Debt, It's Not Me, It's You.

“I’ve kept up with the debt payments as long as I can. I mean, I charged the stuff and I agree that it should be my responsibility to pay it off. But in 6 months my rate has gone from 0% to 12 to 23 and now it's at 33%. Credit card companies have become worse than loan sharks. I don’t think it’s right that they can charge so much interest that you can never pay off your debt. And when you’re struggling they call your house night and day and treat you like some deadbeat! I’ve tried and tried, but if I pay them what they ask I won’t even be able to afford to feed myself. So forget it. They’re not getting a penny more of my money.”

Most people agree that if they borrow money they should pay it back. They will even agree that it is acceptable for a lender to charge interest on the amount borrowed (unless their religion forbids it). But what happens when the terms of repayment go beyond a person’s idea of what is fair and reasonable, or when the borrower feels powerless to meet the lender’s demands?

As terms become more unbalanced in favor of the lender, the borrower’s sense of ownership for the debt decreases.

Call it the consumer's APR: Adjusted Personal Responsibility.

I’ve said before that lending is a business, and right now the lenders are holding a lot of cards. Regulatory caps on interest rates and fees have been eroded in recent years, and consumers live in a world where the 0% APR on your Visa can jump to 23% (or higher) just because you’re late paying the electricity bill. These are pretty tough terms. Factor in the aggressive practices of collection agents and you have a situation where the besieged borrower, already stressed, now feels attacked and victimized.

In these situations, the mind will reframe the circumstances in a way that preserves the borrower’s sense of his own self-worth (“goodness”) and will recast the lender as predatory, unfeeling, and downright evil.

Part of the problem is the way that consumer goods in general, and credit in particular, are marketed and sold. In order to ease consumers through the anxiety that comes from parting with their money, they are presented with the option of buying on credit. And in order to get the consumer to override their natural aversion to debt, they are flattered and told that this credit is something they’ve actually “earned,” something available only to people who are “worthy.”

So when a lender switches from acting like a loving parent or an approving friend to acting like a wronged lover, this can come as somewhat of a shock to the consumer. The consumer may experience the lender’s escalating (punitive) interest hikes as erratic and unreasonable behavior.

First, the borrower is wounded:
Creditor, I thought you loved me!
Next, the borrower reproaches himself:
Maybe I’m not as great as Creditor said I was.
Then the borrower’s sense of self-preservation kicks in:
This Creditor is acting like a real creep.
Finally, the borrower rejects the negative message:
Creditor, we’re through.

The “break up” can take a number of forms depending on the situation. Maybe the borrower stops answering the creditor’s calls or opening their letters. They may transfer the balance to another card (if they’re able), or take steps toward filing for bankruptcy.

Since you cannot actually break up with a creditor, all of these scenarios are bound to cause more grief for the borrower than they will for the lender. Trust me, you can't punish MasterCard by throwing their bills in the trash. Eventually they will get your attention.

However, I do feel that creditors are taking the wrong tactic with their penchant for ever higher fees and interest rates. I’ve spoken with many consumers who feel personally betrayed by the actions of their creditors. Having experienced extreme consequences for what they perceive as relatively minor missteps, they are bound to be wary of exposing themselves in the same way again if they can possibly avoid it.

Creditors should be concerned about the rising tide of consumer anger. When creditors hold all the power in a relationship, they also hold a higher proportion of responsibility. Even in Shakespeare's day, nobody cried for the money lender.