Consumer Power: Credit (1973)

I can say [music] yes. I like it. I can say no. [music] Won't buy it. Consumeable power. [music] Consumable power. [singing] Uh you know we psychoanalysts believe that uh one of the most primitive and one of the earliest needs of the infant is what we call the oral need. the need to put things into his mouth. And the infant, you'll note, by the way, will grab anything and put it in his mouth. It's his first way of getting to know the world. And it doesn't matter whether it's something edible or not edible. The mouth is the place that it goes. Unfortunately, a great many adults never quite get over this first oral phase. They have so many things to get and they want everything now and you don't have the money to do it all now. And and credit's great. >> Morality in some people leads simply to overeing and they get terribly fat and they don't know what to do about it. But in the more symbolic sense, it leads to trying to grab and seize everything in sight and to overextend yourself to the point where it uh it's completely irrational and has no relation to your real needs or to your real capacities. >> Credit and installment credit in particular uh makes a very substantial contribution to the quality of life in this country. I think in the main this contribution is made because or through the ability of credit to permit the consumer to have the use of a product or a service earlier than he would be able to if he had to save the money until he had sufficient funds to pay for that product. >> It sounds good. But then uh there's a big red bait there. There's a hook in it. You know >> what is the hook? Well, the hook is you're going to pay 18%. Overall, so don't you see that makes me makes me pay more for the item where I could do without the item. If it's something like a stove or an ice box or something like that that I have to have, well, then uh I would get it and and suffer the 18%. But if I if I didn't have to have it, I'd rather save the money first and then purchase it for cash. >> Consumer credit contributes to the economy as a whole in that it enables people to buy products that they would not otherwise be able to buy. >> Furniture mainly, >> our living room set and our bedroom set, >> clothes, appliances, house, car. >> So we always buy our cars and get it. refrigerators, major appliances, >> property and furniture. >> Well, my bedroom suit, just everything that I've ever had, I bought it on time. >> Well, certainly the the extension of credit uh is the main pillar of of of our economy in terms of uh accelerating consumer purchases. And I think there's no question that without the extension of credit, our economic growth and our economic situation would be severely jolted uh as well as our banks and finance companies, insurance companies and other institutions that rely on the uh the growth of an economy with all it produces by way of taxes and goods and services that's based on the extension of consumer credit. It's obvious that many segments of the society benefit from the use of credit. Obviously, the lender benefits. Uh the lender makes a profit, but also he creates jobs in that there are many positions that have to be filled in the financial industry because of the demand for credit and the creation of jobs through that source. What would your life be like without credit if you didn't do buy things on time? >> We would probably have two pieces of furniture in the house. >> I I don't know. It just makes a whole bunch of money for people. I I don't think about it. It's just a convenience for me. That's all. >> I buy mine on time. >> Why do you do that? >> Because I can't afford to uh pay cash for it because I don't have any money and I pay it as I make it. >> I like it because I see something I don't happen to have the money right then. All they do is charge it. Well, who eventually pays for it? >> I do. [laughter] >> I think that fundamentally the irrational needs far outweigh the rationalizations that are given for using credit. And that's what makes it a neurotic, destructive force in our society and not the constructive thing that so many people would like us to believe it is. We used the credit card on the trip because we didn't have the money and we went first class all the way and then it took us three months. >> That was the only time we ever did that. >> No, I think it's uh I like it. >> The person who feels helpless, who feels impotent, needs some kind of magic potion, something that will restore his feelings of power or even of omnipotence. And here is where the credit card or somebody says to you, all you need to do is sign your name. The signature suddenly becomes magic. And at that moment when you're signing that your name on that thing, you're filled with this feeling of magical omnipotence. And that too is great stuff. I to me I think credit cards they've got a place like if I like I've got a well I've applied for a master charge and I'm waiting for my card now but I work at a bank so in there you you have to sell credit cards that's part of your job. So you learn to you know you have to if you have to sell it you've got to believe in it. The bank credit card provides the consumer with the equivalent of a charge account at each of many thousands of merchants throughout the area where he lives. This means that if a particular bargain is available to him at one merchants and that merchant accepts the card, and most merchants do today, the consumer can go there and take advantage of the bargain. If he decides that he is going to use the card only as a convenience, by this I mean that he is going to charge during the month and then pay the entire balance at the end of the month. There is no cost to the consumer for this service. >> The uh the credit card um uh growth in this country I believe increases consumer prices. For example, suppose you have two consumers. One walks into a restaurant and uh pays for his meal with a credit card and the other walks into the restaurant, pays for his meal uh in cash. Now in the credit card, the restaurant certainly is going to pass on the discount uh to the consumer. Uh the uh the credit card company is going to take its five or 7% and the restaurant is going to pass that on by increased prices to the consumer. So prices are increased not only to the credit card customer but also to the cash customer uh who in a way is discriminated against because he didn't cause any uh increase in the restaurant owners uh prices similar to that caused by the credit card customer. There's an effect on the economy that is very difficult and perhaps impossible to judge. But to the extent that the use of credit cards increases the volume of business, it's almost certain that it results in some economies of scale and some reduced prices to the consumer. >> My husband said, you know, you would have the money to buy the things you need if you did not charge so much on the credit cards. If you get them paid off, then you'll have the money to go buy it. That's great if you can just keep your faces off the credit card. >> And obviously, it would be possible to present the card to many different merchants in a week or a month and make many, many purchases, the aggregate amount of which would exceed the amount of the credit limit and perhaps exceed the individual's ability to repay. >> If I had to write out a check or I had to pay cash for something, I would think twice before I would rip that checkbook out of my purse. But if I can just rip out a credit card and say, "Oh, well, I could pay half of it this month and half next month." I'm not, you know, it's it's completely different. I'll get it where before I probably would not get it. I'd probably wait a month or, you know, just not bother with it or wait till I could afford it. This way, I don't wait. I just take it and then I suffer the consequences when he comes home. >> Again, it's just like the extension of any credit. If you can pay as you use or if you can uh p purchase and obtain a product now and pay for it later, you're more likely to purchase more products. >> The horrible part of it is, I think, is that I know when I'm charging that I I shouldn't be. I know that I shouldn't be using the credit cards as much as I do. And I know that I'm fully aware of it, but it's just something that you get caught up into. I would say it's a little bit like giving yourself a shot of speed. You know, for a little while it makes you feel good. It fills that need, but then there's the inevitable comedown when you're faced with the reality. The reality in the case of the credit cards is that you have to start paying up and you see the gap between the fantasy and the reality. >> And then come the end of the month when all of it starts coming back in, it's uh it's too easy. And I think there's also a bit of the same element of addiction that the person who becomes habituated to using drugs has to raise the dosage all the time. And the same thing happens with with this. The few credit cards don't uh do the job anymore. So some new usurer will come along with a super duper credit card that will again make you feel a little better for a period of time. And um I used them and right now I have uh used them to about the limit that I can because um I just don't have that much self-control. >> Do you think the credit makes you buy more than you need to buy? >> Yeah. >> Well, I don't. >> No, I don't. If I want something, I want it. You know, I want it now. And I don't like to wait. >> And people don't know how to use credit. See, they're not educated. They don't mature. They're not mature enough. You know, I would rather get it now, do what I want to do with it, and then pay for it at my leisure when I can. >> My children, and you see, they they have access to do something, so they do it here, and they do it there, and they do it here and do it there, and pretty soon they've got $75 coming in and $100 going out, and somebody has to wait. >> You know, sometimes you want something, and you can't always have it, right? Then to me, I have used credit so much that I think it would be like slapping my hands or something. Finally, then they pay him and then they pay him. They don't pay him and then that's what they pay him and they don't pay him and finally you're two months behind here. One month behind here or one behind here and everybody's going >> you didn't have it and he said, "Okay, you know, let's go to the collection agency. Let's go to court." Well, what's the court going to do to you? If you don't have it, you can't pay it until you do. Then they go to the finance company and they want to make a personal loan to consolidate >> consolidation >> and they consolidate their their loans and they've got one small monthly payment of $23.99 and they go out and do it again and they still got that $23.99 payment but they've got 35 here and 20 here and 47 here and all that and they've got no money coming in. So finally they go bankrupt or they get sued and then they get their wages attached and and that kind of stuff and they get everything repossessed. Then they wind up going bankrupt and then they're they're dead. They don't think. uh I prefer to say it more as a psychoanalyst that he develops certain unconscious patterns of behavior which limit his ability to think clearly for himself and to feel like a free independent human being. >> I've known people that have had two-year contracts that have run 17 years and they're still trying to drive the same car. >> You know, it's the truth. And then when they do go to sell sell it or trade it in, they've got a $1,900 balance on a on a 47 year old car or something >> because they've converted it from a conditional sales contract into a loan. Then they've refinanced the loan >> and then they may the loan and they sell them something else >> and add it on and they still all the time whenever they add something on. If you buy a couch and you add keep adding things to your bill, that couch is never paid for till you've got a zero balance. >> Never. Never. Even though you paid even though the couch cost $300 and you've paid $1,200 while you keep adding things to that contract, you've never paid for that couch and they can always repossess it. They can always they can get everything until you got everything until you get a zero balance. So if you get you can get a car, a living room, television, bedroom, ice box, stove, everything. And if you don't pay for you can have paid for these things and still owe on the color television. They can come in and get everything. The whole house is empty. We've done that on claim and deliveries on what they call a CND before it was illegal. We used to go in and uh for repossessing stuffing and repossess the house full of furniture take pots and pans and everything else just to be spiteful >> just to put in the little little >> little digs. [laughter] We got you. You didn't get us. >> Do you like people? You guys >> Yeah, love people. We love people. >> We love people. We're happy. Always have a good time. Love having a good time. Like people, but we like we don't like skips. Well, typically a consumer gets overextended for two reasons. One, indiscretion on the part of the consumer, wanting to purchase so many goods and s services uh beyond his or her means. And and second, not knowing really uh how to resist uh a fast sale. Uh there are many finance companies in this country and other extenders of credit that basically um exploit uh the weakness or the indiscretion of consumers and pull them deeper and deeper into debt. Uh first by advertising comes but second by not really disclosing the full uh price that the consumer has to pay. You've got the idea that it's this this particular item is only going to cost you $8.16 per week or per month. What is $816 per week >> for 149 weeks? You know, [laughter] >> and don't miss a week cuz it's gone. >> Don't miss a day. >> Well, there are just many illegal or fraudulent practices uh that have flourished as a result of the credit economy. uh the huge uh uh growth of door-to-door uh uh selling for instance is heavily dependent uh on taking advantage of uh of the credit economy. Um, and I think there have just been inordinate types of frauds in such activities as aluminum sighting sales, uh, referral schemes, pyramiding schemes, uh, uh, magazine subscriptions, encyclopedia sales, uh, the the food freezer, uh, uh, sales where the, uh, uh, the, uh, consumer has to pay for a freezer plus so much meat over a given period of time. Uh these are um enormously uh fraudulent what might be called hardcore types of fraudulent experiences that have been documented across the country by the Federal Trade Commission, by other government agencies. Watch out for the place that says we carry our own contracts. You know, they're the places that do it to you cuz they're the ones that put on their own interest and their own finance charges, their own charges. The reputable store, you buy something, you have to finance it. They put it through the bank. That's the reputable store. The the store that says the the place that advertises, "We carry our own contracts. No credit needed." They're the ones to watch out for because they're the ones that'll put the screws to you if they can't. >> They really won't. >> Don't you agree with me? >> Yeah. >> We carry our own contracts, boy. They'll do it to you every time. >> If you've been bankrupt, if you're new in town, >> Yeah. >> that type of thing. >> They're the ones that sell money. >> The flashing lights beep by here. >> They sell money. They sell credit. They're the ones. Well, the first rule of thumb is is just to uh focus common sense on what the consumer is getting in return for what he's paying. And uh uh and that means you've got to look at the product, the quality of the product, the the interest payments, uh how many months or weeks uh the payments are spread over, uh and the kind of uh of store or the kind of creditor that you're doing business with. You can determine whether it's a fly by night, whether it's an established operation or if it is an established operation, whether they're they're playing it straight and they're disclosing facts and they're willing to answer your questions without getting irritated or without trying to uh uh treat you uh like a child. If a person would take time to sit down and add up the finance charges on a contract on one contract each the monthly bill say in a revolving charge account they'd be astounded. They wouldn't believe it. They wouldn't believe the amount on a uh you can owe $600 and pay $200 in finance charges. But people are scared. I think that they don't want to do that because then they'll think that they've been taken. So they just kid themselves and they don't they don't care. >> They don't want to know the truth. You know, they don't want to know what's happening. They bury their heads. >> They do. >> Well, credit can give you more freedom. For example, in the sense that a struggling young couple who need some money now to provide certain things for their young children, if they can get what they need when they need it without usurious rates, I think it can help them really live better here and now and can give them more freedom of movement. But the way it is practiced in the large majority of cases, I think it enslaves you. It makes you like the peeon in Mexico or the sharecropper in the south or the miner in a company-owned town who runs up enormous debts so that he is never free to leave the land or to leave his job. He's in effect a surf. Now clearly there are great benefits to the credit economy but when an individual or a family is locked in for two three years uh there's a certain um uh kind of of economic dependency uh on the creditors that flows over into broader uh restraints that um that uh impinge on people's ability to do what they want. uh it makes it even more dangerous let us say to be a dissident. It makes it more dangerous to be critical of the institutions of our society because you have so much to lose and in this way I think it really cuts down not only on your freedom of movement but even on your freedom to think clearly and independently which is a very essential requirement for a citizen in a democratic society. >> [music] [music]