Monday, June 11, 2007

Maxed Out - A Review

I recently viewed Maxed Out, a documentary about the credit card debt in the US. The film focuses on consumer credit card debt, and vaguely touches on the US government's debt to other nations. It shows us some stats on how much money has been borrowed from social security, which certainly makes you think about the problems we are having with it now. I've read elsewhere that social security would not be in trouble if we hadn't borrowed from it to spend the money elsewhere. Possibly true. But otherwise it focuses on individuals in debt.

Expect loud music, a little cursing, and some really tragic stories. This isn't a movie to watch with little kids.

A few of their stories looked at mortgage lending. A woman in a shambled house that refinanced, a mentally handicapped man refinancing into a loan he couldn't afford (that one got to me) and didn't understand, a widow who is losing her house because of her choice of a bad mortgage. Tragic stories, but I'm a bit critical of the film here. We listen to their story of how they can't afford their mortgage, why they refinanced, and what they are going through now that foreclosure is drawing near. But what the film misses on, which I feel is a really critical point, is all the backstory. If someone refinanced into a bad mortgage to pay off credit card debt, why? What got them into the financial problem in the first place?

Did their health insurance stick them with a huge medical bill (love those exclusions)? Did they lose a job? Or did they just take too many vacations to Tahiti and put all their income into financing a big SUV?

We don't get to hear about any of that. Nor do we get to hear the specifics of their mortgages, or how the mortgage process was introduced to them. All we know is that they are wallowing in debt, can't pay their bills, and the bank is coming to take their house.

One practice that I recognized and never really considered until now was the college campus credit cards. Universities are bought off to allow card companies to set up booths on campuses to entice young students without jobs to sign up for credit cards. Fine, they are 18, and their parents or themselves should have been responsible for teaching them about credit card use. Right? We say they are legally adults at 18, so why don't we accept the consequences of not properly preparing them for it?

And that's what made me angry. The university is supposed to be a safe haven for young adults trying to enter the world. Its a sanctuary of education, yet universities allow companies to prey on the students without offering any financial education courses. Where can you learn about credit cards in college? I certainly never saw such a course. As near as I can tell, you either enter college with the knowledge beforehand (likely from mom and dad) or you end up learning the hard way.

It is a reasonably good documentary that will keep you interested to the end. Expect a lot of tear jerker stories and the gloomy consequences of debt that is out of control. What I missed from this movie, and what I think it lacks, is any hint of a resolution, or any information on how good mortgages work or how you handle credit card debt wisely. One woman refinanced into a bad mortgage. Well, why is it a bad mortgage? Why did she sign up for a mortgage with an adjustable rate; did she know what it would be costing her when it adjusted?

Watch the movie and expect to come out of it angry, but certainly not any more educated or aware than you were going in.


1 comment:

Jim said...

I agree with your review and did notice much of the reasons these people are MAXED OUT was missing from the film. Sure some of them probably had some debt that they just rolled over into their home, and now the evil bank wants to take their home because they can't pay the mortgage? Some of these people are putting themselves in the situations that push them to the limit. It's hard to say what happened to these people while they got into debt, it's just the view of the end.

College is a breeding ground for the next debteration. Banks spend tons of money setting up these stupid booths and people walking the campus signing people up for credit cards. I admit opening about 4 cards (which were never used and closed now) in school because I thought it would help me establish credit. That was stupid but the logic of a 19 year old freshman with not much financial knowledge thought it was a good idea. What is beyond me is I signed up for most of my cards stating my income was $1 a year. They still sent me a brand spanking shiny new credit card anyway! Universities allow these companies to do this because they pay them money to come to campus and promote this crap. They don't let alcohol or tobacco companies on campus because those things are bad for students. Why are the credit card companies on the safe list? It would be interesting to see these companies banned from campus as well one day.

Maxed Out also made me irritated as well. It is sad at points how far it took some people, but what happened? These questions will never be answered.