James Scurlock on Fixing the Credit Mess
James Scurlock's film Maxed Out takes a hard look at the American lending industry and how it has enabled the country's spiraling debt. Scurlock, a business school dropout who opened and sold four restaurants before he turned 25, discusses recent shakeups in the business world and where both debtors and lenders should go from here.
The film basically says the credit card industry has become increasingly predatory in the past few decades. If the industry has changed so much, why haven't consumers kept up? Why are Americans still surprised?
The tradition in this country has been one of regulation and responsible lending. When people go to a pawnshop or a financing company, they expect to be screwed. But if they go to a Wells Fargo or Bank of America, they expect they're going to be treated fairly. I just did a radio show where a banker said, "Look, we're in the business of helping people save." And I thought, yeah, that was true 30 years ago, but now you're in the business of getting people to spend as much as possible. The banks are having it both ways. They are still using their marquee to be trusted, and then they take advantage of that trust that people have had for decades.
What about the government's response?
Congress and the president don't tend to do anything when things look kind of OK. In a way, all this credit has made home ownership and college attendance look great. We're borrowing to fight the war in Iraq, and we're taking money out of Social Security to make the deficit look smaller. There's a lot of denial going on. There's also a fear in Congress that if they come down too hard on the industry, this credit will dry up and suddenly the economy will grind to a halt. We live in a consumer economy now, and they're very loath to do anything that might plunge us into recession or worse.
Do the recent Senate hearings on the practices of credit card companies make you optimistic?
They actually did. I'm not an activist and I'm not a consumer advocate, but the people I've talked to, like [Harvard Law professor] Elizabeth Warren, who's been going to Congress for years and years, feel as if things are really changing. Chase announced it would stop double-cycle billing, which was really a nefarious kind of practice, and Citi announced it would no longer do universal default. So yeah, there's reason to be hopeful. Certainly more so than there was a year ago.
Your film is very revealing when it comes to the subprime lending industry. What do you think of its recent problems?
It's incredibly scary because it's like Enron. People don't understand how complex and interrelated and how infested the economy is with debt like this. If New Century [a major mortgage lender to less-creditworthy borrowers] goes bankrupt, we just don't know what the ramifications will be. People are very nervous because nobody knows exactly how deep and how wide this could go.