A dinner conversation

A friend described his job with a lending company early in his career. The company worked with car dealers to offer loans. Many customers were unaware of the financial arrangements that the dealers were making. One frequent dealer tactic was to arrange a car loan for a buyer, and then send them to the lending company to get the downpayment for the car. Frequently, the customer was unaware that the downpayment was also a loan, on top of the car loan…He also had a fellow worker who would stand outside the local bars on payday and corner people who owed money as they walked out…My friend expressed considerable consternation at how individuals can be bilked out of money by questionable methods.

Another friend replied, well, yes…But I have a hard time coming up with too much sympathy for individuals who put themselves in those situations. They have some responsibility for their choices, and need to be aware of what they are signing or agreeing to. They don’t have to buy that car, or enter into that contract – they signed it, they are accountable for it.

Contrasting viewpoints. And a basic conflict that government faces: how can we protect people from themselves? We live in a capitalist society where our individual livelihood depends upon performing some function that gains us money. A company lends money to individuals who pay it back with interest – thus gaining a profit. What is the responsibility of that company to educate the individual about the contract or agreement and make sure the person knows the fiscal risks, or his own ability to pay?

We, as a society, could determine that we need to protect individuals from hurting themselves by making poor decisions. What is the cost of that protection? Using the above example, what if we wanted to do something that restricts a lending company from certain tactics. There is a cost to writing the laws, setting the rules, printing and filing contracts, and creating a team of people who oversee and enforce that protection (a government agency, the courts, enforcement means such as police, etc.). What is the return to that investment? When is it too much?

How far do we as a society go to keep individuals from failing?