Whether the company will make money on Rose Ajuria’s account is uncertain at this point. CompuCredit

Whether the
company will make money on Rose Ajuria’s account is uncertain at this point.
CompuCredit says that customers offered the Tribute MasterCard at 28 percent
generally have middling credit histories and that it is willing to work with
those who have trouble paying their bills. Executives say the company clearly
discloses interest rates and imposes fees up front so consumers won’t be
surprised later. But in February 2007, CompuCredit disclosed that the FTC and
the FDIC had launched separate civil investigations into the marketing of one
of its other credit cards. The company denies
»

Whether the
company will make money on Rose Ajuria’s account is uncertain at this point.
CompuCredit says that customers offered the Tribute MasterCard at 28 percent
generally have middling credit histories and that it is willing to work with
those who have trouble paying their bills. Executives say the company clearly
discloses interest rates and imposes fees up front so consumers won’t be
surprised later. But in February 2007, CompuCredit disclosed that the FTC and
the FDIC had launched separate civil investigations into the marketing of one
of its other credit cards. The company denies any wrongdoing. As a goodwill
gesture, it says it has stopped charging late fees and interest on accounts
more than 90 days past due. On its Web sites and in its marketing brochures,
CompuCredit says it helps customers “rebuild credit” by reporting all of their
loan payments to credit bureaus, unlike traditional payday lenders. Not that
altruism drives the operation, says co-founder Hanna. “We’re not going to chase
somebody where we can’t make money.” Even for those who climb above the lowest
rungs of the economic ladder, a legacy of debt can threaten to undercut
progress. Connie McBride, a 44-year-old computer programmer who lives near
Tacoma, Washington, grew up in foster homes and has led an adult life notably
lacking in stability. She has held decent jobs but sometimes has subsisted on
food stamps. She earns $47,000 a year as a freelance programmer, working from
the weather-beaten aluminum trailer she rents for $590 a month. Wind whistles
through small holes in the walls, and she keeps warm in the winter by feeding a
wood-fired stove on a cracked cement foundation. McBride showed an early
aptitude for math and received a GED at age 16. In the late 1980s, she studied
computer science at Washington State University, sometimes arriving for class
with her three young children. “Taking those classes, given my life, I felt
this was the only way out,” she says. She graduated in 1992, owing $45,000 on
student loans. That debt became her main financial burden, she says. The 9.5
percent interest rate isn’t particularly steep, but she tended to view the
payments as less pressing than putting food on the table or paying rent. Late
fees piled up. Today she owes $159,991, up from $117,000 only 18 months ago.
When dunning notices arrive, she tosses them in the stove. Personal bankruptcy
proceedings in 2003 dissolved dozens of McBride’s liabilities. But by law her
debt to student lender SLM Corp. (SLM), better known as Sallie Mae, wasn’t
affected. Every month, $450 is garnisheed from her wages, reducing her
take-home pay to $1,338. The garnishment doesn’t even cover interest and
penalties, let alone the principal. Says McBride: “There’s no way this thing
will ever be paid off.” New obligations are piling up. She pays $385 a month on
a 21 percent car loan. And now she’s buying baby supplies. McBride says her
adult son can’t deal with his four-month-old daughter, who has medical
problems. McBride can’t bear the thought of her granddaughter going to a foster
home. So she is postponing nonessential expenditures such as fixing a badly
chipped front tooth. McBride acknowledges her mistakes. “My life is full of bad
decisions,” she says. But if she had started out with the funds for college,
she wonders whether she would at least be able to afford an apartment and a
trip to the dentist. “If you have money to begin with, you don’t have these
issues or these kinds of bills,” she says. “You don’t have to worry about the
rent or pay double for a car.”

1. What is
the responsibility of for-profit companies to attempt to help customers like Roxanne
Tsosie see the dangers of indebtedness?

2. Assuming
that Byrider is acting legally, is it acting ethically?

3. Under
what conditions must customers take responsibility for their decisions?

4. Do you
believe that customers who are poor credit risks deserve to be charged higher
interest rates? If you say yes, are you not taking advantage of customers who
can least afford to pay extra for the things that they buy ?

5. Do you
believe that every consumer pays hidden or unanticipated charges for the things
that they buy? High interest rates on unpaid balances? Annual membership fees?
Service charges? Are such charges ethical? Do you want to work for companies
that make such charges?

»

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