I can't find the exact interview where she mentioned changing the rates on an existing loan, or any 60 minutes interview for that matter, but she's a popular gal and she says the same basic things in various interviews. Her interview with PBS was better because she didn't say they change the terms on an existing loan. She said they change the terms of your credit card, which is slightly different. That's a good start, and it's truthful, but then she goes on to imply that the lender is essentially doing the same thing as changing the terms of a contract.
http://www.pbs.org/now/shows/501/credit-traps.html
This is where she starts to lose me. She's trying to say that there is something uniquely wrong when credit card companies do this.
ALL lenders do this, and I'm pretty sure she knows it. If you have a 5 year term on your mortgage, the rate could change after 5 years. It's not a mystery, it's not a secret, and everyone is very open about this. In general, lenders actually do want you to pay the money back. The credit card company doesn't like writing down your debt then selling it to a third party at a steep discount to par.
I remember people on the left saying the exact same things about mortgages a few years ago. Guys like Michael Moore will go on TV and pretend (I hope) to not understand how a fixed rate term works so he can pretend to be outraged when the rates change upon renewal. In the case of Michael Moore and his documentary Capitalism: A Love Story, he presented cases of people talking about how their mortgage payments kept going up and up as the interest rates went up like it's some kind of grand conspiracy to kick people out of their homes. Of course the rates go up. That's how lending works. When you get shorter and shorter terms, the immediate interest rates are lower, but there is less protection against interest rate increases. Everyone knows this. It's dishonest to present this as anything other than common knowledge. You can even do this with things like your natural gas bill. If you have a floating rate, the floating rate is lower than the fixed rate
today, but the floating rate offers no protection against rate increases tomorrow. My electricity bill is on a floating rate. It's just common knowledge that every responsible adult is aware of.
Most of my dislike probably just boils down to personal disagreements over how the debt problem is to be solved. She wants the nanny state to wipe everyone's ass and keep people shielded from reality. Ironically, her solutions would actually cause interest rates to rise. If the loan's locked in rate is for 1 year instead of 30 days, the loan would start at 20% instead of starting at 8% because the lender would not be allowed to raise the rate for a year after a payment has been missed. We see this every time price controls are enacted. If a landlord can only raise rent 1 time per year, the landlord is forced to project a year worth of rent increases and start at that projected endpoint.
I think a more effective solution is education.
There is a strong correlation between poor math skill and mortgage defaults.
We don't have a debt problem because these evil kkkorporations are trying to screw people. We have a debt problem because Americans suck at math, and we don't seem to be doing anything to fix that math problem. By shielding people from the horrors of real life, we encourage people to show no interest in math. Don't worry about math - the goverment will do all of your thinking for you!