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If you’re in the mood for a movie and you need a little more convincing to pay off your credit cards then I have just the movie for you. Maxed Out: Hard Times, Easy Credit and the Era of Predatory Lenders is a documentary about both consumer and government debt in America.

The video is currently available on Google Video:

Watch Maxed Out on Google Video (You Tube)

Synopsis

The US Government is broke. The citizens of the US are broke. All the blame belongs to the credit card companies and Republicans. Borrowers are helpless victims that need the protection of the government to make it through each day. Much of the movie explores these themes but there is also some good stuff in there if you can get past the preaching.

Analysis

The film really lacks a coherent stream of thought at we are moved back and forward decades in time as it suits the filmmaker. When problems occur during the Clinton years, senate testimony from eight years later during the Bush administration is shown.

Let’s discuss the individuals and their stories.

The Los Vegas Real Estate Agent

The film starts with a real estate agent discussing real estate developments in Las Vegas. She reveals that her house is one hundred percent financed and that she couldn’t afford this home without the bank valuing the house at its estimated completion value. This is something I didn’t quite understand as I thought that estimated value was what banks usually based the construction loan against. I never worked in construction financing.

I think it’s pretty obvious that housing speculation is pretty foolish. Building a mansion on a working man’s budget is stupid no matter how much you believe in the “investment.”

Robin Leach

We’re treated to a conversation with Robin Leach discussing the American dream.

Leach is an obvious symbol of the glamorous life style many Americans supposedly want. His inclusion adds a bit of color and celebrity to the movie.

Missing Mother

A family discusses the disappearance of their mother which they find is possibly related to thousands of dollars of gambling and credit card debt that she had hidden from the family. At the end of the movie they fish a car of a river that may contain the missing mother.

This is a real tragedy. From personal experience gambling and debt go hand in hand like a tumor and cancer.

College Kids

Two Oklahoma teens committed suicide after running up large credit card bills. At first I thought these kids were married but they appear not to have any relation except for the circumstances of their deaths.

The film really gets across the message about credit cards on campus. Credit card companies love to get college kids hooked early. I fell into this trap myself. It is amazing that a company will give a kid with little income and no credit history thousands of dollars of credit. However, they know that if you get hooked early and if you move into the work force that they have a potential wage slave for life.

If you’ve been to a college campus with the last couple decades no doubt you’ve seen credit card sign up booths on campus. Usually they are offering free T-shirts or some other trinket. There is an effort underway to get these credit card companies off campus but that’s very hard. Why? The campuses get a nice little cut of the money. Still think colleges are all about education?

Victims

I feel sorry for this group. These are the people that are either mentally not able to understand what they are getting into or are tricked into it. Finance companies can be very clever about getting people to sign up for loans that aren’t in their best interest. One trick is to offer to lower your payments. The payment is often the only thing money poor people care about. Can I make my payment every month, can I get by? Often finance companies can roll your credit cards, vehicle loans and your current mortgage into a bundle that can lower your monthly payment. However, this can increase the lifetime of your loan. You’ll be paying for that bag of potato chips for 30 years.

There are many people that will not hesitate to take advantage of other people. This isn’t new and it won’t change anytime soon. A great many of us can take care of our selves. However there are some people like the elderly and disabled that are getting a raw deal because they don’t understand what’s happening.

Banks

As one person in the film remarked, banks no longer want bankers, they want salesmen. What’s the difference? A banker is supposed to decide about credit worthiness and the ability for an individual to repay a loan. A salesman sells credit cards, credit insurance, credit life, credit disability, overdraft protection, ready reserve loans, payday advances and any other potentially profitable product to a customer, whether they need it or not.

Notice that Wells Fargo now calls its banks retail locations or stores instead. They are also a leader in the salesman versus banker front. They don’t want bankers they want someone who can put a credit card in the pocket of every person that walks through the front door. While this is great of Wells Fargo, it’s not so good for people that trust their banker. (A side note: never trust your banker).

Wells Fargo also finances Payday Loan / Cash Advance chains. As one pawn shop owner found it in the movie. He banked with Wells and he was surprised that they also funded the pay day loan places. You know it’s a good business when the banks want to get in on the action.

It may seem like I’m picking on Wells Fargo but I worked there so I can tell you that what goes on in the banking / personal finance industry as portrayed by the movie is true. I saw a lot these practices at Wells.

When they talk about calling the neighbors of debtors to leave a message you might think that sounds ridiculous. I thought it was ridiculous too until my boss told us to do it. Neighbor calls are a regular collection technique.

Also collection agencies are a thriving business. Wells Fargo also owns at least one if not more collection agencies. Once the credit card debt is charged off it is “sold” to another part of the company where it collected on after it is charged off. (A charge off is where the creditor writes off the debt as no longer collectible, so it becomes a tax break for the credit card company.)

I can also tell you that Wells Fargo was and is one of the most conservative, "by the book" banks there is. They are conservative on their lending practices and their collection practices. I’ve heard of some pretty rough handling at other credit card companies.

One last point, with all the news of sub prime lending, foreclosures and bankruptcies in the news don’t get the idea that the banks are hurting. As stated in the film, banks find marginal customer very profitable. They have learned to love customers who pay a little late, who overdraft, who go over their limit as they can charge fees for all of this. Banks are making a killing on fees. I know, I've seen reports showing fee income at various banks and it was outrageous. I guarantee you would be shocked at how much even very small banks make on fee income!

Financial Gurus

Dave Ramsey comes off as a super nice and down to earth guy. I’ve listened to Dave Ramsey on occasion and I believe his principles are sound. However, Suze Ormond is shown to be somewhat of a hypocrite as she is sponsored by one of the credit bureau companies. In one scene she is telling her viewers that a FICO score is one of your most important financial assets. I’m ambivalent about Suze. I need to research more of her philosophy before I pass judgment.

Government

The government is a huge debtor. The national debt is a ridiculously high number that most of us mere mortals can’t comprehend. The movie gave a figure of $90,000 per family. Can you imagine if your family was suddenly saddled with almost a hundred thousand dollars in debt and you had almost no say about it? That’s what has happened in America. Both political parties share the blame for this, although the Republicans (rightly or wrongly) get most of the blame in this film.

It seems in the film that we are approaching a crisis and I would say that’s correct. The government is spending our great grand children into debt. This has real implications on the average citizen in higher taxes and higher interest rates (the government is competing with individuals and business for money).

Praise

This film says a lot of things that need to be said. We as a country are in debt. Giving $600 tax rebates and trying to keep interest rates artificially low only do so much. We need to tighten our belts and pay off our debt. I’ve done it, now it’s your turn.

Businesses take advantage of people. I think it’s safe to say that this has always been happening and it always will. What can you do?

Get educated, ask questions. Be on the lookout for those around you who might be victims of predatory lending. The elderly and those with diminished mental capacity are at the greatest risk. If you have kids going to college or you are a college kid understand that credit card companies are licking their chops to get a card in the hands of inexperienced college kids. This is another area where are education system fails us. We can learn about Shakespeare but a good portion of high school graduates don’t have a clue about personal finance (or Shakespeare for that matter).

Criticism

Far from being an unbiased documentary, this is a social action movie with an axe to grind. While that is expected, I feel an obligation to disclose that filmmakers choose to portray many of the people in this film as helpless victims and the creditors and lawmakers (especially Republicans) as cold hearted bastards.

My criticism may sound harsh but don’t get the idea that I didn’t like this movie. In fact I enjoyed it very much, if you can enjoy such a movie. I can tell you much of what is this movie is true, my criticism is bases on the fact that this a stereotypical blame the evil Republicans for the plight of poor people. If you are going to blame lawmakers, make sure you level the criticism fairly. Bill Clinton is not criticized yet they pull film clips of Reagan to make him seem like some kind of scam artist.

Finally if you are going to point figures make sure you point the biggest one right at yourself. You can vote and you elected these people. You can choose not to live in debt. There’s a dirty little secret: Americans get what they want. We get what we want but what price have we paid for our current situation? How much more debt can we possibly add to the pile before it falls on our heads.

Think before you spend, your country needs your fiscal responsibility!

The official Maxed Out Movie Site

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