I Worked at Capital One for 5 Years. How We Justified Piling Debt on the Poor
newrepublic.com
newrepublic.com
There was a profound moment in my career when I was working as a consultant for a company I wont name, but they were in Canary Wharf, which is the financial center of London, UK.
I was in a glass high-rise building, and had been working there for about 4 weeks. The project I was working on was at heart, selling loans and credit to people who couldnt afford it - all hidden by opaque language and euphemisms like the article mentioned. After a few weeks it became clear to me that this is nothing other than programmers being told to use machines to steal from the poor, while the managers walked around like they were geniuses when really they were total frauds and liars.
We were very high up, and I remember going on lunch break and overlooking the poorer areas of London. With knowledge that the algorithms I was writing were causing them misery.
At that point I just quit, I told my boss I didn't want to be part of it. He just looked at me like I was crazy, then when I grilled him to the point of belittling his intellect, he admitted he knew what they were doing, but had an insane burn rate (wife, kids, expensive house and shit) so he couldn't just quit.
If these institutions would die, I would be glad.
A core belief I have, and I try to spread it where possible, is that a person owes it to themselves and to those around them to live in such a way that they have personal freedom.
This is precisely the way in which debt is pernicious. This man is trapped in a debt cycle - just as those below him are.
We really don't need a lot to get by. But people find ways of trapping themselves - golden handcuffs - it's the house, or the car, or the kids, whatever.
The whole financial industry seems very much like this. There are all these conspiracy theories that propose that someone -- some group of actual humans -- is on top, but look closely and it seems that in reality the entities themselves are on top and the whole system exists to feed itself as an end in itself.
The remaining problems are the hard ones. No surprise they are hard to solve. Ones that can be solved with our current intelligence already have a known solution.
If you'd stayed and worked your way up the ladder, that would have been your fate too.
So much respect for quitting - rare, and much appreciated when it happens.
If the government banned this kind of lending and didn't provide an alternative, poor people would have no lending options. Regulating this kind of lending (e.g. by tightening the already regulated limits on interest rates) can only go so far before the products become unprofitable and will be discontinued.
There is not a market solution for this.
IIRC poor women's self-run savings groups enable microcredit for poor people, and these loans generally have high repayment rates and relatively low interest. It has been a while since I read about this so it is possible that my info is now out of date.
Then they borrow from criminals, which historically provide services the government bans.
Conversely, criminals, by definition not being bound by any such structures, can come take not just your wages or savings, but also you kidneys, your wife or daughter, etc.
This is not to say that all criminal lenders are or would immediately become as bad as the worst stereotypes about the mafia, but whom do you think it would be a better to owe money to, when considering your long term ability to get out of debt, or even the long-term survival of yourself or family & friends? Predatory Payday Providers, or Big Tony?
Yes... That's why they're called.. criminals?
I realize monetary policy of inflation is in-effect a debt jubilee, as it was applied to the boomer generation in the 70s and 80s. Since diminishingly few people keep their savings in cash (instead of putting into homes, durable goods, index funds, etc), inflating away debt seems like an inevitable policy outcome. In the US, if the democrats don't do it next term with MMT, the republicans will do it with negative interest rates. It's not just a partisan issue, and it seems like there is no alternative. The main problem is that without supporting the bottom end with a minimum wage increase to match inflation, it will just be a middle class debt bailout, and the precariat will remain as screwed as they always were. Approaching this by funding a minimum income with a new VAT doesn't improve the their situation since it just subsidizes exploitation by subsidizing disadvantaged wage levels. The horror is that it's going to come down to less of what's right, and more of finding people to screw who are less likely to vote. It's a grisly business.
These Capital One people were just following orders, as the saying goes, but unsecured debt is a form of slavery. Not sure how long people will accept incremental quality-of-life improvements in slavery, but at least now we have entertainment, software, and high speed pizza delivery.
Suddenly, those land parcels in New Zealand are looking more appealing.
These days my credit score is ~780 and I do some casual churning for travel points.
A decade+ out I have rebuilt my credit to excellent and secured cards were instrumental in that. Ironically my two secured cards from when the rebuild started have both been aquired by Capital One ;D
I've recently become much more alarmed by the rise of these "buy now, pay later" companies like Affirm and Afterpay, which partner with merchants that most would categorically put in the discretionary bucket (shoes, makeup, jewelry, designer clothes) charging similar interest or fees.
It's easy to dis something on the way out the door.
I don't think the cynicism is warranted. In fact, it takes a fair amount of introspection then courage to put your name on an article saying you spent so much time doing something you now find morally repugnant. The easy path is to either (a) not ever recognize you were taking advantage of poor people or (b) sweep it under the rug and go on with your life.