A Fighting Chance

That may have been the year I started so many kitchen fires that Daddy gave me a fire extinguisher for Christmas. Oh, happy day.

Back then, our toaster oven had an on-off switch and that was it. On was On, which meant that it was possible to leave toast under the little broiler all day and all night, until the food burned, the wiring melted, and the whole thing burst into flames. At some point—I have no idea exactly when—someone had the bright idea of adding a timer and automatic shutoff. This simple change made it a whole lot harder for distracted mothers, or anyone else, to leave the broiler running until it set the kitchen on fire.

Thirty years later, while working on an article about how the government could protect consumers from predatory financial companies, I thought about those old toaster ovens. By then, it was all but impossible to buy a toaster that had a one-in-five chance of bursting into flames and burning down your house. But by the 2000s, it was possible to refinance a home with a mortgage that had a one-in-five chance of costing a family their home and putting them out on the street. In fact, it wasn’t just possible; those mortgages were bursting into flames all over the country.

Likewise, it wasn’t possible for a manufacturer to change the price of a toaster oven after someone had purchased it. (Imagine getting the bill in the mail: “Send us another $100 immediately or else your toaster will stop toasting your English muffins!”) But long after the papers had been signed, it was possible for a credit card company to double or triple the interest rate on a balance that someone had already taken out. (“Send us more money immediately or else your credit rating will be destroyed!”) Read the fine print: it was all perfectly legal.

Why the difference? The United States government was—and is—the difference. By 2007, the year I was writing my article, a government agency actually monitored toasters for basic safety, and if anyone tried to sell a toaster that had a tendency to burst into flames, the agency would put a stop to it. In fact, government agencies ensured the basic safety of pretty much every product offered for sale. The agencies worked to keep us safe: No lead paint in children’s toys. No medicines laced with rat poison. No cars without functioning brakes. And no exploding toasters. But in 2007 there was no government agency that would stop the sale of exploding mortgages.

Despite their name, financial products were not treated like products. They were regulated as contracts—which meant that two sides, supposedly negotiating as equals, could form pretty much whatever agreement they wished. And this meant that when it came to dealing with the giant banks, consumers were mostly on their own.

I figured the fix could be pretty simple: Treat mortgages and other financial products like, well, products. No one expects a consumer to evaluate the wiring diagram for a toaster. I thought no one should expect a consumer to digest thirty pages of tiny print to evaluate every trick in a credit card agreement. Common sense and basic safety—to my mind, that’s what this was all about.

In the article, I compared the safety of toasters with the safety of financial products. I proposed the creation of a new government agency, one whose sole mission would be to look out for consumers, and to serve as the cop on the beat who would make sure that financial companies follow some commonsense rules. People could still use mortgages and credit cards however they wanted, but the products themselves would be clear. No tricks hidden in the fine print, no traps buried in complex legalese.

It was a pretty simple idea. Getting it done would not be so simple.





Cheated

Over the years, I had heard a lot of stories from people in bankruptcy. The stories so often started with something unexpected and sad. A job that was going great—until the pink slip arrived. A beloved wife—lost to cancer. An aging father—who broke his hip, forcing his daughter to cut back on her hours at work.

And then, more often than not, the story would take a turn that would make me furious—blood-boiling furious. Because then, just when a family was down on its luck, some giant financial company would come along and make things worse.

Sometimes the lenders lied. Sometimes they cheated. Sometimes they baited a trap. And sometimes, even when the target figured it out, the lender just brazened it out.