Sort of. I got into a rough spot after I got out of the military and I ended up defaulting on all my credit card debt. I got kicked out for being gay with no notice and had no savings. What little I had went to moving and finding a new job.
Only AmEx sued me (and we settled). I later sued most of the collection companies with the help of a lawyer and netted about $40K in settlements. Some had called my parents and told them they’d call the police and arrest me that day (they paid). Another called me work repeatedly and told my boss (he didn’t care other than the endless harassment).
It took 7 years for my credit to be clean. I still get calls from scummy bottom of the barrel collectors about debt I paid/settled - even 20 years later. They give up easily though, statute of limitations is long past.
Anyway my point is it’s not optional, you can get sued. And they'll harass you endlessly.
> Another called me work repeatedly and told my boss
Even from a purely self serving perspective, why would they do this? If your boss gets mad that you have bad debt and fires you, then it’s now even less likely that you will be paying off the debt, no?
> I got kicked out for being gay with no notice and had no savings.
Same, in December 2002. Feels a little strange how it works now, compared to be drug out of the barracks by MPs like a criminal. The Army never apologizes.
I’d love to build tools that automatically exercise your rights as a consumer against these large corporations. The simple truth is that they rely on the social norms of a society as weapons against them, whilst simultaneously breaking the codified ones.
They rely on people not knowing their rights or not having the time/ability to fight them.
It's not just a corporate thing, but a problem in the US as a whole that the government banks on. When people are overworked, underpaid, and uneducated then they don't have the time/ability to keep up with politics, fight for their rights, and see how they've been getting fucked by local, state, and federal government for decades.
Wife and I tried to start a business a couple years ago; ran onto circumstances that made it difficult, went bankrupt. We talked to all our credit card issuers about our troubles beforehand, trying to get some better option than "just stop paying"; they were not interested.
Discover actually laughed at my wife when she asked about it: "you're not even delinquent yet!" We were going to be the next day, and would've liked to negotiate before that point. They have no systems for that nor (apparently) any ability to recognize it.
Their comfort zone is this system of debt collections.
They don't have the people, systems, or process to deal with individually negotiated delinquincy plans. They have batch jobs that run daily, if you miss your payment date they hit you with a late fee, then another one in another 30 days, and maybe after 90 days they will close the account and sell the debt. That's all they do, it's strictly based on dates and payments.
You'd think with all the personal profile data they're able to buy and collect themselves, they could identify the accounts that are just in a temporary bind vs. those that are going to be long-term problems. But AFAICT they don't do this.
you dealt with your creditors in a way that a responsible business owner (or farmer) would do it -- like adults dealing with bad news in a long-term relationship. A difference though, is that in consumer credit cards, the scale of the offering made it a whole-new situation. The people you talked to are low-training cogs, and there is almost zero sense of relationship at the scale of consumer credit like that. The people at the top of the consumer credit business were making more money than almost anything in the entire economy, and definitely had no time or consideration for a single small business.
The plus side is that you and your wife were able to access credit very easily compared to the past, the downside is that when you tried to treat it like a long-term relationship, it was shocking how not like that it was. don't change!
I had a lot of debt on a Discover card once. I can't remember the exact circumstances, but I do remember that they were awful and will never use that company again.
> Well, not all of it. I didn’t inherit the assets. She didn’t leave a will, which meant the state of Tennessee inherited her house. What I inherited was her debt.
Wait, is this right?! In Ireland, and I thought most common-law places, if someone dies intestate, an administrator is appointed, in practice generally the next of kin. Any assets go in the estate, the administrator pays any debts out of the estate. At the end, anything remaining goes to, generally, the person’s children (there are more rules for if there are no living kids or parents). If debt exceeds assets, then some debts are paid, the estate is closed, and that is the end of that; the creditors generally have no further recourse, and certainly no recourse against the debtor’s kids. Is this not how it works everywhere, more or less?
When you die, your debts don't die with you - they are still part of your estate.
The major function of the executor of an estate is to settle the debts of said estate. If the estate runs out of money (even after selling property, for example) before paying all the debtors, according to order of seniority, then everyone else in line is out of luck.
However there are quite a few states with "filial responsibility" laws (Tennessee is one of them) that oblige children to take care of their parents in usually vague and under-specified ways ... those have been used to chase children for unpaid nursing home debts etc.
That's how it pretty much works in the whole United States. This isn't the first article I've seen where the author passes on the notion that debts are inherited. You would think an author would have a duty to their audience that they should inform them about the truth and help prevent them from falling into this trap, but instead we get stories about people working to pay off inherited debts, normalizing it.
> A second scrub will typically remove dead debtors, because they infrequently answer their phones. (Debts are not inherited in the United States, a fact which the debt collection industry frequently demonstrates strategic ignorance of.)
> Without addressing the politics of it, the impression among many informed people that most defaulted debt is medically-related is the result of successful advocacy work rather than being substantially based in reality.
Is this actually an impression informed people have? I’m the prime target for such opinions because of my issues with the U.S. healthcare system, but even I always understood the common understanding to be that most bankruptcies are caused by medical debt, and not debt defaults in general (most debt default doesn’t lead to bankruptcy, especially with credit card debt. It usually just leads to a payment plan).
>I’m the prime target for such opinions because of my issues with the U.S. healthcare system, but even I always understood the common understanding to be that most bankruptcies are caused by medical debt, and not debt defaults in general
Only 4% of US bankruptcies are because of medical bills. <https://www.washingtonpost.com/blogs/post-partisan/wp/2018/0...> A tipoff that [insert large percentage here] of bankruptcies aren't actually because of medical costs is that only 6% of bankruptcies by those without health insurance are because of that cause. The biggest cause of bankruptcies is lack of income, which health insurance doesn't affect anywhere in the world.
Yes, it's optional in the sense that you won't go to prison.
But if you want any chance of being able to take out a mortgage on a house, or to finance a car purchase, then it's not very optional. Not to mention a bad credit score makes it much harder to even rent many apartments.
Also, lenders will sue you if you have the money. In which case it's no longer optional either, when they win.
The article is about shady practices of debt collectors, but in no way does that ever make a leap to the idea that paying consumer debt is "optional". If you don't pay, it generally has real negative consequences. It's up to you whether those consequence are worth it.
>If you don't pay, it generally has real negative consequences.
If you owe a lot of money on your credit cards, the lender will actually sue you - rather than selling the debt - and then put a lien on your property. I once bought a house in an estate sale which was also a short sale (I do not advise this) and both American Express and another bank had done this to the prior owner who owed $20-30K.
Is it still blogspam if this paragraph exists in the end of the post?
McKenzie doesn't know what will fix this. But Michael Hudson, a renowned scholar of the debt practices of antiquity, has some ideas. Hudson has written eloquently and persuasively about the longstanding practice of jubilee, in which all debts were periodically wiped clean (say, whenever a new king took the throne, or once per generation): https://pluralistic.net/2020/03/24/grandparents-optional-par...
He then summarizes Hudson's position that "debt's that can't be paid won't be paid", and goes on to share a few other stories related to this problem.
> One other thing debt collectors due is robo-sue their targets, bulk-filing boilerplate suits against debtors, real and imaginary. If you don't show up for court (which is what usually happens), they'll get a default judgment, and with it, the legal right to raid your bank account and your paycheck. That, in turn, is an asset that, once again, the debt collector can sell to an even scummier bottom-feeder, pocketing a lump sum.
I feel like this paragraph basically invalidates the rest of the article. If it's this easy for them to sue and get legal access to your money how is paying "optional"?
Aaah but in Mexico exactly the same thing happens: you can basically ignore Buro/Circulo de Credito and after 6 years by law they have to drop any unpaid debt report.
I worked in a Mexican credit startup 10 years ago and one of the main issues we dealt with was just that: there is no legal mechanism for a lender to recover the money they borrow. Not paying a loan is not illegal. And people in Mexico have 0 financial education .
So you have to include your default rates as part of your lending model. 30% default first loan. 15%-20% default mixed 2nd+ loan .
That in addition to a base bond rate of 10% (you can lend your money to the Mexican government for an extremely secure 10% interest) is what makes credit in Mexico Soooo expensive.
I have a friend who is lawyer and used to work in the enforcement area if Scotiabank mortgages . The stories he tells about people that just decided not to pay their mortgages but had 4 or 5 Harley Davidsons in their houses when they went to evict them... among other crazier stories.
When creditors sell debt to collections they should be required to allow the debtor to buy their debt back at that price.
Of course they'll never actually do that. Usurers are unreceptive to any notion that you won't pay every last extortionate penny. They'd rather sell it to collections for 5 cents on the dollar than let you settle for 50 in a straightforward conversation.
I think that'd be hard in practice since the article mentioned that they're sold in bulk. Sending offers to everyone in a package would be difficult.
But I wonder if it could be possible to crowd fund something like this, or have a non-profit that just buys cheap debts like this and forgives them all? Idk what that would cost, but it could help shrink the shady debt collector industry a little.
As a lawyer who has fought a few collection cases, I would disagree with the notion that the collectors typically can’t document the debt. They can. Moreover the fdcpa doesn’t require the collector to prove the debt to you with absolute metaphysical certitude. They just have to verify it.
One would expect that the cases that actually get to the point of lawyers and courts are atypical. It seems likely that the ones who can't document the debt would probably drop the matter when first challenged, long before that stage.
> the vast majority of consumers, including those with the socioeconomic wherewithal to walk away from their debts, feel themselves morally bound and pay as agreed
The extent to which the headline is true is probably only because of the above quote. If a significant number of people who actually had the means to pay simply chose not to, of course debtors would start taking collection more seriously.
Perhaps this means you could game the system, but I’m still skeptical that any debtor would choose not to sue you over 20k+ if they thought you had the means to pay.
People with 20k of delinquent debt and the means to pay it are a bit of an edge case, though; mostly people that collections agencies go after will not have the means to reasonably pay their debt, at least not all of it. This encourages agencies to be more aggressive; they want _their_ debt to be first in line for anything that does get paid.
I've had things go to collections twice in my life, both times were some bill I forgot about and moved away and the first time I heard about being delinquent was the collections call. One time I asked for the evidence and they actually did mail me all the documentation and proof of the debt. The other time I asked for documentation and ended up never hearing from them again. I still don't really know what that debt was, it never appeared on my credit history or anything else.
Reminder. There are states that protect your home from judgements: "exempts homestead property from levy and execution by judgment creditors". Medical bankruptcy should be expected and planned for - as you age it will be difficult to get health insurance. Move to states that will protect your home.
I wish there was a way we could automatically garnish any gratuities a debtor makes and put them toward a debt instead of the original business. With credit cards it should be more possible to do this.
Its weird at that point it wont drop off whether you pay the collections or not, for 7 years so theres literally zero incentive to pay the collections off.
You can believe that collection agencies behave illegally and also think that is unethical not to pay your debts to the best of your ability. Even if paying consumer debts is optional, not being able to get credit in the future, especially a home mortgage, is an incentive to pay. Some employers check the credit scores of applicants, and such scores probably are a decent indicator of whether someone has their life in order.
Once the debt has been sold off, it's very likely that your credit score has already been impacted.
On the ethics front: let's say I owe money to a credit card company. They sell it off to EZ-Sleez, the debt collection company. What do I owe to them? I certainly didn't borrow money from them. We have no particular relationship. They have one with the credit card company, but that's none of my business, from an ethics standpoint. The idea of selling debt itself feels very unethical to me, and I'd like to see that justified before we talk about what we may or may not owe people.
In both California and New York I had to prove I had good credit to rent a half decent apartment. And I don’t blame the landlords, plenty of people sign leases and never pay. I think lots of people take advantage of a system that is designed to have protections for those who hit hard times.
blcknight|2 years ago
Only AmEx sued me (and we settled). I later sued most of the collection companies with the help of a lawyer and netted about $40K in settlements. Some had called my parents and told them they’d call the police and arrest me that day (they paid). Another called me work repeatedly and told my boss (he didn’t care other than the endless harassment).
It took 7 years for my credit to be clean. I still get calls from scummy bottom of the barrel collectors about debt I paid/settled - even 20 years later. They give up easily though, statute of limitations is long past.
Anyway my point is it’s not optional, you can get sued. And they'll harass you endlessly.
l33t7332273|2 years ago
Even from a purely self serving perspective, why would they do this? If your boss gets mad that you have bad debt and fires you, then it’s now even less likely that you will be paying off the debt, no?
ta20230813|2 years ago
Same, in December 2002. Feels a little strange how it works now, compared to be drug out of the barracks by MPs like a criminal. The Army never apologizes.
coldtea|2 years ago
This, in a functional legal system, should have them immediately arrested and/or slapped with a fine.
mistrial9|2 years ago
[deleted]
orange_joe|2 years ago
commonlisp94|2 years ago
Norms like being honest and not stealing? society gets really expensive and unfriendly when we have to use enforcement instead of norms.
hanniabu|2 years ago
It's not just a corporate thing, but a problem in the US as a whole that the government banks on. When people are overworked, underpaid, and uneducated then they don't have the time/ability to keep up with politics, fight for their rights, and see how they've been getting fucked by local, state, and federal government for decades.
h2odragon|2 years ago
Discover actually laughed at my wife when she asked about it: "you're not even delinquent yet!" We were going to be the next day, and would've liked to negotiate before that point. They have no systems for that nor (apparently) any ability to recognize it.
Their comfort zone is this system of debt collections.
SoftTalker|2 years ago
You'd think with all the personal profile data they're able to buy and collect themselves, they could identify the accounts that are just in a temporary bind vs. those that are going to be long-term problems. But AFAICT they don't do this.
mistrial9|2 years ago
The plus side is that you and your wife were able to access credit very easily compared to the past, the downside is that when you tried to treat it like a long-term relationship, it was shocking how not like that it was. don't change!
latchkey|2 years ago
rsynnott|2 years ago
> Well, not all of it. I didn’t inherit the assets. She didn’t leave a will, which meant the state of Tennessee inherited her house. What I inherited was her debt.
Wait, is this right?! In Ireland, and I thought most common-law places, if someone dies intestate, an administrator is appointed, in practice generally the next of kin. Any assets go in the estate, the administrator pays any debts out of the estate. At the end, anything remaining goes to, generally, the person’s children (there are more rules for if there are no living kids or parents). If debt exceeds assets, then some debts are paid, the estate is closed, and that is the end of that; the creditors generally have no further recourse, and certainly no recourse against the debtor’s kids. Is this not how it works everywhere, more or less?
NovemberWhiskey|2 years ago
The major function of the executor of an estate is to settle the debts of said estate. If the estate runs out of money (even after selling property, for example) before paying all the debtors, according to order of seniority, then everyone else in line is out of luck.
However there are quite a few states with "filial responsibility" laws (Tennessee is one of them) that oblige children to take care of their parents in usually vague and under-specified ways ... those have been used to chase children for unpaid nursing home debts etc.
MerelyMortal|2 years ago
h2odragon|2 years ago
but missed this bit:
> A second scrub will typically remove dead debtors, because they infrequently answer their phones. (Debts are not inherited in the United States, a fact which the debt collection industry frequently demonstrates strategic ignorance of.)
DangitBobby|2 years ago
Edit: looks like the literature referenced was from almost 200 years ago.
rhaway84773|2 years ago
Is this actually an impression informed people have? I’m the prime target for such opinions because of my issues with the U.S. healthcare system, but even I always understood the common understanding to be that most bankruptcies are caused by medical debt, and not debt defaults in general (most debt default doesn’t lead to bankruptcy, especially with credit card debt. It usually just leads to a payment plan).
TMWNN|2 years ago
Only 4% of US bankruptcies are because of medical bills. <https://www.washingtonpost.com/blogs/post-partisan/wp/2018/0...> A tipoff that [insert large percentage here] of bankruptcies aren't actually because of medical costs is that only 6% of bankruptcies by those without health insurance are because of that cause. The biggest cause of bankruptcies is lack of income, which health insurance doesn't affect anywhere in the world.
crazygringo|2 years ago
Yes, it's optional in the sense that you won't go to prison.
But if you want any chance of being able to take out a mortgage on a house, or to finance a car purchase, then it's not very optional. Not to mention a bad credit score makes it much harder to even rent many apartments.
Also, lenders will sue you if you have the money. In which case it's no longer optional either, when they win.
The article is about shady practices of debt collectors, but in no way does that ever make a leap to the idea that paying consumer debt is "optional". If you don't pay, it generally has real negative consequences. It's up to you whether those consequence are worth it.
NovemberWhiskey|2 years ago
If you owe a lot of money on your credit cards, the lender will actually sue you - rather than selling the debt - and then put a lien on your property. I once bought a house in an estate sale which was also a short sale (I do not advise this) and both American Express and another bank had done this to the prior owner who owed $20-30K.
Turing_Machine|2 years ago
https://www.bitsaboutmoney.com/archive/the-waste-stream-of-c...
egypturnash|2 years ago
McKenzie doesn't know what will fix this. But Michael Hudson, a renowned scholar of the debt practices of antiquity, has some ideas. Hudson has written eloquently and persuasively about the longstanding practice of jubilee, in which all debts were periodically wiped clean (say, whenever a new king took the throne, or once per generation): https://pluralistic.net/2020/03/24/grandparents-optional-par...
He then summarizes Hudson's position that "debt's that can't be paid won't be paid", and goes on to share a few other stories related to this problem.
willprice89|2 years ago
I feel like this paragraph basically invalidates the rest of the article. If it's this easy for them to sue and get legal access to your money how is paying "optional"?
antisthenes|2 years ago
They get to mark it 90% of it as a loss on their balance sheet and pay less taxes as a result.
pier25|2 years ago
In Mexico there's something called the Credit Office (buró de crédito) that banks can check if you've paid all your debts.
xtracto|2 years ago
I worked in a Mexican credit startup 10 years ago and one of the main issues we dealt with was just that: there is no legal mechanism for a lender to recover the money they borrow. Not paying a loan is not illegal. And people in Mexico have 0 financial education .
So you have to include your default rates as part of your lending model. 30% default first loan. 15%-20% default mixed 2nd+ loan .
That in addition to a base bond rate of 10% (you can lend your money to the Mexican government for an extremely secure 10% interest) is what makes credit in Mexico Soooo expensive.
I have a friend who is lawyer and used to work in the enforcement area if Scotiabank mortgages . The stories he tells about people that just decided not to pay their mortgages but had 4 or 5 Harley Davidsons in their houses when they went to evict them... among other crazier stories.
gene91|2 years ago
doctorwho42|2 years ago
jwie|2 years ago
Of course they'll never actually do that. Usurers are unreceptive to any notion that you won't pay every last extortionate penny. They'd rather sell it to collections for 5 cents on the dollar than let you settle for 50 in a straightforward conversation.
bogwog|2 years ago
But I wonder if it could be possible to crowd fund something like this, or have a non-profit that just buys cheap debts like this and forgives them all? Idk what that would cost, but it could help shrink the shady debt collector industry a little.
tiahura|2 years ago
Turing_Machine|2 years ago
One would expect that the cases that actually get to the point of lawyers and courts are atypical. It seems likely that the ones who can't document the debt would probably drop the matter when first challenged, long before that stage.
Is that not the case?
viknesh|2 years ago
The extent to which the headline is true is probably only because of the above quote. If a significant number of people who actually had the means to pay simply chose not to, of course debtors would start taking collection more seriously.
Perhaps this means you could game the system, but I’m still skeptical that any debtor would choose not to sue you over 20k+ if they thought you had the means to pay.
rsynnott|2 years ago
vel0city|2 years ago
ransom1538|2 years ago
ericjmorey|2 years ago
Are you unaware of Medicare and Medicaid?
BasedAnon|2 years ago
xwdv|2 years ago
yieldcrv|2 years ago
But if its already reached collections then it doesn’t really make a difference to your credit eligibility for the next X many years
nerdchum|2 years ago
p1esk|2 years ago
Bostonian|2 years ago
pavel_lishin|2 years ago
On the ethics front: let's say I owe money to a credit card company. They sell it off to EZ-Sleez, the debt collection company. What do I owe to them? I certainly didn't borrow money from them. We have no particular relationship. They have one with the credit card company, but that's none of my business, from an ethics standpoint. The idea of selling debt itself feels very unethical to me, and I'd like to see that justified before we talk about what we may or may not owe people.
cyberlurker|2 years ago
unknown|2 years ago
[deleted]
c22|2 years ago
tjrgergw|2 years ago
unknown|2 years ago
[deleted]
bryanlarsen|2 years ago
syngrog66|2 years ago
college debts? hope Dems get power in DC
biz debt? declare bankruptcy
its hard to find a type of debt that cant just be magically blinked away with a procedural wave of the hand
hanniabu|2 years ago
Pointless unless the root cause is addressed first
willcipriano|2 years ago
And they want to do debt forgiveness as opposed to another war.
NovemberWhiskey|2 years ago
That's totally an option for individuals too (modulo student debt for the most part).