Think thrift to combat debt culture, report says

We live in a debt culture, a place where too many people live beyond their means and think "fast cash" and "free money" really exist.

Those are the findings of "For a New Thrift: Confronting the Debt Culture," a new report issued today in Washington, D.C., by the Institute for American Values, a New York-based private nonprofit group that promotes families and civil society. The institute, New America Foundation, Demos, Public Agenda, the Consumer Federation of America and several other organizations collaborated on the 67-page report.

They cite numerous "anti-thrift" lending institutions that have sprung up in recent years, namely, payday loan lenders and tax anticipation loan vendors and subprime mortgage lenders, as the reason many families are experiencing financial difficulty.

"In recent decades, new predatory lending institutions have moved into the malls and main streets of America," David Blankenhorn, president of the Institute for American Values, says in a press release. "Anti-thrift institutions promise 'fast cash' and 'free money' at usurious interest rates and trap many Americans in a cycle of debt."

According to the report, Americans need to shift their focus to thrift rather than spend to pull ourselves out of our current debt crisis.

A shift to thrift
How do we do that? The report recommends:

• Launching a public education campaign around saving and thriftiness that is modeled after anti-smoking and drunk driving campaigns.
• Supporting and promoting creation of low-interest consumer loan programs that would replace payday loans and subprime credit cards that charge high interest rates.
• Adding a savings ticket feature to the popular state lotteries around the country. In addition to buying a lottery ticket at convenience stores and other outlets, consumers would be able to give money to a lottery vendor and get a savings ticket. State lotteries "spend millions of public dollars each year figuring out how to get more and more of us to gamble," the report notes. "Under our proposal, this same group of publicly funded wizards who develop games and ads to sell lottery tickets would also be charged with developing innovative sales techniques and jazzy new promotions for savings tickets."
• Capping interest rates on small loans so they do not exceed "usury rates" and restricting predatory lending practices.
• Keeping credit card companies off college campuses.

Other recommendations include starting a national children's savings account program to allow parents to set aside tax-free dollars for their children's education and encouraging childhood and adolescent saving habits through school-based savings programs. The report also recommends creating a U.S. Financial Products Safety Commission, patterned after the Consumer Product Safety Commission. The new agency (the brainchild of Harvard University law professor Elizabeth Warren) would help consumers sort through and rate complex financial products and set minimum standards for disclosure.

See related: "What if debt still equaled a prison sentence?" "Poll shows teens lack credit card knowledge," "Clueless about credit? Enroll in Financial Peace University," "10 ways college students ruin their credit"