How We Justified Piling Debt on Poor Customers
&gt; But the morality of the credit card executive is a morality of autonomy: If I’m giving people choices, that’s a good thing. “How could I be making this customer worse off,” a credit card executive asks herself, “if nobody is forced to use this product?”<p>I guess I&#x27;m an evil executive, because I do think that the default assumption is that people are better with more choices.  There are obviously exceptions, but I&#x27;d want some evidence to the contrary before I started blaming others for offering them choices.  And I&#x27;d want especially strong evidence if banning those choices is damn near impossible (since loan sharks will just appear), so that unilaterally deciding to not offer choices makes people even worse off (because they go to the loan shark instead).<p>I went searching in this article for evidence, but couldn&#x27;t find much. This seems to be the extent of it (am I missing something substantive?):<p>&gt; As Scott Schuh and Scott Fulford have shown in a paper for the Federal Reserve of Boston, people who get credit limit increases tend to keep their “utilization” constant. In other words: If a person is carrying a $1,500 balance when they have a $3,000 credit limit, you’d expect them to start carrying a $4,000 balance if the limit is raised to $8,000. If most people use the full credit-limit increases they are offered, the thinking goes, that must mean that most people want to borrow more money.<p>Isn&#x27;t this consistent with poor people needing loans, and yet them also wanting to make keep some of their credit limit in case things get even worse?<p>The author&#x27;s main argument seems to be that Capital One has a lot of research resources, and if they were making their subprime customers better off they would be able to prove it with data, but they can&#x27;t so they must not be.<p>&gt; If [CEO] Fairbank cared to know the answer to any question—such as, “How many of the loans that we give out actually make the borrower’s life better?” or “What are the consequences of raising our credit card interest from the prime rate plus 19 percent to the prime rate plus 23 percent on child hunger in America?”—he could have gotten thoroughly researched answers. But those are the kinds of questions that the entire Capital One workplace was designed to drive out of view.<p>The author concludes<p>&gt; When I was at Capital One, I wanted to understand if it was possible to keep loans as an option for the people who have exhausted all their better alternatives—without also causing suffering for those who would be better off forgoing purchases or borrowing money from friends and family. After five years, I concluded it was more or less possible to achieve that goal—to do the good loans without doing the bad loans.<p>But I can&#x27;t see why she thinks that.