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“Basically, payday loans are the Lay’s potato chips of finance. You can’t have just one and they’re terrible for you.”
Felix Salmon built Bad Paper around Jake Halpern’s book and New York Times Magazine piece of the same name. By playing the game, you can put yourself in the shoes of a debtor or collector and explore the different scenarios. You win when you get the case dismissed or collect a judgment.
It’s an interesting exercise, but the game is misleading about what it takes to win in court. According to the game, all you have to do is show up in court and say “Excuse me: Where’s the proof that this is my debt?” to the judge.
Three years ago, Congress added this sentence to the farm bill:
Notwithstanding any other provision of law, regulation, or administrative limitation, no limitation on the period within which an offset may be initiated or taken pursuant to this section shall be effective.
What that sentence did was remove the statute of limitation on debts owed to the federal government. As a result, according to the Washington Post, the Treasury Department is intercepting hundreds of thousands of tax returns this year, to collect on very old debts, some going back to the 1960s. So far, it has collected something like $75 million using this tactic.
Bankruptcy is sort of a relief valve for the economy. When financial pressure (debt) builds up to a certain point, the relief valve opens and people use bankruptcy to discharge their debt. Then, they go back to being consumers and the economy can return to a healthy state. There are other relief valves, of course, but bankruptcy is really the only one available to consumers. Bailouts are for too-big-to-fail banks, not the little guy.
If consumers cannot declare bankruptcy, they cannot go back to being consumers. That means the pressure stays high and the economy has trouble returning to a healthy state.
A “child-nutrition manager” in Salt-Lake City, notified of an unusually-large number of students who owed money for lunch at Uintah Elementary School, came up with a brilliant plan: take away their lunches. Students with delinquent school-lunch accounts went through the lunch line as usual, but when their card was declined at the register, the lunch-room staff tossed their meal in the trash.
Several parents told the Salt Lake Tribune that they were not notified that they owed money for their children’s lunches. It doesn’t seem like anyone was notified that their children would have their lunches taken away from them, either. The school has said it is “currently investigating to see if [notification] guidelines were followed correctly.”
The Minnesota interest rate for debts due to overdrawn bank accounts is 6%. Bradstreet & Associates was trying to charge 21.75%. According to Minnesota Attorney General Lori Swanson,
Since 2009, Bradstreet and its predecessor company bought at least $18 million in debt that originated with Wells Fargo and U.S. Bank. This affects, we believe, at least 16,000 Minnesota consumers.
Under the terms of the settlement reached in several class actions against Midland Funding for its (apparently past) practice of employing robo-signers to execute affidavits for debt buyer lawsuits, each class member would receive under $20 — and that’s it. The Sixth Circuit rightly decided this was unfair (pdf).
Unfortunately, the Sixth Circuit seemed to think the settlement was unfair primarily because the named plaintiffs (i.e., those whose names actually appeared on the complaints) would receive $8,000 plus the elimination of their debts. The class members who opted into the settlement just got $17.38 each, and still owed their debts:
It turns out that a comically-large number (26%) of consumer credit reports may have errors. However, 95% of those with errors do not need to worry about them, because those errors do not affect their “credit risk tier.” Or, conversely, only 5% of the consumers with errors on their credit reports were “significant enough” that the consumers affected (about 10 million) might have been denied credit or paid more for it.
Which means there is a good chance that you have errors on at least one of your credit reports (which you should obviously fix), although they probably do not affect your credit.
Of course, being denied for credit or paying more for it are only two consequences of credit reporting errors. Many more people experience other consequences, like incessant calls from debt collectors looking for someone else.
Right now, you have a right to a free credit report, but not a free credit score. That’s annoying, because the score is what really matters whenever you apply for credit. Consumer Union wants to make it easier for consumers to get their score, and is putting in motion a grass-roots campaign to put free credit scores on Congress’s agenda.
So contact your representatives, and let them know you want a free credit score. Here’s where you can find out how to contact them:
The Fair Debt Collection Practices Act is basically a checklist for debt collectors, a list of things they must do and things they cannot do. With some regularity, someone actually breaks it up into a list. Consumerist just put together a list of 23 things debt collectors may not do, which includes the obvious:
As well as the not-so-obvious:
This list is far from complete, but it is a good place to start. It is also worth pointing out that these prohibitions only apply to consumer debts; they do not apply to business debts. (Via Consumer Law & Policy Blog)