Alycia: Last week I was at an industry conference, and this conference was for business owners, people who own like retail appliance shops and furniture shops and kind of home furnishing types of retailers. And we were all in this big lecture hall, and the presentation at this conference was from a company called Synchrony. And what they were pitching to us, what this lady was up on stage with all of her beautiful stats and her beautiful presentation was pitching to us, would have been illegal 40 years ago in America and was illegal for the full 2000 years of history before that, right? Western history. And so what she was pitching us on was the idea that we should be offering financing to people who want to come in and make purchases at our stores because that is what the consumer now expects. Now, if you don't know what synchrony is, we're gonna go into that in this episode. We're also gonna go through the history of usury, interest, and why this is absolutely eating the American household alive. So I'm Alicia, your host, of course. Welcome back to Fathom. Okay, so I want to open back up with some numbers here. We have paid in 2025, American households paid $181 billion in credit card interest, that which is double, over double what we paid in 2021, which was $75 billion. This totals $253 billion for 2025 when you add in all of the fees and everything else associates associated with credit cards. And we talked about the fees, the transaction fees associated with electronic payments on another episode. So go back and watch that. Here's a pitch. But we are paying Hundreds of billions of dollars in interest alone. That averages to $1,000 per year per American household. Right. So if I had to bring that down to the the individual household, that is a thousand dollars a year that the American household is paying just to be able to keep their credit cards active, whatever balance that they have. We had a record outstanding balance last year, tail end of last year, right? So I think it was November, December last year. And we're approaching that point again this year in 2026, right? Record outstanding balances on credit cards. Now, when I take this back to the presentation that I was at, the company synchrony, one of the points that she continued to make very warmly, if I have to give her something, was that when you split apart. The people, the consumers, right? When you look at the demographics of the consumers, those that are in the higher income buckets are making up a higher portion of the spend than those in the smaller income buckets, as you would expect. And what she kept saying, kept coming back to in this presentation, was that spending is up, quote unquote spending is up, right? And we did not have a ton of time to ask questions at the end of this presentation. And so I only got in one small one, right, about whether or not they're seeing defaults rate rise. But my question for her, like what she's bringing up in terms of spending rates being up and that being a positive indicator for their economy, is the only one that you can call out and that only lives at surface level because when you dive into that, just even even when you ask one question about it, spending is up because inflation is up. Spending is up because it costs more for gas and groceries and your t utilities, like spending is up across the board because things cost more. Okay. It's not, I think people are largely not in a place where they are spending more money on discretionary items because. We want to. And I I think that's something that needs to be said very clearly here is that in this presentation, what was presented to us, the business owners, was spending is up and sp consumers now are expecting, quote unquote expecting financing options. And when I say expecting financing options, that means that we because they do not have any other option, they need to be able to finance purchases. And I'm talking not necessarily even though everybody has seen, I've never used them the buy now pay later kind of after pay. Klarna, whatever those are, right? Buy now pay later on little things, right? Little things where they integrated that. And I think that is absolute nonsense, right? If you don't need an extra pair of shoes, don't buy the extra pair of shoes. Okay. That's very simple, very cut and dry. But if your fridge goes out, right, and you can't fix it, you have to go get another fridge. I'm not gonna tell people you could make a case, yeah, you don't need a fridge, get an ice box. You need a fridge. Okay. It's 2026 America, you need a fridge. and most households do not have the money to Finance that type of purchase. Most households cannot cover an emergency expense of like $800 or $600, whatever that number was. I'll look up the stat later. But most households cannot support that. And therefore they are coming to stores looking for financing because they do not have an option. That is different than an expectation of having financing available, right? And I want to make that distinction because it was not made in our presentation. Anyone that happens to see this should know that that's what's going on. now let me back up here and give some more data on this, right? Because so the our average APR on credit cards is twenty-one percent across the board, right? And so that is the average amount of interest we are paying annually to credit card people who have a balance on their credit cards, which again is a ton of people. twenty-one percent is the average interest that we're paying. and over the last 40 years, this has really gotten us into a genuine bind. Like the kindest way to put it, where you have I don't know what direction this is, K-shaped economy, and where the people at the top are benefiting from the fact that the people at the bottom cannot pay that interest. They cannot pay for the very normal and natural purchases that they need to make in their everyday lives, right? And so you have a K-shape economy where people at the top are getting richer, people at the bottom are getting poorer. They're getting more and more and more debt, right? It's the spiral to the bottom if you're at the bottom of this K. And it's one of those things that everybody has acknowledged. This is what we're doing now. Nobody's and it I don't want to get too political, but like this is why you see the push towards socialism, towards the DSA. Like people are seeing that this economy that we have created for ourselves is to, I don't want to say I don't know, maybe it might be too far gone, right? To fix for the people at the bottom. And I think a lot of this stems from our interest system. So what we're gonna do here is go through the history of interest, also known as usury, because it started out as usury. So I'm gonna take you guys back through the history here because charging interest to someone, charging interest to your fellow neighbor used to be a sin. It used to be a sin and it used to be illegal in a lot of cases. So a number of religions used to outlaw this. Christianity, Buddhism, Hinduism, Islam, Judaism, all of these things were it, they frowned on the idea of charging people interest because interest they it wasn't called interest at the time. It was called usury, right? It got rebranded at some point in history. It used to be considered usury because it was unethical to say, okay, my neighbor can't buy XYZ. They really need it. I'm gonna borrow them some money. You're not supposed to charge interest to people who are in need. Right. And so that was the first idea of usury, you know, heavily frowned upon and then made illegal when we started putting together our laws and linking the church and the state. Right. So it was made illegal, put in law, you were fined if you were charging people interest. right around the 1500s in 1545, Henry VIII was the first one to actually legalize charging people interest. So for all the, you know, 2,000 years before that, it was illegal, it was frowned upon, you couldn't do it, right? So then in the 1500s, this king says that, okay, we can legalize interest, but this is actually going to be capped at 10%. this is also like when people started to explore, right? So people were starting to go on ventures and they had to be a way to cover for the risk that was associated to lending money to other folks for ventures, things that were discretionary, things that were meant to build businesses and expand economies and go explore the new world, right? There had to be money turning into the economy for that and a return on that money because some lenders were gonna lose it, right? So they kind of the idea of interest came about at this time because business ventures were trying to expand and they could not without more capital. So this was first regulated in the 1500s. In 1624, it regulated downwards. So the cap went from 10% to 8%. In 1660, it went down to 6%, right? So that was the cap for a good long time. Now, this is in England. In over in Rome, they held out a little bit longer because a lot of what they were doing with the church, they held on to their usury framing. And in nine or eighteen thirty, eighteen thirty, they weakened the ban. So for 400 odd years, right? So mid-1500s to mid-1900s or so, the discussion was around it wasn't it was no longer illegal to charge interest. And the the terminology slowly transitioned from usury to interest to kind of designate the difference there. The difference between borrowing to someone be for something that they need or borrowing to someone who wants to go build something with it. Okay. So that was kind of the distinction. So when credit cards came on the scene, and again, there's another episode about credit cards in the history of electronic payments. But when credit cards came on the scene, then that was the point at which people were borrowing to consume and not to build ventures, right? Then you have the whole modern credit system developed off the back of that. But even at that point, right, even at that point, we still had usury laws on the books. We still do today have usury logs on the books for states. Like there's state well, certain states, because we'll talk about that too. But Originally the system was set up and there were usury caps set per state. In Florida, I think that the cap is still 18% because it still applies to certain types of loans, personal loans, payday loans, certain things that that will apply to. But credit cards, which is the majority of what people are using, does not have a cap. And there's a reason that it doesn't have a cap. credit cards and electronic payments started coming on the scene in nineteen sixties ish, right? So nineteen seventy, you're getting to a point where most states were capping the interest rate at around eighteen percent. Minnesota shout out, because I am Minnesotan, was at twelve percent. So Minnesota's always, you know, just for like a quick anecdote, Minnesota's always on the right side of things. And the way that they protest and come out, like shout out to the Minnesotans, okay? Even now, like today, day and age, right now, they're protesting flock cameras, and we'll talk about that. but shout out to the Minnesota's Minnesota's usury rate was at twelve percent relative to the other states, which were a little bit higher. But what was happening was that there was a lot of inflation, right? And the banks were not able to keep up on making money on the interest that they were charging people for those credit cards. So what happened, you know, whenever corporations want to get something done, they started a whole legal battle. And that legal battle ended up all the way at the Supreme Court. And we ended up with what is called the Marquette ruling in 1978. And what the Marquette ruling said was that if you are a credit card company, you do not have to abide by the usury rate in the the borrower's state. So if you're a credit card company, you're based in Florida, and I'm based in Minnesota, you do not have to abide by the 12% cap that Minnesota has. You have to abide by the rate that Florida has set, 18%, right? So you have to abide abide by that usury rate cap, which really changed the game because then things got a little bit malleable, right? So then in February of 1980, South Dakota, the state of South Dakota, decides to repeal their usury rate law, right? So they they decided to repeal their usury cap to incentivize Citibank to come over to South Dakota and set up for jobs. So if you think about South Dakota, I mean, if you've never been there, it's pretty flat. It is pretty flat. I think there's some pretty things to do if you're driving through things to go see national parks, whatever. But South Dakota is not a place in the United States that is known for commerce or known for big business. And so as you imagine, a lot of the the states that are like a little bit sleepier need jobs, right? They need jobs and they need companies to relocate there so that they have jobs. So what they were trying to do was lure in the big banks to set up shop in South Dakota because when they set up shop in South Dakota and they do not have a usury cap, that bank can then charge interest, whatever interest they want. To all of their consumers. And I tried to do some research to see if there was any information I could find, any like backdoor deals that were going on between primarily was the governor, Governor Jank Blow and Citibank, the executives from c from Citibank, the attorneys there. I can't find it. And I would be very knowing what I know now, like the research that I've done about all these systems and how they work together. I would be very surprised if there was not something behind the scenes, right? That we did not see that he they he linked up with them and they decided, okay, let's, you know, just take away the usury recap and then they relocate all their employees outside of what your standard. I'm not I'm not saying like I I don't know, maybe I shouldn't go down the path of just saying stuff like that because but I'd I look at all these systems and how they work from the inside. I would be very surprised if there was not something that was incentivizing him outside of the fact that his state is gonna get more jobs, but we'll leave that for Another time. so that is why Citibank moved its headquarters from New York to South Dakota, right? That is the reason that they are there is because South Dakota does not have a cap on usury on what they can charge you, the card holder, in interest on your card. So they can charge you whatever interest that they want on their credit. You have to opt in, obviously, right? So when you're signing up for a credit card, you they state what their APR is, 24%, whatever that is. You sign on to that. As the consumer, right? To get a credit card. But they do not have a cap on what they can charge you as long as you have legally opted into it. And for all of history, this was not something that you could do. And I also think this is why we are now in a system where we are paying $181 billion of interest every year. And that is only going to climb. I do not see a a scenario where we end up like out of this conundrum where the average American family is able to get up out of their credit card debt, right? The debts that we have all accrued. I don't know how that's going to happen and how we are going to get ourselves out of this situation. And you know, I'm not the person to even propose solutions here because I'm you know, the reason that I do these is because I'm trying to understand the systems and how they work. I do not see how this one is going to resolve itself. now to bring it back to the present tense, right? The present state of things, the presentation that I was at that I mentioned at the start of the episode was by Synchrony. And Synchrony was born in the Great Depression and it founded as GE Contracts Corporation in 1932 to finance the purchase of appliances from GE, which I just thought was like a very funny full circle moment. For the things that I've been thinking about here already and to be at an appliance conference and get pitched by Synchrony, which is the same, it's not the same company anymore. So it's changed entities, I think. Two times, maybe three over the history because they got sued and then they got sued again, class action lawsuits, the whole thing, right? But they started out as a way for people to buy GE appliances when they could not buy GE appli GE appliances in the Great Depression, right? So that is where Synchrony got its start. They are now the largest private label credit card issuer in the United States. When I say private create private label credit card, it means like the Lowe's cards, or when you go to JCPenney and they're like, You wanna get a JCPenney credit card? That is Synchrony. Okay. So they're the ones that partner with the retailers. They're also doing this in healthcare and other other spaces, but they're partnering with retailers to give consumers credit at their stores. they're the ones that are partnering with retailers to give consumers credit at the point of sale, right? So when you're buying something and they're offering you, do you want a credit card? That is, that is them, right? That is the whole system. And I think we've all interacted with it, but most people don't recognize what that is. So that is synchrony. now the thing that I think people run into issues with is that a lot of times these financing options are being offered on a zero percent basis for a certain amount of time. So it's like, okay, I wanna go in and buy a washing machine and I want a really high-end one because I'm gosh, I was gonna say because I'm an idiot, but I can't really say that. Maybe I'll sell luxury appliances one day. I won't say that. I want a very decked out washing machine because I have a lot of discretionary income. And I think I can afford it for my luxury home. It costs over two billion dollars. Okay. So I'm very affluent. I can do this. And it's reasonable for me to want to do that as opposed to being unreasonable and absolutely stupid if you don't have the money to do it. Okay. We'll make the distinction. So pretend I have money and I want to buy a luxury washing machine. And I don't want to pay the whole thing up front, right? I'd I would rather save my money, save my thousand dollars, and pay it over time. So synchrony, if you pay that financing off in the first 12 months or 24 months, whatever, if you pay it by the date, you won't get charged interest. It's 0%. But if you do not pay it by the date, then you have a retroactive interest, and this is like 29%, 25%, whatever it is on the books. But you sign into this agreement and a lot of people don't recognize that if they don't pay it by that date, they're gonna get charged for that whole balance retroactively, right? So like on on the day, that is the point at which you have to pay it off or you're gonna get charged. And a lot of people don't know that. And I think that's probably why synchrony is runs into lawsuits is because they're, you know, not necessarily, I'm sure they do their best to be clear about it. But a lot of people don't know. And what they're pushing, at least from what I gathered at the conference, what they're pushing is the idea that if you as a retailer, so at this point, when this launches next week, we should have a full blown appliance company that we own, appliance sales and service, almost all used, so whatever. but they're pushing people to like business owners to implement financing options and saying that consumers really want financing now, which duh, they don't have money. And and two, if you don't offer financing, they're gonna go to Somebody else who does, right? Because it's your job. She literally said this in the presentation, it's your job as the business owner to get that sale from that consumer, however, they want to transact it, right? If they want to offer you payment on a credit card, you're supposed to take that. If they want to offer you payment cash, you're supposed to take that. If they want a financing option to run directly through your store, you're supposed to take that, right? That was her framing for the presentation. and this was not a conference for like only luxury appliance dealers, right? Like because we are not a luxury appliance dealer. We do used appliances, right? Very affordable used appliances. And a lot of the people that were at this association conference are not luxury appliance dealers. Again, they're people who are in the middle of nowhere. You're like rural areas in Ohio. And Tennessee and Georgia and like all throughout the mostly like the middle of the country and the eastern states, the southeastern states, right? And so I look at that and I'm like, I know your consumers are not buying the highest end appliances. They're buying appliances and replacing their stuff in their home because they have to. And you have to offer financing because they need financing, not because they want financing. And so it puts the retailers and the business owners in like kind of a weird spot where your incentive as a business owner is to make the sale, right? I want to make the sale, I want revenue for my company. But I look at this as someone who is a part of a community because most of these clients, dealers, retailers are a part of the community. Like they're a part, they're in the zip code and people come there. There's like only a couple of them for any given zip code or whatever. And you at some level have a duty to the community, right? If your business is based there and you could say, maybe and I was talking to my brother about this after. And he was like, maybe we're just terrible capitalists. Like that totally is possible that I look at it and I say, is this healthy for the community? The answer is probably no. And Other people are like, I they don't care about that. They might not care about that, right? Because your incentive as a business owner is to make more money. Right. That's what you're trying to do in business. Whereas I think, yeah, you should make more money, but also you should be well aware of the impacts that the things you put in place will have on the community that you are fully settled in as a physical location in that community. Just my opinion. Okay. So I can't say if it's right or wrong. That's just my opinion. Now, I do think we are so underwater as a country, right? So if you look at our national debt and also look at our just household debt, we are literally so underwater that I don't know if you could do away with not offering financing at this point, right? Like you can't. if people your fridge breaks, your washing machine breaks, your dryer breaks, whatever. If people cannot afford those appliances, those really like core household things, electronics that you need. I don't know like if you can't afford that stuff, I don't know to tell you because most people don't know how to fix their own stuff. Most people cannot go in and fix their own appliances. And if you need to fix your own appliances, you have to buy parts. And maybe the parts are a little bit cheaper, right, than than like fixing the whole appliance or replacing the whole appliance. But I don't know how we get out of this again. Like I look at it and this is a really doom and gloom kind of situation that you have to offer financing as a retailer because otherwise people can't afford to buy it. So now I sense that we are at a point where usury, and I want to make the distinction here and bring back the distinction between lending to go on a business venture, right? Because we take out business loans to acquire companies. That's you know, totally fair. Charging some interest is a risky thing. There's a difference between that and charging interest to people who cannot afford to buy things that they need to live. Okay. Like this is these are different scenarios. And I think we should bring it back, right? I think we should bring back the idea of usury versus interest and the idea that you're borrowing for consuming your everyday stuff or borrowing to go on a business venture and make some more money, right? Those things need to be distinct. They no longer are. It's all the same. It's all interest now. And I think that that is a problem. We're at a point now where this userous system just is the infrastructure of the economy, right? So the banks, that's where they make their money. It's on charging interest to people. And the people that own the banks, right? Top twenty percent of all the banks are gonna be are owned by your usual suspects, your Vanguard, your State Street, and your BlackRock. Okay. So this is all infrastructure built into the economy at this point. And I do not know where we go from here. And again, I am not the person with the answers. I'm just surfacing and looking into things that I think are interesting and things that we should all kind of be aware of and maybe take a deeper look at. And so I appreciate you joining me today on Fathom. I will be back next week and I think we're gonna talk about manufactured obsolescence. Because I think Apple is coming up with a new model yet again. And I don't know if we need it. So I'm Alycia, your host. Thank you again for joining me.