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Author of STOP GETTING RIPPED OFF
In STOP GETTING RIPPED OFF, you argue that innumeracy is as big a problem as illiteracy, and that it played a key role in the housing meltdown and subsequent economic collapse. What is innumeracy, and how did it help lead us into the recession? Innumeracy is illiteracy about numbers. Just as there is a hidden epidemic of people who are functionally illiterate in our country, there is big problem (bigger, by my estimate) of people who can’t do basic math. There’s no way to function in our society without understanding money, percentages, interest calculation, and so on. Yet in a recent study, only one in seven American adults ranked “proficient” at math. Two years ago, I would have had to lay out a doomsday scenario to draw attention to this ticking time bomb. Well, the bomb’s gone off. People who were bad at math could hardly have been expected to see through the consequences of an adjustable-rate mortgage, or to make a sound bet on their future earnings potential. These consumers didn’t stand a chance against mortgage brokers, real estate agents, and an overheated market. They can’t fight with financial planners over fees that are swallowing one-third of their retirement savings. Heck, they can’t even stop taking out 250 percent APR payday loans, 1,000 percent overdraft protection loans, or paying tax preparation firms $100 for three minutes work to fill out simple tax forms. Now, millions of individuals are losing their homes and are on pace to become destitute in old age.
What steps can we take to combat innumeracy? It’s a two-step problem. We have to do triage right now. Keep people in their homes, help them preserve what little retirement funds they have left. And we need something like the proposed Consumer Financial Protection Agency to engage in public service advertising campaigns like Smokey Bear to get people talking about financial basics But that’s just a band-aid. The real problem is America’s schools and our chronic underachievement in math. Only three states currently require any financial education classes. That’s crazy. After all we’ve been through, financial education should be a federal mandate. And we need more teachers who love math teaching in the primary grades. Elementary school certification programs should add strict mathematics requirements – some states have none! If Johnny’s teacher can’t do math, Johnny will never learn math. Most important, we need kids to be confident when they are eventually faced with a real-life math problem like “How much will this mortgage really cost me per month?” As a technology writer for MSNBC.com and the creator of the popular blog “The Red Tape Chronicles,” you’re a tech-savvy guy. Does technology—computers, calculators, apps etc.—help us or hurt us when we try to get a fair deal?
It’s a mixed bag. Technology can be a big help. I think online banking, automated payments, and 24-hour access to accounts can help consumers a lot. I receive a text message every day from my credit card company with my balance, so I find out right away if something unusual has happened…or if I’ve overspent my budget for the month. On the other hand, Gotcha Capitalism really is a system, and sophisticated computer programs run by banks and other firms are constantly mining data looking for more and more ways to cheat us with sublime subtlety. Remember the plot of the movie Office Space? Taking tiny amounts of money from people millions of times is a great way to get rich. Change this word in a product description, fool another 3 percent into signing up. Raise fees to $9.87 a month – research shows people don’t complain until the amount exceeds $10. In the end, the edge goes to companies, because they focus so much on using technology to beat us at this game. We’re busy raising children, trying to find a date or taking care of sick parents. It’s not a fair fight.
What are some consumer behaviors that can stack the deck on the dealer’s side? There’s quite a long list. Here’s a start: Distraction. People who are worried about getting their kids at school probably don’t have time to wait on hold 30 minutes to get a refund. Greed. Consumers want everything. They want fast cars to impress girls, and granite counters to impress their friends. It’s easy for companies to use this force to their advantage. Speed. Consumers not only want everything, they want it now. And they are afraid of losing out on an “opportunity.” Just about every scam I’ve ever heard of the “you better act now…” tactic by the scammer. Fear. Most people hate talking about retirement. They hate paying taxes. They hate calling banks. They love when someone else says, “don’t worry about that. I’ll take care of it. You don’t even have to think about it.” Financial advisors live on this attitude. And it’s all wrong. Only you can make good decisions about your money.
In STOP GETTING RIPPED OFF, you talk about the “21st century bank account,” the “21st century raise,” etc. Most of us have been keeping track of our finances for years. Why do we need to restructure our financial lives in the 21st century? So much has changed, so fast. There’s even a new law on clearing checks called “Check 21” which makes things easier for banks and harder for you. You have to keep up. If you’re going to deal with banks at all, you have to understand how they can clear checks in three minutes now instead of three days, and why that might cost you big. Balancing a checkbook today is no longer a simple matter of adding two deposits and subtracting five checks. A typical consumer might have 50 to 100 transactions each month, just in their checking account. That’s a recipe for disaster. At the same time, the world of employment has also changed dramatically. Companies add and subtract workers on a quarterly basis, or even more frequently. Jobs change, skills change, profit targets change, and everyone works between 5 p.m. and 9 a.m. now. The only way consumers can fight back is to change their attitudes about work. Everyone needs to be an entrepreneur now. Everyone needs to make plans for a side venture, to diversify their personal revenue streams. Some of this is not good news, but it’s inevitable.
In STOP GETTING RIPPED OFF, you offer strategies for getting a fair deal in any industry, from autos and housing to student loans and retirement plans. If you had to pick the most important strategy that works across the board, in any industry, what would it be? Bargaining. And the only way to do that is to comparison shop. And the only way to do that is to slow down, just enough to get three quotes on everything we buy or sell. We all tend to be lazy and take the first offer that comes along. When we do, we abdicate our role in a capitalist society. I a big believer in fighting over every last detail, every last fee. But the truth is many people do poorly when they over-focus on little things. Comparing bottom-line, out the door prices on everything with two competitors is the best way to get to the heart of the matter. The only way to be sure you’re not getting cheated by your auto insurance company is to get three quotes on auto insurance every year. The only way to get the best mortgage is to get three Good Faith Estimates. It takes time, but it’s always worth it in the end.
The government has been moving toward greater regulation of certain industries—limits on credit card and bank fees, for example. Do you think the new wave of regulation will make a significant impact? How far do we have to go to achieve an acceptable level of consumer protection? I’m all for the CARD Act, the overdraft reform act, the new Good Faith Estimate form, etc. But I think we all know where these things are going. Tell banks they can’t raise interest rates and they raise minimum payments. End overdrafts and they add fees to everyone’s checking account. The real problem is that all these industries have been living under an “anything goes” regime for decades. They knew they could come up with deception after deception and nothing would happen. This is what really needs to change. American companies need to know that if they step out of line, they will face swift consequences. Consumers need to know that they have somewhere to turn when they are mistreated. A government agency with wide powers to enforce existing consumer protection law is absolutely essential to righting the America economic ship.
In your introduction, you say that consumers can help save America capitalism. What do you mean by that, and what is the most important thing we can do to start changing the system? Complaining is like voting. Sometimes it’s a pain to do, and often it seems like your vote and your complaint don’t count. But think about what would happen if no one voted? That’s almost precisely what’s occurred in our financial society. Many people have given up complaining. They just shut up and pay up when the $25 fees come. They don’t demand higher-quality toys or cars. That’s been a contributing factor to the rise of Gotcha Capitalism. Bank of America could easily ignore on complaint about overdrafts, or five, or even 500. But not 50,000. Things will change when consumers organize themselves into groups and consistently demand better products and better treatment.
What can your readers expect to see next from you? I have what I think is the best job in journalism, writing the Red Tape Chronicles on msnbc.com. It allows me to hear from millions of readers, and to communicate with them in the instant forum of the Internet – on Facebook, on Twitter. When some new scam hits, my readers tell me immediately. Thanks to the reach of NBC News, I reach million of TV viewers at the same time. I am thrilled to have the opportunities I do every day, particularly at a time when so many journalists are struggling to find outlets for their work. I have a number of other projects under consideration to expand the reach of the Red Tape Chronicles, and perhaps help consumers organize and have impact. You’ll hear more about these in the coming months. And of course, I have a number of new book projects I’m considering. It’s not hard to imagine what they might be. We already hinted at one of my pet topics: The unintended consequences of technology. And I’m fascinated by what will happen to the consumer movement in the early 21st Century. Poised for a comeback, or was the 1970s Ralph Nader era just a mirage? We’ll see. |
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