Film Review: 'Maxed Out'

So much a part of our daily life involves the routine use of credit cards that it is difficult to imagine living without them.

As customers, we are often seduced by suggestive advertising to keep spending, buying items beyond our means, including gadgets that we may not even need. But with trillions of dollars in credit issued every year by the financial industry, things have gotten out of control, turning the U.S. into a debt-addicted nation.

In his first feature documentary, Maxed Out, director James Scurlock takes a direct approach illustrating today's credit card epidemic, and reveals, with facts and humor, the financial industry's predatory lending tactics.

Varied interviews with financial experts, debt collectors, a pawnshop broker, victims themselves, and coupled with startling statistical data give a visceral feel for the problem's magnitude.

While the receipt of credit in the past required the evaluation of one's character, trustworthiness, capacity, and capital (property and savings); Scurlock argues that none of that matters today. "A good customer used to be someone who paid his bills on time, now it's a customer who doesn't."

In fact, today's best customers are those who already declared bankruptcy once and cannot file it again and those who are broke and can only make minimum monthly payments forever, explained Harvard Law School Professor Elizabeth Warren.

The documentary explains that more Americans will go bankrupt this year than get divorced, graduate from college, or be diagnosed with cancer, and that more profits are made through these small payments and added fees than the total amount of bankruptcy filings.

Getting families to acquire more debt yields more money, even if the number of foreclosures and defaults keeps rising. Many financial institutions regularly mail to "preferred customers" courtesy checks to keep on charging more fees. This accounts for 90% of payday lending revenues that are based on fees stripped from trapped borrowers.

Contrary to what people believe, said Scurlock, "credit scores don't have anything to do with how much money you make. So there is a disconnect between how much credit someone gets and his ability to pay it back that didn't use to exist."

Further exacerbating the problem are the errors present in most credit reports that favor the credit card companies. Fixing inaccuracies would counter the financial institutions' self interests because, along with the late fees, over-limit fees and high interest rates are part of what is driving the financial institutions' profits high.

For each $1.00 of principal, said Warren, there is an average of $2.00 in interest and fees.

Today's Families Are More Impoverished

The documentary explains how today's families are more impoverished compared to the 1970s. Bearing in mind that low and middle-income households have on average $8,650 in credit card debt, families composed of a husband, wife, and two children have less money to cover food, clothing, insurance, toys, and entertainment. Attempting to cover these basics drives people to the edge.

Loan sharks target customers least able to pay: the most marginal, low income, little town folks, and the unaware and uninformed college students working for minimum wage.

One disconcerting story in the documentary is of a mother whose 44-year-old, severely mentally retarded son was conned by a CitiFinancial salesman into signing a document to refinance their low mortgage home with another one at a higher rate.

Another distressing story was that of a national guardsman who was sent to fight in Iraq. As the duty of this husband and father was extended in Iraq, the bills kept accumulating at home with no break from the credit card companies.

"He literally had to be recalled from Iraq in order to come home for a few days, declare bankruptcy, and then be shipped back" said Scurlock. There were soldiers "that could not be deployed because their credit was so bad, they were considered a security risk."

When working on this documentary, Scurlock said: "It started out with the assumption that it is a consumer behavior problem. But the real and bigger story is about how the banks have changed in a generation.

The problem is that a lot of people don't realize that banks have changed. They still think that banks are rationing credit, and that if you get an approval you can afford to pay it back.

When in reality, these banks are giving credit cards to students, to people who just declared bankruptcy, to widows on social security. So there is a huge disconnect, and banks have done nothing to bridge the gap and really alert customers to the new reality." People think that if they are dealing with a bank they will be treated fairly. But, "the line between the bank that will take care of you, and the financing company that is going to rip you off has gone totally blurred. It's not being regulated."

Scurlock explains, "when financial institutions send letters to maxed out customers stating, 'thank you for your responsible use of credit, now you can get another credit card' the industry shares the blame."

"The irony is that the industry needs to wake up for its own good. The situation we have now should not be happening. You should not have foreclosures, bankruptcies, and defaults skyrocketing, and savings plummeting, while bank profits keep going up and up, it doesn't make any sense. We are at a time where economic theory doesn't really work. How banks could be making money while their customers are going broke."

"Everyone is being affected by this, and everyone understands what it means to be screwed. So it's not so much a stretch. The industry has really redefined so many terms."

"Mortgage, used to be a hedge against inflation, a vehicle for savings for your old age. Now it is an ATM. And now it is something you can catch out on a fly to pay off your credit card bills."

"My hope with the film," said Scurlock, "is that people will become aware of what all this euphemism means now, like 'preferred customer.' People need to understand how the industry has changed and they need to act accordingly."

Maxed Out, like other social documentaries before it, such as Super Size Me and Enron, effectively explores one of the most important issues affecting our lives today.

Powerful and well researched, Maxed Out is a definite must see!