Interesting Story About a Guy Who Sues Debt Collectors

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Better Off Deadbeat: Craig Cunningham Has a Simple Solution for Getting Bill Collectors Off His Back. He Sues Them.

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It's not unlikely that Cunningham's next call will be from a bill collector, since he's between jobs—except for being in the Army Reserve—and owes $100,000 in debts.
While most Americans with unpaid bills dread the collector's call, Cunningham sees them as lucrative opportunities. Many collection and credit card companies, intentionally or not, violate little-known consumer rights laws, and Cunningham's favorite pastime is catching them doing so and then suing them. In fact, it's a profitable side job.
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Debtsmanship was written by Steven Katz, a former New York debt collector turned consumer advocate, who now lives in Phoenix. In 2005, Katz founded a message board called "Debtorboards," with the slogan "Sue your creditor and win!"
Katz doesn't believe that people are morally obligated to pay back their debts. That notion was invented by debt collectors as a way to beat people into submission, he says. "Bill collectors would love for you to send them a check and then explain to your kids because you have the moral obligation to pay your debt they're not eating this week," he says. "But they don't see the moral obligation to feed your children or yourself.
"People are brainwashed to think that paying a credit card is more important than paying for the necessities of life," Katz says. "If you're in a position where you have to make a choice, my argument is food, clothing and shelter come first... Nobody ever went to hell for not paying a debt."
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www.dallasobserver.com/2010-01-21/news/better-off-deadbeat-craig-cunningham-has-a-simple-solution-for-getting-bill-collectors-off-his-back-he-sues-them/1

I think this mentality that paying debts is optional is dangerous. IMO It's also been one of the more interesting repercussions of the Fed bailout of banks that were "too big to fail".
 
It's like reading about an immature kid not understanding why he has to pay for the candy he just ate.

"People are brainwashed to think that paying a credit card is more important than paying for the necessities of life," Katz says. "If you're in a position where you have to make a choice, my argument is food, clothing and shelter come first... Nobody ever went to hell for not paying a debt."
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If you can't afford the basic things you need in life like food, or shelter, why are you buying things on credit in the first place. That's the problem with people.
 
[quote name='perdition(troy']If you can't afford the basic things you need in life like food, or shelter, why are you buying things on credit in the first place.[/QUOTE]
You mean like the basic things you need in life like food, or shelter?
 
[quote name='crystalklear64']You mean like the basic things you need in life like food, or shelter?[/QUOTE]

You can get by for a long time off of 100k.
 
The people the article focuses on are people who were buying houses to rent out to people, security systems they didn't need, internet subscriptions they didn't need, etc.
 
[quote name='perdition(troy']It's like reading about an immature kid not understanding why he has to pay for the candy he just ate.[/QUOTE]

More like the immature kid with awful parents.

Big banks telling this guy to pay up is like an out-of-control chain-smoking alcoholic father yelling at his kid for striking out at the little league game.
 
[quote name='perdition(troy']If you can't afford the basic things you need in life like food, or shelter, why are you buying things on credit in the first place. That's the problem with people.[/QUOTE]
Exactly. Ask any financial coach worth his weight, and they will tell you that the first thing you do with your money is pay for housing, food, water, the necessities. After that start paying your bills. If you have to call your debtors and explain to them that you can't afford the $50 a month payment because after you feed your family you only have $20 left, they will say send us your $20.
The problem is this guy doesn't want to take RESPONSIBILITY for his past actions.

Oh, and if you don't have enough money to pay for food and rent, so you have to charge it to a credit card, you have one of two things: 1-a lifestyle problem(spending the money you do have one something you don't need) 2-an income problem(you simply don't make any/enough money for the basics). Most likely the 2nd.
 
It is quite a sneaky way out of accepting responsibility but ignoring how he got there for a moment, if you're in that position, it's a creative solution and one I applaud. After the recent events, banks telling people to be responsible is a laugh.

His scenario works far better from an ethical standpoint if it were medical bills/debt from a small business going under/non-profit not making ends meet as opposed to overextending your lifestyle/overspending.
 
Creative solution? The guy is cheating the system and anybody appluading him due to what the banks did should turn around and applaud the banks for cheating everyone.

The bailouts were also a 'creative solution', weren't they?
 
The guy who wrote the book is on crack, but I don't blame Cunningham for suing them. People don't need to be harassed via phone to remind them that they owe debt. Either the harassing won't do anything, because the person's poor and can't pay it, or it won't do anything because the person was going to pay it anyway. Nobody just happens to forget about their debt.
 
So Cunningham's a villain for taking these exploitative and law-breaking collections agencies to task for the laws they violate?

The agencies that violate the laws are victims here? What happened to "you do the crime you do the time" (or pay the settlement in this case)?

What the fuck is the matter with you people, defending a corrupt, abusive, and law-breaking set of financial institutions and collectors?

This isn't even remotely about issues of responsibility and managing risk/borrowing what you can. It's about keeping the fuckers in the banking industry accountable for following the laws that apply to them. Would you rather he acquiesce to them, allowing the banks and collectors to violate the law and walk all over him and millions of other citizens who got into debt trouble as a result of the housing market bursting and economy hitting the shitter?

For fuck's sake, people.
 
Agreed Myke.

Though I think some may be latching more on to the quotes by Katz in the first post about people not being morally obligated to pay back debts, more than bashing Cunningham for suing the debt collectors for breaking laws.

Paying back debts should be a moral obligation--though one that comes after providing necessities for yourself and your family of course.

But at the same time, banks and debt collectors have to follow the laws in collecting the debts owed them. And they shouldn't be harassing and intimidating people. You can't get blood from a turnip. They'd likely have better success working with people to find payment plans that work, informing them of options for consolidating debt etc. than harassing people who simply don't have the money to make their full payments.
 
They would use the law to their advantage to get the money from him, he'd be stupid to not use the law to his advantage also.

There was a similar story last year of a guy who made fairly good money by suing telemarketers who break the law. The law is there folks, use it.
 
[quote name='mykevermin']So Cunningham's a villain for taking these exploitative and law-breaking collections agencies to task for the laws they violate?

The agencies that violate the laws are victims here? What happened to "you do the crime you do the time" (or pay the settlement in this case)?

What the fuck is the matter with you people, defending a corrupt, abusive, and law-breaking set of financial institutions and collectors?

This isn't even remotely about issues of responsibility and managing risk/borrowing what you can. It's about keeping the fuckers in the banking industry accountable for following the laws that apply to them. Would you rather he acquiesce to them, allowing the banks and collectors to violate the law and walk all over him and millions of other citizens who got into debt trouble as a result of the housing market bursting and economy hitting the shitter?

For fuck's sake, people.[/QUOTE]

Corrupt, abusive? This guy is searching for any method to abuse the law and not pay anything! He's sitting on his debts, waiting for somebody to call and make a mistake so he won't have to pay what he owes, and you take his side?
 
[quote name='dmaul1114'] But at the same time, banks and debt collectors have to follow the laws in collecting the debts owed them. And they shouldn't be harassing and intimidating people. You can't get blood from a turnip. They'd likely have better success working with people to find payment plans that work, informing them of options for consolidating debt etc. than harassing people who simply don't have the money to make their full payments.[/QUOTE]

Maybe so, but this guy should be paying what he owes. Defending him is basically saying, 'Go small guy! Banks screwed us so we'll screw them!'. In the end, two wrongs don't make a right, and you've lowered yourselves to the banks level.
 
[quote name='AdultLink']Creative solution? The guy is cheating the system and anybody appluading him due to what the banks did should turn around and applaud the banks for cheating everyone.

The bailouts were also a 'creative solution', weren't they?[/QUOTE]

They were. The banks lured an entire country into paying for the boneheaded decisions of those who had bigger eyes than their wallets.
 
The law is the law, for better or worse.

I am on his side, I do say fuck the banks and fuck debt collectors. Moral obligation or not, debt collectors and debt collection agencies are the scum of the earth.
 
I'm going to have to side with myke here. Strongly.

There is also quite an argument to be made for how most debt is money that never existed or was owned by anyone in the first place. Especially with credit card companies.

In other words, if I got permission from the government to loan you $100,000, which I don't have, I would. And then when you can't pay it back to me I would ruin your credit and harass you with debt collectors. Then, if you still didn't pay me and I went whining to the government so that they paid me, you could say my name was citibank.
 
1) I'd like to know what his debt is comprised of. I think that's fair for me to want to know.

2) If the law is being broken by creditors, then someone ought to be able to bitch slap 'em with it.

3) Seems to me like everyone in this situation is being a dick, personally. The guy is fighting the good fight, but there is an element of questionable responsibility here.

4) The general sentiment of bank and creditor fucking I agree with, and all the news of the last two years only solidifies it. Really, everything in my entire life seems to tell me that my generation is going to get fucked no matter what. Health programs will run out of money, gas prices will continue to climb, cable companies will keep squeezing more money out of customers, net neutrality will probably not be upheld, and every goddamn school I went to (including my college) got funding for awesome playgrounds/new buildings the SECOND I stopped going there. Difficult to expect me to take their sides on anything these days.
 
I don't see the moral angle to debt at all. Who's the victim? How can there be a moral issue when we're talking about a business contract?
 
[quote name='speedracer']I don't see the moral angle to debt at all. Who's the victim? How can there be a moral issue when we're talking about a business contract?[/QUOTE]

Maybe ethical would be a better term to use. You have a ethical obligation to honor your part of a contract. If you borrow money you have an ethical obligation to pay it back.

Again it doesn't justify law breaking by debt collectors, or the harassment and intimidation they use etc.
 
ethical or social.

I kinda wish some of the more typical conservative slogan-bearers came around more often to comment on this article. Because I bet you dollars to donuts that the same folks who, time and time again neglect to acknowledge that there are any social causes/effects of wage inequality would be the first people to come crying about how people who don't pay their debts wreak economic havoc on the rest of us.

Selective collectivism FTL.
 
[quote name='RedvsBlue']We could always just outlaw credit and debt. No more lending, cash up front for everything.[/QUOTE]

Boy, that's free market, I tell ya whut.
 
[quote name='mykevermin']The law is the law, for better or worse.

I am on his side, I do say fuck the banks and fuck debt collectors. Moral obligation or not, debt collectors and debt collection agencies are the scum of the earth.[/QUOTE]
I get what you are saying, and I'm not against it. But honestly, people who can't control their credit card debt on frivolous spending are the scum of the earth, followed by debt collectors and collection agencies. If everyone paid off their debt, we wouldn't need collectors or agencies. It all comes down to personal responsibility, and I don't like seeing people get out of being responsible for their money.

[quote name='RedvsBlue']We could always just outlaw credit and debt. No more lending, cash up front for everything.[/QUOTE]

[quote name='Strell']Boy, that's free market, I tell ya whut.[/QUOTE]
Problem is, credit agencies need to smarten up about who they loan money to. If you can't pay the bill, you don't get the credit.
 
It's hard to defend a guy that's doing shady shit like this but those debt agencies are fucking scum. Both sides are losers in this situation.

Isn't this kinda like the person that went into McDonald's and sued over hot coffee. He knew the coffee was hot but it wasn't marked or labeled as hot so he won on a technicality.

In the end, it hurts all of us because the corporations are gonna get their money by hook or crook. Everytime the debt collectors lose money on shit like this, they get that much crazier with everyone else they call. Eventually, you're gonna run into debt collectors on the street looking to get that cash money.

As long as we buy on credit and default, there will be debt collectors.
 
[quote name='myl0r']I get what you are saying, and I'm not against it. But honestly, people who can't control their credit card debt on frivolous spending are the scum of the earth, followed by debt collectors and collection agencies. If everyone paid off their debt, we wouldn't need collectors or agencies. It all comes down to personal responsibility, and I don't like seeing people get out of being responsible for their money.[/QUOTE]

This is what I meant earlier by selective collectivism. I get that Cunningham's shitty attitude towards creditors comes out of my pocket, no matter how miniscule, at some point in my life as someone who deals with banks and lending institutions.

But the "personal responsibility" here is mislabeled. It's an appeal to social responsibility: don't be an asshole and make me pay more because you're a deadbeat. You're concerned about yourself, not the wellbeing of the bank or integrity of lending as an institution.

But this social responsibility is the first thing to be chucked out the window by many of you (the royal you, not you specifically, that I know of) and disregarded when we have conversations about wage inequality in the US. People do not see that the social responsibility to provide wages that allow a decent standard of living, which is why we've seen the normative growth of two-income households in the US, the death of sustainable careers with good wages earnable by people with just a high school diploma, the migration of manufacturing to second-world nations with lax environmental and human rights policies, etc. - all in the same context as growing wages for executives, growing compensation for executives. It's why we've seen the greatest example of "entitlement culture" disguised, abused, and mislabeled as the news talks about bank "bonuses" (as if something contractually obliged can dare be called "bonus").

But that's "hard work" and "personal motivation" and all that. We feel no obligation to help anyone else or pick up sinking ships as the tide rises (as that one metaphor goes).

But when it comes to repayment of debt, suddenly collectivism is a virtue. I don't see a situation where someone can resolve the inconsistency wherein economic determinism/individualism/worship at the altar of the false idol meritocracy can give way, only temporarily, for appeals to collectivist social support.

Doesn't seem hypocritical...just seems insincere.
 
Easy solution all around.

Get rid of the debt collectors and hire more lawyers. Then, everyone who owes a debt can just be taken straight to court. Why bother with the song and dance of harassing the individual in debt? Just bring it to court and destroy their credit score.

Now, I know we don't have debtor's prisons here in the US - but at some point (say, over $100,000 in debts) this has to be getting into some kind of larceny stages...
 
[quote name='dmaul1114']Maybe ethical would be a better term to use. You have a ethical obligation to honor your part of a contract. If you borrow money you have an ethical obligation to pay it back.[/quote]
I strongly disagree. The only obligation that can arise is if the lender has a fiduciary duty to someone other than itself *AND* if the contract takes only the time value of money at the rate of inflation. With that being the case then I'd say yea, that's reasonable. But as soon as you loan and expect more than the principle + time value of money at the rate of inflation then you're a speculator, a gambler, absolutely no different than a guy sitting at a table counting cards. We as a society feel no remorse for the speculator that loses when he puts his chips on 35 black, or remorse for the house when the guy bets on 35 black and wins. Why here?

Lenders are buying debt and allocating capital on the speculation that it'll be paid back. Assigning capitalism this vague notion of ethics or morals is crazy. Without this very basic feature of capital, there's no return above inflation. Without that, there's no capitalism.

Just sayin.
[quote name='UncleBob']Get rid of the debt collectors and hire more lawyers. Then, everyone who owes a debt can just be taken straight to court. Why bother with the song and dance of harassing the individual in debt? Just bring it to court and destroy their credit score.[/quote]
I agree 100%. But it's not cost effective most of the time to sue for a judgment. Yet somehow this is spun as the "good graces" of the lender. Bullshit. It's a business decision. So when the lender acts solely on the basis of decisions best for itself according to its business its reasonable, but if the entity being lent to does the same it's some moral or ethical issue. No way.
Now, I know we don't have debtor's prisons here in the US - but at some point (say, over $100,000 in debts) this has to be getting into some kind of larceny stages...
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I'd say we need lender's prisons for the idiot foolish enough to lend that much without some serious collateral.
 
[quote name='speedracer']I'd say we need lender's prisons for the idiot foolish enough to lend that much without some serious collateral.[/QUOTE]

I'm assuming someone who's racked up $100,000 in debt has done so through multiple lenders.

If I swindle 100 old ladies into "loaning" me $100 each, who should go to jail, me or the old ladies?
 
[quote name='mykevermin']But when it comes to repayment of debt, suddenly collectivism is a virtue. I don't see a situation where someone can resolve the inconsistency wherein economic determinism/individualism/worship at the altar of the false idol meritocracy can give way, only temporarily, for appeals to collectivist social support.

Doesn't seem hypocritical...just seems insincere.[/QUOTE]

I'll take a weak stab at it.

Credit card companies blame higher rates on everybody's debt because of defaults and not on propping up the incomes of their elites.

Elites by their definition are rare, but everybody has met that "scumbag" who brings on their own problems.

Let's try an anecdote.

My wife and I have a considerable amount of debt: credit cards, mortgages and student loans.

My wife and I make enough money to slowly get out of debt. However, we could out of debt in a third of that time if I could get my wife to focus and make some changes.

1. Going out to eat. We probably piss away $5K a year on restaurants. The food is either crap (any fast food) or my son throws a temper tantrum in public because he and I have finished our food while waiting for my wife pick through her food or nobody except for me has eaten all of their food which forces me to throw away food costing 4X the grocery store.

2. Day care. We piss away $10K a year on daycare. If my wife allowed me to work weekends and/or evenings, we could be that much further ahead. In the spring and summer, days could be spent at the park free or the pool with a season pass reducing the cost to practically nothing.

Either change would cause a dramatic shift in our family and could strain us to the point of collapse. However, it is nearly impossible for me to blame some paradigm shift of lowering wages that occurred before I was born and my wife won't do little things like eat leftovers.
 
[quote name='mykevermin']But when it comes to repayment of debt, suddenly collectivism is a virtue. I don't see a situation where someone can resolve the inconsistency wherein economic determinism/individualism/worship at the altar of the false idol meritocracy can give way, only temporarily, for appeals to collectivist social support.[/QUOTE]

I'll take my own stab at it.

No one forces anyone (dead beats or honest individuals who have to pay higher fees) to get any kind of credit card. It's a choice they make and an agreement they enter into.

Your idea of "social support" tends to lean towards "Give Uncle Sam money or we'll send men with guns and throw you in jail."

Now, if you want to make the argument that we, as a caring society, should be willing to freely donate our earnings when we can, I'll agree. How much as the free citizenry of the US donated to Haiti over the past two weeks?
 
[quote name='UncleBob']I'm assuming someone who's racked up $100,000 in debt has done so through multiple lenders.

If I swindle 100 old ladies into "loaning" me $100 each, who should go to jail, me or the old ladies?[/QUOTE]

Neither. They "loaned" you money. They can take you to civil court. If you stole money out of their purses, then we can take about criminal charges.
 
[quote name='UncleBob']I'm assuming someone who's racked up $100,000 in debt has done so through multiple lenders.[/QUOTE]

Not really. I have no debt in my life except for one car (2 years to go) and my house (30 years to go) and I owe $400,000+ to the bank. I need to hit the lottery.
 
What happened to personal responsibility anyway? If companies forced people at gunpoint to sign loans and credit cards I could understand the hatred and animosity toward lenders. Short of that happening, if a company truly participated in nothing but predatory lending,it would go under right quick. At a certain point all the borrowers would just go bankrupt and there goes all the lenders, buh-bye.
 
[quote name='UncleBob']Now, I know we don't have debtor's prisons here in the US - but at some point (say, over $100,000 in debts) this has to be getting into some kind of larceny stages...[/QUOTE]

Part of larceny involves the act of taking - since loans are given, it can not legally be larceny.

And please stop with the "guns to your head" metaphors. As for your explanation, people don't accumulate hundreds of thousands of dollars in credit card debt alone. I've just about $120K in student loans. I have credit card debt as well, but it's far smaller than that. Not even 10% of my total debt is credit cards.

Wanna start a cag lotto pool, javery? ;)

Cunningham's story is one of speculative investing - he bought rental property based on a bad faith statement from the lenders he mortgaged from, and defaulted on payments because there weren't many/any renters in the property (contrary to what he was told). The idea of "personal responsibility" is a red herring argument that makes a villain out of a victim and lionizes the lenders in this case. With the benefit of hindsight, it's easy to cast those stones.

FoC, the fact that it is "your wife and you" that earn that much kind of reinforces the point of growing inequality. If (EDIT: How sexist of me) either you or your wife did not work, leaving only one income-earner, that would save you a good clip in day care costs - but how would that position you relative to paying your other debts? If that would be unsustainable on income from you working as a sole income earner, you kinda reinforce the point about inequality. As the elites continue to carve off a greater share of the proverbial pie amongst fewer people, the lives of *everyone* in this nation have had to change - again, two income households are normative (and perhaps greater than two if you consider those who work a combination of multiple full-time/part-time jobs). Now we've reframed the changing structure of American social life to see hard work as virtuous - and it is. But at what point does it become indentured servitude? At what point does virtue acquiesce to stupidity and capitulation to the power elite? I see your point, but you haven't convinced me of anything.
 
[quote name='javeryh']Not really. I have no debt in my life except for one car (2 years to go) and my house (30 years to go) and I owe $400,000+ to the bank. I need to hit the lottery.[/QUOTE]
Two things
1-you are missing the point. we are focusing more on credit card debt, not a mortgage. It's really easy to wrack up $100,000 when you consider home buying.
2-$400,000 for a car and home....is that after you figure out how much you will pay over the life of the loans?(factoring for interest) or is that just the principle?
 
[quote name='myl0r']Two things
1-you are missing the point. we are focusing more on credit card debt, not a mortgage. It's really easy to wrack up $100,000 when you consider home buying.
2-$400,000 for a car and home....is that after you figure out how much you will pay over the life of the loans?(factoring for interest) or is that just the principle?[/QUOTE]

Really? I thought we were just talking about debt generally. People are constantly buying houses they can't afford just like they are spending with the credit card on things they can't afford. All of this leads to defaulting on payments and ruined credit. $100,000 on just credit cards is just insane and any moron who does that should suffer the consequences. The $400,000 is principal only. I don't even like thinking about the total amount I'll end up paying over the 30 years.
 
[quote name='mykevermin']FoC, the fact that it is "your wife and you" that earn that much kind of reinforces the point of growing inequality. If (EDIT: How sexist of me) either you or your wife did not work, leaving only one income-earner, that would save you a good clip in day care costs - but how would that position you relative to paying your other debts?[/QUOTE]

Correct.

From an external perspective, my pay not worth as much as it was 20-40 years ago can be seen. From an internal perspective, the problem of retaining debt can be laid at my wife's behaviors.

As far as going down to a single income, I'm pretty sure we could make it after filing bankruptcy, but that wouldn't be fair to my creditors.

I suppose I could sell my children. It was foolish of me to thinking two college graduates could afford two children and a middle class lifestyle in this century.
 
[quote name='fatherofcaitlyn']It was foolish of me to thinking two college graduates could afford two children and a middle class lifestyle in this century.[/QUOTE]

Bingo.
 
[quote name='javeryh']Really? I thought we were just talking about debt generally. People are constantly buying houses they can't afford just like they are spending with the credit card on things they can't afford. All of this leads to defaulting on payments and ruined credit. $100,000 on just credit cards is just insane and any moron who does that should suffer the consequences. The $400,000 is principal only. I don't even like thinking about the total amount I'll end up paying over the 30 years.[/QUOTE]

Well, I could be wrong. That's just how I have been reading it, . I consider credit and a mortgage different(although it all boils down to the same.)
 
I can only imagine how much your income must be to acquire $100,000 worth of credit in the form of credit cards. That seems more impossible to accomplish than unlikely.
 
[quote name='fatherofcaitlyn']I suppose I could sell my children. It was foolish of me to thinking two college graduates could afford two children and a middle class lifestyle in this century.[/QUOTE]

Agreed. What were we thinking? Although I guess I can "afford" my lifestyle but I work my ass off and I spend well below my means. It annoys me to no end seeing the mansions that some of my friends live in without a care in the world. I'm sure if everyone was fiscally responsible my situation would look pretty good but everyone has to keep up with the Jonses.

[quote name='myl0r']Well, I could be wrong. That's just how I have been reading it, . I consider credit and a mortgage different(although it all boils down to the same.)[/QUOTE]

I agree they are very different animals - a mortgage is something that is necessary whereas I view credit card spending as mostly irresponsible. People have to have everything RIGHT NOW!

[quote name='mykevermin']I can only imagine how much your income must be to acquire $100,000 worth of credit in the form of credit cards. That seems more impossible to accomplish than unlikely.[/QUOTE]

yeah - I think my max limit is like $20,000. Every so often they call and ask if I'd like to raise the max and I'm always wondering what they think I need to buy. $100,000 would probably have to be spread out over 4 or 5 cards - very hard to do.
 
[quote name='javeryh']I agree they are very different animals - a mortgage is something that is necessary whereas I view credit card spending as mostly irresponsible.[/quote]
Again I disagree 100%. There is no significant different between short term credit and long term credit. Debt is debt. And I think the belief (happily reinforced by the lending industry) that mortgages are somehow different than other forms of credit is what's gotten us in this mess.
yeah - I think my max limit is like $20,000. Every so often they call and ask if I'd like to raise the max and I'm always wondering what they think I need to buy. $100,000 would probably have to be spread out over 4 or 5 cards - very hard to do.
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I just mean to use your statements as an example. I don't mean it as a commentary on your finances.

This is a person with current total liabilities at $400,000 (plus interest over 30 years which is almost certainly hundreds of thousands of dollars). This person has secured creditors who surely get 1st, 2nd, 3rd, etc. calls on any collateral to satisfy debt obligation should this person default. Why on god's green earth would you offer to buy tens of thousands of additional dollars of debt from this person? On what planet is that a good investment?

Yet the credit companies are doing that right now, even after the past few years! That is why we're in this mess folks.
 
[quote name='speedracer']I strongly disagree. The only obligation that can arise is if the lender has a fiduciary duty to someone other than itself *AND* if the contract takes only the time value of money at the rate of inflation. With that being the case then I'd say yea, that's reasonable. But as soon as you loan and expect more than the principle + time value of money at the rate of inflation then you're a speculator, a gambler, absolutely no different than a guy sitting at a table counting cards. We as a society feel no remorse for the speculator that loses when he puts his chips on 35 black, or remorse for the house when the guy bets on 35 black and wins. Why here?
[/QUOTE]


Just have to agree to disagree. People should know what they're getting into when they sign a loan or rack up credit card debt. Every person has the responsibility to take on debts they can handle and pay back as scheduled.

Of course disasters happen and people have to take on debt for medical emergencies, home damage the insurance won't cover etc. So not everyone that can't pay back their debt is some irresponsible dead beat.

But for the majority of us we make decisions about how much debt to take on when deciding what kind of car to buy, what kind of house and location to buy in (or whether to buy or keep renting), when deciding to buy something with a credit card because we don't have cash to pay it back.

As such, there is an ethical obligation to pay back those debts as we entered a contract saying we would. And people are pretty much fucking worthless if they can't honor their word and stick to contractual agreements.

The debt collectors bending or breaking laws, harassing and intimidating people are scum. But people that willingly take on debt they can't pay aren't a whole lot better IMO. Again excusing those who got into debt they couldn't avoid for medical reasons etc.

As for poor lending choices by banks etc., yeah they do need to be held accountable for that. But that doesn't excuse an individual person from buying more house than they can afford, or taking on too much credit card debt than they'll ever be able to pay off etc.

We just need tighter regulations on the granting of loans (require higher % down payments, set limits on how much the monthly payment can take of the persons monthly income etc.). And similar limits on how high of credit card limits a person can carry based on their income etc.

[quote name='speedracer']Again I disagree 100%. There is no significant different between short term credit and long term credit. Debt is debt. And I think the belief (happily reinforced by the lending industry) that mortgages are somehow different than other forms of credit is what's gotten us in this mess. [/QUOTE]

That's kind of true and not true. Debt is debt....but some debt is better or worse than others.

Even with in the same type of loan. i.e. Student loan debt that's in a high demand/income field that will end up making you money and giving you job security is a "good" debt. Student loan debt to get a degree in philosophy or some other random field that will likely not help make money down the road is "bad" debt (or at least not good debt).

Similarly, racking up credit card debt to buy TVs, video games, dine out and other optional stuff is worse debut than a home mortgage. It's higher interest and going to be harder to pay off. And it's shit you don't need.

Staying with mortgages, a mortgage you made a nice down payment on and can easily afford the monthly payments is of course better debut than taking on a big mortgage that you struggle to pay because you had to have the McMansion in the nice suburbs that was out of your budget.

With my debts, my $53K student loans to get my master's and Ph D I consider good debt as it's gotten me a nice professor gig that I love, that pays pretty well and it's a position with great job security as long as you bust ass and get tenure. Not immune--out a a couple grand this year with furlough days--but still one of the more secure jobs you can nab.

My car loan is probably bad debt. My old car was dying, but on my income level at the time (2nd to last year of grad school) I probably should have bought a used car instead of a new as the payments were rough then--though I can easily make them now.

Credit cards I've never carried a balance as I just use one for everything and pay it off in full each month so I can earn reward points. Only time I've carried a balance is on things like 2 year ,no interest deals to buy a TV or something. And those I've always paid off way before the end of the promo.

So debt is debt in the sense that you owe someone money. But there's good debt and bad/worse debt based on instant rates, how much the debt is relative to your income, whether the debt is for a necessity like a house or car (which should be within your means) or complete luxuries like electronics, dining out etc.


And again, the credit industry needs tighter regulations to prevent them giving huge credit to people with poor finances. But that's no excuse for the individual taking on more debt than they can handle for non-emergency reasons.
 
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[quote name='javeryh']yeah - I think my max limit is like $20,000. Every so often they call and ask if I'd like to raise the max and I'm always wondering what they think I need to buy. $100,000 would probably have to be spread out over 4 or 5 cards - very hard to do.[/QUOTE]

Don't credit-issuing agencies have protections to keep this from happening? I know debt:income ratio is a factor that affects future credit you apply for - so the bank of jarveryh can see if the bank of speedracer has already issued lil ol' me a credit card with a $15,000 limit. Add to that my salary of $8 an hour makin' sammiches for Jimmy Johns (mmm, sammiches), you have enough data to say "this hombre is high risk," right?

I'm pretty sure the structure is in place that prevents people from juggling cards in excess of $100K or more. Not to say card juggling doesn't happen - it certainly does. But I suspect that $100K overshoots the actual financial scope of it.
 
[quote name='dmaul1114']Just have to agree to disagree. People should know what they're getting into when they sign a loan or rack up credit card debt. Every person has the responsibility to take on debts they can handle and pay back as scheduled.[/quote]
Fair enough. I just think if it is the correct business decision to walk away from a contract, it's a no brainer. Every business entity on the planet iterates this decision every day and I just don't think individuals should be different.
That's kind of true and not true. Debt is debt....but some debt is better than others.

Even with in the same type of loan. i.e. Student loan debt that's in a high demand/income field that will end up making you money and giving you job security is a "good" debt. Student loan debt to get a degree in philosophy or some other random field that will likely not help make money down the road is "bad" debt (or at least not good debt).
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I agree that student loans are a good investment, but they're still an investment with risk associated. Even then, student loans are a means in which to gain a return above the rate required for repayment on behalf of the person borrowing, which is in stark contrast to the other debts.
Staying with mortgages, a mortgage you made a nice down payment on and can easily afford the monthly payments is of course better debut than taking on a big mortgage that you struggle to pay because you had to have the McMansion in the nice suburbs.
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But mortgages are not de facto good debt. A business decision is made and if the value of the investment declines, people should weigh their current assets against liabilities and decide if it makes sense to continue or default on the contract.

And the absolutely enormous industry built on creating a bad deal for the person being lent to should preclude any questions of morality or ethics.
With my debts, my $53K student loans to get my master's and Ph D I consider good debt as it's gotten me a nice proffessor gig that I love, that pays pretty well and it's a field with great job security as long as you bust ass and get tenure. Not immune--out a a couple grand this year with furlough days--but still one of the more secure jobs you can nab.
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For sure. My wife and I secured debt in order to put her through law school. After 3 years and around $30k in debt at under 7% interest that started 6 months after graduation, we have upped her income by roughly $120,000 annually.

That's good debt right there.
So debt is debt in the sense that you owe someone money. But there's good debt and bad/worse debt based on instant rates, how much the debt is relative to your income, whether the debt is for a necessity like a house or car (which should be within your means) or complete luxuries like electronics, dining out etc.
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I can't remember the term for it, but finance teaches the value of taking on debt in order to increase profit via investment. We agree that student loans would fall in that "good" debt category, but virtually no other individual originated debt falls in that category. The volatility of the housing market puts it squarely in the "bad" debt category in my book, not least of which because even "good" mortgage notes typically result in payments of hundreds of thousands of dollars above principle. Nothing about that can be categorized as good, unless your house appreciates above the total sum... and that world no longer exists (and probably never did).

People think get student loans, get a job, get a car, get a mortgage, spend the rest of your life making payments. That's flat wrong. It's get student loans, get a job, PAY THE LOAN OFF, save enough to leave the principle on a house note under $100k (or 2 times annual salary), pay it off early, and smile every time you think of the extra quarter to half million dollars in your account in unpaid interest.

People flinch when they think of spending $12k yearly on an apartment. It's wasted money! So they get a house note and drop a quarter mil in interest over 30 years. Finance fail.

A $250,000 loan on a $300,000 house, 6.5% 30 year note results in a grand total of $333,548.72 in interest alone. That's the most ridiculous thing I've ever heard spoken from the mouth of conventional wisdom.
 
When somebody gets sick and loses their job, I think it is important that the person stops spending any money.

He or she and their family should move directly into a cardboard box and hand over all worldly possessions to creditors.
 
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