In the pursuit of prosperity, we have 'Maxed Out'

The American dream of easy credit has become a nightmare, this writer insists.

"Charge it" may be one of the most enticing phrases in the English language. Who needs cash – or even a modest bank balance – when your wallet is bulging with plastic? After all, the bill won't come until later, and there's no need to pay in full each month.

That faulty reasoning, perpetuated by the mushrooming "financial services industry," has spawned another phrase that is anything but reassuring: Maxed Out. It's the perfect title for filmmaker and writer James Scurlock's astute indictment of the credit industry – and the perfect warning for what he sees as a society headed for trouble.

It begins innocently enough – an overdraft here, a missed payment there. But faster than you can say "late fees," the penalties snowball. Add more purchases to the balance, and soon a cardholder can be saddled with unmanageable debts. For some, bankruptcy becomes the only option.

Scurlock calls this maxing-out a "bear trap," and he finds plenty of places to cast blame. He points one finger at the increasingly unregulated banking industry. How, he asks, can banks keep lending to people who can't afford to repay them? Americans rationalize that banks would not extend them credit unless they could handle it. Yet banks make far more money teaching people to spend than to save.

Congress becomes another target of Scurlock's ire for passing the Bankruptcy Reform Act in 2005. The law makes it sometimes impossible to discharge debts. Yet studies show that divorce, medical emergencies, and job loss are the primary reasons for financial devastation. Middle-class Americans, single mothers especially, are among those hardest hit by bankruptcy reform.

Even the Oval Office is complicit. Scurlock chides President Bush for dismissing the federal debt as "numbers on paper" and criticizes Vice President Cheney for claiming that "deficits don't matter."

As proof that debts do matter, Scurlock offers a parade of real-life examples. He interviews a husband whose wife drove her car into the Ohio River after she ran up tens of thousands of dollars on her credit cards. Suicide, he notes, is particularly high among those with crushing debt.

Mothers of two college students share heartbreaking stories of their children's suicide in the face of insurmountable credit card debts. Credit-card companies pay colleges and universities millions of dollars to gain access to vulnerable students.

For Scurlock, debt is more than a theoretical subject. In college he squandered a $250,000 inheritance from his grandfather in a failed fast-food venture. He experienced the terror of harassing calls from a debt collector named "Mr. Johnson." Calling the collections business the "underbelly" of the financial industry, Scurlock describes its nearly 3 million employees as masters of intimidation.

During the same period, he found himself entwined in the netherworld of "alternative banking" – pawnshops – when he pawned a watch his father had given him. "The largest pawnshop chain and the largest check-cashing outfit in the US are both largely financed by Wells Fargo, the fourth largest bank in America," he states. Ironically, pawnshops are more heavily regulated than banks.

Credit-card companies derisively call those who pay their bills on time "freeloaders" and "deadbeats." Their prized customers are the "revolvers" who pay heavy interest and fees. By one estimate, these companies collect $20 billion a year in fees that didn't exist two decades ago.

This is not just an American problem, Scurlock finds. And he offers a sober warning: "Sometime, maybe sometime soon, this house of cards is going to collapse." To prevent that he calls for nothing less than a revolution. As one solution, he urges Americans to stop believing "That doing without is immoral.... That wealth is spending, not saving, and that there will always be more credit coming, as long as one remains on the preferred customer list."

Smartly written and by turns funny, irreverent, serious, and angry, Scurlock's book is well timed, coming just as the sub-prime lending industry is collapsing and foreclosures are mounting. His documentary of the same title is playing in theaters nationwide.

Not all financial experts share Scurlock's pessimism about an indebted society. But he builds a persuasive case that deserves serious attention. As he cautions, the American dream can be a mirage.

• Marilyn Gardner is a Monitor staff writer.