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bjbjLULU JEFFREY BROWN: And we turn once again to our series After the Fall, our look at
what's changed and what hasn't since the financial meltdown of 2008. In recent days, we have
examined the housing market and risk and regulation on Wall Street. Our focus tonight: consumers
and banks and attitudes toward credit and debt. For that, we're joined by Adam Levin,
chairman and co-founder of Credit.com, a consumer education advocacy group. He's former director
of New Jersey's Consumer Affairs Division, James Chessen, chief economist for the American
Bankers Association, an industry trade group. And Kathy Kristof, she reports on personal
finance for CBS MoneyWatch and Kiplinger's Personal Finance. Kathy Kristof, let's start
with consumers. Are people generally more willing to take on debt now? And, if so, who
is doing it and what kind of debt? KATHY KRISTOF, Kiplinger's Personal Finance: Consumers are
definitely taking on more debt, certainly on average. What you see are two different
groups of consumers. We have people who never really had a problem in the financial crisis.
They didn't lose their jobs. They never were overextended. They have never had difficulty
in paying their bills, but they have been very cautious over the past couple of years.
And right now, they're in very good shape because actually the debt they have is at
lower interest race. Mortgage rates in particular have gone down. And for most families, that
means that 50 percent -- or -- excuse me -- 30 percent of your budget is actually at a lower
price. So you're in good shape. The other side of the coin are the consumers who did
have real problems in the financial crisis. Some of them lost their homes. A lot more
declared bankruptcy. And, oddly enough, those consumers are also actually in a better spot
right now because, while they lost assets, they also lost that debt. So, going forward,
they're better able to borrow. And now you have. . . JEFFREY BROWN: Sorry. KATHY KRISTOF:
Go ahead. JEFFREY BROWN: Let me just -- let me just bring in Jim Chessen here. Does that
jibe with what you're seeing, a two-tiered market? JAMES CHESSEN, American Bankers Association:
Well, I think that's absolutely correct, Jeff. What we ve seen is, overall, debt levels are
down. We ve also seen that the amount of monthly income that people have, the amount that they
devote to debt is at a 28-year low. So we ve seen a significant reduction in the amount
of debt held. We have seen savings go up. So we have seen a very good improvement on
consumer debt levels. Now, as Kathy said, we know there's people that have had trouble,
but the good thing now is they have an opportunity for a second chance, and in products that
will help them rebuild the credit that they need to buy the kinds of product that they
want, whether it's a car or to build back up credit, so that they can buy a house. JEFFREY
BROWN: Adam Levin, what impact have regulatory changes had? I know you have looked at this
push for more transparency in loans, in lending. ADAM LEVIN, chairman, Credit.com: Well, there's
been a great deal more transparency. There has been a great deal more restraint in certain
areas of fees on the part of financial institutions. And consumers in general are in a position
where more information is available to them, but it's now their responsibility to be able
to actually read that information, digest the information, and make intelligent decisions
based upon that information. Plus, we also have the Consumer Financial Protection Bureau.
And we have more people actually looking at the problem, studying the problem, and trying
to see if what we see today is a good omen or a warning sign and the headlamp of the
oncoming locomotive, as opposed to the light at the end of the tunnel. JEFFREY BROWN: Well,
Adam, just to stay with you, what do you see in terms of consumers' attitudes? Is there
more a fear of taking on debt? Were there lessons learned after what happened four years
ago? ADAM LEVIN: Well, again, I think that some people may well be taking on more debt
out of necessity because we have a stagnant economy. And we also have a stubborn unemployment
rate. Some people may in fact have a much healthier attitude about credit and debt than
they have ever had before. But remember that while we're looking at this particular kind
of debt, there's another horrifying debt that's exploding right now that also impacts so many
people. And that's student debt, which has now eclipsed auto debt and credit card debt.
So this may also be part of an entire mosaic where consumers are looking at the entire
picture and saying, I really have to be more responsible in this area, because I'm being
eaten alive someplace else. JEFFREY BROWN: Well, Kathy Kristof, fill in that picture
a little bit more. You start talking about the riskiest borrowers. Do you see them getting
into the market more, and do you see lenders, banks and credit card companies, reaching
out to them once again, as they were earlier? KATHY KRISTOF: You are seeing them cautiously
getting back into the market where they can. But there are some people who are not borrowing
because they don't have the opportunity. Their credit got so trashed in the financial crisis
that they will not be allowed to borrow for a little while. There are tentative feelers
out to get some of these people and certainly to get people with thin credit files, as opposed
to bad credit files. So college students, for instance, are being segregated from the
bad credit risk to the new credit risk. And those people are being offered credit. And
they're taking it. And, you know, again, consumers are in a better position to handle the credit
they're getting. And so I don't see this as a worrisome trend. JEFFREY BROWN: Jim Chessen,
are banks or some banks getting back into this business of lending to risky borrowers
again, one of the big problems, of course, from four years -- from the bubble? JAMES
CHESSEN: Well, of course, there's a whole range of risk, right, from the best credit
to the people that, as Kathy said, really have very poor credit. JEFFREY BROWN: Right.
JAMES CHESSEN: Banks are treading cautiously. I agree with Kathy on that. They want to make
loans. And they know now, with the economy improving and jobs and income improving, that
the risk of lending is now much lower than it was before. So they want to look at those
consumers that really have the ability to repay that debt. It doesn't do banks or customers
any good to put hands, put credit in their hands if they can't repay it. We don't want
to repeat the lessons that we have had before. So both banks and consumers, I think, are
being much more prudent, much more cautious. And I think that's appropriate. JEFFREY BROWN:
Of course, some of the regulations took some of the ability of banks to make money off
of -- to charge some of the fees that they did in the past. JAMES CHESSEN: Right. JEFFREY
BROWN: What kind of impact does that have? JAMES CHESSEN: Well, banks are in the business
of making loans, right? That's what they do. That's their bread and butter. And they want
to make loans. They want to reach out to their customers. It may shock some people that two
out of every three banks, FDIC-insured banks, have been in business for more than 50 years.
You don't stay in business unless you treat your customers right, make sure they have
the credit that they need and that they can repay it. And that's what banks want to do
now. The risky lenders are out of business now. The banks that have survived today are
the healthy ones that are going to be here for the next 50 or 100 years. And they want
to get credit in the hands of their customers that can handle it. JEFFREY BROWN: Well, Adam
Levin, what do you see in terms of the -- on the side of the banks responding to the various
regulations that were put in place over the last few years? ADAM LEVIN: Well, the banks
are -- they find themselves in a bind. They're looking for alternate revenue generation sources.
They feel that -- a lot of the bankers I have talked to say, look, we -- we have to find
ways to increase our footprint with our existing customers and make a compelling case with
other customers because, frankly, there was a period of time when the bigger banks were
getting hammered by credit unions and smaller banks as consumers were expressing and manifesting
their anger. So, you know, there is the continuing search for fees. And if -- they will shift
from one to another and they will go with it. For instance, consumers, the question
is, has consumer credit card limits, have they increased because consumers are moving
away from debit cards that they had been moved into because, once the swipe law went into
effect and limited fees on swipe that -- and rewards were taken away from debit, and fees
were raised on debit, the consumers then were migrating back to credit cards, and there
was also a greater demand for credit cards. And banks are going with the flow on that,
too. So, is it because the boat is rocking or because there really is a new attitude
about things? This is a work in progress. JEFFREY BROWN: Okay. Kathy Kristof, a last
word from you. What -- what -- is it a work in progress and which direction is it going?
KATHY KRISTOF: You know, credit is always a work in progress. Like everything else,
there are business cycles. And you're seeing we have left the cycle or the point in the
cycle when nobody is lending and nobody can get credit unless they don't need any money.
And we're going into the -- credit is easing and people -- but people are still cautious.
Banks are still cautious. And then we will go to the point where they're not cautious
and people overspend and banks lend too much money to them, until everybody hangs themselves
and we start all over again. It's kind of the nature of the beast. But, at the moment,
I think we're still in a position where people are borrowing in a judicious way, and banks
are lending in a reasonable way. And so, at the moment, there's nothing to worry about.
(LAUGHTER) JEFFREY BROWN: All right. We will stop there then. Kathy Kristof, Adam Levin,
and Jim Chessen, thank you, all three, very much. gdz gdz urn:schemas-microsoft-com:office:smarttags
State urn:schemas-microsoft-com:office:smarttags place JEFFREY BROWN: And we turn once again
to our series After the Fall, our look at what's changed and what hasn't since the financial
meltdown of 2008 Normal Microsoft Office Word JEFFREY BROWN: And we turn once again to our
series After the Fall, our look at what's changed and what hasn't since the financial
meltdown of 2008 Title Microsoft Office Word Document MSWordDoc Word.Document.8