institutions agree that consumers should be educated on how to manage their credit card debt, but feel the ultimate responsibility falls on the consumers' shoulders. Certainly the consumer holds the final responsibility; however, the banking industry has a responsibility to allocate credit with limits and reasonable criteria. After all, they are responsible for protecting their own assets. With few resources available to educate students and adults on financial health, lenders need to fill the gap. It would only be in their best interest in protecting their business. Consumer advocates agree that consumers need to take on a greater responsibility in managing credit card usage, but also believe there is much the financial industry can do.
Dr. Robert Manning, Research Professor and Director of the Center for Consumer Financial Services at Rochester Institute of Technology, is a renowned author and expert in consumer finance and education. Manning says that consumers were at one time able to distinguish between appropriate and inappropriate credit card debt; however, with a change in the core values of today's society, consumers have lost the penny saved, penny earned premise. As a result, the banking industry has altered their marketing strategies to meet the needs of today's consumer and to realize increased profits. Many lenders have marketed the premise that "It's my right to have whatever I want." Partner this with their aggressive marketing strategies aimed at our youth, and bang, credit has lost its claim to being an earned privilege. Rather than having to demonstrate reliability in repaying credit card debt, the new generation has now been taught to believe they deserve it.
Opponents of Mr. Manning believe differently. They say this is a myth and that excessive consumer spending didn't just happen in the 1990's, it existed way before then. It's the manner in which the credit is now owed that is different. Consumers don't owe the baker, the butcher, or doctor; they now use their credit cards to pay. These opponents agree that financial values have changed, but they believe the media and government adversaries are just seeking to put the blame on the financial industry.