Q25 - Credit card companies justify charging

[kimjy89]

I was confused between B and C. Is C wrong, because it is risking people to inconvenience rather than exposing them to financial risk?

[ManhattanPrepLSAT1]

Yep. You got it!

The principle bridges the gap between exposing institutions to financial risk and making those responsible pay for exposing that risk. Answer choice relates risking inconvenience to those who would want to check out the overdue book.

Great eye!

[mxl392]

I thought the principle was that if you cause other people risk, you have to bear the cost of the risk yourself. In the case of B, you are only causing that one insurance company extra risk, whereas in C, you are causing everybody else risk. Doesn't C fit the principle better?

[timmydoeslsat]

Notice how B lines up like the stimulus did. The late paying customer is more likely to default which would harm all of the credit card holders in the company according to the stimulus.

Answer choice B would allow for this principle in the stimulus to justify the sports car drivers to pay more since they are more likely to be the ones who cost the company money, which would otherwise have to come from the other drivers.

Answer choice C does not have any issue of financial risk. Answer choice B sufficiently covers the idea of everybody, as in everybody involved in coverage in a company.

[sejin.park.214]

So I'm guessing that it's important to distinguish what kind of risk we're looking at in this passage? The "financial risk" in the stimulus has to correspond to a "financial risk" with one of the AC's? Not just any risk?

[alexg89]

The trick to this question used by the test makers is the last part of the stimulus - (Without late fees...) this part is used to mislead you to think it is part of the principle. The principle ends at ..should pay for that risk. If the last sentence was included in the principle then C would be reasonably supported. Since it is not about having to spread the risk to others and only about having to pay for your own risk answer B becomes the correct answer.

[Alvanith]

I have a slightly different approach to attack this question. Please correct me if I am wrong...

Principle:

(1) One bunch of people pose more risk than the other people, and (2) the other guys would have to bear this risk had no punishment for this bunch of people

B: good match

(1) Sports car drivers pose more risk of accidents than the other drivers, and
(2) since sports car drivers are more likely to require the insurance companies to pay out the damage, the other drivers would have to bear this risk had no higher insurance paid by sports car drivers

C: not a good match

(1) there is NOTHING indicate that overdue books would pose a greater risk of inconvenience than other uses,
(2) other people have to bear this risk of inconvenience if no fines for this bunch of people

[christine.defenbaugh]

Alvanith, I really like where you're going with this!

This is a really interesting stimulus because in triggers a lot of preconceived ideas about 'late fees'. Many people think of these as a punishment that's used to try to deter the 'bad behavior' of paying late - but that's not at all what the credit card companies are actually arguing!

The principle invoked is: those who expose other individuals, companies, or institutions to financial risk should pay for that risk.

Now, financial risk here is key, but even without that characteristic, we could sort these relationships. Essentially, the credit card company is not charging late fees because paying late is a moral failing that needs to be punished, or even to try to deter the bad behavior of paying late. It is simply acknowledging that the group 'late payers' is a group that is more likely than normal to cause some damage in the future (in this case, financial). And it is because of that increased likelihood of future damage that it's justifiable to set the costs of that possible future damage on the sub-group. (Because the alternative is that everyone pay the costs - financial or otherwise).

Note that there is no argument that the costs will change the future behavior! The late fees aren't intended to try to get people to stop paying late, nor are they intended to prevent the defaults (the future damage). The paying late is simply a signal to the credit card company that you are in a sub-group that is more likely to create a future cost (default).

(B) is the only one that lines up with this idea of a sub-group(sports car drivers) that is more likely than normal to incur future damage (in the form of accidents and claims). The sports car is a signal to the insurance company that you are in a subgroup that is more likely to create a future cost. The higher insurance is not meant to deter people from buying sports cars, nor is it meant to prevent future accidents.

Instead, the costs of those future accidents is being placed, in the present, on the group most likely to cause the future costs.

The big temper here is (C). But Alvanith is right that we don't know that the current overdue-book people are more likely than anyone else to create future damage. Even if they were, notice that the purpose of the fine in (C) is so that people don't keep the books indefinitely. The purpose of the fine is to change people's behavior and AVOID the future costs! Not to make sure the costs are borne only by the risk-group!

Notice that in the stimulus it is not the fees, or lack thereof, that make the group higher or lower risk. The credit card company is not saying 'without these fees, people are more likely to default'. But in (C) we ARE saying 'without these fees, people are more likely to keep the books indefinitely'. The lack of fees makes the future damage more likely, and that doesn't match the stimulus.


Let's spin through the other incorrect answers:

(A) This argument is spreading the cost of a sub-group's activities out onto everyone. That's the opposite of what we want!

(D) This is actually very similar to (C) - the purpose of the fine is to prevent the future littering. without the fine, people would presumably be more likely to cause the future damage (litter!).

(E) Like (A), this argues for spreading the costs of a sub-group over everyone. Also, there's no increased likelihood of future costs here!

I hope this helps clear up a sticky question!

[YufeiR103]

The term "invoke" here has a similar meaning as "quote" and "use", so the question is asking for an argument that can be supported by the same principle supported the credit card company's argument.
So first we need to find the principle, which is "those who expose other individuals, companies, or institutions to financial risk should pay for that risk".
B doesn't mention the term risk, but it mentions the probability of requiring companies to pay out money, which can be seen as a financial risk.
C does mention the term "risk", however it is the risk of inconvenience, which is not financial risk.
That is why B is better than C.

At first I was confused by why in B, the financial risk on the company can be extended to the risk on the other customers, but then I realized that this wasn't explained by the credit card company's case neither, so we can take it for granted.