You Can’t Cheat An Honest Man

I have been listening with great amusement to Obamatalk about the credit card industry. There’s been a lot of discussion of how companies are entitled to make ‘reasonable’ profits, but must be prevented from utilizing ‘unfair’ fees and changes to conditions.

How? By government regulation, presumably.

Why do I say that, despite that phrase never being mentioned in any of the speeches or press releases I’ve come across on the subject? Because no mention of the highly effective default control of corporate behavior – consumer discretion – is ever made.

The contracts typically offered for credit card agreements are frequently Byzantine, obscurantist, and give the companies the right to change the terms therein as they wish. And people still accept the agreements! As long as people will do business with companies that create such contracts, the companies have no reason to ceasing doing so if it’s in their interests.

The most offensive idea being batted about is that consumers are entitled to contracts they can understand. Look, this is quite simple: if you are presented with a contract for a service you want, and you don’t understand it, you should refuse to sign it – even if that means not getting the service you want.

But that’s a concept that’s gone completely out of fashion. Imagine: being expected to act with self-restraint instead of being entitled to the things you want! The modern way is to demand that you get what you want and in the way you want it to be provided to you. Can’t understand the contract for cellphone service? Get the government to force the company to change its terms – and keep the price down while it’s at it.

(sigh)

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11 Responses to “You Can’t Cheat An Honest Man”

  1. Jake G. Says:

    Which credit card company offers it’s costumers the legally-binding promise that it will present them with one single legal item understandably detailing every single aspect of it’s pricing plan, such that no legal loophole or obscure document will provide the company with the ability to nickel and dime the customer?

    Because that is what is required for there to be an opportunity for a customer’s due diligence regarding his purchases to even matter. In this case government regulation can help, and no general argument of “government regulation==bad(always)” can deny that specific, reductionist logic (only other specific logic can do that.)

    My point: The real free market does not behave idealistically like it does in theory. For example, companies can form back room deals to only lower prices on products so much, far above their natural market value, in an industry where starting up a competing company is next to impossible. It’s not so straight forward how much government reg. is appropriate.

  2. “Which credit card company offers it’s costumers the legally-binding promise that it will present them with one single legal item understandably detailing every single aspect of it’s pricing plan, such that no legal loophole or obscure document will provide the company with the ability to nickel and dime the customer?”

    Melendwyr’s point is that *no* credit card company will present understandable contracts while people continues signing contracts that they don’t understand.

    “companies can form back room deals to only lower prices on products so much”

    Yes, but politicians can make “back room deals” too… The case for freer markets doesn’t rest on perfect markets; it rests on markets being “more perfect” than regulation.

    While contracts can be difficult to understand, legislation is not “crystal clear” and can additionally be impossible to read by its mere volume. I don’t see a clear advantage for regulation there…

    Sorry for my clumsy English, I’m not a native speaker…

  3. Mr. Chouza is quite right.

    There’s nothing preventing credit card companies from nickel-and-diming people. That’s precisely the problem – the people should be stopping them by refusing to deal with any company that acts that way.

    Rather than refusing to do business, the people are demanding that some other entity (in this case, government) force the corporations to act as they want them to without making any sacrifices themselves.

    If we believe that companies have made a deal to keep the prices of a service or product artificially high, we should refuse to purchase that service or product.

    The reason De Beers gets away with their artificially-high diamond prices is that people are willing to pay those prices. If people refused to do business with De Beers or any other diamond provider who used those prices, the price would have to come down. But rather than doing without, people pay.

    Diamond wedding rings aren’t even the original tradition. The tradition in was once for agate-set rings. Then an ad campaign convinced people that diamonds were what should be used, and no one wanted to go against mass opinion.

  4. Jake G. Says:

    “If we believe that companies have made a deal to keep the prices of a service or product artificially high, we should refuse to purchase that service or product.”

    But the comprehension of that principle was built into my objection. Credit cards can be seen as an essential item, that many people cannot choose not to have, and since the status-quo of card companies is to nickel and dime their customers through legal obscurity, and (as far as I know) all participate in that behavior, there is no existing free-market mechanism to break out of the unfair cycle. Although government regulation can.

    The diamond prices example is an example of an industry that is fundamentally closer to true free market ideals. That is, diamonds are non-essential to much of the market for them, and people can use their freedom to not-buy as leverage to change the prices.

    And in a way, the people (voters) getting sick of this archaic system and demanding their elected officials do something to directly change it, is an example of personal responsibility just as much as them choosing not to buy from a company. After all, they have identified something they don’t like, and taken an action to change it, which is very similar to how you would describe not buying from a company when you don’t like how it does business. And the results are close to the same (so long as the legislation is written efficiently for its purpose, and there’s no reason to believe it can’t be.)

  5. “Credit cards can be seen as an essential item”

    And Freddy Got Fingered can be seen as an artistic triumph of American cinema.

    “there is no existing free-market mechanism to break out of the unfair cycle.”

    Sure there is. You’re simply refusing to acknowledge it.

  6. Jake G. Says:

    “And Freddy Got Fingered can be seen as an artistic triumph of American cinema.”

    Sure, you can view credit cards as just tools for financially challenged who have no savings and have to outsource their money management to a corporation. But that’s not everyone. Many people with low paying jobs cannot afford to pay out the cash for large expense items when they need them-they don’t have it. Hence, necessary CCs. Loans are an option, but are more trouble than they are worth for the gain, and also offer many of the same pitfalls as CCs.

    And sure, I agree that consumers deserve the products that they demand; if they don’t demand clear contracts, they shouldn’t expect to get them. But what’s so wrong about demanding that the politicians they elect rapidly implement the end result they want through legislation, instead waiting for the slower acting market to ‘figure out’ what the consumer wants?

  7. “Sure, you can view credit cards as just tools for financially challenged who have no savings and have to outsource their money management to a corporation. ”

    Except no one here is doing that. Credit cards are a convenience and a luxury, not a necessity.

    “Many people with low paying jobs cannot afford to pay out the cash for large expense items when they need them-they don’t have it.”

    Then they either save up a discretionary fund, get a bank loan, or don’t get the item. If they don’t have the money, how exactly are they going to pay the bill? If they can pay the bill over a long time, they can save up over a long time too.

    “Loans are an option, but are more trouble than they are worth for the gain, and also offer many of the same pitfalls as CCs.”

    Credit cards ARE loans. Loans with strings attached, and hidden costs, and high penalties for failing to pay them back quickly.

    “But what’s so wrong about demanding that the politicians they elect rapidly implement the end result they want through legislation, instead waiting for the slower acting market to ‘figure out’ what the consumer wants?”

    What a remarkably stupid question.

  8. Jake G. Says:

    “Then they either save up a discretionary fund, get a bank loan, or don’t get the item. If they don’t have the money, how exactly are they going to pay the bill? If they can pay the bill over a long time, they can save up over a long time too.”

    Except this is not accurate, as there are numerous exceptions to this generalized description that make it invalid: young people just starting to save and who have no other resources, but have an immediate necessity purchase, people with perpetually bad luck, etc.

    In either case, I think the side-discussion of whether credit cards are necessary or replaceable by bank loans is besides the point; if consumers are sick of CC company shenanigans, it is every bit their right to demand swift action by the government rather than waiting for the free market to catch up with consumer demand, and this represents little difference in personal responsibility from just not buying from these companies. It’s the results that matter, not the emotional aspect of expecting consumers to “endure” the hardship from not having a CC. A non-disruptive solution is preferable to a disruptive solution, all else being equal.

    “What a remarkably stupid question.”

    There is nothing stupid about the question. It was rhetorical, it was meant to highlight the absurdity of criticizing the consumer for not standing up to the credit card companies by not buying their products, when they have actually found a much smarter way of doing just that: ask their elected representatives to change things to their favor directly through legislation, and in the mean time not disrupt their life by forgoing one the most convenient and efficient methods of payment (change/cash gets lost, debit cards can be less secure, etc.)

  9. “Except this is not accurate, as there are numerous exceptions to this generalized description that make it invalid: ”

    It’s a prescription, not a description, you idiot.

    “if consumers are sick of CC company shenanigans, it is every bit their right to demand swift action by the government”

    Of course it is! No one’s said it isn’t. They have just as much right to do so as they do to demand that the government become a fascist dictatorship and enslave them all. But that’s a BAD IDEA.

    “it was meant to highlight the absurdity of criticizing the consumer for not standing up to the credit card companies by not buying their products”

    What frightens me is that a majority of people in America seem to have accepted the same idiotic ideas that you have. The markets should be made palatable by us, rather than for us.

  10. Jake G. Says:

    “It’s a prescription, not a description, you idiot.”

    The piece by you I quoted served as a list of functional alternatives to credit cards for people with low income and high expenses. Either these alternatives are relevant to real people for the stated purpose, which amounts to a description of reality, or they are not relevant in which case a prescription serves no purpose in the argument, because it is the already existing market conditions that matter (which would be described, not prescribed), not what they idealistically should be. Thus, “description” was the appropriate word, not “prescription.”

    “Of course it is! No one’s said it isn’t. They have just as much right to do so as they do to demand that the government become a fascist dictatorship and enslave them all. But that’s a BAD IDEA.”

    Straw man. The full context of what you quoted was not referring to the legal right to raise a fuss about market conditions (which is implied given its obviousness) but rather the right to do something that is fundamentally fair and sustainable over the long term, along with the assertion that it is fair and sustainable.

    “What frightens me is that a majority of people in America seem to have accepted the same idiotic ideas that you have. The markets should be made palatable by us, rather than for us.”

    And the point I have repeatedly made is that by pressuring politicians to change the situation with legislation would qualify as a palpable economy that is “made by us”, just as much as not buying from a credit card company is. Both are realities created by the volition of consumers. Mechanically, legislation works: Credit card companies are prevented from putting in obscure legal loopholes that even diligent readers would miss, and the companies are forced to provide more actual value to their customers to increase revenue, which is a greater enabler of the free market as it enables the consumer to easily assess which company provides more economic utility, making the market more efficient.

  11. “Thus, “description” was the appropriate word, not “prescription.””

    If I had merely been listing alternatives, that would be a description. Saying that those alternatives should be used rather than resorting to force of law is a prescription.

    You can’t even use English properly, no wonder politics is beyond your comprehension.

    “And the point I have repeatedly made is that by pressuring politicians to change the situation with legislation would qualify as a palpable economy that is “made by us”,”

    And your point is wrong – not merely factually incorrect, but logically incoherent.

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