It is true that identity theft is a bad thing. It's unconnected to a different bad thing, which is people not paying what they owe.
...people (not you, I just think it's fitting) often think that being lax on credit is helping the poor or making the world a better place by some kind of self-enforced redistribution.
It is, however, far better to have strong contractual and property institutions while caring for those in need with well established legal and economic structures. (This could be a full welfare state, but could also be any other set of policies targeting the same problem.)
I have, for example, strong feelings about the idea that there are some loans you can't default on. But if that turns out to be a societal problem it needs to be solved there, not through a lack of enforcement for the few who leave the country.
Here's the problem though: the money is there to push for strong contractual and property institutions, but there isn't much for adding the "caring for those in need" part. They should go in lockstep, but they don't. I agree with you wrt. how things should be, but I do empathize with people who use lax enforcement as a way to escape inhumane regulatory conditions.
> ...people (not you, I just think it's fitting) often think that being lax on credit is helping the poor or making the world a better place by some kind of self-enforced redistribution.
Is this risk not the reason interest is charged? If you want perfect enforcement of all loans, interest must go to 0, otherwise the interest is pure profit.
You can also have ruined credit through no actions of your own, without knowing that you do, until that day you try to rent an apartment or a phone contract or whatever, and everywhere turns you down and you don't know why.
You can also have ruined credit, oddly, while having a large amount of savings at the same time. I don't know about other countries, but in the UK, the credit reference agencies don't keep track of bank deposits (even though they do keep track of bank overdrafts), so you can have say £100,000 in the bank, while being unable to get a £1000 limit credit card or £1000 loan (which you might choose if you wanted to keep the £100k in a tax-efficient account), not even at the same bank.
It's surprisingly easy to have a ruined credit rating through no fault of your own, without knowing, if you aren't obsessive about checking.
For example: When the credit reference agencies (CRAs) hold incorrect information about you. Or accounts that don't exist and which have entirely fictional transactions on them, which of course are never paid because they aren't real and start flagging as "overdue", because some utility leaves accounts that are closed open in the CRA files for years later, and then add bogus transactions years later, which magically disappear when you ask the company if you owe them anything (I'm looking at you BT).
In the UK, if your CRA record address doesn't match a local government address for you, there's quite a severe penalty to the credit score. Most people don't know that, but CRA data often has errors like that, which can be difficult to correct (I'm looking at you Equifax "it will take us 8 weeks to respond to your complaint, and please send us a copy of your passport").
Eventually you may find this out and call each of them individually to make a correction. And then find, each time you correct it, it periodically gets replaced with incorrect data automatically, because some system has an incorrect address database and uses it to automatically "improve" data back to the erroneous version (I'm looking at you Experian).
By "someone else's" you surely mean "the bank's money". I don't think individuals are going to benefit from this, just a few large players around the world.
Banks are not like a giant piggy bank with your savings in it. They create money when they create loans. They're not protecting "your money" with things like this, they are protecting their profits.
A large percentage of it is entirely their money. And in fact, not even actual money somebody at the bank owns, just numbers on their ledger (that they still make interest from borrowers off).
In fact, there's most of the money the banks loan is not "somebody else's" at all, it's "loan money".
And how would people get services typically offered by a bank? Sorry but most of people on this planet need banks because they don't have enough cash to buy real estate. Are you suggesting that people should not own their homes?
If they're also afforded the same responsibility, sure. Because if people had the same rights as banks, I'd be free to gallavant down to Vegas, blow all my money on slots, and expect the government to vacate my debts and pay for my steakhouse dinner
If the US hadn’t systematically defunded and outsourced the court system, lenders could take defaulting debtors to (small claims) court, and they could check court records before lending money.
That would completely eliminate the debt collection industry, secondary debt markets, credit reporting agencies, and so on.
But, raising taxes to pay for it is “too expensive”, so we pay orders of magnitude more in credit card processing fees, credit report monitoring, etc.
I agree the courts have issues. Courts have given me (Pro se) faslse information and refused to answer procedural questions. In what sense are you referring to outsourcing? Could you explain you outsourcing view
Those borrowing are much more than those that lent money. And the latter by definition have more money to burn.
So not sure if what you say is the more social damaging scenario or the inverse...
Just pointing that across countries and cultures, human civilization has had a constant, throughout millennia, disfavor, of those lenting money, and of interest in particular.
I wonder what would happen if at the airport they wouldn't let you fly unless you could prove that all your assets more than cover all your debts in the country you're flying from?
Unpopular opinion: someone who welches on their debt SHOULD have their reputation blackened for a reasonably long time.
When you default on your debt, it makes it much much harder on everyone else in the system. All other things being equal, your creditors (and their depositors) have to either accept lower interest rates as result of your irresponsibility or the other debtors have to be squeezed (1+1/n) times as hard, where n is the number of remaining debtors.
I am glad this cross-border credit reporting is becoming a thing, if anything.
The only way I could agree with you would be when speaking about a reasonably intelligent, healthy individual not living where health is a bankruptcy lottery. As it stands now - and I apologise if I completely misunderstood a poorly written comment meant well - your comment sounds like coming from a Martin Shkreli-like sociopath.
"To welch on one's debt"[0], if I have to believe the Merriam-Webster diary, means to avoid payment, and has gained an offensive connotation. You might want to be more careful about your use of language describing such a sensitive subject as debt.
Defaulting on one's debt is not necessarily due to irresponsibility. People sometimes have really bad luck for example. Or they're just plain stupid, with insufficient regulation in place to protect them from their own limited intelligence.
One might also want to look at the context of borrowing, from a human perspective. I'll give just one example.
The lender side of the equation. There's plenty of irresponsible lenders, often with far too little regulation. My native Belgium has some interesting lending regulations:
* All loans taken by individuals are gathered in a database run by the national bank.
* Lenders are legally obliged to check the lending database before offering a loan, in order to assess the risk. If they don't, or if they recklessly extend a loan, the borrower can legally walk away from it.
* Lenders are required to obey strict APR limits [1], or they risk the borrower legally walking away with the principal, and without interest payments.
Not sure about the whole sensible-topic thing, but:
I think the reason why our parents opinion is unpopular is because people usually account for diminishing marginal returns by acknowledging that the loss of utility one person experiences paying 1 is greater than the summed up loss of utility of two people paying 0.5 each, even if all three people are equal.
I think you're right in making clear that not paying what you owe doesn't need to be ones fault and can happen through inability, bad luck, etc.
Reputation, however, doesn't imply fault. Bad luck is evenly distributed and inability should be reflected in reputation to work as intended.
Regarding the policies you list: I think enforcing some responsibility regarding loans is a good thing, but:
The idea that there's a central, state run individualized debt database does not sound like a particularly great idea (thinking of system resilience, surveillance and potential leakage).
"I think the reason why our parents opinion is unpopular is because people usually account for diminishing marginal returns by acknowledging that the loss of utility one person experiences paying 1 is greater than the summed up loss of utility of two people paying 0.5 each, even if all three people are equal."
This sounds like an interesting comment, but I'm not sure I understand you 100% right. Could you please elaborate?
"Reputation, however, doesn't imply fault. Bad luck is evenly distributed and inability should be reflected in reputation to work as intended."
Totally agree.
"The idea that there's a central, state run individualized debt database does not sound like a particularly great idea (thinking of system resilience, surveillance and potential leakage)."
You certainly have a point there. Of course, then the question becomes how to better reconcile system resilience, protection from surveillance and leakage. Any suggestions?
well, well, well. Debt given with an APR has a certain rate of default built in (minus cost of money to the bank, expenses, inflation and x% profit). It's very different from grandma giving you $1000 as a loan.
Scenario: you take a credit card with 11.9% APR. It goes to 14.9% after a year. You miss the payment by a day and it jumps to 23.9% or 29.99%. F them, if you could.
From the article: "It requests data from international credit bureaus such as Experian and Equifax (with the individual’s consent), paying a fee for the service. It then packages the information to be usable by American banks and landlords."
Genuinely curious -- aren't Experian and Equifax doing business in America to begin with? Why don't they have internal portability of their own data?
The CRAs have very different levels of reach, access to high quality data, and legal authority to do what they do in each jurisdiction. Joining it all up would be a nightmare IT problem.
In the UK for example Experian is originally the result of running a mail order catalog company which offered credit and noting which customers (most of whom would have been housewives) paid and which did not. The government gives it privileged access to records of company directors and the names and addresses of registered voters, but it is obliged to give access to all data about people to those people for a small fee on request, and to fix any mistakes.
In the US the sources are completely different, and the laws are completely different.
I'm an ex-Experian employee but I don't believe I've said anything above that isn't public knowledge.
I moved to Canada a couple of years ago from Australia and when I got there, I couldn't open a bank account or find a rental - Experian thought I had three mortgages and outstanding debt. I had never been to Canada before, let alone own property or get loans.
Keep as much info out of their hands as possible if they can't keep it accurate.
And also making laws with fines against banks that libel you by telling a credit bureau that you took out a loan and didn't repay. "Identity theft" does not really exist. The reality is a bank loaned money to a fraudster and then when the fraudster did not pay back the loan the bank libels the person the fraudster impersonated when they got the loan. It would be great if the media changed the name they used from "identity theft" to "bank libel" but I don't see that happening.
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[ 3.0 ms ] story [ 102 ms ] thread...people (not you, I just think it's fitting) often think that being lax on credit is helping the poor or making the world a better place by some kind of self-enforced redistribution.
It is, however, far better to have strong contractual and property institutions while caring for those in need with well established legal and economic structures. (This could be a full welfare state, but could also be any other set of policies targeting the same problem.)
I have, for example, strong feelings about the idea that there are some loans you can't default on. But if that turns out to be a societal problem it needs to be solved there, not through a lack of enforcement for the few who leave the country.
Is this risk not the reason interest is charged? If you want perfect enforcement of all loans, interest must go to 0, otherwise the interest is pure profit.
See also: "I was declared deceased three times and it destroyed my credit" https://news.ycombinator.com/item?id=19656322 https://www.reddit.com/r/personalfinance/comments/bctflo/i_h...
You can also have ruined credit through no actions of your own, without knowing that you do, until that day you try to rent an apartment or a phone contract or whatever, and everywhere turns you down and you don't know why.
You can also have ruined credit, oddly, while having a large amount of savings at the same time. I don't know about other countries, but in the UK, the credit reference agencies don't keep track of bank deposits (even though they do keep track of bank overdrafts), so you can have say £100,000 in the bank, while being unable to get a £1000 limit credit card or £1000 loan (which you might choose if you wanted to keep the £100k in a tax-efficient account), not even at the same bank.
It's surprisingly easy to have a ruined credit rating through no fault of your own, without knowing, if you aren't obsessive about checking.
For example: When the credit reference agencies (CRAs) hold incorrect information about you. Or accounts that don't exist and which have entirely fictional transactions on them, which of course are never paid because they aren't real and start flagging as "overdue", because some utility leaves accounts that are closed open in the CRA files for years later, and then add bogus transactions years later, which magically disappear when you ask the company if you owe them anything (I'm looking at you BT).
In the UK, if your CRA record address doesn't match a local government address for you, there's quite a severe penalty to the credit score. Most people don't know that, but CRA data often has errors like that, which can be difficult to correct (I'm looking at you Equifax "it will take us 8 weeks to respond to your complaint, and please send us a copy of your passport").
Eventually you may find this out and call each of them individually to make a correction. And then find, each time you correct it, it periodically gets replaced with incorrect data automatically, because some system has an incorrect address database and uses it to automatically "improve" data back to the erroneous version (I'm looking at you Experian).
In fact, there's most of the money the banks loan is not "somebody else's" at all, it's "loan money".
https://opentextbc.ca/principlesofeconomics/chapter/27-4-how...
There is (in simple terms) as much money as people can reasonably borrow.
That would completely eliminate the debt collection industry, secondary debt markets, credit reporting agencies, and so on.
But, raising taxes to pay for it is “too expensive”, so we pay orders of magnitude more in credit card processing fees, credit report monitoring, etc.
And you can not complain about any random company nuking your credit rating to zero after failed automatic payment. Seems only logical.
Had a friend who ran into that after Bell Canada billed his closed account. I was like "and what so?," but the guy was almost moved to tears.
Before that, I never gave regard to people telling that "you should be very cautious closing a bank account"
So not sure if what you say is the more social damaging scenario or the inverse...
Just pointing that across countries and cultures, human civilization has had a constant, throughout millennia, disfavor, of those lenting money, and of interest in particular.
When you default on your debt, it makes it much much harder on everyone else in the system. All other things being equal, your creditors (and their depositors) have to either accept lower interest rates as result of your irresponsibility or the other debtors have to be squeezed (1+1/n) times as hard, where n is the number of remaining debtors.
I am glad this cross-border credit reporting is becoming a thing, if anything.
"To welch on one's debt"[0], if I have to believe the Merriam-Webster diary, means to avoid payment, and has gained an offensive connotation. You might want to be more careful about your use of language describing such a sensitive subject as debt.
Defaulting on one's debt is not necessarily due to irresponsibility. People sometimes have really bad luck for example. Or they're just plain stupid, with insufficient regulation in place to protect them from their own limited intelligence.
One might also want to look at the context of borrowing, from a human perspective. I'll give just one example.
The lender side of the equation. There's plenty of irresponsible lenders, often with far too little regulation. My native Belgium has some interesting lending regulations:
* All loans taken by individuals are gathered in a database run by the national bank.
* Lenders are legally obliged to check the lending database before offering a loan, in order to assess the risk. If they don't, or if they recklessly extend a loan, the borrower can legally walk away from it.
* Lenders are required to obey strict APR limits [1], or they risk the borrower legally walking away with the principal, and without interest payments.
[0] https://www.merriam-webster.com/dictionary/welch [1] https://economie.fgov.be/nl/themas/financiele-diensten/consu...
I think the reason why our parents opinion is unpopular is because people usually account for diminishing marginal returns by acknowledging that the loss of utility one person experiences paying 1 is greater than the summed up loss of utility of two people paying 0.5 each, even if all three people are equal.
I think you're right in making clear that not paying what you owe doesn't need to be ones fault and can happen through inability, bad luck, etc.
Reputation, however, doesn't imply fault. Bad luck is evenly distributed and inability should be reflected in reputation to work as intended.
Regarding the policies you list: I think enforcing some responsibility regarding loans is a good thing, but:
The idea that there's a central, state run individualized debt database does not sound like a particularly great idea (thinking of system resilience, surveillance and potential leakage).
"I think the reason why our parents opinion is unpopular is because people usually account for diminishing marginal returns by acknowledging that the loss of utility one person experiences paying 1 is greater than the summed up loss of utility of two people paying 0.5 each, even if all three people are equal." This sounds like an interesting comment, but I'm not sure I understand you 100% right. Could you please elaborate?
"Reputation, however, doesn't imply fault. Bad luck is evenly distributed and inability should be reflected in reputation to work as intended." Totally agree.
"The idea that there's a central, state run individualized debt database does not sound like a particularly great idea (thinking of system resilience, surveillance and potential leakage)." You certainly have a point there. Of course, then the question becomes how to better reconcile system resilience, protection from surveillance and leakage. Any suggestions?
Scenario: you take a credit card with 11.9% APR. It goes to 14.9% after a year. You miss the payment by a day and it jumps to 23.9% or 29.99%. F them, if you could.
Genuinely curious -- aren't Experian and Equifax doing business in America to begin with? Why don't they have internal portability of their own data?
In the UK for example Experian is originally the result of running a mail order catalog company which offered credit and noting which customers (most of whom would have been housewives) paid and which did not. The government gives it privileged access to records of company directors and the names and addresses of registered voters, but it is obliged to give access to all data about people to those people for a small fee on request, and to fix any mistakes.
In the US the sources are completely different, and the laws are completely different.
I'm an ex-Experian employee but I don't believe I've said anything above that isn't public knowledge.
Keep as much info out of their hands as possible if they can't keep it accurate.
If a credit agency has incorrect info on you that harms you (financially or reputationally), they would have to compensate you.
They'd soon have a really strong incentive to check the info they report very thoroughly...
If this means more fraud/scam/conmen so be it.
So basically not protected at all?
At least banks will ask your SSN to verify your identity. The health industry just asks for your DOB.
(Example is in the US. Social Security Number, Date of Birth)