'World News:' Banks 'Deceived' Borrowers into Overextending Themselves
The blame game for the personal credit woes plaguing the
â[John LaPerch] is like the millions of Americans, who at the height of the housing boom, watched the value of their home go up, along with the number of sweet deals arriving in their mailbox,â ABC correspondent David Muir said on the June 16 âWorld News.â
The sweet deals Muir were referring to were credit card deals that âjust showed up.â But rather than exercising discretion with these offers, LaPerch threw caution to the wind and âtook advantage of it.â
âI had a $1,000 credit limit,â said LaPerch. âNext thing I know, itâs up to 14 grand.â
Now LaPerch finds himself $78,000 in debt on a âhalf dozenâ cards that he is struggling to pay off. But, rather than using the opportunity to show viewers what can happen with they are irresponsible with their finances, the segment placed the blame on the companies that offered him the credit.
âA USA Today analysis shows that at the peak of the housing boom, credit card companies quietly hiked cardholdersâ spending limits, on average up 17 percent, to more than $8,000 a card,â Muir said. âAnd in many cases, much higher â without consumers asking for it.â
Muir referred to a liberal advocacy group that compared the will of these borrowers to a domesticated rodent and called the process a âlucrative hamster wheel.â
âThen the banks told consumers you can pay off those rising credit card bills by taking out a loan on your house, a home-equity loan, essentially borrowing more. One consumer advocate says, for the banking industry, it became a âlucrative hamster wheel.ââ
The âconsumer industry groupâ Muir referred to was the Consumer Federation of America, a group that lobbies against businesses and for increased regulation. The groupâs spokesman didnât fault borrowers.
âIn many cases, consumers didnât simply use home loans to pay down their credit card debt. They ran up more credit card debt,â said Travis Plunkett, legislative director for CFA. âThis was a vicious cycle.â
The report did include one brief defense of banks, from chief economist James Chessen of the American Bankers Association. âI think the issue really has been it was their prudence on the part of borrowers to not extend themselves too far,â said Chessen. âMany were using their home equity as an ATM machine.â
Rather than treating the situation of LaPerch and a woman who has $140,000 in debt, including her house â as a lesson in financial irresponsibility, ABCâs Muir turned to a regulation proponent. Rep. Carolyn Maloney (D-N.Y.) also blamed lenders for providing the âATM machine.â
âTheyâre [lenders] the ones who gave them the ATM machine â an ATM machine they could not afford,â Maloney said.
According to Muir, Maloney is pushing for a âcredit-card bill of rightsâ in Congress that would further regulate the lending industry.
According to a Business & Media Institute study, "Debt: Whoâ$ Responsible?,â businesses and lenders were blamed much more often for debt that borrowers (6 to 1 margin). That study also concluded that ABC News ignored personal responsibility 66 percent of the time.