7 ms·

Paying consumer debts is basically optional in the United States

55 points by tpaschalis 3y ago

BasedAnon 3y ago
The comedian (?) Sam Hyde is famous for doing this: https://www.youtube.com/watch?v=BD5anPSzS-0&t=220 https://www.youtube.com/watch?v=BD5anPSzS-0&t=220
Bostonian 3y ago
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.
- deleted 3y ago
  [deleted]
- cyberlurker 3y ago
  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.
  - pavel_lishin 3y ago
    Every ecosystem will have parasites, at every trophic level.
- pavel_lishin 3y ago
  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.
  - tehwebguy 3y ago
    > Once the debt has been sold off, it's very likely that your credit score has already been impacted. Right — this “optional” description really only means anything after the borrower has nuked their credit for many years.
  - lukas099 3y ago
    I'm guessing you agreed that the CC company could sell your debt when you signed up for the card.
    - pavel_lishin 3y ago
      Could be! But I'm not sure that a coerced choice - "if you don't pay us exactly on time, we'll sell your information to criminals who'll harass your family" - is itself ethical. And yes, it is a coerced choice. It's difficult to live in modern American society without a credit card, or a credit score which is very difficult to keep high without a credit card.
      - SV_BubbleTime 3y ago
        You are being hyperbolic, and the argument isn’t strong.
      - vel0city 3y ago
        It's not that difficult to live without a credit card. Debit cards don't have that same collections concept and can almost always be charged through credit card networks netting the same outward experience. As for not building a credit score, well, it sounds like you're not really interested in taking out loans in terms that others wish to offer them, so what good is a credit score? The people who care about credit scores are largely the same who will only do contracts with collections classes and be unwilling to adjust contracts. If you're working with a lender who is willing to change contracts like that they're probably also going to be fine evaluating your non-normal financial arrangements.
  - singleshot_ 3y ago
    You have a relationship; creation of the relationship was enabled if not formed when you signed the card agreement and agreed that your debt could be sold, transferred, or exchanged to or with a third party. If you thought that was unethical, you should have redlined it at the time.
stbenjam 3y ago
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.
- l33t7332273 3y ago
  > 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?
  - stbenjam 3y ago
    My experience with debt collectors is they don’t act rationally and once they’re able to find someone they harass you using any means necessary. The fear of being fired is a good motivator to get people to pay.
    - FreshStart 3y ago
      It's basically stalking made a profession.. So it draws a certain crowd.
    - PartiallyTyped 3y ago
      I mean they are extorting your livelihood. I think that’s pretty up there in terms of scummy behaviour.
    - 3y ago
c22 3y ago
That's why the interest is so high...
yieldcrv 3y ago
One reason to pay is because you plan to borrow again But if its already reached collections then it doesn’t really make a difference to your credit eligibility for the next X many years
- p1esk 3y ago
  I thought once you paid the debt the credit score should improve, no?
  - yieldcrv 3y ago
    It improves but collections are an adverse notice on your credit report that stay for 7 years. Its different from just holding a high balance on the card. The score almost means nothing with them present.
    - p1esk 3y ago
      So if I want to finance a new car, does it make a difference whether the debts are paid or not?
      - NovemberWhiskey 3y ago
        Yes - unpaid charge-offs are more derogatory than paid ones - I'm not sure that hits (say) a FICO score but lenders that look at a full report can tell the difference.
    - vel0city 3y ago
      I once had a collections report on my credit history. I paid off the debt and asked them to remove it, a few days later it was gone as far as I could tell. Not that everyone's experiences will be like this, just pointing out it is not necessarily always 7 years on the report.
- nerdchum 3y ago
  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.
Turing_Machine 3y ago
Link to Patrick McKenzie (the actual source, rather than Cory Doctorow's blogspam): https://www.bitsaboutmoney.com/archive/the-waste-stream-of-consumer-finance/ https://www.bitsaboutmoney.com/archive/the-waste-stream-of-c...
- egypturnash 3y ago
  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-party/#jubilee 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.
  - vluft 3y ago
    > Is it still blogspam if this paragraph exists in the end of the post? yes
  - NovemberWhiskey 3y ago
    >Is it still blogspam if this paragraph exists in the end of the post? I have no particular opinion on that question but, having read the original patio11 post, virtually 90% of this one is just paraphrasing of its contents.
syngrog66 3y ago
Federal debt? gov keep borrowing or printing more to payoff past debts 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
- willcipriano 3y ago
  > hope Dems get power in DC And they want to do debt forgiveness as opposed to another war.
  - sattoshi 3y ago
    They’re financing a war right now
- hanniabu 3y ago
  > college debts? hope Dems get power in DC Pointless unless the root cause is addressed first
- NovemberWhiskey 3y ago
  >biz debt? declare bankruptcy That's totally an option for individuals too (modulo student debt for the most part).
orange_joe 3y ago
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.
- commonlisp94 3y ago
  > they rely on the social norms of a society Norms like being honest and not stealing? society gets really expensive and unfriendly when we have to use enforcement instead of norms.
  - YeBanKo 3y ago
    Can confirm. Cost of transactions in trust-less societies is a very heavy burden. Also, it goes hand in hand with corruption.
- hanniabu 3y ago
  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.
tjrgergw 3y ago
What's with people not offering RSS?
- bryanlarsen 3y ago
  control f rss works.
  - tjrgergw 3y ago
    Well that's embarrassing. Thank you.
- deleted 3y ago
  [deleted]
tiahura 3y ago
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.
- Turing_Machine 3y ago
  Hmmm... 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?
  - tiahura 3y ago
    These were as typical as they get - random credit card debts. Friend of a friend got sued and asked for help. I serve discovery thinking they’ll never be able to respond, they do.
  - tehwebguy 3y ago
    Banks and card companies absolutely sue people as well — not just third party debt collectors. Discover obviously has the documentation, they can produce it. I’d like to know the deciding factor for sue or sell.
  - TheOtherHobbes 3y ago
    I know someone who walked away from £15k of credit card debt because the collection company sued with forged paperwork. He happened to have all the original paperwork on file and it proved they hadn't followed the required legal procedures. Trying to forge an essential document wasn't going to help their case. I've heard from a number of people who work for banks, lenders, and insurers that record keeping is a complete mess, and a certain amount of unlawful creative improvisation isn't unusual. So... they may claim to have proof, but there's a reasonable chance that if it's examined closely and/or all original correspondence is kept, they don't. This seems to be worse in the US where debts are traded and retraded and the original paperwork may be long gone.
rhaway84773 3y ago
> 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).
- TMWNN 3y ago
  >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/2018/03/26/the-truth-about-medical-bankruptcies/ 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.
pier25 3y ago
Isn't there like a credit score system in the US that companies can check? In Mexico there's something called the Credit Office (buró de crédito) that banks can check if you've paid all your debts.
- gene91 3y ago
  https://news.ycombinator.com/item?id=37110429 https://news.ycombinator.com/item?id=37110429
- doctorwho42 3y ago
  There is, and a good rule of thumb is that if it's a bad trait of your government... Most likely learned it from the US.
  - ethanbond 3y ago
    That’s not actually a good rule of thumb, nor is there any government credit agency in the US. Wrong on both counts.
- xtracto 3y ago
  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.
xwdv 3y ago
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.
h2odragon 3y ago
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.
- mistrial9 3y ago
  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!
  - h2odragon 3y ago
    Among our creditors was also a local bank (whose customers include a lot of farmers); they were willing to discuss things with us. We managed to pay them off (with a few months of forbearance) and continue doing business with them. Lovely folks there, I fear the day they get bought up and turn bad.
- SoftTalker 3y ago
  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.
ransom1538 3y ago
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.
- ericjmorey 3y ago
  > as you age it will be difficult to get health insurance. Are you unaware of Medicare and Medicaid?
viknesh 3y ago
> 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.
- rsynnott 3y ago
  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.
rsynnott 3y ago
From the linked piece: > 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?
- DangitBobby 3y ago
  Yeah, that's how it works here in Tennessee too. Not sure what happened. Edit: looks like the literature referenced was from almost 200 years ago.
  - rsynnott 3y ago
    Only thing I can think of is that the author was a guarantor on the mother’s debt. Which I suppose is possible. Even still though I don’t understand why the house would go to the state. The book she mentions is pretty old, but the situation with her mother she mentions is current.
    - mindslight 3y ago
      The house going to the state could be due to Medicaid reimbursement. But I share your general frustration that when such details are glossed over it tends to propagate myths (two, in this example). If this is what happened, a will wouldn't have helped. Deeding over the house while keeping a life estate or putting it into a formal irrevocable trust, before the lookback period, could have.
- MerelyMortal 3y ago
  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.
jwie 3y ago
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.
- bogwog 3y ago
  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.
  - extraduder_ire 3y ago
    Forgiven debt counts as income. There's some messing you can do with it, like I think one of the latenite hosts did with some student debt. The whole sold-in-bulk thing I could see being 'remedied' by having some sort of federal clearinghouse that each item of debt has to pass through. Though, that'd probably get fought tooth and nail so money-men can pull subprime-shenanigans.
willprice89 3y ago
> 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"?
- antisthenes 3y ago
  It's optional, because for a lot of smaller debts (<5000) they won't bother suing. They'll sell it for 0.1x cost to a collection agency and move on. They get to mark it 90% of it as a loss on their balance sheet and pay less taxes as a result.
crazygringo 3y ago
This headline/article is silly. 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 3y ago
  >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.
  - latchkey 3y ago
    > I do not advise this That sounds like an interesting story...
    - NovemberWhiskey 3y ago
      It's not that interesting - it's just that there is a much larger number of parties who have to be in agreement about the sale, and the sale price, than is typical - you end up with probate court judges, lien holders, the executor, the estate's attorney as well as possibly a second real estate attorney for the estate and absolutely all of them (and their staff) can be sick / on vacation / golfing which wreaks havoc on the closing timeline. Plus if there is any FUBAR paperwork it is much more difficult to fix if it means going back to probate court to (for example) add a spouse who was wrongly omitted from the approval to sell ... in this case, I ended up getting the mortgage and deed by myself and then quitclaiming the property to the two of us because that was less hassle. Oh, and short sales in probate are basically always as-is because the estate has no money to make good any repairs to the property.
vel0city 3y ago
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.

55 points by tpaschalis 3y ago

The comedian (?) Sam Hyde is famous for doing this: https://www.youtube.com/watch?v=BD5anPSzS-0&t=220 https://www.youtube.com/watch?v=BD5anPSzS-0&t=220

Bostonian 3y ago

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.

deleted 3y ago
[deleted]
cyberlurker 3y ago
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.
- pavel_lishin 3y ago
  Every ecosystem will have parasites, at every trophic level.
pavel_lishin 3y ago
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.
- tehwebguy 3y ago
  > Once the debt has been sold off, it's very likely that your credit score has already been impacted. Right — this “optional” description really only means anything after the borrower has nuked their credit for many years.
- lukas099 3y ago
  I'm guessing you agreed that the CC company could sell your debt when you signed up for the card.
  - pavel_lishin 3y ago
    Could be! But I'm not sure that a coerced choice - "if you don't pay us exactly on time, we'll sell your information to criminals who'll harass your family" - is itself ethical. And yes, it is a coerced choice. It's difficult to live in modern American society without a credit card, or a credit score which is very difficult to keep high without a credit card.
    - SV_BubbleTime 3y ago
      You are being hyperbolic, and the argument isn’t strong.
    - vel0city 3y ago
      It's not that difficult to live without a credit card. Debit cards don't have that same collections concept and can almost always be charged through credit card networks netting the same outward experience. As for not building a credit score, well, it sounds like you're not really interested in taking out loans in terms that others wish to offer them, so what good is a credit score? The people who care about credit scores are largely the same who will only do contracts with collections classes and be unwilling to adjust contracts. If you're working with a lender who is willing to change contracts like that they're probably also going to be fine evaluating your non-normal financial arrangements.
- singleshot_ 3y ago
  You have a relationship; creation of the relationship was enabled if not formed when you signed the card agreement and agreed that your debt could be sold, transferred, or exchanged to or with a third party. If you thought that was unethical, you should have redlined it at the time.

stbenjam 3y ago

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.

l33t7332273 3y ago
> 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?
- stbenjam 3y ago
  My experience with debt collectors is they don’t act rationally and once they’re able to find someone they harass you using any means necessary. The fear of being fired is a good motivator to get people to pay.
  - FreshStart 3y ago
    It's basically stalking made a profession.. So it draws a certain crowd.
  - PartiallyTyped 3y ago
    I mean they are extorting your livelihood. I think that’s pretty up there in terms of scummy behaviour.
  - 3y ago

c22 3y ago

That's why the interest is so high...

yieldcrv 3y ago

One reason to pay is because you plan to borrow again But if its already reached collections then it doesn’t really make a difference to your credit eligibility for the next X many years

p1esk 3y ago
I thought once you paid the debt the credit score should improve, no?
- yieldcrv 3y ago
  It improves but collections are an adverse notice on your credit report that stay for 7 years. Its different from just holding a high balance on the card. The score almost means nothing with them present.
  - p1esk 3y ago
    So if I want to finance a new car, does it make a difference whether the debts are paid or not?
    - NovemberWhiskey 3y ago
      Yes - unpaid charge-offs are more derogatory than paid ones - I'm not sure that hits (say) a FICO score but lenders that look at a full report can tell the difference.
  - vel0city 3y ago
    I once had a collections report on my credit history. I paid off the debt and asked them to remove it, a few days later it was gone as far as I could tell. Not that everyone's experiences will be like this, just pointing out it is not necessarily always 7 years on the report.
nerdchum 3y ago
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.

Turing_Machine 3y ago

Link to Patrick McKenzie (the actual source, rather than Cory Doctorow's blogspam): https://www.bitsaboutmoney.com/archive/the-waste-stream-of-consumer-finance/ https://www.bitsaboutmoney.com/archive/the-waste-stream-of-c...

egypturnash 3y ago
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-party/#jubilee 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.
- vluft 3y ago
  > Is it still blogspam if this paragraph exists in the end of the post? yes
- NovemberWhiskey 3y ago
  >Is it still blogspam if this paragraph exists in the end of the post? I have no particular opinion on that question but, having read the original patio11 post, virtually 90% of this one is just paraphrasing of its contents.

syngrog66 3y ago

Federal debt? gov keep borrowing or printing more to payoff past debts 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

willcipriano 3y ago
> hope Dems get power in DC And they want to do debt forgiveness as opposed to another war.
- sattoshi 3y ago
  They’re financing a war right now
hanniabu 3y ago
> college debts? hope Dems get power in DC Pointless unless the root cause is addressed first
NovemberWhiskey 3y ago
>biz debt? declare bankruptcy That's totally an option for individuals too (modulo student debt for the most part).

orange_joe 3y ago

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.

commonlisp94 3y ago
> they rely on the social norms of a society Norms like being honest and not stealing? society gets really expensive and unfriendly when we have to use enforcement instead of norms.
- YeBanKo 3y ago
  Can confirm. Cost of transactions in trust-less societies is a very heavy burden. Also, it goes hand in hand with corruption.
hanniabu 3y ago
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.

tjrgergw 3y ago

What's with people not offering RSS?

bryanlarsen 3y ago
control f rss works.
- tjrgergw 3y ago
  Well that's embarrassing. Thank you.
deleted 3y ago
[deleted]

tiahura 3y ago

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.

Turing_Machine 3y ago
Hmmm... 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?
- tiahura 3y ago
  These were as typical as they get - random credit card debts. Friend of a friend got sued and asked for help. I serve discovery thinking they’ll never be able to respond, they do.
- tehwebguy 3y ago
  Banks and card companies absolutely sue people as well — not just third party debt collectors. Discover obviously has the documentation, they can produce it. I’d like to know the deciding factor for sue or sell.
- TheOtherHobbes 3y ago
  I know someone who walked away from £15k of credit card debt because the collection company sued with forged paperwork. He happened to have all the original paperwork on file and it proved they hadn't followed the required legal procedures. Trying to forge an essential document wasn't going to help their case. I've heard from a number of people who work for banks, lenders, and insurers that record keeping is a complete mess, and a certain amount of unlawful creative improvisation isn't unusual. So... they may claim to have proof, but there's a reasonable chance that if it's examined closely and/or all original correspondence is kept, they don't. This seems to be worse in the US where debts are traded and retraded and the original paperwork may be long gone.

rhaway84773 3y ago

> 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).

TMWNN 3y ago
>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/2018/03/26/the-truth-about-medical-bankruptcies/ 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.

pier25 3y ago

Isn't there like a credit score system in the US that companies can check? In Mexico there's something called the Credit Office (buró de crédito) that banks can check if you've paid all your debts.

gene91 3y ago
https://news.ycombinator.com/item?id=37110429 https://news.ycombinator.com/item?id=37110429
doctorwho42 3y ago
There is, and a good rule of thumb is that if it's a bad trait of your government... Most likely learned it from the US.
- ethanbond 3y ago
  That’s not actually a good rule of thumb, nor is there any government credit agency in the US. Wrong on both counts.
xtracto 3y ago
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.

xwdv 3y ago

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.

h2odragon 3y ago

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.

mistrial9 3y ago
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!
- h2odragon 3y ago
  Among our creditors was also a local bank (whose customers include a lot of farmers); they were willing to discuss things with us. We managed to pay them off (with a few months of forbearance) and continue doing business with them. Lovely folks there, I fear the day they get bought up and turn bad.
SoftTalker 3y ago
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.

ransom1538 3y ago

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.

ericjmorey 3y ago
> as you age it will be difficult to get health insurance. Are you unaware of Medicare and Medicaid?

viknesh 3y ago

> 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.

rsynnott 3y ago
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.

rsynnott 3y ago

From the linked piece: > 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?

DangitBobby 3y ago
Yeah, that's how it works here in Tennessee too. Not sure what happened. Edit: looks like the literature referenced was from almost 200 years ago.
- rsynnott 3y ago
  Only thing I can think of is that the author was a guarantor on the mother’s debt. Which I suppose is possible. Even still though I don’t understand why the house would go to the state. The book she mentions is pretty old, but the situation with her mother she mentions is current.
  - mindslight 3y ago
    The house going to the state could be due to Medicaid reimbursement. But I share your general frustration that when such details are glossed over it tends to propagate myths (two, in this example). If this is what happened, a will wouldn't have helped. Deeding over the house while keeping a life estate or putting it into a formal irrevocable trust, before the lookback period, could have.
MerelyMortal 3y ago
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.

jwie 3y ago

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.

bogwog 3y ago
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.
- extraduder_ire 3y ago
  Forgiven debt counts as income. There's some messing you can do with it, like I think one of the latenite hosts did with some student debt. The whole sold-in-bulk thing I could see being 'remedied' by having some sort of federal clearinghouse that each item of debt has to pass through. Though, that'd probably get fought tooth and nail so money-men can pull subprime-shenanigans.

willprice89 3y ago

> 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"?

antisthenes 3y ago
It's optional, because for a lot of smaller debts (<5000) they won't bother suing. They'll sell it for 0.1x cost to a collection agency and move on. They get to mark it 90% of it as a loss on their balance sheet and pay less taxes as a result.

crazygringo 3y ago

This headline/article is silly. 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 3y ago
>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.
- latchkey 3y ago
  > I do not advise this That sounds like an interesting story...
  - NovemberWhiskey 3y ago
    It's not that interesting - it's just that there is a much larger number of parties who have to be in agreement about the sale, and the sale price, than is typical - you end up with probate court judges, lien holders, the executor, the estate's attorney as well as possibly a second real estate attorney for the estate and absolutely all of them (and their staff) can be sick / on vacation / golfing which wreaks havoc on the closing timeline. Plus if there is any FUBAR paperwork it is much more difficult to fix if it means going back to probate court to (for example) add a spouse who was wrongly omitted from the approval to sell ... in this case, I ended up getting the mortgage and deed by myself and then quitclaiming the property to the two of us because that was less hassle. Oh, and short sales in probate are basically always as-is because the estate has no money to make good any repairs to the property.

vel0city 3y ago

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.