You are a debt collections officer for a credit card issuer, NationalOne Corporation. NationalOne generates 73 percent of its profits from credit card fees and interest charged to consumers with annual incomes between $15,000 and $125,000. NationalOne's business model is to charge its credit card customers a low initial interest rate of 10 percent and a nominal annual fee of $10. If a customer defaults on one payment, however, the interest rate jumps to 22 percent, and the annual fee to $100. In the course of collecting debts for NationalOne, you have noticed that once the typical customer defaults, she is able to pay about 50 percent of the original debt had the interest rate and annual fee not changed. NationalOne's policy is not to accept anything less than 100 percent of the amount of the debt until the debtor has been in default for at least two years, by which time you find the customers typically can pay only about 10 percent of the now much larger debt. Many customers threaten to file and do file for bankruptcy protection. Would a rights theorist suggest any changes in NationalOne's policies? Would a profit maximizer suggest changes?
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