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My guess: when Chase says "we felt it was a better decision for all parties" they mean "we realized we broke some kind of law without anybody noticing, and sell
by al2o3cr 7y ago
My guess: when Chase says "we felt it was a better decision for all parties" they mean "we realized we broke some kind of law without anybody noticing, and selling the debts to collections could turn up evidence of that in future litigation"
- devoply 7y agoFrom what I understand it's not much money as these cards have been unavailable for a year.
- bsder 7y agoMeh, someone did the math and calculated that standing up an organization that obey all the financial laws in order to collect money from a bunch of people who can barely pay the minimum payment probably isn't worth it. If they write off this debt, they probably also get to claim a deduction somewhere on money that they would never be able to collect. (At one point, one of these ilk of companies offered my grandfather the "privilege" of taking a lump sum settlement for his black lung payments. I calculated what principal I expected they needed to reserve to provide his payments, discounted it slightly and hoped that they wanted rid of the accounting and maintenance in order to give him the lump sum. Alas, they weren't desperate enough to get him off the books and we never heard from them again.)
- Scoundreller 7y agoI guess the moral of the story is: reject the first offer and see if they'll come back for more or not, because running any tabulations.
- froindt 7y agoA personal pet peeve of mine is misunderstandings of how taxes work. I'm not sure if you're misunderstanding, but I do want to clarify. They can certainly take a deduction for some money they wouldn't be able to collect successfully. But they can deduct the entire balance now, rather than writing off small portions over the next so many years. Of course, they're simply not getting taxed on money they didn't earn (since it's a deduction, not a credit). The mathematically optimal solution is certainly not to write everything off. They could have sold it to a debt collection company and made a larger profit.
- lonelappde 7y agoWhy do you assume selling the debt would be profitable? It depends on the price.
- Thorrez 7y agoI think in this case "larger profit" doesn't mean profitable, it means "less magnitude of negative profit".
- cryptica 7y agoIt's concerning because ultimately that money came out of the bank's profits. The profits where derived from interest on loans which were paid off by responsible individuals. This seems like part of a global trend of individuals being rewarded for being economic parasites.
- NikkiA 7y agoWouldn't be the first time - I had a bank write off a debt a few weeks after they called me at 5am to harangue me about the debt, while I was living in California.
- dave5104 7y agoYep, that's a violation of the FDPCA. It was probably more cost effective for them to write it off than to have to deal with you litigating.
- colejohnson66 7y agoNitpick: It’s the Fair Debt Collection Practices Act, so FDCPA
- dkersten 7y agoI had a few hundred dollars (so not a huge debt) written off, without me doing anything. The debt was due to charges (and interest on those charges) applied on a dormant account. The thing is, I didn't know that the charges were accumulating or I would have closed the account. If they had told me, eg, after 6 months or so (seems like a reasonable amount of time to give), I would have paid the $40 or whatever and closed the account. Instead they let the charges accumulate for five years before feeling the need to contact me. So, yeah, I wasn't going to pay that! I was planning on offering to pay whatever the amount would have been after 6 months but then I got a letter stating that they won't pursue the matter. Maybe they realised how ridiculous it was that they didn't contact me sooner. I wonder did it affect my credit rating, but where I am, credit ratings really aren't all that important compared to the US (and reset over a few years anyway).
- moltar 7y agoBut why would they sell it to collections if people continue paying the minimums?
- toast0 7y agoIt sounds like Chase wants out of Canada. If they sell or discharge the debt, they can extinguish their business. Discharging the debt probably gets them to the end faster, since there will be less requests for records going forward, and it should be reasonable to destroy the records sooner in that case.
- dfsdfklgjljg 7y agomore likely the cost of operating in another country to collect minimum payments for n+ years is higher than the value of the debt.
- paxys 7y agoA more likely scenario is that the total outstanding debt was small enough that the positive PR + tax write-offs were bigger than getting pennies from a collections agency.
- kgwgk 7y agoGetting pennies and writing off the rest would be better than writing off the whole amount. I don’t how much the positive PR is worth, or how much additional costs do they eliminate by renouncing to recover anything. But arguments of the “losing money is good for companies because they recover a small part of it as tax savings” kind do not make a lot of sense in general.
- gruez 7y agoTax write-offs are profits that were never made in the first place. It's not some sort of a tax credit. The reason you pay less taxes is because you didn't make a (or made less) profit.
- thedudeabides5 7y agoAnyone see the notional amount of the total write down? Couldn't find it in the article anywhere.
- kjaftaedi 7y agoThis is not a good guess. Chase announced they were closing these accounts in April 2018, and tried to have them closed by March 2018. The reason was that Chase was getting out of it's relationship with J.P. Morgan. It's now over a year later, and due to contractual obligations can't legally force people to pay their full balances all at once. Other than continuing their relationship with J.P Morgan until all cardholders payed off their balances in full, this was the only other option.
- panarky 7y ago> getting out of it's (sic) relationship with J.P. Morgan Huh? They're the same company, "JPMorgan Chase & Co." https://finance.yahoo.com/quote/JPM https://finance.yahoo.com/quote/JPM
- dragonwriter 7y agoIt was getting out of the Canadian credit card market, not it's relationship with JPMorgan (which is the same company).