First, I would like to thank Peter for letting me write an article here. Being a Christian myself, I have been very impressed with how Peter shares his thoughts about what the bible says about money and other things. I would like to talk about and highlight shady business practices, how many still fall for marketing hype and what we can do to avoid and not get involved in these industries. I would also like to challenge everyone who works in these industries or any industry that has any ethical question marks over them to come up with ways to either not engage in these practices or leave your industry altogether.
But first, I would like to highlight some questionable business and marketing practices by businesses that are pretty much part of our everyday life.
“For the love of money is a root of all kinds of evil, and by craving it, some have wandered away from the faith and pierced themselves with many pains. – Timothy 6:10:”
Shady Mortgage Practices
We all know what happened in the mortgage industry that led to the whole real estate boom and bust. In the good old days, banks were required to hold on to your mortgage on their balance sheet until you paid it off or until it matures. With the innovation of securitization, banks did not really have to check if their mortgage applicants are really creditworthy since they will sell those mortgages off to investors anyway.
Mortgage brokers also knew that since banks did not really care as much about creditworthiness of their borrowers, they too became lax in their lending standards. Since they were paid “commissions” for their sale, all that mattered was the sale!
When “no income docs” was first accepted in the mortgage, it was really meant for small business owners who really did not report their income fully or had better cash flow numbers than their “income” implied. Instead, this got abused by the mortgage industry. But happened will now go down in financial history as one of the great housing bubbles we have ever faced. But aren’t we to a certain extent guilty of our lack of personal responsibilities when we took on loans that we could not have afforded? And to those mortgage brokers who pushed a loan even without proof of income, wasn’t that not really ethical even though the banks accepted no docs (or fake income declarations)?
“Better is the poor who walks in his integrity, than he who is perverse in his ways, and he is rich. Proverbs 28:6”
Get Rich Quick Schemes
You see that all over the internet. Schemes promising “instant riches”. Just follow the “set formula” and you will start earning passive income. Look, ask Peter, it takes effort to build any business. It takes effort for him to write great post so that readers keep coming back to this site. Nothing is easy, anything worth doing requires hard work.
The worst thing is that not only are many of these schemes scams, but they are way overpriced and not appropriate. I remember attending a David Bach “free seminar” that was conducted and there was a lawyer who was talking about reducing taxes. He mentioned the concept of using a variety of techniques like a charitable remainder trust. At the end of his speech, he then proceeded to sell his cookie cutter techniques for $4,000. What a rip off! How could you sell a cookie cutter “estate type planning” when these sort of things have to be highly customized.
Stock Trading Techniques
Many folks sell their “technical trading systems”. During that same David Bach seminar, one chap stood on the podium telling how his IMO “backward looking” software would have told you not to buy Enron, Worldcom, Ford etc during 2000!
Here’s the deal, if you discovered a secret technique to invest or day trade or an arbitrage opportunity that the financial market has not discovered, why tell the whole world? Why not use it yourself? You can set up a hedge fund, approach institutions and raise money. If you are really that good, you will raise more money and earn the true big bucks like a really good hedge fund manager instead of subscribing to silly stock picking newsletter!
Sub Prime Credit Cards
The segment in the credit card industry (my expertise) where we see the most outrageous practice is in the sub prime sector. Here, there are cards that are specifically issued for folks who have their credit slammed to the low 600s or 500s type score. They also target folks who just come out of bankruptcy.
Using past history as their excuse, they charge a heck of a lot of fees. When you apply for such cards, they will have to pay an upfront application or processing fee. On top top of that, you have to pay an annual fee and in many cases, a monthly “maintenance” fee (whatever that is for). They are not ashamed to charge you rates of 19% or more! Heck, the fees are more expensive than an Amex Gold Charge Card!
I get many emails from my readers asking me to recommend credit cards for people with bad credit. I usually suggest that they consider getting secured credit cards instead because you do not get charged outrageous fees. But still, most end up getting an unsecured sub prime card even though it is more cost effective (fee wise) to get a secured card! Does ego have anything to do with this?
Now, if these cards disclosed their fees openly, that is all good and fine (well, still not really). What what they do is to send junk mails to residents and tell them that “THEY CAN GET A CREDIT CARD EVEN WITH BAD CREDIT” or “NO CREDIT CHECKS”. Unfortunately, most people never ask or even read the fine print if there is any. The FTC has sued a few companies like Compucredit for deceptive marketing!
“Dishonest money dwindles away, but he who gathers money little by little makes it grow. Proverbs 13:11”
Colleges getting paid for credit card sign ups
Nobody really knew about these practices until recently. But credit card companies have been paying “commissions” to colleges whenever a student signs up for student credit cards at campus.
The credit card companies are smart. They “sponsor” different sports teams and groups and make their members get their friends to sign up! Now, none of these is illegal. But if you really think about it, a colleges’ main job is to educate and prepare their students to lead a productive economic life. They really have no business allowing credit cards to be issued at college campus know well that most students will end up lots of credit card debt! But I guess they could use the money, so they close one eye.
When a sale is not a sale
Here’s one last example of questionable business practice. Check out this piece about a grocery flyers. It turns out that many times, items listed there are not on sale at all! Rather, they are “sponsored” by manufacturers. In fact, the article went on to state that when an item is listed on a flyer, sales could increase by a few hundred percent!
Once again, another deceptive practice by folks who are just after the next sale.
How to Guard Against Deceptive Marketing
Yes, folks are out their selling products that do not work or stuff based on unrealistic hype. But we consumers are at fault as well. We fall for things because we blindly follow what others say. We want things instantly. We want success now. We want to lose weight without working out. We want to buy things that we cannot afford. We want to buy that furniture at zero down and 0% for 24 months.
Here are a few things we have to do and be constantly aware of :
- Realize that there is no magic formula- you need to work hard to get something that you want. Can’t lose weight overnight, can’t get a million dollar house if you only make $50,000
Lazy hands make a man poor, but diligent hands bring wealth.” (Proverbs 10: 4)
- You have to educate yourself before you make any major purchases
Wisdom is supreme; therefore get wisdom. Though it cost you all you have, get understanding. (Proverbs 4:7).
The heart of the discerning acquires knowledge; the ears of the wise seek it out. (Proverbs 18:15).
A wise man has great power, and a man of knowledge increases strength.” (Proverbs 24:5).
While businesses are all about profit maximizing, there are opportunities out there that you can pursue without compromising your conscience, and your relationship with God. And for those working at your own business, ask how can you serve your customers better instead of how much money you can make if you implement a particular marketing technique.
Whoever trusts in his riches will fall, but the righteous (i.e., morally right and just) will thrive like a green leaf.” (Proverbs 11:28)
I hope this post has given you some food for thought.
This is an article by Mr Credit Card from askmrcreditcard.com. Mr Credit Card reviews credit cards , lots of them!
I think a common thread running through these is the desire for the purchaser to get something easily. Whether it’s getting rich quick or getting a bigger house, the motivation is the same: To avoid some of the planning and work that goes into building wealth. Sadly, most people who fall for these kinds of schemes end up poorer in the long run.
Mr Credit Card says
Thanks for the opportunity. Appreciate it.
Mr Credit Card
Mr Credit Cards last blog post..Can I Keep My Home And How Much Credit Card Debt Is Discharged In Bankruptcy?
I noticed a while ago that Target would have tags on some merchandise listed as “As Advertised” and some listed as “Sale”–obviously, the “As Advertised” items were the usual price, but I’m sure many people bought them thinking that it was on sale. I thought it was pretty tricky; I wasn’t upset, but it just made me pay attention. A store is simply trying to sell stuff. If I fall for it, it’s my fault. They weren’t hiding the fact that the item wasn’t on sale (in fact, the sale items will have the normal price listed on the sale tag; the other items obviously will not).
I think that the problem is people use their credit cards to live beyond their means. The other day at bible study one person was bragging about how they had consolidated their credit card debt into their mortgage when they refinanced their house. That same person was later talking about how they were again running up their balance on the card. HELLO!!!!!!!! It is a slippery slope and it is far to easy to start sliding down into the quicksand. I ALWAYS pay off my credit card balance each month. No matter how hard it is to do so because I know it will not get any easier once the balance gets bigger and bigger!!!!