Mormons and Credit Cards
For all the criticizing we do of Mormonism, there are some positives that are worthy of mention. I occasionally run across them in my varied reading on the internet. I came across this story about the Mormon culture region having the lowest amount of credit card debt of any region in the U.S. Is this a case of advice from the leadership actually translating into practice? If so, kudos to Mormons!
I am a little bit intrigued by the contrast of low credit card debt with the oft-repeated and over-stated claim that bankruptcy rates are high in Utah (they are, but Utah is not #1). This seems somewhat contradictory – low credit card balances but relatively high bankruptcy rates. Thoughts, anyone?
(Seth, any thoughts given your line of work?)
well, I’m wondering if this goes back to the idea that Utah (and western states) has a greater than average amount of startups and things like that. Since a lot of new businesses fail, that could (I say could because I may be just pulling rabbits out of a hat with this guess) account for why there is a higher bankruptcy rate…I don’t know if that would have any impact on credit card rates though.
Posit: more children means more general costs that absolutely supersede a mortgage payment in priority, then also a compounding exposure to catastrophic healthcare costs?
Both interesting possible explanations for bankruptcy. But I’m wondering about the credit card deal. Is this as simple as, “The prophet says to do X, so we do X”?
As usual, I highly highly highly discount that kind of reasoning. Whether it’s for a bad thing (e.g., bankruptcy) or for a good thing (lower credit card debt). There’s something more to culture than prophetic guidance
Keep in mind that any differences in bankruptcy rates are probably going to be so marginal that you don’t see much practical difference on the ground. But that said…
A recent study suggested that higher bankruptcy rates in Utah were more a function of Utah’s collection laws than of any particular inherent attributes of the people themselves.
Studies also seem to show (and don’t ask me to provide citations since I’ve long forgotten exactly where I read this stuff) that the Intermountain West in general suffers from high bankruptcy rates.
So, here are my thoughts on it.
First culprit is lousy collection laws. These make it easy for creditors to get away with abusive collection practices.
The Fair Debt Collection Practices Act drops the hammer on abusive collection tactics. For example:
-Calling the debtor repeatedly at work (often despite requests by the debtor to stop).
-Using foul or abusive language.
-Threatening arrest or criminal action (there’s no such thing for standard debt delinquency – but a lot of Americans don’t know that)
-Calling repeatedly at all hours of the evening and morning (like 1:00 AM)
-Calling up the parents of the debtor and complaining what a “deadbeat” the debtor is
-I even had one collection agency who called my clients next door neighbor bad-mouthing my client and asking for additional dirt on her
But here’s the catch: the FDCPA only applies to “collection agencies” not the original creditor.
For enforcement against original creditors, we are left to state laws. Colorado has a pretty good law for original creditors that basically mimics the FDCPA and applies it to ALL creditors. My practice manual may be a bit outdated, but last I checked Utah’s collection laws don’t even have any prohibited practices for collection agencies, and original creditors are only barred from extending credit where both debtor and creditor understand that delay or failure to repay may result in violent or criminal means to damage the person, property, or reputation of any person….
Which basically means that Utah debtors get jack for protection.
No wonder I’m seeing more and more major creditors setting up their collection divisions in Salt Lake City.
So if you want to blame anyone, blame the jackasses in the GOP-dominated state legislature (a.k.a. “the party of the mean people”).
So creditors are allowed to get away with more. This could very well push people into bankruptcy didn’t really want to go there (or even particularly NEED to be there). An elderly widow who might otherwise be able to cope financially, might file bankruptcy just to get the “angry man” to quit swearing at her on the phone. Because bankruptcy is usually more than sufficient to take care of him permanently.
Another factor to consider is the nature of western state economies.
Intermountain states like Arizona, Utah, Nevada, Colorado and such are still very much a part of the boom-or-bust model of economics. The latest hot thing flourishes in these states and dies just as quickly. Whether it be a telemarketing boom, and oil or coal boom, or uranium, or tourism, or whatever. These states do not enjoy the vested and solidified economies of other older states. In many ways, they still act like colonial possessions, rather than as a part of the actually motherland. The economies tend to be very exploitative and transitory.
And entrepreneurship absolutely flourishes in these kind of climates. Things tend to be more open in the new states and the new economies. More opportunity for the new guy to break in and get a foothold (I should know – it’s the exact thing I did here in Colorado).
But entrepreneurship is a really risky gig. About 80% of all startups fail. And when the startup fails, the entrepreneur’s only rational choice is usually bankruptcy. I’ve seen it happen with many of my own clients.
You simply cannot get on with life with the kind of debt a new startup racks up hanging over your head. And it’s really impossible to even talk about paying it back.
Bankruptcy and entrepreneurship go hand-in-hand. And both encourage each other.
Anyone who has lived in Utah knows that there is no shortage of entrepreneurship. But that spirit comes with a real price.
Now, what about credit card debt?
Well, I don’t really correlate credit card debt with financial health actually. In most of my bankruptcies the credit cards were not the culprit.
I mean, sometimes they are. I’ve seen people who were just stupid about the credit cards and got burned.
But most of my clients end up in my office over stuff like business lines of credit that are beyond recovery. Adjustable rate mortgages. And out of control medical debt.
Seriously, America’s health care system sucks. It’s probably the worst system in the first world.
Sure, it’s great if you can afford it. But that’s the problem – no one can afford it. And insurance rates are so exorbitant that people can’t afford those either. At least, not for a package that actually covers your health care. I’ve seen monthly payments of $400.00 that buy you a $5,000.00 deductible (meaning what you have to pay per hospital visit before the insurance company steps in). And that’s assuming they don’t find a way to deny your claim.
Mortgage loans, auto loans, hospital bills, lines of credit… there are plenty of ways to have debt and still have the small moral victory of having never used plastic to buy groceries.
Hispanic populations may play into it as well. There seem to be a lot of payday loans and predatory or discriminatory auto loans foisted on these guys.
OK… I’ll admit that the rhetoric about the GOP wasn’t very professional.
Carry on.
You expect us to believe that that was on your conscience 3 hours after you said it?
Whoever you are, I’m telling Seth you were posting from his computer.
I think that we should invite Seth to write a separate essay. We should first try to publish it in the Salt Lake Tribune before we waste it in the Blogernacle.
May be, a national paper might be interested such as the Christian Science Monitor. I can even imagine something like Seth’s essay in the New York Times.
If no one else will take it, we can always publish it ourselves. First rate, Seth. I enjoyed reading your response.
Nobody should be ripped off like that. It’s time that we stand up for ourselves and the people we love.
Are you kidding Hellmut?
If I published there, I’d actually be expected to back up my rhetoric. And what kind of blogger does that?
The article seemed to be a poll more than a study; i.e. people responded as to whether or not they had more credit card debt than they could afford.
Perhaps Mormons are more likely to believe they can afford higher credit card debt. Perhaps “Mormon outposts” tend to have other debt, like second mortgages, rather than credit card debt.
I know of older couples who have moved to Utah to retire. They have almost no debt because housing costs were so cheap compared to where they lived before.
Perhaps, but the invitation to write something for Main Street Plaza is still open. 😉
Interesting topic!
Frank McIntyre wrote a post at Times and Seasons a few months ago pointing out a paper he co-wrote where they found evidence suggesting that differences between states were largely attributable to differences in laws about bankruptcy. (So I guess pretty much what Seth already said.) Here’s the link:
Explaining the Puzzle of Cross-State Differences in Bankruptcy Rates
Also, I tend to agree with Andrew that we likely over-attribute differences between states on any variable to Mormonism. I think there are other explanations (like in the bankruptcy case) and sometimes it’s just random.
It’s hard to get a credit card after you declare bankrupt.
Seriously, that’s what happened to me ten years ago. I bought a house on the prophet’s advice (back in the 1960s and 1970s it was very common to be told to buy, not rent). Then I needed to move home for work reasons, and a housing slump meant the house would not sell. This led to repossession, leading to bankruptcy, leading to zero credit rating. I’m not saying this is the case in Utah, but it happened to me.