Legal and Ethical Environment of Business
The Legal and Ethical Environment of Business
MGM365-1204A-08
Phase 3: Philosophy
Brendon Foster
America is a country of true convenience and consumerism. In this country of opportunity, the very well established credit industry allows people who only earn fifty thousand dollars a year to purchase and “own” two hundred and fifty thousand dollar homes and thirty thousand dollar cars. We pay over time to enjoy or conveniences and lives now. In developing economies, this is very far from the case. Take Jamaica for example where very little is done on credit. In the past decade the nation implemented tax identification numbers which is the same as social security numbers here. But establishing credit there is very complicated and nothing as streamlined as we have in the United States. As a result of this streamline industry, business and the economy in turn flourish from the interest rate and fees they earn from customers. The longer the loan terms, the more interest is earned and similarly the higher the interest rate that is charged. It is this high rate of return on providing credit that influences and pushes companies to try and squeeze as much as they can out of their customers. We see this daily and disturbingly more so now with the recession. One such company that is facing major hot water as a result of their unethical push of loan products, rates and fees is Countrywide.
Countrywide was one of the leading sub-prime home mortgage companies in the United States until they were slapped with prosecution for unethical business practices in June of 2008 (Guargian.co.uk). Considering that they were the leading lender, it means that they were one of the major contributors to the mortgage crisis in the recession. Countrywide was cited for using deceptive lending practices where they intentionally steered lenders into loans that they knew were doomed to fail. They did this to earn the large fees that came out of selling a loan and the interest rates as well.
MGM365-1204A-08
Phase 3: Philosophy
Brendon Foster
America is a country of true convenience and consumerism. In this country of opportunity, the very well established credit industry allows people who only earn fifty thousand dollars a year to purchase and “own” two hundred and fifty thousand dollar homes and thirty thousand dollar cars. We pay over time to enjoy or conveniences and lives now. In developing economies, this is very far from the case. Take Jamaica for example where very little is done on credit. In the past decade the nation implemented tax identification numbers which is the same as social security numbers here. But establishing credit there is very complicated and nothing as streamlined as we have in the United States. As a result of this streamline industry, business and the economy in turn flourish from the interest rate and fees they earn from customers. The longer the loan terms, the more interest is earned and similarly the higher the interest rate that is charged. It is this high rate of return on providing credit that influences and pushes companies to try and squeeze as much as they can out of their customers. We see this daily and disturbingly more so now with the recession. One such company that is facing major hot water as a result of their unethical push of loan products, rates and fees is Countrywide.
Countrywide was one of the leading sub-prime home mortgage companies in the United States until they were slapped with prosecution for unethical business practices in June of 2008 (Guargian.co.uk). Considering that they were the leading lender, it means that they were one of the major contributors to the mortgage crisis in the recession. Countrywide was cited for using deceptive lending practices where they intentionally steered lenders into loans that they knew were doomed to fail. They did this to earn the large fees that came out of selling a loan and the interest rates as well.