Debt: The next big American crisis?

Generations ago, borrowing money was a privilege. A credit card was hard to come by, and anyone fortunate enough to have one was expected to pay the money back. But all that's history now.

Until the recent financial crisis, easy credit was everywhere. And the credit card industry spent billions to make plastic a way of life - and to persuade us that credit was smart way to buy the things we deserve, even if we couldn't afford them.

Chris Hansen: Do you ever regret having these credit cards in the first place?

Chriss Snyder: Oh, definitely. Oh, gosh, every day.

Chriss and Matt Snyder's financial problems are typical. What was once a nation of savers is now a nation of debtors - borrowing money for everything from cars to college. And even before the unemployment rate soared, nearly half of American families were carrying credit card debt, with average balances of more than $7,000.

Harvard's Elizabeth Warren says many Americans have gotten used to living on the float - and in the process, the credit card companies have thrived.

Elizabeth Warren: There is profit to be made in debt. Not profit for the family, but profit for the people who hawk it.

And Warren says this was no accident. Nearly three decades ago, in a move to boost profits, credit card companies lobbied the government to get rid of caps on interest rate.

Elizabeth Warren: We told the credit card companies anything goes.

Then they made billions by lending to just about anyone, profiting from charges described in the fine print of those credit card contracts that even Warren - a Harvard Law professor - can barely understand.

Elizabeth Warren: Credit card contracts have grown from about a page and a half in 1980 to more than 30 pages in the early 2000s. And let me just be clear. That additional 28 and-a-half pages did not help the customer. It's tricks and traps and trailing interest and pay to pays and a whole bunch of things that literally didn't exist 25 years ago.

The Snyders were carrying a big load of credit card debt even before Matt lost his job. Now they can barely make the minimum payments and are falling behind at warp speed.

Chris Hansen: So, more than half of your payment is going to the interest?

Chriss Snyder: Yes. There's a finance charge, $140. And the payment was $220.

Chris Hansen: So, you're at 19 percent there?

Chriss Snyder: Yeah. I couldn't pay it before. I certainly can't pay it now when you add on more fees and higher interest rates.

But Warren says that's exactly how credit card companies have been making a big chunk of their profits.

Elizabeth Warren: They're not looking for customers who can pay off credit cards. They're looking for customers who will hit the sweet spot, fall into the tricks and traps, and incur a $45 fee, 19 percent interest rate, a 29 percent interest rate after that is just profit, profit, profit, profit, profit.

Chris Hansen: What you describe sounds like loan sharking, which is illegal. Why isn't this illegal?

Elizabeth Warren: That's the best part. The credit card companies have put the loan sharks out of business. The kinds of interest rates that some credit card companies are charging would make Tony Soprano blush.

Nessa Feddis: Riskier borrowers pay more for credit just as riskier drivers pay more for car insurance.

Nessa Feddis is an attorney with the American Bankers Association, the industry trade group. GE Money, a unit of NBC's parent company that's in the credit card business, is a member.

Chris Hansen: Why has the industry fought so hard against any kind of regulation when it comes to interest rates?

Nessa Feddis: Well, history has shown if you cap interest rates, people pay more for credit, and fewer people have access to credit. We have supported regulation that makes consumers understand what they're getting.

President Obama recently signed into law a landmark credit card reform bill that includes restrictions on some fees and on on how banks go about changing customer's interest rates.

But even with the new rules, banks can still ultimately charge whatever rates they see fit.

Nessa Feddis: It's an unsecured loan, which means there's no collateral. There's no house, no car, which is used to encourage people to make payments. It’s the riskiest type of loan.

While credit card lending has returned steady profits for decades, the industry is bracing for unprecedented losses this year. Defaults are on the rise among families like the Snyders, who filed for bankruptcy after months of financial desperation.

And for those still struggling with unpaid bills? Well, the credit business has spawned another multi-billion dollar shadow industry ready to take over: Debt collection. And some say the recent tough times are leading to vicious collection tactics.

Some harass, others threaten.

Elizabeth Warren: This is an industry that makes its money by being out of control. Pay it or your life becomes a living hell.

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