Depends on the debt. If they can be paid off prior to closing, this is not true. If they are a foreclosure or bankruptcy, the waiting period is 3 years assuming extenuating circumstances (Life Happened, not just "I didn't want to pay my mortgage"). Refer to Fannie Mae, Freddie Mac, or FHA underwriting guidelines for specifics (lots of complexity here around non-QM originations, overlays, portfolio loans, etc so the answer will always be "it depends"). FHA is 3.5-10% downpayment required, depending on credit score.
(sources: have been foreclosed on after buying at the peak prior to the Global Financial Crisis, had judgements erroneously on my LexisNexis risk report for over a decade, have family in the mortgage banking industry [specifically mortgage underwriting], did a brief stint as a contract mortgage underwriter in my early 20s, and am very familiar with navigating creditor law but am not an attorney nor your attorney)
That's true in theory, though in practice any house you would actually want to live in is going may have a bunch of buyers competing on it and having an FHA loan (or VA, sadly, or USDA) ensures your bid is in last place. However, there are some conventional lenders that will do 3% if you get approved for PMI.
And yeah, some creditors will do pay-for-delete in which case you may be fine. If you have more than 1 that won't though you may have a hard time, especially if it's not due to medical or something easily justifiable.
> And yeah, some creditors will do pay-for-delete in which case you may be fine.
Pay for delete is paying to have it removed from your credit file by the data provider (either the creditor or their debt collector). This is distinctly different. You pay the debt and provide confirmation the debt was paid. Whether it is still on your credit file is immaterial to close. It's paid? You close.
(the guidelines are what makes the originated mortgages conforming, and able to be bundled for securitization and sold into the bond market; to understand mortgage guidelines is to be able to hack mortgage financing)
> Whether it is still on your credit is immaterial to close.
Not if your score is tanked from having collections on it. Again, there are guidelines, but then there’s the real world. In the real world FHA loans means any desirable house you can’t buy and if you don’t have a decent score you’re not getting PMI.
You can file a dispute[0] about items with credit reporting services. The reporter has a time window to reply with supporting evidence. If they don't, you win the dispute by default. If they do, you can dispute it again.
I had a completely BS negative mark on my credit report[1]. I ran that process in a loop (maybe 3-4 iterations IIRC) until the reporter was either bored with it, annoyed by the paperwork, or on vacation until after their deadline. They didn't reply in time and the mistaken mark went away.
You shouldn't abuse that process to get rid of legitimate reports. In the long run it's easier to just pay your bills as best you can. But the credit reporters have all kinds of processes they can use to ruin your day. You absolutely should use the processes available to you to make sure your report's accurate.
[1] In before "you must've done something wrong!" Nope. A large government agency claimed I owed them money. I had all of the receipts showing that I paid in full. I eventually had to involve my senator, resulting in an apology letter from a very high ranking official (and I'm sure a few chewed butts). They didn't get around to removing the derogatory report, though, so I did it myself while waiting for the second senator inquiry to wrap up.
You write them a polite and direct letter (or email or webform or...). A couple of things to remember: 1) They literally work for you. You (collectively) elected them, and they get a salary to represent you. That's their job. 2) YMMV, of course, but by and large representatives love helping their constituents. It's the official reason they ran for office in the first place, and a lot of them take that seriously. And cynically, it also looks great come re-election time.
My letter looked like:
"Senator Schmuckatelli:
Please get ${federal_organization} off my back for a debt I already paid to them. # <- "BLUF", or Bottom Line Up Front
${federal_organization} claims that I owe them $X. However, I have receipts proving that I already paid that amount in full. (See enclosures A through J.) They have threatened to garnish my tax returns and wages (encl. K, notice of garnishment), and as a hard-working plebe, I can't afford that. I have written (encl. L through P, copies of my letters) and called them multiple times (encl. Q: call log) multiple times without receiving a reply.
As my senator and beloved Protector Of The Little People, could you please contact them and ask them to stop trying to collect this invalid debt?
Many thanks, and see you at the polls!
- Me"
Tell them at the start of the letter what you'd like them to do. That helps them sort your mail quickly into the right bucket. Then make your case clearly and concisely, including all the evidence you might have. You don't want them to have to look at a wall of text with a phone book's worth of unlabeled paperwork. In short, make it easy for them to help you.
> I have had substantially more at-bats with debt collectors than most people, as a result of an old hobby of writing letters on behalf of debtors to their lenders and non-affiliated debt collectors.
What kind of "old hobby" is this? My hobbies are.. well, ok, I do help my family with their various enterprises in my free time.
To be fair, it took writing this comment to make the mental leap :D
Off topic: I've ignored any medical bills I thought were unfair for 12+ years. It's probably over $10k in bills altogether. It's never shown up on my credit reports though (I check often and bought a house last year). So your results may vary. In the mean time I just throw out the debt collector bills as I get them.
> A statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt. Most statutes of limitations fall in the three to six years range, although in some jurisdictions they may extend for longer. Statutes of limitation may vary depending on state laws, the type of debt you have, or the state law named in your credit agreement.
Someone in a similar situation to yours might consider researching your state's statute of limitations on debt, and if your debts are expired based on that statute, file a complaint with the CFPB, FTC, and your state's attorney general to report a debt collector's FDCPA violations. Not legal advice.
Mine too, nothing better than someone who agrees to a service then decides later that they aren’t going to pay because now the deal is “unfair.” Screw the system!
When they agreed to the service 12+ years ago, were they shown the costs? Would you say their purchase was fully informed? Hell for all we know it was an ER visit and they had absolutely no say in the matter.
That reminds me of the time I went to my favorite local restaurant for my annual complimentary dinner and received a bill the following month for $150 then received another bill several weeks later for a further $175.
More like you went to your favorite restaurant and wanted the fish but there was no price on it, and when you asked how much it would cost they would ask if you had insurance or not because that would determine your price, so you say no insurance and they say okay well it could cost anywhere between $10 and $1500 and then you get the fish and enjoy it and they give you the bill after and it's actually $10,500.
Don't forget the social shaming where the waiters act like you're ridiculous for possibly caring about how much the fish might cost. No well defined consideration means there is no contract. No contract means there is no legitimate basis to bill for anything more than reimbursement of costs that have been actually incurred.
> Hell for all we know it was an ER visit and they had absolutely no say in the matter
This has been tried in case law, and failed. Even if you're documented unconscious, the EMTs are allowed to make a good faith assumption that you want reasonable efforts of resuscitation. Look up "implied consent" laws.
You plead poverty with the ambulance company and hope they'll settle on a reduced amount with you. They may also put you on a payment plan, or report non full on time payment to the credit bureaus. Sometimes all 3.
The EMTs assess your financial situation before deciding if you can afford their actions?
(Charging people for emergency treatment is one of the most insane aspects of the US system, and we need to fight it as long as possible in the UK before it gets inflicted on us)
I understand how it works, I think you’re missing the thrust of my point. Buying a car for an agreed-on price is one thing. Opaque medical billing where we don’t even know what is covered, let alone what it costs, is very different.
I can count on one hand the number of times in my entire life that I've agreed to a price for a healthcare service in advance and they actually billed me the agreed upon price and no more.
Dentists tend to work that way. Now, the price they'll charge for any given service is super-arbitrary, as is what they'll claim you need. But they will quote you up-front for what they'll be charging you.
I'll provide an example...while heavily medicated after breaking both of my legs I signed something on an Ipad, once. I asked for a copy and they weren't able to provide me one. After more than a dozen phone calls I was finally able to get a copy. But that involved figuring out whether it was the company that rented me the wheelchair, the company that billed me, the company that billed my insurance, or the company that owned all of those companies. They provided me three documents I had signed with not the same signature on them. Then when I asked them to pickup the 'rental' that they never told me was a rental, it took five phone calls and over two weeks (during which time they billed me and my insurance for another month of renal). They finally came and picked it up within three hours when I had the news reporter who covered my accident get in touch with the CEO's office.
I reported all this, with call recordings, logs, notes, etc. to my insurance's fraud hotline and they closed the file without doing anything.
Much of health care in the US is wrapped in a blanket of outright fraud. You can't agree to be a victim of fraud. Until I get to charge them for the time I spend correcting their billing mistakes I am totally fine deciding what bill is appropriate and what bill is not on my own.
Let me describe the situation the other person is talking about, with two examples that happened to me in the past year.
1. I scheduled a colonoscopy with a hospital. They charged me $300 for the procedure, which I paid up front. Everything went smoothly and there were no delays, complications, or followups. A week later they sent me a bill for over $1k. They had not applied my $300 payment towards the total. They had not waited for insurance to reimburse them. They simply decided they could arbitrarily charge me more, and they did. Fortunately, my wife is somewhat familiar with medical billing and we did not pay. Insurance reimbursed them, then we called them and told them to apply the $300 we had already paid, at which point we owed nothing. If we had paid the $1k+ bill, I am sure we would not have been reimbursed.
2. I went to a clinic for a minor sports injury. They charged me a $60 consultation fee which I paid up front; I then spoke to the doctor for 15 minutes and got a prescription. A week later, I got a bill demanding an additional $180, and in that bill they claimed they had already been paid by my insurance. I checked with my insurance provider and found they had not even filed the claim yet. I ignored the bill, insurance reimbursed them, and they have not contacted me since.
Your characterization is ignorant of how scummy medical billing actually is.
FWIW for #1 if you had paid the fraudulent $1k bill, after your "insurance" paid you could have likely spent more time on the phone with the provider and gotten them to refund you. Of course if you had paid the fraudulent bill promptly they might not have even bothered billing your "insurance", meaning even more time/rounds on the phone in order to get them to do that.
> Your characterization is ignorant of how scummy medical billing actually is.
Concur completely. I once lived in a state where "Balance billing" was illegal, yet despite having a bluechip insurance plan, seeing some physicians in-network AND paying the co-pay at the same time, I could always count on being balance billed.
GRRRR. Talk about a seriously ticked off customer. Given what I know about medical billing though, I would not be surprised to hear that insurance companies were likewise trying to bilk the practices, forcing these shady responses (My wife's practice has an in-network private practice model, but insurers refuse to accept the billing rates they agreed to as a part of contract with the practice, and they play an intentional game of denials after previous authorizations, or, they intentionally send patients checks which the PTs go and cash, and fail to reimburse the practice)
> nothing better than someone who agrees to a service then decides later that they aren’t going to pay because now the deal is “unfair.”
I would agree for any medical transaction where the price for the service was disclosed prior to the transaction. Hell, I’d even agree if an estimate with a low and a high range were provided.
I don’t know about you, but in my lifetime the number of times this has happened rounds to 0%. And I ask for the price at a rate significantly higher than the average medical consumer.
So, since the entire industry has completely and totally failed at price transparency, then I’m completely on the side of someone who makes this decision.
Until our latest insurance, Ive never had a medical interaction in the US that didn't involve my wife fighting some midwit over the phone for an hour over billing mistakes.
She's probably saved us $5-10k, probably $50k for her extended family (about five nuclear families)
You standing on this system like it is worth defending is pathetic. You are lower than a worm if you can't see the inhumanity of the system and how defending it is anti-human. If I heard you say something like this in person you wouldn't do it again.
I've done the same, with the same results, because I've rarely come across a medical bill that is actually correct.
I'll call the provider once and explain what's wrong with the bill. Either they fix it, or I ignore them completely after that. Their bills go straight to the trash unopened.
Frequently as soon as you explain they need to fix something they just completely drop the bill for the same reasons as in this article: It's simply not worth their trouble to bill accurately, and they don't have the ability to do so. (And I'm talking about the provider here, not a debt collector.)
I've never once had a provider actually fix the bill, the closest I've gotten (just once so far) is a "courtesy credit" to make the bill what I told them it should be, and I paid that one.
All the others didn't fix the bill, so I didn't pay them.
Yeah, to fix it would mean giving the insurance back the money on whatever was wrong.
The whole system is a mess. I had a bill rejected by the insurance as a duplicate. No, but I could easily see why they thought it was--and they told me how it should be billed so it wouldn't be rejected. Call the lab, tell them what they did wrong in the billing. They resubmit unchanged. The insurance won't accept my statement that it's legit. Call the lab, simply offer to pay it at the negotiated rate (which is all I was after, the deductible wasn't met.) Round and round--finally the insurance rejects it as billed too late and the whole thing goes away.
Is there a chance for a HN starter upper to "fix" some of this (or at least a service to tell you what to do), or is it just too spaghetti like? Not from the US so haven't experienced it.
The same thing that's keeping the biller from doing it correctly will also keep the startup from fixing it.
Unless you intend it to be a manual process, which isn't practical since you'll need info from everyone that's going to be hard to collect, i.e. the same problem the biller has.
The way it used to work was the biller charged insurance, and insurance paid, and that was the end of it. No one ever double checked anything.
Obama (with Obamacare) changed that - now everyone has a high deductible, insurance pays part, but you pay part. And suddenly people are motivated to check the bills.
Realistically the biller just drops bills where the person has to pay, and they live off of what insurance pays automatically.
The "on paper" of what American health care is, vs the reality are very different. The reality is weirder, but better (by better I mean less expensive than it looks on paper).
Also businesses that could have been profitable, but failed due to being out competed by businesses that secured 10X the venture capital and sold things at unsustainable prices for years.
Treating one part as the 'product' and other as 'waste' is merely a matter of perspective.
Eg in the early days of web search, think Yahoo and friends before Google showed up, someone might have shown you a banner ad, but most of what is now used as essential data to target the ads better was just 'data waste' that only showed up in server logs at most.
Support, speaking as someone who for a while built a cottage business out of providing it for stuff I didn't build.
It has several flavors, but there are some common themes and causes. Developers simply like writing code more than they like writing documentation, and they like writing documentation more than they like maintaining old codebases. Meanwhile, software vendors of all kinds have universally decided that they shouldn't be spending any money on any form of technical support that comes with a heartbeat.
Down in the home and small-business markets, there are a lot of people that get absolutely screwed by this. New software comes out, something tries to auto-update (or the user is forced to update), something goes sideways, and ... that's it. Stuck. Nobody to call. Some really sharp Google skills once upon a time could sometimes find an answer, but even that's thoroughly rotted out now.
So if your small business has your entire customer database in an old version of Quickbooks running on the office PC with Windows 7 configured by the last tech to stop complaining about updates, and then one day Quickbooks refuses to launch and displays instead an obtuse error message ... what do you do? For a while, you could call me, and for several years, I mostly enjoyed building a business out of fixing these sorts of things (and helping people navigate the sometimes very tricky update process so that this wouldn't be a recurring problem).
Unfortunately, software kept getting worse, documentation kept getting harder to come by, Google kept getting worse, everything kept getting converted into subscription SaaS (which meant that most of my answers started becoming, "yeah, that's just how it works now, I can't do anything about it, yeah, it sucks, yeah, lots of other people are complaining too, no, there's nobody you can call, sorry"), and I never felt good charging a lot of money for getting people out of bad spots.
I eventually noped out of this in favor of relaxing for a while in a slightly less hopeless part of the industry, but there's still a huge, under-served market of people who are getting hosed by sociopathic technology and would pay someone just to make it work again.
You are getting a lot of troll replies, but it is actually interesting to think about.
The waste is uncaptured value. It is some part of your software business's domain that is just too hard, expensive, or requiring physical intervention to encode the process in their system. So the business never chooses to build that feature. This leaves some part of your business's problem domain unsolved. Potentially someone else smaller could come in and try and solve that problem and capitalize on that wasted value.
> The former advocate in me will observe that the single most effective method for resolving debts is carefully sending a series of letters invoking one’s rights under the FDCPA (and other legislation)
Can we get a summary of which letters / rights to invoke?
That is an interesting read indeed. I found the parts about not showing anger and not pretending to write like a lawyer to be particularly illuminating.
this was an awesome article that I think will literally help myself and others in dealing with bureaucracy of any kind. Wow. saved that one. As well as the things the other commenter mentioned I liked the parts about finding who to write to at large companies. very useful
There's a point in this article where Patrick suggests you Google "litigious debtor scrub" to confirm a point he's making, and when you get to that point --- not before --- I highly recommend doing the search and reading some of the links, because they're pretty funny.
> I will bet you that, in practice, they simply avoid collecting against anyone who demonstrates ability and financial resources to enforce their rights. This is one for the history books of borked equilibriums. We devoted substantial efforts to pro-consumer legislation to address abuse of (mostly) poor people. We gated redress behind labor that is abundantly available in the professional managerial class and scarce outside of it, like writing letters and counting to 30 days. (People telling me they were incapable of doing these two things is why I started ghostwriting letters for debtors.) We now have literal computer programs exempting heuristically identified professional managerial class members from debt collection, inclusive of their legitimate debts, so that debt collectors can more profitably conserve their time to do abusive and frequently illegal shakedowns of the people the legislation was meant to benefit.
That is such a common pattern. Growing up, I saw the same happen with the German welfare system: there's enough of a social safety net in that country that no one would have to be homeless. But, to access the social safety net, you have to navigate some minimal amount of bureaucracy and paperwork.
That bar isn't very high, but if you have at least that minimal skill with paperwork literacy, you are also much more likely to have a job and much less likely to need the welfare.
So all in all, Germany still has homeless people, despite welfare programs generous enough in principle that no one needs to be homeless.
Addendum: Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much etxra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
This is the same with tax collection in the US (seen different versions of this done by IRS, California’s BOE and SF treasury)
It goes something like this: they send you a scary looking letter telling you there’s something off about your taxes, you then need to call them (because they don’t do email and mailing anything will go over the time limit to comply), then they tell you more in detail what the problem is and push you to amend your return forms, once you do, you’ve legally accepted liability for whatever extra taxes they convinced you you owed (and will have to pay)
What most people should actually do: they send you a scary letter, you tell them to audit you, usually they’ll stop here, if they audit you and make a final assessment against you, you tell them you want to go to court, they’ll almost definitely drop it at this point, unless you actually owe them taxes and it’s such an easy and big case that they are willing to go through the trouble
Most people will just amend their return forms and pay, because it’s just too scary to even think of going against these agencies
Perhaps you have had a different experience but the IRS has always been polite and helpful in the few cases where I had income tax disputes. The key is to follow the process instead of trying to argue with bureaucrats or treat them as enemies.
Compliance deadlines are measured in months. You have plenty of time to mail responses. Usually they'll put a hold on collection activities while you have a dispute pending.
It depends on the situation. They might be polite but unwilling to budge on the issue.
My mother had a problem back before "identity theft" became a common term. Apparently someone used her SS# with their employer. The IRS was coming after her about the unreported income. Hey, that's not mine! Contact your employer and get it fixed. I've never heard of them let alone worked for them and I can't find them, can you give me their address? (This was pre-internet.) No, we aren't allowed to, you need to get it fixed.
I went off to college at that point and never learned how it ended up.
Sent me a letter saying that because I had filed my federal return with my Arkansas address I clearly lived in the state, and because I hadn't filed a state return they were assessing taxes on me for the entire year at the single rate.
I called and they said the same thing, I interrupted them and said "so should I tell California to fight you over this money, since I lived there until (XX/YY/ZZZZ)?" Oh and here's my AR lease, here's my CA lease, my CA tax return, me transferring my license to an AR drivers license, and me transferring my vehicle registration on (XX/YY/ZZZZ). Anything else I can help you get from the state, since you don't seem to have access, but do from the feds.
I got the most sheepish "this case is resolved" letter from them <72 hours later.
The welfare system requires more than a minimal amount of paperwork, and a lot of people are surprisingly bad with paperwork. Then you have immigrants who don't have access to this system, or are afraid to use it.
> "a lot of people are surprisingly bad with paperwork."
I guess you're writing for a class of people for whom this is easier. But perhaps a more informative view of the situation, rather than saying "people are bad at this" may instead be to realise that if you're able to deal with this sort of stuff without issue, you are very likely in the minority (very few are as good at this as us). This can perhaps inform how you feel about certain requirements for certain programs.
As an illustrative example, a great many otherwise highly capable people who are able to write impressive art or fiction (including for example, many famous musicians and authors) struggle mightily with contracts and managers on the regular.
A little over a decade ago I knew a young adult in the US that had a pretty rough life and I was trying to help her get back on her feet.
When you’re homeless, it’s hard to get mail, and hard to keep your stuff; going from nothing to your standard documents is tricky.
To get your birth certificate, you need to write a check to the state at some address where you’ll be able to receive mail in 2-4 weeks.
Once you have that, you can go into the social security office and request a replacement social security card. Which they’ll mail to you in 2-4 weeks. There’s also a lifetime limit to how many times you can replace your card, which is surprisingly small.
State ID cards also get mailed to you. Moreover, you need to provide proof of your address, and the address gets printed on the card. We used my address, but no good deed goes unpunished - the address on your ID card gets published in the paper when you’re arrested. Then my nosy neighbor asks if everyone is alright because someone living at my house got arrested for possession of meth.
On top of each of those steps costing money and being hard to do when you’re homeless, there’s a dependency chain. You got to do them one at a time.
Navigating the public bureaucracy is an annoyance for someone in what patio11 calls the professional/managerial class. There are other social strata’s where it’s a virtual impossibility without help. That’s important to keep in mind when you’re thinking about welfare bureaucracy or voter ID laws or anything like that.
> That’s important to keep in mind when you’re thinking about welfare bureaucracy or voter ID laws or anything like that.
Amen to that. Though luckily while it's huge problem for the former, it doesn't matter for the latter. (Because individuals by and large don't benefit from being able to vote. Voting is at best something altruistic, individuals do out of civic duty.)
Is there supposed to be a restricted demographic with a monopoly on identification? The overwhelming majority of Americans have one. Even the large majority of any given minority group does. And if this is a legitimate concern it could be mitigated by, for example, making it free to get a state ID. Address whatever prevents some people from having one, instead of not requiring it.
But also, isn't your disaster scenario the thing that happens in a democracy regardless? Majority rule when you're the minority.
What you're left with is the fairness argument: It's supposed to be one person, one vote. But that's the argument the proponents of voter ID make.
Have you read the rest of the discussion, or at least the comments higher up the chain?
> Is there supposed to be a restricted demographic with a monopoly on identification? [...] mitigated by, for example, making it free to get a state ID.
We were talking about how many ostensibly free resources, rights and welfare are gated behind paperwork and bureaucracy. The discussion was exactly about just making something free is only a small part; and most of the time money isn't even the biggest hurdle for poor people.
I don't have too strong of an opinion on voter id laws. (I grew up in Germany where approximately everyone a government ID, and you need it for voting. And that seems to work ok. And the US system of mostly not requiring voter ID also seems to work ok.) But despite my lack of opinion on whether those laws are good or not, I can understand that just making ID cost $0 misses most of the hurdles in practice.
But isn't that the point? You have to address the other hurdles too.
For most benefits programs that is still going to be necessary even if you remove means testing, because some kind of identification would be necessary to keep someone from claiming the benefit an unlimited number of times. Which is the same as the problem with voting.
Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much extra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
That works for medicine because nobody wants two appendectomies. But plenty of people would want a second apartment, an unlimited amount of subsidized food they could resell, another UBI or social security payment etc. Then everyone backs up their truck to fill it with a fungible commodity being offered below the market price.
The biggest problem with most of these things isn't that they require ID, it's that they require means testing. Showing your ID is, I mean, you take it out of your pocket. We could make one sufficiently easy to get and then it works for everything.
But if you also have to show that you're currently unemployed but previously made an amount of money within the eligibility threshold but haven't been unemployed for more than six months to collect unemployment and then show that you don't have investment income more than some other amount to get food assistance and then show that your household income is below some other threshold to get housing assistance etc. etc., that's a hot mess.
The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork. But it still requires something basic to keep you from getting more than one.
You can give out welfare without id or means testing: just require people to hang out in a specific place, and give them eg five dollars each hour.
It's a terrible wast of people's time, but it solves the specific problem.
> The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork.
Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
> You can give out welfare without id or means testing: just require people to hang out in a specific place, and give them eg five dollars each hour.
You can do this, but is that supposed to be less burdensome than requiring ID?
> Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
That's fine from a theoretical perspective, but the practical point is that it doesn't require separate means testing paperwork for the transfer payment.
> At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
Only in the sense that it would remove the means testing whatsoever.
If you look at the effective rate curve of a flat tax - UBI, it's quite progressive and can be made arbitrarily so by adjusting the tax rate and the amount of the UBI. And this is in fact the preferred way to do it, because phase outs for existing benefits programs are often higher than tax rates paid in higher tax brackets, especially when combined with a lower but still non-zero tax rate at low to middle income levels.
Switching to a flat combined tax-and-phase-out rate would be no less and possibly more progressive than the existing system, while also being vastly simpler and require no means testing paperwork or privacy-invasive income tracking of any kind.
I agree that individual votes by and large don’t matter, but when public policy makes it harder for an entire class of people to vote, that does matter, especially when there’s a correlation between the class of people and policy preferences.
The really shit side: its impossible to change your drivers license (which is your "official address") to homeless.
And if you get sued, they send your mail to that former address, regardless if you ever get it.
And, well, I was sued. My parents destroyed my mail. And had a summary judgement against me on a case I didnt know exist, to an address I couldn't change cause I didnt have a new one.
German driver's licences don't normally have addresses on them. You can easily find example pictures of them with an image search on the web.
> If legal actions were to occur involving an average person, how does that person get notified?
The authorities send you a letter at the address that's registered with them (if you have one and they have one). That system is just completely independent of driver's licenses.
Your government ID card and passport do have your address on them (if you have one).
Interestingly, I also don't have a fixed address in Germany, because I haven't lived there in a while.
Officially, you need to tell them that you are leaving, but for the longest time I did not. (Mostly out of laziness.) They tracked me down once in Singapore to remind me to pay back my student loans, and I dutifully complied.
My passport shows my Australian address, because that's where I lived when I last had to renew that document. (And it also only shows that I lived in Sydney without any further details. German addresses would tell to the street and number etc.)
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Just to summarize: Germany does have many of the same issues in general (but the exact details vary). It just so happens that in Germany this system does not intersect (much) with driver's licenses.
Mostly because Driver's licenses are not used as general ID cards in Germany.
Singapore has many systems, rules and laws that would not and could not work elsewhere. It's great that it works for them, but it doesn't work in the USA, or most other countries. I will point out that they are an affluent, monocultural, somewhat xenophobic, authoritarian and borderline fascist city-state.
Singapore has only recently become affluent, mostly thanks to hard work by the locals, but also partially thanks to policies that did not discourage people from putting in that hard work.
I'm not sure what you mean by monocultural? Singapore is famously multicultural.
Singapore is very open to foreigners. Almost no one's family has been here for longer than three or four generations. I'm not sure where you get xenophobic from? (However, they do like some foreigners more than others. Just like in the rest of the world, people who came from affluent places to spend money are typically the most welcome visitors.)
Authoritarian might be true, depending on your definition of the world. To call them 'borderline fascist' you'd need a rather torturous definition of fascism (or a generous definition of borderline).
Yes, Singapore is a city-state. For comparison, Berlin and Hamburg are also city states in the federal system of Germany and enjoy considerable autonomy, but with less success. I agree that more cities should become independent and be better run as city-states. London would be an interesting candidate.
> To call them 'borderline fascist' you'd need a rather torturous definition of fascism (or a generous definition of borderline).
Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
No, it's well known to everyone everywhere that trafficking drugs into Singapore will get you a death sentence. Those drugs destroy families, they absolutely destroy families.
not really. fascism isn't just "doles out severe punishments." It's a slightly tired trope to trot out Umberto Eco's definitions of fascism but suffice to say it's a name for a political tendancy that appeals heavily to imagined glorious history and family while stoking fear of a destabilising influence within society, taken to extremes. It usually also emphasises emergency needing reliance on strong leaders and distain for comittee and taking time to make right decisions that work for everyone.
Sometimes people get all upset when they hear some of these characterisations, because they personally think family ought to be more important, or that people are ignoring a proud shared history. Maybe they feel that beuracracy and comittee meetings have led to overcomplexity. It turns out as with anything else these things are perfectly fine and not bad until this way of thinking becomes the sole goal of the leading class, they become highly authoritarian, and it lashes out more and more at any percieved imperfection in society regardless of severity.
Does this fit with singapore, to a greater or lesser extent? I really don't know. But I understand why people would feel annoyed by simplifying it down to "strong laws against drugs"
Fascism is very specifically about about the subordination of all competing spheres to the State. "All within the state, nothing outside the state, nothing against the state."
> Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
No. Why?
Singapore goes up to the death penalty for trading in drugs. Consumers of drugs face punishment, but not the death penalty.
In any case, harsh punishment does not make anything fascist (nor does comparatively lax punishment make something not fascist).
Eg the US is not fascist, despite them handing out harsher sentences for eg drug offenses than other parts of the world (or even the US itself at different points in time).
(Just to be clear: I like living in my adopted home of Singapore. I disagree with their drug policies, and think drugs in general even 'hard' ones should mostly be taxed, not banned. But I don't harsh punishments for some behaviour is a sign of fascism. Especially if the laws are clear and knowable, and there's a scrupulous legal system that predictably enforces these laws for all without prejudice.)
> Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
No.
Fascism, of course, tends to incorporate harsh punishments for (at least some) criminals, but that's neither central to fascism nor is it sufficient for fascism, you don't get anywhere near the borderline of fascism just with ahesh criminal punishments forbthings that are widely criminalized in liberal regimes.
It may be bad, but not all bad things are fascist.
Singapore may be many of those things but it's not "monocultural". Besides the fact that it has 4 official languages, foreigners make up about 30% of the resident population - a much higher portion than the USA, for example!
> [...] foreigners make up about 30% of the resident population - a much higher portion than the USA, for example!
I mostly disagree with acyou's comment, but since Singapore is a city as much as a state, the more enlightening comparison might be with how many of eg New York City's residents were born out of town? (Or perhaps how many of NYC's residents were born out of the country? It's murky, and there might not be one best comparison.)
In any case, I agree that Singapore is not 'monocultural'.
To push your point a bit further, my high school History teacher (I went to HS in NYC), would constantly remind us that New York was nothing like the rest of America.
I think they're using this to mean "doesn't have a visible ethnically different underclass". Such a thing would never be allowed to be visible in Singapore.
Similarly with the British system, especially the disability system. You have to fill in a 160-page form and turn up to an appointment. They interpret everything you have written on the form as evidence of ability, including turning up to the appointment itself. Ability to fill in a form and turn up to an appointment is used as evidence that you should be capable of having a job, and are therefore ineligible for help. You are denied.
You then take the case to tribunal, where it is put in front of a normal non-rigged judge who interprets the law in a reasonable manner, and are awarded your disability benefits.
This process takes about a year and is basically impossible unless you get help from someone who is "professional managerial class" enough to work the system for you.
Coda: periodically they write to you to check that e.g. the two legs you lost have not grown back. This must also be dealt with.
Sounds about like my understanding of how disability works in the US, also. If you have one clear-cut showstopper it's not a problem but anything else expect to be denied and you probably have to hire a lawyer.
> So all in all, Germany still has homeless people, despite welfare programs generous enough in principle that no one needs to be homeless.
One of the reasons is that for being part of those programs, the people have to want to be re-integrated, leave out any kind of drugs that there were using, take part in employment trainings,... and not everyone is keen in going through that and rather stay on the streets.
I would formulate it slightly more cynically: to be part of many programs you have to go through the right motions so that the civil servant in charge can tick the box that says 'wants to be re-integrated' etc.
If you are literate enough with bureaucracy and paperwork, that's not too much of a hassle; and they can't really look into your heart and see that you'd really rather sit at home, collect welfare and play computer games, compared to working a low paying, entry-level job.
But the skills that make this dissembling easy are also the same skills that make holding down many kinds of job easy. Especially low level, white collar jobs. Conversely, the people who can't get nor keep a job or also likely to lack these skills and preferences for playing the bureaucracy.
> (like eg the British NHS does, modulo the option to go to a private hospital for enough money)
IME it's more complicated than that.
Firstly, the NHS allows consultants to do private work, making use of NHS resources, including beds, radiography and theatres. Secondly, a consultant can refer you back to the NHS for treatment, effectively "jumping the queue".
I would never rely on a private hospital. They never have an emergency department, and emergencies happen in hospitals too. Many private hospitals can only treat certain types of case; I wouldn't want to be stuck in a hospital that couldn't treat anything that happened to me.
> Secondly, a consultant can refer you back to the NHS for treatment, effectively "jumping the queue".
The patient would go to the back of the NHS queue, so I'm not sure how they're jumping anything.
The real problem is that private healthcare over-treats people with unnecessary surgery, and cherrypicks the easy stuff, but dumps patients back into NHS care as soon as they get complex.
> The patient would go to the back of the NHS queue
This is not true.
I went to the NHS over my kid's glue-ear. We had to see a consultant, but the earliest appointment was 9 months, and the hearing problem was impeding our child's language acquisition. So we went private, and had an appointment with the consultant in a few weeks. The consultant recommended surgery to install grommets (wow!), and a few weeks later we attended for NHS surgery, to be performed by the same consultant.
This was 30 years ago; but I've been told recently (a couple of days ago) that this still goes on.
Weren't there reports back in the Occupy Wall Street days of people organizing to buy up debt like this and then just forgive it all?
It sounds like debts are sold in such bulk that there's no way to do something very targeted, like starting an org in your town to buy debt from your ZIP and collecting contributions to cancel your neighbors' debts, but if these debts are already only worth 5¢ on the dollar to the sellers, it seems like it would make quite a news story if you could.
If I could buy up $2000 of my neighbors' debt for $100 and remove that burden from them? I think I would, at least occasionally.
But even if you don't assume goodwill, if the whole community knew the plan was to buy and cancel everyone's debt, you could probably get the debtors themselves to band together to do it!
People are less likely to pay their debts if they think their debts will be sold to someone who will forgive it, so the debt issuer's other non-written-off debts will be harder to collect (since now those people know that they might be able to get out of their debts by waiting and hoping they get sold to a debt-forgiver).
That becomes a problem if debt forgivers become a large percentage of purchasers. It doesn't "only work the first time", it only works as long as you're in a tiny minority, which will likely be forever. The debt issuer won't take notice until the value of their debt starts to drop.
The debt issuer would note that they had to write most of that debt off, so the credit score impact will mean that the same borrower will have a much harder time getting another loan.
Ah, you're interpreting it differently: I took them as saying that you can only buy debt and forgive it once, not that you can only have your debt forgiven once.
I never heard of buying credit debt, but I had heard of people buying medical debt in this manner. I get and respect the medical debt concept. Credit debt though is a tough one. How can you tell that someone ran up credit debt because they were paying for medical bills or something vs debt financing shopping sprees or vacations? Giving those who fall on hard times help is admirable. Giving people bad at personal finance a free ride is not
Medical debt shouldn't be a thing in a civilized society. Credit card debt is a failure of the financial system to properly assess risk, credit cards shouldn't be that easy to get, and predatory credit card offers should be outlawed. Similar to how identity theft is somehow your problem when it's actually the banks and other systems that enable it.
I’m not sure saying credit cards should be harder to get is the correct stance. I saw a paper talking about the rise of payday loans came at the cost of pawn shops. Basically there is a lot of demand for short term loans, I would argue that better access to credit would help many people greatly.
The only thing I’m unclear on is how to avoid the predatory aspect. I’d assume that part of the usury terms of these kinds of loans is a response to such small amounts. Just paying the hourly cost of dealing with the transaction could put a $200 dollar loan into 5% territory without taking into account any risk profile.
I’d be intereted in running experiments similar to cash giving charities. Measure how much a $2000 line of credit does to improve lives (hopefully without making them worse).
This strikes me as the same as saying “but the homeless person might take my $5 to buy whiskey instead of a hot meal.”
Or, possibly more apropos to your example, “how do I know my medical debt relief payment goes to someone who truly Deserves It because of bad luck and not someone whose poor diet and exercise habits lead to their stroke?”
The system is designed to turn bad choices into bad luck - and the opposite - and to pass moral judgements on those who need help. Reject the framing and help people; most are good and deserving.
If you want to think of me in that tone, then fine, but I never caveated the medical debt. As the sibling comment to you said, medical debt in a civilized society is just wrong. So I really don't care why the medical care was needed. Helping people out of debt for medical reasons is commendable.
The thing I specifically caveated was people making bad financial decisions on their own. Sure, maybe giving an 18 year old $5k credit limit is not a smart thing on the creditor's part, but not everyone financing retail therapy sessions via credit is an 18 year old. The whole 30 thousandaire outspending their earnings for FOMO or keeping up with the Joneses or whatever does not seem like something we need to bail out.
There's a huuuuge difference from being poor serfs in the feudal lord's fiefdom than someone that can't say no to a sale but can't actually afford it and buys on credit.
Not the parent commenter but to chime in: I don't want to be a moral judge but I'd rather give money to someone actually poor than to someone richer than me that just lives beyond their means.
Frankly the vast majority of people with credit card debt I know still deserve relief. Even people who are under significant credit card debt due to frivolous spending— they likely need therapy or time to budget or similar but now they cannot due to the crushing weight and stress of credit card debt. Or they could’ve been able to pay it off but an emergency happened and they got laid off or they were already barely scraping by and now their car broke down or something.
I think we worry too much about what if undeserving people receive help. Most people are good people who just got caught out on something and could use some help getting themselves out of some goddamn 25% interest craziness.
I said that I wasn't familiar with the concept of buying credit debt, but specifically said I was familiar with buy medical debt. I then compare and contrasted how I feel they are different. I also said that buying credit debt isn't necessarily a bad thing, but due diligence should be applied to whose debt is getting wiped out.
You've spun into something it's not to make a point. Which I'm still not sure what it is
if you're talking about the random person that approaches you on the street, then yes, that's a high possibility. but there are homeless that are not addicts and don't necessarily live on the streets.
i think this confusion is something holding back progress on homelessness.
When you say “don’t give cash to homeless people” obviously you’re talking about beggars and street vagrants, not whatever demographic some NGO has decided to formally define as “homeless” in order to game the statistics.
First, I didn't say "don't give cash to homeless people" because I do have a very different interpretation of being homeless. The view you take sounds like you've been privileged enough to have never been homeless yourself. I promise you will think of homelessness in a very different manner if you ever have the misfortune of being homeless. I specifically modified the comment to call out addicts.
I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay. People that are not addicts can be put in making choices that they would never even consider in a normal situation, but we faced with sleeping in a car/street/public shelter, those choices suddenly start to look more acceptable. Even more so if you have kids.
> First, I didn't say "don't give cash to homeless people"
Sorry, I meant “you” in the general sense, not you personally.
> The view you take sounds like you've been privileged
Stuff it with the personal comments.
> I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay.
I have as well. And in my experience, at least with street people, it’s much better to give them bottled water and food than to give them cash. If it’s a family member or someone you actually know, that’s a completely different situation than what most people (not you, to be clear!) are talking about when they say “don't give cash to homeless people”.
> Giving people bad at personal finance a free ride is not
I get what you're saying but if you've ever gotten to "I now have enough credit card debt for it to be A Problem", the baseline level of stress in your entire life gets pretty high. That doesn't mean that suddenly everyone has "learned their lesson forever", but especially for stuff like "I was bad at personal finance in my 20s, and now I am better but the debt is still around and a problem", helping people with that debt can just make somebody's life much better.
Nothing is guaranteed but if it were a family member and you had a way to clear out some stuff for pennies on the dollar, it feels like the right sort of thing to do.
You've moved the goalposts with making it a family member. What about total strangers?
Student loan debt is an entirely different thing though. I'm still on the fence about student loan forgiveness because I specifically stopped going to school because I did not want to take on the debt. It's a sensitive subject, and I am sympathetic to it. I'd be much more open to 0%, or partial payoff to reduce the obviously bloated amounts the schools are charging.
I didn't mean to move goalposts, and I don't really believe this is something where you can be "right or wrong" about. Just expressing how I feel about it.
The thing I was implicitly thinking is that you might do that for somebody you care about, and ultimately things like debt forgiveness programs are also about giving compassion to people you might not know.
There are some non-profits specializing in buying up medical debt and forgiving it (e.g. RIP Medical Debt [0]). These non-profits usually rely on individual donations, and $100 can relieve as much as $10,000 of medical debt. They also frequently rely on donations from other organizations such as churches [1]. There are examples of churches buying up tens of millions of dollars worth of debt [2]. I'm not aware of this being done for other kinds of debts, although I would assume it happens.
The obvious limitation is that they only sell hopeless debt for pennies on the dollar - no lender will allow a community to buy all of their debt at a significant discount. You'll be able to buy your neighbors' debt only if your neighbour is either a complete deadbeat or their circumstances have changed so much that they are totally bankrupt; every other neighbor's debt won't be for sale.
> Many people have suggestions for obvious improvements here, which might rhyme with the Federal Trade Commission’s suggestions from 2010 or the Consumer Financial Protection Bureau’s spate of rulemaking from 2021 through 2023 or the FDCPA from 1978.
I would humbly suggest looking at how different countries deal with the same issues, and seeing what works and what doesn't work. Many of the differences will be cultural, some will be differences in laws and regulations. Some will be systematic differences, some will be down to random chance.
>they will use their substantial experience in dealing with people in poor economic circumstances to target the dates and times of day when benefits payments or paychecks have posted to your account. They’ll surge collection attempts at 3 AM on the 1st of the month, learn the differences between various banks as to when Social Security payments post, etc.
In an article full of eyebrow-raising statements this hits the hardest. Taking people's social security or welfare payments so that they might not eat is just so dirty
patio11’s prior writing on this topic helped give me the knowledge and fortitude to successfully dispute several thousand dollars of fraudulent claims that Enterprise rental cars tried to collect from me. As he alluded to, my high-FICO self felt morally bound to settle and pay for the dented bumper, but they definitely violated the FDCPA and some CFPB rules (in writing!), which I enumerated for them. Maybe if I went “all the way” I could have paid $0 and gotten on the litigious debtor scrub list, but I worried that could somehow have been held against me in the future.
Yeah, that line stood out to me... I don't know how many of those high FICO score people pay because of morality verse how many pay because they want to continue to have access to lower cost debt that having a high FICO score gets you.
Well, challenging the debt on legal grounds shouldn't negatively impact your FICO score.
Presumably also if enough people broke this system, debt collection would be forced to change in a way that made it harder for people to do this. It is perhaps better if people who can manage to pay it do, so people who can't retain the ability to exploit the bad recordkeeping in the system as it is today?
Eventually your challenge (assuming you win) will have any negatives removed from your FICO score, but it may remain for a time while the challenge is in process and during that time you don't have the high score. Worse the lower score may mean other changes to your behavior that affect your credit indirectly - if you don't take out a loan you would have for example.
> This effectively makes paying consumer debts basically optional in the United States, contingent on one being sufficiently organized and informed. That is likely a surprising result to many people. Is the financial industry unaware of this? Oh no. Issuing consumer debt is an enormously profitable business. 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.
They will likely appear on your credit report and will stay in there for 7 years. So yeah, prolly, if you're not planning on using your credit for 7 years.
He states that they typically won't sue you for debts of just a few hundred dollars, but if it's over $1000, then they're more likely to sue you in order to be able to garnish your wages and bank accounts, and/or file liens against your property.
So, "maxing out all your credit cards" it depends on just how much that maxxing would be.
Article is great, (with it being written by pat mckenzie that is almost tautological)
> The value of portfolios is a huge discount to the face value of the debts; at the point where a lender has only worked it themselves and the debt is a few months delinquent, portfolios generally fetch about 5 cents on the dollar. That value will continue to decay over time.
I agree with his point directionally (the value of the sold debt is far below the face value of the balance) but he is off on the absolute value. You can expect more like 7-15% after working the account for 4-5 months.
> Debts are conveyed to the debt buyers as large CSV files with minimal supporting documentation.
This is funny - it is true that just big ole csv files (only ever opened in excel of course) are the way the debt is sold but how else would you suggest it be done? And in my experience you provide the debt collections agency all supporting contracts and account documents for each loan.
If the contracts and supporting documentation were digitized, you could theoretically upload them to S3 or similar and include links to them in the CSV.
> in my experience you provide the debt collections agency all supporting contracts and account documents for each loan
This might be true for first party lender to first party debt buyer, but it often falls apart after that first step.
The article mentioned the chain of debt ownership and that, in my experience, is where contracts and supporting docs are lost. Once you're buying debt 3 or 4 steps removed from the primary lender the documentation becomes sparser and sparser, which is why as the article rightly said, most of these "last mile" agencies rely on people's ignorance and use a "spray and pray" strategy for debt collection.
My experience, from a large primary card issuer in the US, was that most of the major, reputable debt purchasing agencies would only buy primary debt portfolios that had _contractual guarantees_ about the accuracy of the supporting contracts and docs. They'd spend a lot of time and effort reviewing them, but they would in turn outright _refuse_ any such provisions when THEY sold their debt to smaller agencies!
It’s even more cathartic to show up in court with a motion in hand to dismiss with prejudice and a second motion barring them from both servicing and selling the alleged debt. That’s almost a money maker, since winning their suit entitles you to compensation for filing fees, and violating the second order can be wildly punitive if you haul the collector back into court.
It might be a very European view to the problem but: Why does the American government does even tolerate this credit card garbage business in the first place ?
We are in the 21th century. Most payment can be validated electronically and processed under 200ms. I can pay something with my phone and get money taken directly from my bank account within seconds. There is absolutely no need of Credit Cards where Debit Cards can perfectly do the job.
So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy ? For the sake of few profits in Wall Street ?
This is complete nonsense.
I understand why the credit card business was born in the first place: Amex, Visa and MasterCard has been invented in a time where electronic payment was still a dream.
In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
We are not in the 60s anymore. A cashless payment system does not need debt.
A lot of credit card companies offer cash back or redeemable points towards other purchases like for travel. If credit cards are used effectively (you pay back every statement balance) and the merchant isn't significantly raising the price of goods or services for transaction costs, you can make a serious amount of money back, easily in the amount of thousands of dollars per year from normal everyday use.
Edit: When I was referring to "transaction costs," I was referring to merchant fees
But those thousands of dollars are effectively subsidized by every one making a credit card purchase (e.g. merchant fees) - and not everyone being able/savvy enough to utilize them well
Consider how much cheaper things might be across the board with lower fees
That money still comes from your spending with the merchant, so ultimately out of your own pocket.
But you are right, that the system is not very transparent, and merchants probably seldom give people the full discount of the costs saved when they use non-credit card payments.
Most sadly don't give a discount for not using a credit card. I've only seen my local bagel place do that. Other places say they will charge a credit card transaction fee even if you use a debit card (which still has costs for the merchant but not as much as credit cards)
You can indirectly see some of this happening though: lots of places with lower margins (ie cheaper prices) won't accept American Express, but might accepts Visa and Mastercard. That's exactly because of the difference in fees.
If you go shop at merchant A that accepts American Express, you pay a higher price no matter how you pay. But if you have a non-American Express means of payment, you can shop at merchant B, which has lower prices overall (no matter how you pay). The economic effect is similar to directly passing on the fees transparently.
> The first one is just an hidden tax and garbage profits made possible only due to the monopolistic behaviour of credit card companies.
I'm not sure any supposed monopoly is necessary here to explain anything. In fact, there's no monopoly and different competing issuers have different levels of fees and 'rewards'. Eg American Express explicitly has high fees and high rewards, and competes against Visa and Mastercard (and against domestic systems in eg Germany or Japan).
A monopoly (or oligopoly or cartel) argument could perhaps explain why the smallest fees you can find are still 'high' by some arbitrary standard, but it couldn't explain why American Express is a viable competitor.
Moreover, it's an inequality engine. Get money from those who can't pay their bills (poor - they are punished bad back-breaking late fees and penalties) to those who can (middle class and the rich who usually pay their cards off in full every month so never pay any interest, and get cashbacks and bonuses/airline miles/etc).
A lot of the American consumer finance infrastructure seems to be set up like a regressive tax on poor people who can’t avoid using the system.
If you don’t have money, banks will charge you $15 / month for a basic checking account, plus $50 overdraft fees if you make the slightest mistake in balancing the account (or if a company makes a fraudulent charge on your account — also dismayingly easy in the US system).
If you have any reasonable income they start waiving the fees, and beyond that they’ll shower you with offers for credit card rewards and other benefits effectively paid from the massive windfall the banks and other companies collect from the poor.
The market isn’t solving this, so there should be more regulation and very tight caps on these various fees. A bank account shouldn’t cost more than $2 / month. An overdraft shouldn’t be possible unless you opt in to a loan facility.
Why is the market like this? It's naturally harder to make money off poor people because they have less money. It's also not how retail banking works in Europe, they tend to make money off the rich here in ridiculous ways ("keep $400,000 frozen on your deposit for an almost zero interest rate and get a few useless perks like a red-carpet priority lane at the airport"). And i don't think it's regulation. Maybe European poor and American poor are different (can't do the math, don't care, have planning horizon too short)?
There are a lot of poor Americans. 22% say they have absolutely no emergency savings. That’s 57 million adults who get milked by banks at every turn.
In Europe, exorbitant fees paid by the poorest would end up getting paid by the welfare system. It would be more obvious that it’s a wealth transfer from the state to the banks and other corporations. So the government has a direct interest in enacting regulation that prevents this.
In America, the welfare system avoids transferring actual money to people as far as possible (because the system doesn’t trust poor people to handle money). Instead these transfers are made indirectly using systems like “food stamps” that you can use only to buy groceries. When the government is giving food stamps to someone, and simultaneously the same person is paying $100 in overdraft fees to a bank, it’s much less obvious who’s really paying the bank’s profit here, but it’s still the taxpayers.
It’s not even credit, you’ll get hit with fees for just having a bank account when poor.
Wells Fargo, one of the largest national banks, charges $15 / month for a checking account (last I checked) unless you keep a balance of over $1500.
And overdraft fees are hard to avoid because the American banking system is fundamentally flawed. Companies can make charges from your account if they know the number. (This is mentioned in the debt collection article too.) If you don’t have money, your account can suddenly go negative because some company somewhere decided to pull some money from you, and then the bank charges you $50 for the overdraft.
The system is so broken, it’s hard to believe from a European point of view. The USA only got European-style bank transfers this year! Until now, almost all money transfers were being bolted onto a system meant for handling paper checks.
In any case, you can just print more money, if people in the economy aren't spending enough. (In more formal terms: the central bank can control nominal gross domestic products.)
Yes, but instead of consumption, that alternative money would be biased towards investment or even less productive activities, such as house price speculation. Consumer credit creates money where it has the greatest benefit.
> [...] that alternative money would be biased towards investment or even less productive activities, such as house price speculation.
How is that supposed to work? When the central bank injects money into the economy, they don't earmark it to be only spend in specific ways.
Just to forestall one pseudo-explanation: yes, a central bank usually injects money into the economy by buying government bonds. However (a) they buy the bonds at market prices and (b) the whole process is very well known and announced in advance, so market participants can and will anticipate what is happening. Money in the economy does not act on 'hydraulic' principles where it has an effect first on where it enters the economy and then slowly works its way through.
As a hypothetical: assume that the US Fed credibly announces today in 2023 that in 2030 they are going to keep printing money until American Dollar and the Japanese Yen are at par. (At the moment, 1 USD buys about 147 Yen.)
You can bet your hat that prices in the US would react long before 2030 has arrived, and thus long before any of that new money had been printed and had any chance to slowly work its way through the economy. Nothing special would happen on 2030-01-01 when the money-printing starts, because everything would have long been priced in already for years.
The economy in general, and monetary policy specifically, is all about expectations and anticipation.
I guess the idea that directly giving out money to consumers is more beneficial to the economy (e.g. if the government just gives a $1000 check to everyone making under 100k) they are more likely to just spend it on goods and services.
If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets). On the other hand that wouldn't increase consumer good inflation as much.
First, if you just hand money to individuals, it's very hard to remove that money from the economy later. If the central bank injects money by buying an asset, like a government bond, they can just sell it later to (approximately) remove the same amount of money as they previously injected.
> If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets).
What makes you think so?
Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
> On the other hand that wouldn't increase consumer good inflation as much.
And if you have an inflation target, you just print more money, until you hit it.
> First, if you just hand money to individuals, it's very hard to remove that money from the economy later
I'm not really arguing that that would be a better option (outside of exceptional circumstances) though.
> What makes you think so?
Because lower income households generally have low saving rates.
> Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
Which drives up the stock price a bit which makes it cheaper for the company to pay its workers, allows them to issue more stock/ borrow more/acquire other companies/etc.
> And if you have an inflation target, you just print more money, until you hit it.
You can't control where that money goes to though. So you are not unlikely to end up with bubbles in specific sectors while overall CPI remains low.
Bubbles don't really exist as a meaningful empiric concept. Especially not when you have a robust short selling system so that speculators can pop 'bubbles'.
Ok, higher inflation in certain sectors. e.g. "free" money resulted in housing prices growing at a much faster pace than goods and services for an extended period of time (something similar also applies to education in the US for instance)
> short selling system so that speculators can pop 'bubbles'.
Like in real estate? I mean technically, yeah it's not even really bubble in most places (obviously not China for instance). But I'm pretty sure you understand what I'm trying to say (or should, anyway)
The Federal Reserve already overprints, that’s one reasonwhy the USD and almost every other major currency is currently struggling. Printing more money during high inflation only worsens the problems.
Maybe. But in that case, adding more consumer spending via consumer credit would be a negative, not a positive?
(Only money that's actually being actively spent makes a difference. If the Fed prints oodles of money but buries it in their backyard, it would have no impact on inflation.)
> adding more consumer spending via consumer credit would be a negative, not a positive?
In a way yeah. I mean you increase demand for goods/services without an equivalent increase in productivity you just end up with higher prices (of course the idea is that "economic" stimulus still tends to increase productivity somewhat, just by a lower % than the increase in money supply. That generally seems to be fair).
Absolutely. I am not advocating for consumer credit, in fact I find the current system immoral. I am saying that injecting Monopoly money into the economy is part of what’s gotten us into this mess.
I don’t know the answer to your questions. But I do know this. People generally are weary of using their debit cards for transactions because of the security and the direct access to bank accounts. We don’t have chip pin. And if a fraudulent credit card transaction appears there is generally a lot of consumer power to get that removed, after some time. But a fraudulent or simply inaccurate debit transaction happens to you can lose a lot more. And overdraft fees can cost hundreds of dollars in a bad situation.
On the other side, if you are privileged enough to be financially stable, in the USA it’s best to pay for every single thing with a credit card.
Aside from the points and rewards, credit cards are much more likely to reverse fraud transactions. I’ve had banks deny fraud reports and demand police reports while credit cards always reverse the transaction no questions asked.
Actually it’s best to not even have a debit card in your wallet if it’s linked to your main bank account - the only debit card I carry has access to an account with a hundred dollars or so just in case I need cash.
That is just another symptom of the problem I would say. Although it does happen, there are other mechanisms in place to protect you from fraud, which discourage fraud in the first place. I’ve been paying with debit cards for more than 15 years in Europe, tens of thousands of transactions and not once did I need to reverse one.
The only time I've ever had to dispute a charge is when I bought something from a website that had apparently gone out of business without taking down their site. Weeks passed after my order, I reached out multiple times, and I never heard a peep from them. I just logged in to my Chase account, disputed it, got my money back instantly, then went on with my life.
That doesn't sound like something that's super easy to prevent.
> Europe, tens of thousands of transactions and not once did I need to reverse one.
Me neither. But (living in an EU country) every time I hear about someone who was a victim of a fraud/scam/etc. when SEPA/Bank transfers or debit cards are involved the banks just seem to pretty much tell everyone that's not their problem and that you should go the police (who obviously can hardly ever get the money back from the scammers directly, especially if they are in another country).
Some banks ever offer some sort of a "scam insurance" for a fixed monthly fee, which just seems absurd. Why do I even have to pay them in the first place (most banks charge some monthly fee just a for a debit card) if they can't guarantee they won't just start giving away my money to random people with no recourse?
OTH if you're using a credit card chargebacks seem to be an option even here (local banks just do their best to hide that from you)...
You're mostly correct but I should point out one thing that credit cards do that debit cards don't really do in America: fraud protection. Credit card companies spend a lot of money protecting their customers from card number theft (which is rampant in all parts of the world)
Debit cards in the Netherlands at least don't have a number that can solely be used for payments. You need the physical card (with a pin code which isn't written on the card but memorised), or a virtual card like Apple Pay coupled to that card.
It seems that fraud protection is rather something that is necessary because fraud is so easy.
Not all countries apply this protection to their credit cards, even if they are issued from visa/master card/Amex. For example, we knew if a Chinese restaurant in Bellevue WA would target Chinese visitors using ICBC AmEx cards because ICBC (a big bank in China) puts the onus on the consumer to prove they didn’t make the charge rather than in the business making the charge. American credit card issuers would never do that and just let you make the charge back.
That might be true (I don't know), but then we are left with another mystery: why do credit card companies spend more effort combating fraud than debit card companies do?
(Also keep in mind that it's often the same companies that do debit and credit cards. For example, I have debit cards in the Mastercard and Visa networks, but no credit cards. I assume most of the fraud prevention efforts benefit my debit cards as well.
Also that relying on a bunch of numbers alone is pretty sketchy. But I am choosing to interpret fraud more widely, than just card number theft. I am pretty sure card number theft is pretty low(er) in parts of the world where people pay with chip-and-pin, and don't use numbered cards.)
> Credit card companies spend a lot of money protecting their customers from card number theft (which is rampant in all parts of the world)
I only bite half to this argument.
If they really wanted to fight against credit card number theft, they would:
- Enforce pin payment everywhere around the world
- Ban magnetic strip payment once for all
- Enforce two factor authentication system for anything related to online payment.
They do not. Why ?
Because the fraud "real" cost is mainly thrown in the wild on the merchant that have to deal with their goods being sent and their payment being reverted.
It is a liability issue.
I am pretty sure that with a little law that, lets say, enforce Banks to reimburse their customers under 24h00 for a small fee, lets say 10$, in case of fraudulent transaction: This entire system of scam would fade away pretty quickly.
Because the vast majority of people use credit cards without messing up their lives?
I suspect most people don’t even need them but use them for cash back and consumer protection.
For people who do need them, there’s nothing inherently wrong with buying something and spreading the cost or paying for it later in return for paying some interest. Most people who do that won’t get into any trouble.
There are a hundred legal but potentially dangerous things that should be banned before credit cards if you want to go down that route. Start with guns, processed food, alcohol and social media perhaps?
Guns and alcohol banned in Europe? That will surprise my hunting, schnaps-drinking grandfather. My gun-smithing hometown and the people at the Glock factory will be shocked.
I will need to tell them.
Jokes aside: guns are regulated where I am from, they are not banned. That means you have to have a weapons license and store guns properly. That license can be revoked and the guns taken if you have shown to be not mature enough to carry them, by e.g. threatening people or acting unresponsibly with guns. Xertain guns require special permits or expertise to be handled. And if you wanna shoot with LMGs, enter the military. Sounds reasonable right?
And alcohol? Legally we are allowed to drink beer at 16, hard alcohol at 18 — how is it at your place?
> I suspect most people don’t even need them but use them for cash back and consumer protection.
Then make a debit card system with cash back and customer protection.
And kill a system that screw people with useless debts when there is no need for it.
Btw
> Because the vast majority of people use credit cards without messing up their lives?
You never know where life bring you. I can certify you that "good", "honest", "responsible" people can also get screwed under a mountain debts because some unfortunate life circumstances brought that on them.
> Then make a debit card system with cash back and customer protection. And kill a system that screw people with useless debts when there is no need for it.
The debt is inherent to making the consumer protection work: the card issuer doesn't and can't take your money, they can only create a debt and ask you to repay it, and if you didn't get what you paid for you can dispute the billing before a penny leaves your account.
Setting aside the cash back, which is frankly superfluous and plausibly nets negative, the credit is the active ingredient of the consumer protection, specifically the property that when something unusual happens, you still have full access to all of your rightful funds and retain full leverage while bringing your dispute. If card-issuing bank for Some Reason fails to respond to you at all for a month, it's their problem that they're short that money because it's still in your accounts, must of the time minimizing the impact on your day-to-day finances to bricking the one credit line.
> This system just make that much easier.
What are we comparing it to? Inaccessibility of credit comes with its own issues, and predatory loans can get a lot worse.
> EU banks also have many fees... To get a contactless debit card - there is a fee. Use your contactless debit card and pay a 1% fee on every purchase. Use your debit card in another EU country and get a 5% foreign transaction fee added on top. There is no checking account interest paid to you. You need to have a minimum balance. etc. Absolutely terrible service.
> If the govt. banned credit cards, you will then ask why poor people can't get credit.
Or alternatively, poor people would get their credit more from alternative providers. Like payday loans or pawnshops, or even loan sharks.
Those alternative sources of credit have exactly the same problem with shady collectors. The article alludes to that, but decides to focus on credit card debt.
The article also implies that perhaps regulation that encourages banks to offload credit card debt from their balance sheet might be to blame. If you instead had regulations that encouraged banks to keep credit cards on their balance sheets, and/or to make it so that debt collection agencies have to keep mentioning the co-branded sponsors (like Apple and Amazon etc), then collectors might have more of an incentive to be less shady to protect the reputation of established brands.
Reputation of established brands is very, very valuable, and does not require a lot of paperwork or bureaucracy to self-enforce. So that might actually be a better fix than enshrining yet more 'customer rights' in law, that only the literate classes who know how to navigate bureaucracy can actually enjoy.
> credit cards offer credit. Essentially quick loans upto a limit with zero collateral
You say this like it is an unequivocal good, but I don't think it necessarily is. The world functioned before it was common to have instance frictionless access to a no-collateral high-rate loan.
Also, may I remind you these are for-profit loans, and the very article we're commenting under is about how they are disproportionately used to shake down poorer people.
I'm sure you can twist numbers in either way to say credit cards are net good or net bad for poor people, but it's not unquestionably good at the very least.
> Remember, nobody forces you to use credit cards.
Except two factors realistically do encourage you to. Merchants generally charge fixed prices regardless of whether you pay with credit/debit/cash. That price includes their expected credit card fee overhead, so because everyone else pays with a credit card, the price is higher. You pay that higher price whether you use a card or not, and only get the points/miles/cash back/whatever if you also use a credit card.
Secondly, credit scores force me to use a credit card. For some reason, private companies control my credit score, and my salary, savings, etc have no bearing on it.
Originally, I refused to use credit cards since I find them an unethical tool to transfer money from the poor to the rich, and so I had no credit score. When I went to rent an apartment, the landlord checked my credit score, and then could legally turn me away for not having one. Jobs I applied for checked my credit score, and could legally reject me.
I feel like the private credit agencies, and how widely credit scores are used, has in fact forced me to use a credit card, or else run the risk of each landlord running a credit check and then turning me away.
> You say this like it is an unequivocal good, but I don't think it necessarily is. The world functioned before it was common to have instance frictionless access to a no-collateral high-rate loan.
The world also functioned before we had fractional reserve banking, but somewhere along the way we realized it's better to have it than not. It doesn't have to be an unequivocal good for it to be preferable, on balance, to living without.
It's hard to do an apples to apples comparison, but there are countries where there aren't credit cards like in the US, and they are poorer for it. Giving that a proper examination would require a far larger comment box than is here.
You can choose to opt out of the system. It requires a lot of work (and poverty) but the underground economy doesn't run credit checks.
> Why does the American government does even tolerate this credit card garbage business in the first place ?
Why should the government be involved in tolerating or not tolerating this? Credit cards are perfectly legal, ie tolerated by the government, in most of Europe, too.
The real question is: why do customers and merchants tolerate credit cards?
> So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Debt in general, and buying things on debt in particular, ain't unheard of in Europe either. Debt collection agencies with shady practices exist in European countries, too.
> Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy?
Who says it brings zero value? Have a look at why customers and merchants tolerate this industry. It's more complicated than 'banks are evil, and customers and merchants are idiots'. (They might very well be, but for your explanation to work, European banks would need to be less evil, and European customers and merchants need to be less stupid.)
> In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
I don't think that's the case. And even if it was, your explanation doesn't explain the popularity of revolving credit, instead of just paying off everything every month.
Payment by 'Eurocheque' typically involved short term debt with the merchant as well, but I don't think it had the same 'bad' influence as credit cards had.
Similarly, I don't think checks in the US cause the same issues that you are bemoaning here as credit cards do. But checks also work on something that works exactly like (short term) debt.
> A cashless payment system does not need debt.
Debt might not strictly speaking be necessary. But it doesn't by itself seem to cause the problems you are complaining about.
Why have the money taken out of my bank account for a purchase made today when I can pay it without penalty 60 days later and let the money grow in my brokerage account.
Along with the usual answers like cash bank/points/consumer protection, it also decouples spending from "pay day".
> It might be a very European view to the problem but: Why does the American government does even tolerate this credit card garbage business in the first place ?
Credit cards are credit cards, even in Europe. It's just that banks issue debit cards, rather than credit cards and I think that the point. You're financial business in much of the EU is between you and your bank, not some third party credit card company. The debit cards rides on top of the networks built by VISA and MasterCard (and others) for the credit card industry, but the actual financials are between you and your bank. The bank doesn't want you to owe the credit card companies money, they want you to owe them money, but that's normally done using a loan or allow overdraft of your account.
I really think the difference is in the banks and their involvement. Now I'm not suggestions that EU banks are awesome and cuddly entities, but they are more regulated and easily replaceable within many EU country. E.g. switching banks is really not a problem it takes a few days and you don't have to do anything.
> And aren't credit card companies separated from the bank everywhere?
Do you mean in Europe? Because that is not the case in the US and India. While there are credit card companies, most banks issue credit cards themselves.
Credit card use varies substantially amongst European countries. In countries such as Norway, Switzerland, Finland, and the UK, more than 60% of the adult population has a credit card. And it's more than 55% in Germany, Austria, Spain, and Italy[1]
Cash-back credit cards are rare in the UK and Europe not because of bans, but simply because of the interchange fee caps which don't leave enough margin for card companies to offer them.
> "Credit Card payments spread over several months are discouraged or simply banned"
The fees are so heavily restricted EU wide that cashbacks are generally infeasible even where they are legal (I hadn't know they were banned in some countries) (e.g. I have card with a effective 0.2% cashback (in gift cards), it used to be 1-2% back in 2014).
Someone mentioned fraud protection, to be more explicit: With credit cards, you haven't truly paid until the credit card bill gets paid. So, if you have a dispute, you don't have to pay the disputed amount until the dispute is resolved. With a debit card, you've already paid, and so you're out the money until the dispute is resolved. Now, if the dispute is not resolved in your favor, you may have to pay interest on the credit card.
Related to the above, you don't need to make sure you have the money in your debit card account before buying things. You can just charge it and then make sure you're good to pay later. Example: you don't have the cash handy right now for an emergency car repair. You can still pay the mechanic, and then be able to pay off the car repair over the next two months.
Credit is a tool. Sometimes the tool is good and useful. Sometimes you blow your foot off with it.
My experience is similar to another commenter: never in my life did I have to dispute any payment (in Europe). I understand the idea of added consumer protection, but in practice there seems to be very little need for it.
And apparently banks in Europe tend to side with the creditor anyway, so I'm not looking forward to the day I actually have to dispute anything, be it credit or debit.
It is a tool, I agree, but like any other tool it can be excessively pushed and alternatives can be prioritized or not.
As far as I can say, with a European state of mind, is that a credit card poses a risk and temptation for the average person. Not everyone is financially responsible, many times simply due to lack of proper financial education, and they deserve a little attention.
An economy needs money to be created to ensure full employment. If that money is created as loans to businesses it will result in investment; to the government, in lower taxes; to homeowners, in house price bubbles, but if it is created as consumer credit it will result directly in consumption, which has the greatest social benefit since it is the purpose of an economy to enable consumption.
Credit card debt driving families to suicide is super exaggerated. America makes it relatively easy to get rid of credit card debt through bankruptcy. And even after bankruptcy it's possible to get credit cards again after a few years. And after seven years it's completely off your credit report.
As is the notion that it's mostly medical. That was a very unscrupulous "scientist"--what the study actually found was that the majority of bankruptcies included at least one recent medical bill. Of course that nuance didn't get into the popular press very well.
A while back I saw an analysis that showed 5% of bankruptcies were actually medical--and of those half were retirees who were overspending and the medical debt was simply the straw that broke the camel's back.
That's a misunderstanding of the antecedents to death by suicide. We know (from the NCISH work in the UK) that financial distress is a significant factor for many people who die by suicide.
People who attempt suicide may be less able to see the situation with calm rationality.
Credit cards are one of the few things where it feels like you're rewarded for playing by the rules and being prosocial and responsible. Everything else in society is set up to punish the middle class and the well-behaved, or so it often feels. So I very much doubt you'd get the middle class to vote for getting rid of them; if anything with the current breakdown in social trust I'd expect the opposite.
Instead of going to the bank in person, talking a banker, asking for a loan, working out a payback schedule, and then filling out the paperwork for that, just swipe your credit card.
Copyright predators in Germany operate like debt collectors from the article. The moment they fetch your personal details from the ISP, you're their debtor.
My sleep went from bad to utterly shittastic a few years ago and I ended up missing several items that went to debt collection. They were medical bills I would only be too happy to pay and it’s a very weird feeling. I haven’t carried any debt for decades at this point, not even car or house.
I am still scheming ways to pay the creditors by getting them to accept a check, but it’s hard after they’ve gone to collection.
It is in this domain, of broken promises and broken people that you can establish what a society is really made of. Graeber's Debt is obligatory reading (alas not easy to read) if you want to dig into the painful history of debt relations between humans.
The post provides excellent insights into the odious side of consumer finance. It feels like a follow up with ideas about reform would not be wasted effort: Once this domain meets the odious side of tech (uncontrolled data collection, tracking etc) the toxicity will grow exponentially.
I am far from religious, but one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
You can see the reverse effect too not only at an individual but collective level. Once the religious ethos disappears from a sect, widespread adoption of debt becomes the norm.
Whether or not it happened exactly as described within the Torah/Bible, we have plenty of records to indicate ancient societies regularly overturned debts.
... Unless you're making a joke that it happened but was not "celebrated" because most people didn't like it.
But debt and interest are both sound concepts, and both are critical towards building an advanced society. Being able to borrow money from the future is enormously powerful.
...but it's not exploitation. Your head is thinking about bad debt, but bad debt is only a tiny fraction of total debt. It certainly makes for excellent highly memorable emotionally charged stories, which is why we are here, but the fact of that matter is that overwhelming majority of debt is paid off and bears actual fruit.
Even debt like student loans, which gets almost universally panned, is still good debt. The ROI on a collage education is ~1000% (amount borrowed/paid off vs. increased lifetime earnings). On paper your are still dumb to not take out student loans to get a degree.
No I was pointing out that simply because something is beneficial for some people doesn't mean we should want it to exist, which is what I read your comment as saying. Please don't tell me what I am thinking.
You're making the argument that cars shouldn't exist because some people die because of them.
Like I said, debt is overwhelmingly useful to the vast majority of people who use it.
We're not gonna ban cars because a handful of highly emotional road tragedies. We're not gonna abolish debt because of a handful of deranged debt collector stories.
If you want to make an argument make one. "Some people like it" isn't a strong one but if that's all you got I guess.
"We're not going to" presupposed the outcome. I don't agree and won't contend it, since you're not willing to say anything that can be refuted. I'm not the author of the future I can't say what we're gonna. But then neither are you.
"Some people like it" isn't a strong one because it's a straw man of my argument.
"The overwhelming majority bear tangible benefit from it" is the actual argument.
Debt is a core instrument of modern first world society. Just think about how many people would own a car, much less a home, if you had to pay for it all up front.
While having a car today is necessary when living any place where a century of planning has assumed everyone who matters has a car, this state of affairs is not indisputably better than what might have happened otherwise.
Home mortgages are only a few hundred years old, and it's not like they started out as prevalent as they are today.
---
Just because we find ourselves in a particular place today doesn't mean other options aren't feasible. Assuming no better options could have ever existed sounds depressing.
> one thing most religious traditions have common is how they ban usury/interest which would make much of global finance we have today “haram”.
The way Islamic finance avoids interest [1] - the bank buys a property and sells/leases it back to the borrower at a slightly higher price, paid in installments - sounds more like semantics than actually avoiding interest altogether.
It seems to rely on a belief that there is a fundamental difference between rent paid on borrowed money (AKA interest), and rent paid borrow the use of real property.
The virtue in Islamic banking seems to be that it has a healthy skepticism of financial derivative products, preferring to invest directly in physical assets and businesses. This probably avoids a great deal of risk (trading off the upside too).
Some credit card companies - in the UK at least - specifically target people with poor credit scores with rates up to 99.9%(!)
And it's normal practice - but utterly perverse logic - to increase the rate of anyone who starts missing payments.
Debt collectors can get a court order to put a lien on property, and then get another court order to force sale of that property and repayment of the debt.
Of course the collectors bought the debt for some tiny percentage of its nominal value, so this is immensely profitable.
The outcome is that if you lend to poor people with poor credit scores there's an excellent chance you'll be able to secure a supposedly unsecured debt on their property and make them homeless, with a huge margin of profitability.
There are also ambiguous and murky connections between the debt collectors and the credit card companies which allow the latter to distance themselves from the harassment and aggression of the collection companies.
At the same time there's an incredibly toxic combination of wages decreasing in real terms, exploding property prices (both renting and buying), exploitative health care costs, constant ad noise promoting pointless lifestyle spending, and constant reinforcement of the belief that if you're in debt in a glorious economy of freedom and opportunity it's entirely your own fault.
It's a perfect storm of financial servitude. The credit industry is just one part of it.
Debt crisis followed by debt relief is historically normal. Prompting Graeber to wonder if capitalism is inherently unstable.
Maybe capitalism somehow requires debt relief (eg jubilees, bankruptcy). Then we should codify it. Instead of continuing to treat them as unanticipated, unfortunate one-offs.
Our recurring bubbles and bailouts seem to be keeping with Graeber's thesis.
Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
It’s not a problem of capitalism, it’s a problem of reality.
> It’s not a problem of capitalism, it’s a problem of reality.
I'm really not sure about that.
> Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Yet funnily enough the people on top of all these vast structures sail away from their sinking ships on parachutes of gold (if they're even sinking: a lot of times they just sit and collect vast sums of unearned wealth because they had a lot of wealth already).
If debt is such a bad business why are so many massive institutions in it, not discharging debt, and raking in the profits by the shovelful?
> Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
This however we can agree on. As the amount of debts that can be accrued and not discharged (student loans being the biggest) goes up, the economy seems ever more unstable and unsustainable. As it turns out when you strip mine your consumers wallets from every angle, eventually they seem to be unable to buy things for some reason. Then demand craters and your economy stalls.
And just to head off this reply I always get in these discussions about useless degrees and STEM and etc. etc., I think to be frank, if indeed we're only interested in financing "worthwhile" educations, then that should be enforced by the financier, no? A bank wouldn't loan you $200,000 to buy a single-wide trailer on rented land, the asset is not now nor would it ever be worth that, so why is a student able to borrow six figures for a again in quotes, "worthless" literature degree, and be strapped to that one decision they made for life?
I think you mistook my comment as a defense of capitalism. Although I do believe a system based on private property and individual freedom is superior to the alternative, I wasn’t making that statement. I was just pointing out something at a much lower level: we need debt relief because we don’t live in a perfect world, things go south and we need for people to be able to move on. That’s it.
We could talk about the inequalities built into the system, but that would be a different conversation.
Yes and: As an anthropologist, Graeber details historical examples of capital, markets, debt, currency, etc.
TLDR: They're all ancient.
Graeber doesn't try to define capitalism much less Capitalism. He cares about social structures and relations, not finance and monetary policy.
But absolutely do not take me as an authority on Graeber or these subjects. He spent decades researching and refining. I'm just relating my noob understanding of his writing.
It's more complicated than lenders opposing inflation but debtors favoring it. That only works if people are pure lenders or pure debtors.
In reality most people carrying significant debt are people who are strongly affected by inflation of the prices of goods and services, and most people and institutions who are in a position to lend are not as affected by such inflation.
The most at-risk people are those who are both in a lot of debt and also affected by the rising cost of goods in services. This can be anyone carrying a significant mortgage payment (as a % of income) and supporting a family simultaneously. High inflation hits these people especially hard because pay raises and real-debt-dilution often do not keep up with the rising costs of goods and services.
This can cause a great deal of financial fragility in the short term, even if the individual has good long term prospects due to inflation-based debt dilution.
I am quite rabid as far as libertarians go, but even I acknowledge the necessity of bankruptcy protection.
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.
I don't think he needs excuses but his errors and political biases pale in comparison to the systemic hypocrisy and gross inadequacy of an entire profession. Somehow the astrologers advising the emperors du jour have managed to declare themselves scientists and even receive Nobel prizes [1].
The hope is that others will manage to pick up the thread of inquiry and somehow integrate his historical and anthropological observations into a more truthful type of economics.
[1] There are always exceptions. A tiny number of economists do seem to grasp the nature of debt and money better than the vast crowd regurgitating banalities.
I always enjoy patio11's writing, and I think a bit part is he writes as if the reader is intelligent but not knowledgeable about the topic, which is the best way to teach. The other three permutations of those bools are much more common.
565 comments
[ 3.0 ms ] story [ 384 ms ] threadhttps://www.consumerfinance.gov/ask-cfpb/what-can-i-do-if-a-... (CFPB: What can I do if a debt collector contacts me about a debt I already paid or don't think I owe?)
https://www.consumerfinance.gov/ask-cfpb/can-a-debt-collecto... (CFPB: Can a debt collector still collect a debt after I’ve disputed it?)
https://www.consumerfinance.gov/ask-cfpb/what-information-do... (CFPB: What information does a debt collector have to give me about a debt they’re trying to collect from me?))
https://www.consumerfinance.gov/consumer-tools/debt-collecti... (CFPB: Debt Collection collection)
Hat tip to metadat for the previous.
Weep, because it will now be a good 5-6 years minimum before you can buy a house. Or, rejoice, because you didn't have a down payment anyway.
(sources: have been foreclosed on after buying at the peak prior to the Global Financial Crisis, had judgements erroneously on my LexisNexis risk report for over a decade, have family in the mortgage banking industry [specifically mortgage underwriting], did a brief stint as a contract mortgage underwriter in my early 20s, and am very familiar with navigating creditor law but am not an attorney nor your attorney)
That's true in theory, though in practice any house you would actually want to live in is going may have a bunch of buyers competing on it and having an FHA loan (or VA, sadly, or USDA) ensures your bid is in last place. However, there are some conventional lenders that will do 3% if you get approved for PMI.
And yeah, some creditors will do pay-for-delete in which case you may be fine. If you have more than 1 that won't though you may have a hard time, especially if it's not due to medical or something easily justifiable.
Pay for delete is paying to have it removed from your credit file by the data provider (either the creditor or their debt collector). This is distinctly different. You pay the debt and provide confirmation the debt was paid. Whether it is still on your credit file is immaterial to close. It's paid? You close.
Fannie Mae guidelines, for example:
https://selling-guide.fanniemae.com/Selling-Guide/Originatio...
https://selling-guide.fanniemae.com/Top-Trending-Jun-19/1087...
(the guidelines are what makes the originated mortgages conforming, and able to be bundled for securitization and sold into the bond market; to understand mortgage guidelines is to be able to hack mortgage financing)
Not if your score is tanked from having collections on it. Again, there are guidelines, but then there’s the real world. In the real world FHA loans means any desirable house you can’t buy and if you don’t have a decent score you’re not getting PMI.
I had a completely BS negative mark on my credit report[1]. I ran that process in a loop (maybe 3-4 iterations IIRC) until the reporter was either bored with it, annoyed by the paperwork, or on vacation until after their deadline. They didn't reply in time and the mistaken mark went away.
You shouldn't abuse that process to get rid of legitimate reports. In the long run it's easier to just pay your bills as best you can. But the credit reporters have all kinds of processes they can use to ruin your day. You absolutely should use the processes available to you to make sure your report's accurate.
[0] Like https://www.equifax.com/personal/credit-report-services/cred...
[1] In before "you must've done something wrong!" Nope. A large government agency claimed I owed them money. I had all of the receipts showing that I paid in full. I eventually had to involve my senator, resulting in an apology letter from a very high ranking official (and I'm sure a few chewed butts). They didn't get around to removing the derogatory report, though, so I did it myself while waiting for the second senator inquiry to wrap up.
You say that the way a teacher might say "I'm going to have to involve your parents". How does one get a senator involved in a payment dispute?
You call your senator's office and speak to constituent services.
https://sgp.fas.org/crs/misc/R44726.pdf (Congressional Research Service: Constituent Services: Overview and Resources)
My letter looked like:
"Senator Schmuckatelli:
Please get ${federal_organization} off my back for a debt I already paid to them. # <- "BLUF", or Bottom Line Up Front
${federal_organization} claims that I owe them $X. However, I have receipts proving that I already paid that amount in full. (See enclosures A through J.) They have threatened to garnish my tax returns and wages (encl. K, notice of garnishment), and as a hard-working plebe, I can't afford that. I have written (encl. L through P, copies of my letters) and called them multiple times (encl. Q: call log) multiple times without receiving a reply.
As my senator and beloved Protector Of The Little People, could you please contact them and ask them to stop trying to collect this invalid debt?
Many thanks, and see you at the polls! - Me"
Tell them at the start of the letter what you'd like them to do. That helps them sort your mail quickly into the right bucket. Then make your case clearly and concisely, including all the evidence you might have. You don't want them to have to look at a wall of text with a phone book's worth of unlabeled paperwork. In short, make it easy for them to help you.
What kind of "old hobby" is this? My hobbies are.. well, ok, I do help my family with their various enterprises in my free time.
To be fair, it took writing this comment to make the mental leap :D
A natural one for someone who:
1. Is kind and helpful, especially towards anyone who might be described as “the little guy” or “David” (in the “vs Goliath” dichotomy).
2. Is a financial nerd/geek who positively loves getting into the weeds on any topic that interests him.
3. Communicates with people on financial topics (e.g., on forums or subreddits).
The above describes Patrick, imho.
https://news.ycombinator.com/item?id=37106001 (30 days ago, 21 comments)
https://news.ycombinator.com/item?id=37093095 (32 days ago, 1 comment)
https://www.consumerfinance.gov/consumer-tools/debt-collecti...
Someone in a similar situation to yours might consider researching your state's statute of limitations on debt, and if your debts are expired based on that statute, file a complaint with the CFPB, FTC, and your state's attorney general to report a debt collector's FDCPA violations. Not legal advice.
This has been tried in case law, and failed. Even if you're documented unconscious, the EMTs are allowed to make a good faith assumption that you want reasonable efforts of resuscitation. Look up "implied consent" laws.
(Charging people for emergency treatment is one of the most insane aspects of the US system, and we need to fight it as long as possible in the UK before it gets inflicted on us)
I reported all this, with call recordings, logs, notes, etc. to my insurance's fraud hotline and they closed the file without doing anything.
Much of health care in the US is wrapped in a blanket of outright fraud. You can't agree to be a victim of fraud. Until I get to charge them for the time I spend correcting their billing mistakes I am totally fine deciding what bill is appropriate and what bill is not on my own.
1. I scheduled a colonoscopy with a hospital. They charged me $300 for the procedure, which I paid up front. Everything went smoothly and there were no delays, complications, or followups. A week later they sent me a bill for over $1k. They had not applied my $300 payment towards the total. They had not waited for insurance to reimburse them. They simply decided they could arbitrarily charge me more, and they did. Fortunately, my wife is somewhat familiar with medical billing and we did not pay. Insurance reimbursed them, then we called them and told them to apply the $300 we had already paid, at which point we owed nothing. If we had paid the $1k+ bill, I am sure we would not have been reimbursed.
2. I went to a clinic for a minor sports injury. They charged me a $60 consultation fee which I paid up front; I then spoke to the doctor for 15 minutes and got a prescription. A week later, I got a bill demanding an additional $180, and in that bill they claimed they had already been paid by my insurance. I checked with my insurance provider and found they had not even filed the claim yet. I ignored the bill, insurance reimbursed them, and they have not contacted me since.
Your characterization is ignorant of how scummy medical billing actually is.
Concur completely. I once lived in a state where "Balance billing" was illegal, yet despite having a bluechip insurance plan, seeing some physicians in-network AND paying the co-pay at the same time, I could always count on being balance billed.
GRRRR. Talk about a seriously ticked off customer. Given what I know about medical billing though, I would not be surprised to hear that insurance companies were likewise trying to bilk the practices, forcing these shady responses (My wife's practice has an in-network private practice model, but insurers refuse to accept the billing rates they agreed to as a part of contract with the practice, and they play an intentional game of denials after previous authorizations, or, they intentionally send patients checks which the PTs go and cash, and fail to reimburse the practice)
I would agree for any medical transaction where the price for the service was disclosed prior to the transaction. Hell, I’d even agree if an estimate with a low and a high range were provided.
I don’t know about you, but in my lifetime the number of times this has happened rounds to 0%. And I ask for the price at a rate significantly higher than the average medical consumer.
So, since the entire industry has completely and totally failed at price transparency, then I’m completely on the side of someone who makes this decision.
She's probably saved us $5-10k, probably $50k for her extended family (about five nuclear families)
I'll call the provider once and explain what's wrong with the bill. Either they fix it, or I ignore them completely after that. Their bills go straight to the trash unopened.
Frequently as soon as you explain they need to fix something they just completely drop the bill for the same reasons as in this article: It's simply not worth their trouble to bill accurately, and they don't have the ability to do so. (And I'm talking about the provider here, not a debt collector.)
I've never once had a provider actually fix the bill, the closest I've gotten (just once so far) is a "courtesy credit" to make the bill what I told them it should be, and I paid that one.
All the others didn't fix the bill, so I didn't pay them.
The whole system is a mess. I had a bill rejected by the insurance as a duplicate. No, but I could easily see why they thought it was--and they told me how it should be billed so it wouldn't be rejected. Call the lab, tell them what they did wrong in the billing. They resubmit unchanged. The insurance won't accept my statement that it's legit. Call the lab, simply offer to pay it at the negotiated rate (which is all I was after, the deductible wasn't met.) Round and round--finally the insurance rejects it as billed too late and the whole thing goes away.
Unless you intend it to be a manual process, which isn't practical since you'll need info from everyone that's going to be hard to collect, i.e. the same problem the biller has.
The way it used to work was the biller charged insurance, and insurance paid, and that was the end of it. No one ever double checked anything.
Obama (with Obamacare) changed that - now everyone has a high deductible, insurance pays part, but you pay part. And suddenly people are motivated to check the bills.
Realistically the biller just drops bills where the person has to pay, and they live off of what insurance pays automatically.
The "on paper" of what American health care is, vs the reality are very different. The reality is weirder, but better (by better I mean less expensive than it looks on paper).
Start ups that could have been viable small/medium business but were scaled to death?
Treating one part as the 'product' and other as 'waste' is merely a matter of perspective.
Eg in the early days of web search, think Yahoo and friends before Google showed up, someone might have shown you a banner ad, but most of what is now used as essential data to target the ads better was just 'data waste' that only showed up in server logs at most.
Once systems acquire sufficient technical debt, it's packaged up into maintenance contracts and sold to offshore development companies to support.
It has several flavors, but there are some common themes and causes. Developers simply like writing code more than they like writing documentation, and they like writing documentation more than they like maintaining old codebases. Meanwhile, software vendors of all kinds have universally decided that they shouldn't be spending any money on any form of technical support that comes with a heartbeat.
Down in the home and small-business markets, there are a lot of people that get absolutely screwed by this. New software comes out, something tries to auto-update (or the user is forced to update), something goes sideways, and ... that's it. Stuck. Nobody to call. Some really sharp Google skills once upon a time could sometimes find an answer, but even that's thoroughly rotted out now.
So if your small business has your entire customer database in an old version of Quickbooks running on the office PC with Windows 7 configured by the last tech to stop complaining about updates, and then one day Quickbooks refuses to launch and displays instead an obtuse error message ... what do you do? For a while, you could call me, and for several years, I mostly enjoyed building a business out of fixing these sorts of things (and helping people navigate the sometimes very tricky update process so that this wouldn't be a recurring problem).
Unfortunately, software kept getting worse, documentation kept getting harder to come by, Google kept getting worse, everything kept getting converted into subscription SaaS (which meant that most of my answers started becoming, "yeah, that's just how it works now, I can't do anything about it, yeah, it sucks, yeah, lots of other people are complaining too, no, there's nobody you can call, sorry"), and I never felt good charging a lot of money for getting people out of bad spots.
I eventually noped out of this in favor of relaxing for a while in a slightly less hopeless part of the industry, but there's still a huge, under-served market of people who are getting hosed by sociopathic technology and would pay someone just to make it work again.
The waste is uncaptured value. It is some part of your software business's domain that is just too hard, expensive, or requiring physical intervention to encode the process in their system. So the business never chooses to build that feature. This leaves some part of your business's problem domain unsolved. Potentially someone else smaller could come in and try and solve that problem and capitalize on that wasted value.
Can we get a summary of which letters / rights to invoke?
https://www.kalzumeus.com/2017/09/09/identity-theft-credit-r...
It is also fantastically well written.
wow.
That is such a common pattern. Growing up, I saw the same happen with the German welfare system: there's enough of a social safety net in that country that no one would have to be homeless. But, to access the social safety net, you have to navigate some minimal amount of bureaucracy and paperwork.
That bar isn't very high, but if you have at least that minimal skill with paperwork literacy, you are also much more likely to have a job and much less likely to need the welfare.
So all in all, Germany still has homeless people, despite welfare programs generous enough in principle that no one needs to be homeless.
Addendum: Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much etxra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
It goes something like this: they send you a scary looking letter telling you there’s something off about your taxes, you then need to call them (because they don’t do email and mailing anything will go over the time limit to comply), then they tell you more in detail what the problem is and push you to amend your return forms, once you do, you’ve legally accepted liability for whatever extra taxes they convinced you you owed (and will have to pay)
What most people should actually do: they send you a scary letter, you tell them to audit you, usually they’ll stop here, if they audit you and make a final assessment against you, you tell them you want to go to court, they’ll almost definitely drop it at this point, unless you actually owe them taxes and it’s such an easy and big case that they are willing to go through the trouble
Most people will just amend their return forms and pay, because it’s just too scary to even think of going against these agencies
Compliance deadlines are measured in months. You have plenty of time to mail responses. Usually they'll put a hold on collection activities while you have a dispute pending.
But regardless of the politeness, the strategy is the same: get you to admit owing more taxes on your own, with the least amount of effort possible
It’s a known fact, and admitted by the IRS, that they go after easier targets (people with fewer resources that won’t fight them as much)
https://www.forbes.com/sites/eriksherman/2023/01/29/the-irs-...
https://www.latimes.com/business/story/2022-03-14/who-does-t...
https://reason.com/2012/07/13/californias-food-truck-shakedo...
My mother had a problem back before "identity theft" became a common term. Apparently someone used her SS# with their employer. The IRS was coming after her about the unreported income. Hey, that's not mine! Contact your employer and get it fixed. I've never heard of them let alone worked for them and I can't find them, can you give me their address? (This was pre-internet.) No, we aren't allowed to, you need to get it fixed.
I went off to college at that point and never learned how it ended up.
For context, I moved in January of the year.
Sent me a letter saying that because I had filed my federal return with my Arkansas address I clearly lived in the state, and because I hadn't filed a state return they were assessing taxes on me for the entire year at the single rate.
I called and they said the same thing, I interrupted them and said "so should I tell California to fight you over this money, since I lived there until (XX/YY/ZZZZ)?" Oh and here's my AR lease, here's my CA lease, my CA tax return, me transferring my license to an AR drivers license, and me transferring my vehicle registration on (XX/YY/ZZZZ). Anything else I can help you get from the state, since you don't seem to have access, but do from the feds.
I got the most sheepish "this case is resolved" letter from them <72 hours later.
Sorry, I meant that there's a certain bar of competency with paperwork you have to meet. (But exceeding that bar is possible, and can be useful.)
I did not mean to make a statement about how big that bar is.
A 'minimum' does not have to be small in absolute terms. But I realise that usage was confusing.
I guess you're writing for a class of people for whom this is easier. But perhaps a more informative view of the situation, rather than saying "people are bad at this" may instead be to realise that if you're able to deal with this sort of stuff without issue, you are very likely in the minority (very few are as good at this as us). This can perhaps inform how you feel about certain requirements for certain programs.
As an illustrative example, a great many otherwise highly capable people who are able to write impressive art or fiction (including for example, many famous musicians and authors) struggle mightily with contracts and managers on the regular.
When you’re homeless, it’s hard to get mail, and hard to keep your stuff; going from nothing to your standard documents is tricky.
To get your birth certificate, you need to write a check to the state at some address where you’ll be able to receive mail in 2-4 weeks.
Once you have that, you can go into the social security office and request a replacement social security card. Which they’ll mail to you in 2-4 weeks. There’s also a lifetime limit to how many times you can replace your card, which is surprisingly small.
State ID cards also get mailed to you. Moreover, you need to provide proof of your address, and the address gets printed on the card. We used my address, but no good deed goes unpunished - the address on your ID card gets published in the paper when you’re arrested. Then my nosy neighbor asks if everyone is alright because someone living at my house got arrested for possession of meth.
On top of each of those steps costing money and being hard to do when you’re homeless, there’s a dependency chain. You got to do them one at a time.
Navigating the public bureaucracy is an annoyance for someone in what patio11 calls the professional/managerial class. There are other social strata’s where it’s a virtual impossibility without help. That’s important to keep in mind when you’re thinking about welfare bureaucracy or voter ID laws or anything like that.
Amen to that. Though luckily while it's huge problem for the former, it doesn't matter for the latter. (Because individuals by and large don't benefit from being able to vote. Voting is at best something altruistic, individuals do out of civic duty.)
In the US, it was mostly Prohibition I guess?
But also, isn't your disaster scenario the thing that happens in a democracy regardless? Majority rule when you're the minority.
What you're left with is the fairness argument: It's supposed to be one person, one vote. But that's the argument the proponents of voter ID make.
> Is there supposed to be a restricted demographic with a monopoly on identification? [...] mitigated by, for example, making it free to get a state ID.
We were talking about how many ostensibly free resources, rights and welfare are gated behind paperwork and bureaucracy. The discussion was exactly about just making something free is only a small part; and most of the time money isn't even the biggest hurdle for poor people.
I don't have too strong of an opinion on voter id laws. (I grew up in Germany where approximately everyone a government ID, and you need it for voting. And that seems to work ok. And the US system of mostly not requiring voter ID also seems to work ok.) But despite my lack of opinion on whether those laws are good or not, I can understand that just making ID cost $0 misses most of the hurdles in practice.
For most benefits programs that is still going to be necessary even if you remove means testing, because some kind of identification would be necessary to keep someone from claiming the benefit an unlimited number of times. Which is the same as the problem with voting.
Singapore has an ingenious system to ration the amount of subsidies you get on hospital bills without any bureaucracy. The basic idea is that when you go for a hospital stay, you get to pick how much extra creature comforts you are getting, like your own private room vs an open word with many beds. The copay for the fancier options rises 'progressively' enough, that the absolute amount of government subsidy goes down. People tend to self-sort voluntarily.
The medical care you receive is the same for any of the options.
I can imagine an argument that this is somehow against the dignity of poor people to put them into comparatively crowded wards, and that everyone should get the same treatment (like eg the British NHS does, modulo the option to go to a private hospital for enough money). But I suspect many of the poorer people are happier to put up with that 'indignity' than with paperwork and privacy-invading bureaucratic means testing.
In total, adding up private and public expenditures, Singapore spends about half as much on healthcare as a proportion of GDP than the UK does, which spends about half as much as the US. Medical outcomes are no worse in the cheaper systems.
The biggest problem with most of these things isn't that they require ID, it's that they require means testing. Showing your ID is, I mean, you take it out of your pocket. We could make one sufficiently easy to get and then it works for everything.
But if you also have to show that you're currently unemployed but previously made an amount of money within the eligibility threshold but haven't been unemployed for more than six months to collect unemployment and then show that you don't have investment income more than some other amount to get food assistance and then show that your household income is below some other threshold to get housing assistance etc. etc., that's a hot mess.
The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork. But it still requires something basic to keep you from getting more than one.
It's a terrible wast of people's time, but it solves the specific problem.
> The sensible thing to do is replace all of said mess with a UBI, which doesn't require means testing and so doesn't require all of that paperwork.
Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
You can do this, but is that supposed to be less burdensome than requiring ID?
> Yes, though instead of saying that UBI doesn't require means testing, I would say that a UBI folds the means testing of the tax system and the welfare system into one, and then decides on the net payment (constant UBI - taxes) that you get.
That's fine from a theoretical perspective, but the practical point is that it doesn't require separate means testing paperwork for the transfer payment.
> At least that point of view makes sense for something like personal income taxes. If most of your tax take comes from VAT or land value taxes, this framing is less useful.
Only in the sense that it would remove the means testing whatsoever.
If you look at the effective rate curve of a flat tax - UBI, it's quite progressive and can be made arbitrarily so by adjusting the tax rate and the amount of the UBI. And this is in fact the preferred way to do it, because phase outs for existing benefits programs are often higher than tax rates paid in higher tax brackets, especially when combined with a lower but still non-zero tax rate at low to middle income levels.
Switching to a flat combined tax-and-phase-out rate would be no less and possibly more progressive than the existing system, while also being vastly simpler and require no means testing paperwork or privacy-invasive income tracking of any kind.
The really shit side: its impossible to change your drivers license (which is your "official address") to homeless.
And if you get sued, they send your mail to that former address, regardless if you ever get it.
And, well, I was sued. My parents destroyed my mail. And had a summary judgement against me on a case I didnt know exist, to an address I couldn't change cause I didnt have a new one.
Fuck this country.
Are there other countries that allow you to put "homeless" on your driver license?
I'm here, and it costs $3500 plus all my student debt to legally leave.
No, it costs whatever the visas and transportation costs. I've never heard of anyone not being allowed to leave a country because of student debt.
Ive been told countless times "if you dont like it here, leave". And I cant.
If legal actions were to occur involving an average person, how does that person get notofied? How would you be notified?
> If legal actions were to occur involving an average person, how does that person get notified?
The authorities send you a letter at the address that's registered with them (if you have one and they have one). That system is just completely independent of driver's licenses.
Your government ID card and passport do have your address on them (if you have one).
https://icwb.com/de/keine-meldeadresse and https://praxistipps.focus.de/meldeadresse-ohne-wohnung-das-s... are two random website about how to deal with the system, if you don't have a fixed address.
See also https://de.wikipedia.org/wiki/Einwohnermeldeamt
> How would you be notified?
Interestingly, I also don't have a fixed address in Germany, because I haven't lived there in a while.
Officially, you need to tell them that you are leaving, but for the longest time I did not. (Mostly out of laziness.) They tracked me down once in Singapore to remind me to pay back my student loans, and I dutifully complied.
My passport shows my Australian address, because that's where I lived when I last had to renew that document. (And it also only shows that I lived in Sydney without any further details. German addresses would tell to the street and number etc.)
---
Just to summarize: Germany does have many of the same issues in general (but the exact details vary). It just so happens that in Germany this system does not intersect (much) with driver's licenses.
Mostly because Driver's licenses are not used as general ID cards in Germany.
I'm not sure what you mean by monocultural? Singapore is famously multicultural.
Singapore is very open to foreigners. Almost no one's family has been here for longer than three or four generations. I'm not sure where you get xenophobic from? (However, they do like some foreigners more than others. Just like in the rest of the world, people who came from affluent places to spend money are typically the most welcome visitors.)
Authoritarian might be true, depending on your definition of the world. To call them 'borderline fascist' you'd need a rather torturous definition of fascism (or a generous definition of borderline).
Yes, Singapore is a city-state. For comparison, Berlin and Hamburg are also city states in the federal system of Germany and enjoy considerable autonomy, but with less success. I agree that more cities should become independent and be better run as city-states. London would be an interesting candidate.
Does hanging people arrested with small enough amounts of drugs that you'd get a relatively minor punishment in the U.S. not at least toe the borderline of fascism?
Sometimes people get all upset when they hear some of these characterisations, because they personally think family ought to be more important, or that people are ignoring a proud shared history. Maybe they feel that beuracracy and comittee meetings have led to overcomplexity. It turns out as with anything else these things are perfectly fine and not bad until this way of thinking becomes the sole goal of the leading class, they become highly authoritarian, and it lashes out more and more at any percieved imperfection in society regardless of severity.
Does this fit with singapore, to a greater or lesser extent? I really don't know. But I understand why people would feel annoyed by simplifying it down to "strong laws against drugs"
No. Why?
Singapore goes up to the death penalty for trading in drugs. Consumers of drugs face punishment, but not the death penalty.
In any case, harsh punishment does not make anything fascist (nor does comparatively lax punishment make something not fascist).
Eg the US is not fascist, despite them handing out harsher sentences for eg drug offenses than other parts of the world (or even the US itself at different points in time).
(Just to be clear: I like living in my adopted home of Singapore. I disagree with their drug policies, and think drugs in general even 'hard' ones should mostly be taxed, not banned. But I don't harsh punishments for some behaviour is a sign of fascism. Especially if the laws are clear and knowable, and there's a scrupulous legal system that predictably enforces these laws for all without prejudice.)
No.
Fascism, of course, tends to incorporate harsh punishments for (at least some) criminals, but that's neither central to fascism nor is it sufficient for fascism, you don't get anywhere near the borderline of fascism just with ahesh criminal punishments forbthings that are widely criminalized in liberal regimes.
It may be bad, but not all bad things are fascist.
I mostly disagree with acyou's comment, but since Singapore is a city as much as a state, the more enlightening comparison might be with how many of eg New York City's residents were born out of town? (Or perhaps how many of NYC's residents were born out of the country? It's murky, and there might not be one best comparison.)
In any case, I agree that Singapore is not 'monocultural'.
You then take the case to tribunal, where it is put in front of a normal non-rigged judge who interprets the law in a reasonable manner, and are awarded your disability benefits.
This process takes about a year and is basically impossible unless you get help from someone who is "professional managerial class" enough to work the system for you.
Coda: periodically they write to you to check that e.g. the two legs you lost have not grown back. This must also be dealt with.
One of the reasons is that for being part of those programs, the people have to want to be re-integrated, leave out any kind of drugs that there were using, take part in employment trainings,... and not everyone is keen in going through that and rather stay on the streets.
I would formulate it slightly more cynically: to be part of many programs you have to go through the right motions so that the civil servant in charge can tick the box that says 'wants to be re-integrated' etc.
If you are literate enough with bureaucracy and paperwork, that's not too much of a hassle; and they can't really look into your heart and see that you'd really rather sit at home, collect welfare and play computer games, compared to working a low paying, entry-level job.
But the skills that make this dissembling easy are also the same skills that make holding down many kinds of job easy. Especially low level, white collar jobs. Conversely, the people who can't get nor keep a job or also likely to lack these skills and preferences for playing the bureaucracy.
IME it's more complicated than that.
Firstly, the NHS allows consultants to do private work, making use of NHS resources, including beds, radiography and theatres. Secondly, a consultant can refer you back to the NHS for treatment, effectively "jumping the queue".
I would never rely on a private hospital. They never have an emergency department, and emergencies happen in hospitals too. Many private hospitals can only treat certain types of case; I wouldn't want to be stuck in a hospital that couldn't treat anything that happened to me.
The patient would go to the back of the NHS queue, so I'm not sure how they're jumping anything.
The real problem is that private healthcare over-treats people with unnecessary surgery, and cherrypicks the easy stuff, but dumps patients back into NHS care as soon as they get complex.
https://x.com/ShaunLintern/status/1700778868666216542?s=20
This is not true.
I went to the NHS over my kid's glue-ear. We had to see a consultant, but the earliest appointment was 9 months, and the hearing problem was impeding our child's language acquisition. So we went private, and had an appointment with the consultant in a few weeks. The consultant recommended surgery to install grommets (wow!), and a few weeks later we attended for NHS surgery, to be performed by the same consultant.
This was 30 years ago; but I've been told recently (a couple of days ago) that this still goes on.
It sounds like debts are sold in such bulk that there's no way to do something very targeted, like starting an org in your town to buy debt from your ZIP and collecting contributions to cancel your neighbors' debts, but if these debts are already only worth 5¢ on the dollar to the sellers, it seems like it would make quite a news story if you could.
If I could buy up $2000 of my neighbors' debt for $100 and remove that burden from them? I think I would, at least occasionally.
But even if you don't assume goodwill, if the whole community knew the plan was to buy and cancel everyone's debt, you could probably get the debtors themselves to band together to do it!
The only thing I’m unclear on is how to avoid the predatory aspect. I’d assume that part of the usury terms of these kinds of loans is a response to such small amounts. Just paying the hourly cost of dealing with the transaction could put a $200 dollar loan into 5% territory without taking into account any risk profile.
I’d be intereted in running experiments similar to cash giving charities. Measure how much a $2000 line of credit does to improve lives (hopefully without making them worse).
Or, possibly more apropos to your example, “how do I know my medical debt relief payment goes to someone who truly Deserves It because of bad luck and not someone whose poor diet and exercise habits lead to their stroke?”
The system is designed to turn bad choices into bad luck - and the opposite - and to pass moral judgements on those who need help. Reject the framing and help people; most are good and deserving.
The thing I specifically caveated was people making bad financial decisions on their own. Sure, maybe giving an 18 year old $5k credit limit is not a smart thing on the creditor's part, but not everyone financing retail therapy sessions via credit is an 18 year old. The whole 30 thousandaire outspending their earnings for FOMO or keeping up with the Joneses or whatever does not seem like something we need to bail out.
I think we worry too much about what if undeserving people receive help. Most people are good people who just got caught out on something and could use some help getting themselves out of some goddamn 25% interest craziness.
GP is referring to credit card debt, not medical debt.
You've spun into something it's not to make a point. Which I'm still not sure what it is
Which is still a valid point. Don’t give cash to homeless people.
i think this confusion is something holding back progress on homelessness.
I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay. People that are not addicts can be put in making choices that they would never even consider in a normal situation, but we faced with sleeping in a car/street/public shelter, those choices suddenly start to look more acceptable. Even more so if you have kids.
Sorry, I meant “you” in the general sense, not you personally.
> The view you take sounds like you've been privileged
Stuff it with the personal comments.
> I have on multiple occasions helped someone out that was facing some very difficult decisions because of not having a place to stay.
I have as well. And in my experience, at least with street people, it’s much better to give them bottled water and food than to give them cash. If it’s a family member or someone you actually know, that’s a completely different situation than what most people (not you, to be clear!) are talking about when they say “don't give cash to homeless people”.
>Stuff it with the personal comments.
s/privileged/(fortunate|lucky)/
Wasn't meant to be an aggressive comment. A poor choice of words.
I get what you're saying but if you've ever gotten to "I now have enough credit card debt for it to be A Problem", the baseline level of stress in your entire life gets pretty high. That doesn't mean that suddenly everyone has "learned their lesson forever", but especially for stuff like "I was bad at personal finance in my 20s, and now I am better but the debt is still around and a problem", helping people with that debt can just make somebody's life much better.
Nothing is guaranteed but if it were a family member and you had a way to clear out some stuff for pennies on the dollar, it feels like the right sort of thing to do.
Student loan debt is an entirely different thing though. I'm still on the fence about student loan forgiveness because I specifically stopped going to school because I did not want to take on the debt. It's a sensitive subject, and I am sympathetic to it. I'd be much more open to 0%, or partial payoff to reduce the obviously bloated amounts the schools are charging.
The thing I was implicitly thinking is that you might do that for somebody you care about, and ultimately things like debt forgiveness programs are also about giving compassion to people you might not know.
[0] https://ripmedicaldebt.org/ [1] https://www.cnn.com/2023/04/26/us/debt-jubilee-medical-trini... [2] https://www.bostonglobe.com/2020/10/25/metro/new-england-chu...
Yes indeed - that was the Rolling Jubilee, run by a group called Strike Debt. They apparently still operate, under the name Debt Collective:
https://debtcollective.org/what-we-do/debt-abolition/
> What can be done about this?
> Many people have suggestions for obvious improvements here, which might rhyme with the Federal Trade Commission’s suggestions from 2010 or the Consumer Financial Protection Bureau’s spate of rulemaking from 2021 through 2023 or the FDCPA from 1978.
I would humbly suggest looking at how different countries deal with the same issues, and seeing what works and what doesn't work. Many of the differences will be cultural, some will be differences in laws and regulations. Some will be systematic differences, some will be down to random chance.
In an article full of eyebrow-raising statements this hits the hardest. Taking people's social security or welfare payments so that they might not eat is just so dirty
Presumably also if enough people broke this system, debt collection would be forced to change in a way that made it harder for people to do this. It is perhaps better if people who can manage to pay it do, so people who can't retain the ability to exploit the bad recordkeeping in the system as it is today?
try it out, let us know how it goes.
So, "maxing out all your credit cards" it depends on just how much that maxxing would be.
> The value of portfolios is a huge discount to the face value of the debts; at the point where a lender has only worked it themselves and the debt is a few months delinquent, portfolios generally fetch about 5 cents on the dollar. That value will continue to decay over time.
I agree with his point directionally (the value of the sold debt is far below the face value of the balance) but he is off on the absolute value. You can expect more like 7-15% after working the account for 4-5 months.
> Debts are conveyed to the debt buyers as large CSV files with minimal supporting documentation.
This is funny - it is true that just big ole csv files (only ever opened in excel of course) are the way the debt is sold but how else would you suggest it be done? And in my experience you provide the debt collections agency all supporting contracts and account documents for each loan.
Might I recommend a blockchain and smart contracts?
I'll see myself out.
Even by standardized credit numbers, it is more like 60 %
This might be true for first party lender to first party debt buyer, but it often falls apart after that first step.
The article mentioned the chain of debt ownership and that, in my experience, is where contracts and supporting docs are lost. Once you're buying debt 3 or 4 steps removed from the primary lender the documentation becomes sparser and sparser, which is why as the article rightly said, most of these "last mile" agencies rely on people's ignorance and use a "spray and pray" strategy for debt collection.
My experience, from a large primary card issuer in the US, was that most of the major, reputable debt purchasing agencies would only buy primary debt portfolios that had _contractual guarantees_ about the accuracy of the supporting contracts and docs. They'd spend a lot of time and effort reviewing them, but they would in turn outright _refuse_ any such provisions when THEY sold their debt to smaller agencies!
We are in the 21th century. Most payment can be validated electronically and processed under 200ms. I can pay something with my phone and get money taken directly from my bank account within seconds. There is absolutely no need of Credit Cards where Debit Cards can perfectly do the job.
So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy ? For the sake of few profits in Wall Street ?
This is complete nonsense.
I understand why the credit card business was born in the first place: Amex, Visa and MasterCard has been invented in a time where electronic payment was still a dream. In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
We are not in the 60s anymore. A cashless payment system does not need debt.
So: Why ?
Edit: When I was referring to "transaction costs," I was referring to merchant fees
Consider how much cheaper things might be across the board with lower fees
But you are right, that the system is not very transparent, and merchants probably seldom give people the full discount of the costs saved when they use non-credit card payments.
You can indirectly see some of this happening though: lots of places with lower margins (ie cheaper prices) won't accept American Express, but might accepts Visa and Mastercard. That's exactly because of the difference in fees.
If you go shop at merchant A that accepts American Express, you pay a higher price no matter how you pay. But if you have a non-American Express means of payment, you can shop at merchant B, which has lower prices overall (no matter how you pay). The economic effect is similar to directly passing on the fees transparently.
From my understanding this cashback systems come from two sources:
(1) Money taken on processing fees on Merchants themselves.
(2) Money taken from the interests of debt from the people screwed by this entire system.
The first one is just an hidden tax and garbage profits made possible only due to the monopolistic behaviour of credit card companies.
The second one is just plain simply immoral.
> The first one is just an hidden tax and garbage profits made possible only due to the monopolistic behaviour of credit card companies.
I'm not sure any supposed monopoly is necessary here to explain anything. In fact, there's no monopoly and different competing issuers have different levels of fees and 'rewards'. Eg American Express explicitly has high fees and high rewards, and competes against Visa and Mastercard (and against domestic systems in eg Germany or Japan).
A monopoly (or oligopoly or cartel) argument could perhaps explain why the smallest fees you can find are still 'high' by some arbitrary standard, but it couldn't explain why American Express is a viable competitor.
See https://upgradedpoints.com/credit-cards/us-credit-card-marke... for market shares of the different payment networks in the US.
It’s a bit like a casino: somebody can get lucky and get out more money than they’re paying, but most don’t. And the house (Visa/MC/Amex) always wins.
If you don’t have money, banks will charge you $15 / month for a basic checking account, plus $50 overdraft fees if you make the slightest mistake in balancing the account (or if a company makes a fraudulent charge on your account — also dismayingly easy in the US system).
If you have any reasonable income they start waiving the fees, and beyond that they’ll shower you with offers for credit card rewards and other benefits effectively paid from the massive windfall the banks and other companies collect from the poor.
The market isn’t solving this, so there should be more regulation and very tight caps on these various fees. A bank account shouldn’t cost more than $2 / month. An overdraft shouldn’t be possible unless you opt in to a loan facility.
In Europe, exorbitant fees paid by the poorest would end up getting paid by the welfare system. It would be more obvious that it’s a wealth transfer from the state to the banks and other corporations. So the government has a direct interest in enacting regulation that prevents this.
In America, the welfare system avoids transferring actual money to people as far as possible (because the system doesn’t trust poor people to handle money). Instead these transfers are made indirectly using systems like “food stamps” that you can use only to buy groceries. When the government is giving food stamps to someone, and simultaneously the same person is paying $100 in overdraft fees to a bank, it’s much less obvious who’s really paying the bank’s profit here, but it’s still the taxpayers.
Wells Fargo, one of the largest national banks, charges $15 / month for a checking account (last I checked) unless you keep a balance of over $1500.
And overdraft fees are hard to avoid because the American banking system is fundamentally flawed. Companies can make charges from your account if they know the number. (This is mentioned in the debt collection article too.) If you don’t have money, your account can suddenly go negative because some company somewhere decided to pull some money from you, and then the bank charges you $50 for the overdraft.
The system is so broken, it’s hard to believe from a European point of view. The USA only got European-style bank transfers this year! Until now, almost all money transfers were being bolted onto a system meant for handling paper checks.
In any case, you can just print more money, if people in the economy aren't spending enough. (In more formal terms: the central bank can control nominal gross domestic products.)
How is that supposed to work? When the central bank injects money into the economy, they don't earmark it to be only spend in specific ways.
Just to forestall one pseudo-explanation: yes, a central bank usually injects money into the economy by buying government bonds. However (a) they buy the bonds at market prices and (b) the whole process is very well known and announced in advance, so market participants can and will anticipate what is happening. Money in the economy does not act on 'hydraulic' principles where it has an effect first on where it enters the economy and then slowly works its way through.
As a hypothetical: assume that the US Fed credibly announces today in 2023 that in 2030 they are going to keep printing money until American Dollar and the Japanese Yen are at par. (At the moment, 1 USD buys about 147 Yen.)
You can bet your hat that prices in the US would react long before 2030 has arrived, and thus long before any of that new money had been printed and had any chance to slowly work its way through the economy. Nothing special would happen on 2030-01-01 when the money-printing starts, because everything would have long been priced in already for years.
The economy in general, and monetary policy specifically, is all about expectations and anticipation.
If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets). On the other hand that wouldn't increase consumer good inflation as much.
First, if you just hand money to individuals, it's very hard to remove that money from the economy later. If the central bank injects money by buying an asset, like a government bond, they can just sell it later to (approximately) remove the same amount of money as they previously injected.
> If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets).
What makes you think so?
Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
> On the other hand that wouldn't increase consumer good inflation as much.
And if you have an inflation target, you just print more money, until you hit it.
I'm not really arguing that that would be a better option (outside of exceptional circumstances) though.
> What makes you think so?
Because lower income households generally have low saving rates.
> Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
Which drives up the stock price a bit which makes it cheaper for the company to pay its workers, allows them to issue more stock/ borrow more/acquire other companies/etc.
> And if you have an inflation target, you just print more money, until you hit it.
You can't control where that money goes to though. So you are not unlikely to end up with bubbles in specific sectors while overall CPI remains low.
> short selling system so that speculators can pop 'bubbles'.
Like in real estate? I mean technically, yeah it's not even really bubble in most places (obviously not China for instance). But I'm pretty sure you understand what I'm trying to say (or should, anyway)
(Only money that's actually being actively spent makes a difference. If the Fed prints oodles of money but buries it in their backyard, it would have no impact on inflation.)
In a way yeah. I mean you increase demand for goods/services without an equivalent increase in productivity you just end up with higher prices (of course the idea is that "economic" stimulus still tends to increase productivity somewhat, just by a lower % than the increase in money supply. That generally seems to be fair).
Aside from the points and rewards, credit cards are much more likely to reverse fraud transactions. I’ve had banks deny fraud reports and demand police reports while credit cards always reverse the transaction no questions asked.
Actually it’s best to not even have a debit card in your wallet if it’s linked to your main bank account - the only debit card I carry has access to an account with a hundred dollars or so just in case I need cash.
That doesn't sound like something that's super easy to prevent.
Me neither. But (living in an EU country) every time I hear about someone who was a victim of a fraud/scam/etc. when SEPA/Bank transfers or debit cards are involved the banks just seem to pretty much tell everyone that's not their problem and that you should go the police (who obviously can hardly ever get the money back from the scammers directly, especially if they are in another country).
Some banks ever offer some sort of a "scam insurance" for a fixed monthly fee, which just seems absurd. Why do I even have to pay them in the first place (most banks charge some monthly fee just a for a debit card) if they can't guarantee they won't just start giving away my money to random people with no recourse?
OTH if you're using a credit card chargebacks seem to be an option even here (local banks just do their best to hide that from you)...
It seems that fraud protection is rather something that is necessary because fraud is so easy.
(Also keep in mind that it's often the same companies that do debit and credit cards. For example, I have debit cards in the Mastercard and Visa networks, but no credit cards. I assume most of the fraud prevention efforts benefit my debit cards as well.
Also that relying on a bunch of numbers alone is pretty sketchy. But I am choosing to interpret fraud more widely, than just card number theft. I am pretty sure card number theft is pretty low(er) in parts of the world where people pay with chip-and-pin, and don't use numbered cards.)
I only bite half to this argument.
If they really wanted to fight against credit card number theft, they would:
- Enforce pin payment everywhere around the world - Ban magnetic strip payment once for all - Enforce two factor authentication system for anything related to online payment.
They do not. Why ?
Because the fraud "real" cost is mainly thrown in the wild on the merchant that have to deal with their goods being sent and their payment being reverted.
It is a liability issue.
I am pretty sure that with a little law that, lets say, enforce Banks to reimburse their customers under 24h00 for a small fee, lets say 10$, in case of fraudulent transaction: This entire system of scam would fade away pretty quickly.
I suspect most people don’t even need them but use them for cash back and consumer protection.
For people who do need them, there’s nothing inherently wrong with buying something and spreading the cost or paying for it later in return for paying some interest. Most people who do that won’t get into any trouble.
There are a hundred legal but potentially dangerous things that should be banned before credit cards if you want to go down that route. Start with guns, processed food, alcohol and social media perhaps?
Generally Europe more paternalistic and Europeans like it that way. Americans are less so, and like it that way.
I will need to tell them.
Jokes aside: guns are regulated where I am from, they are not banned. That means you have to have a weapons license and store guns properly. That license can be revoked and the guns taken if you have shown to be not mature enough to carry them, by e.g. threatening people or acting unresponsibly with guns. Xertain guns require special permits or expertise to be handled. And if you wanna shoot with LMGs, enter the military. Sounds reasonable right?
And alcohol? Legally we are allowed to drink beer at 16, hard alcohol at 18 — how is it at your place?
Then make a debit card system with cash back and customer protection. And kill a system that screw people with useless debts when there is no need for it.
Btw
> Because the vast majority of people use credit cards without messing up their lives?
You never know where life bring you. I can certify you that "good", "honest", "responsible" people can also get screwed under a mountain debts because some unfortunate life circumstances brought that on them.
This system just make that much easier.
The debt is inherent to making the consumer protection work: the card issuer doesn't and can't take your money, they can only create a debt and ask you to repay it, and if you didn't get what you paid for you can dispute the billing before a penny leaves your account.
> This system just make that much easier.
What are we comparing it to? Inaccessibility of credit comes with its own issues, and predatory loans can get a lot worse.
If the govt. banned credit cards, you will then ask why poor people can't get credit. They will then go to payday loans and loan sharks.
Remember, nobody forces you to use credit cards.
Also, the US is also not the top country for either credit card usage or possession. Some European countries top the US.
https://www.theglobaleconomy.com/rankings/people_with_credit...
> We are not in the 60s anymore. A cashless payment system does not need debt.
Right, when I lived in EU briefly, I remember the insane complex and costly bank accounts. Nothing comes for free.
https://www.cnbc.com/2023/08/31/savings-europeans-hit-out-at...
https://www.reddit.com/r/eupersonalfinance/comments/10usczr/...
> EU banks also have many fees... To get a contactless debit card - there is a fee. Use your contactless debit card and pay a 1% fee on every purchase. Use your debit card in another EU country and get a 5% foreign transaction fee added on top. There is no checking account interest paid to you. You need to have a minimum balance. etc. Absolutely terrible service.
Or alternatively, poor people would get their credit more from alternative providers. Like payday loans or pawnshops, or even loan sharks.
Those alternative sources of credit have exactly the same problem with shady collectors. The article alludes to that, but decides to focus on credit card debt.
The article also implies that perhaps regulation that encourages banks to offload credit card debt from their balance sheet might be to blame. If you instead had regulations that encouraged banks to keep credit cards on their balance sheets, and/or to make it so that debt collection agencies have to keep mentioning the co-branded sponsors (like Apple and Amazon etc), then collectors might have more of an incentive to be less shady to protect the reputation of established brands.
Reputation of established brands is very, very valuable, and does not require a lot of paperwork or bureaucracy to self-enforce. So that might actually be a better fix than enshrining yet more 'customer rights' in law, that only the literate classes who know how to navigate bureaucracy can actually enjoy.
You say this like it is an unequivocal good, but I don't think it necessarily is. The world functioned before it was common to have instance frictionless access to a no-collateral high-rate loan.
Also, may I remind you these are for-profit loans, and the very article we're commenting under is about how they are disproportionately used to shake down poorer people.
I'm sure you can twist numbers in either way to say credit cards are net good or net bad for poor people, but it's not unquestionably good at the very least.
> Remember, nobody forces you to use credit cards.
Except two factors realistically do encourage you to. Merchants generally charge fixed prices regardless of whether you pay with credit/debit/cash. That price includes their expected credit card fee overhead, so because everyone else pays with a credit card, the price is higher. You pay that higher price whether you use a card or not, and only get the points/miles/cash back/whatever if you also use a credit card.
Secondly, credit scores force me to use a credit card. For some reason, private companies control my credit score, and my salary, savings, etc have no bearing on it.
Originally, I refused to use credit cards since I find them an unethical tool to transfer money from the poor to the rich, and so I had no credit score. When I went to rent an apartment, the landlord checked my credit score, and then could legally turn me away for not having one. Jobs I applied for checked my credit score, and could legally reject me.
I feel like the private credit agencies, and how widely credit scores are used, has in fact forced me to use a credit card, or else run the risk of each landlord running a credit check and then turning me away.
The world also functioned before we had fractional reserve banking, but somewhere along the way we realized it's better to have it than not. It doesn't have to be an unequivocal good for it to be preferable, on balance, to living without.
It's hard to do an apples to apples comparison, but there are countries where there aren't credit cards like in the US, and they are poorer for it. Giving that a proper examination would require a far larger comment box than is here.
You can choose to opt out of the system. It requires a lot of work (and poverty) but the underground economy doesn't run credit checks.
Why should the government be involved in tolerating or not tolerating this? Credit cards are perfectly legal, ie tolerated by the government, in most of Europe, too.
The real question is: why do customers and merchants tolerate credit cards?
> So Why ? Why sponsor a system that fuck up entire families and push vulnerable people to suicide by giving them a way to pay things they can not afford in the first place ?
Debt in general, and buying things on debt in particular, ain't unheard of in Europe either. Debt collection agencies with shady practices exist in European countries, too.
> Why tolerate an entire industry of debt management that put people to their knees and bring literally Zero value to the real economy?
Who says it brings zero value? Have a look at why customers and merchants tolerate this industry. It's more complicated than 'banks are evil, and customers and merchants are idiots'. (They might very well be, but for your explanation to work, European banks would need to be less evil, and European customers and merchants need to be less stupid.)
> In the 60s, indeed, holding a debt record to every card holder was probably the only way to get a non physical payment system to work in the first place.
I don't think that's the case. And even if it was, your explanation doesn't explain the popularity of revolving credit, instead of just paying off everything every month.
Compare also https://en.wikipedia.org/wiki/Direct_debit#Germany and https://en.wikipedia.org/wiki/Eurocheque
Payment by 'Eurocheque' typically involved short term debt with the merchant as well, but I don't think it had the same 'bad' influence as credit cards had.
Similarly, I don't think checks in the US cause the same issues that you are bemoaning here as credit cards do. But checks also work on something that works exactly like (short term) debt.
> A cashless payment system does not need debt.
Debt might not strictly speaking be necessary. But it doesn't by itself seem to cause the problems you are complaining about.
The economy functions "better" (for a very specific definition of the word) when people can spend money they don't have.
Along with the usual answers like cash bank/points/consumer protection, it also decouples spending from "pay day".
TIL: Credit cards are banned in Europe. /s
They are not banned. They are heavily regulated in many European countries.
In several of them:
- Cashback systems are simply banned.
- Credit card are by default Debit Card. The credit option need to be opt-in.
- Credit Card payments spread over several months are discouraged or simply banned by default.
Credit cards are also much more rare.
With an average of ~1 Credit Card per inhabitant in some countries. Where the US average is ~4 Credit Card per inhabitant.
Credit cards are credit cards, even in Europe. It's just that banks issue debit cards, rather than credit cards and I think that the point. You're financial business in much of the EU is between you and your bank, not some third party credit card company. The debit cards rides on top of the networks built by VISA and MasterCard (and others) for the credit card industry, but the actual financials are between you and your bank. The bank doesn't want you to owe the credit card companies money, they want you to owe them money, but that's normally done using a loan or allow overdraft of your account.
I really think the difference is in the banks and their involvement. Now I'm not suggestions that EU banks are awesome and cuddly entities, but they are more regulated and easily replaceable within many EU country. E.g. switching banks is really not a problem it takes a few days and you don't have to do anything.
Partially but not exactly.
France "CB" are labelled "Visa" (not Visa Debit nor V-Pay) or "MasterCard" (Not Maestro nor MasterCard debit).
Their interchange system will make these card accepted mostly everywhere where Credit Card are accepted.
They are accepted even where Visa Debit or MasterCard Debit are refused (e.g Airlines ticket, Car Rental, Some Hotel booking).
And still they are all debit cards by default with instant payment taken from your bank account.
Do you mean in Europe? Because that is not the case in the US and India. While there are credit card companies, most banks issue credit cards themselves.
Cash-back credit cards are rare in the UK and Europe not because of bans, but simply because of the interchange fee caps which don't leave enough margin for card companies to offer them.
> "Credit Card payments spread over several months are discouraged or simply banned"
Really? What country "bans" this?
[1] https://www.theglobaleconomy.com/rankings/people_with_credit...
The fees are so heavily restricted EU wide that cashbacks are generally infeasible even where they are legal (I hadn't know they were banned in some countries) (e.g. I have card with a effective 0.2% cashback (in gift cards), it used to be 1-2% back in 2014).
Does everyone have multiple bank accounts ?
Related to the above, you don't need to make sure you have the money in your debit card account before buying things. You can just charge it and then make sure you're good to pay later. Example: you don't have the cash handy right now for an emergency car repair. You can still pay the mechanic, and then be able to pay off the car repair over the next two months.
Credit is a tool. Sometimes the tool is good and useful. Sometimes you blow your foot off with it.
And apparently banks in Europe tend to side with the creditor anyway, so I'm not looking forward to the day I actually have to dispute anything, be it credit or debit.
As far as I can say, with a European state of mind, is that a credit card poses a risk and temptation for the average person. Not everyone is financially responsible, many times simply due to lack of proper financial education, and they deserve a little attention.
A while back I saw an analysis that showed 5% of bankruptcies were actually medical--and of those half were retirees who were overspending and the medical debt was simply the straw that broke the camel's back.
People who attempt suicide may be less able to see the situation with calm rationality.
Instead of going to the bank in person, talking a banker, asking for a loan, working out a payback schedule, and then filling out the paperwork for that, just swipe your credit card.
Such a weird question. Cars kill over a million people every year, no one cares at all. Yet you think the US government should prioritise this??
My sleep went from bad to utterly shittastic a few years ago and I ended up missing several items that went to debt collection. They were medical bills I would only be too happy to pay and it’s a very weird feeling. I haven’t carried any debt for decades at this point, not even car or house.
I am still scheming ways to pay the creditors by getting them to accept a check, but it’s hard after they’ve gone to collection.
The post provides excellent insights into the odious side of consumer finance. It feels like a follow up with ideas about reform would not be wasted effort: Once this domain meets the odious side of tech (uncontrolled data collection, tracking etc) the toxicity will grow exponentially.
You can see the reverse effect too not only at an individual but collective level. Once the religious ethos disappears from a sect, widespread adoption of debt becomes the norm.
[1] https://en.wikipedia.org/wiki/Jubilee_(biblical)
Ancient societies of all stripes had periodic debt forgiveness. Ancient (pre-Christian) Rome, for example.
... Unless you're making a joke that it happened but was not "celebrated" because most people didn't like it.
Even debt like student loans, which gets almost universally panned, is still good debt. The ROI on a collage education is ~1000% (amount borrowed/paid off vs. increased lifetime earnings). On paper your are still dumb to not take out student loans to get a degree.
Like I said, debt is overwhelmingly useful to the vast majority of people who use it.
We're not gonna ban cars because a handful of highly emotional road tragedies. We're not gonna abolish debt because of a handful of deranged debt collector stories.
"We're not going to" presupposed the outcome. I don't agree and won't contend it, since you're not willing to say anything that can be refuted. I'm not the author of the future I can't say what we're gonna. But then neither are you.
"The overwhelming majority bear tangible benefit from it" is the actual argument.
Debt is a core instrument of modern first world society. Just think about how many people would own a car, much less a home, if you had to pay for it all up front.
Home mortgages are only a few hundred years old, and it's not like they started out as prevalent as they are today.
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Just because we find ourselves in a particular place today doesn't mean other options aren't feasible. Assuming no better options could have ever existed sounds depressing.
The way Islamic finance avoids interest [1] - the bank buys a property and sells/leases it back to the borrower at a slightly higher price, paid in installments - sounds more like semantics than actually avoiding interest altogether.
It seems to rely on a belief that there is a fundamental difference between rent paid on borrowed money (AKA interest), and rent paid borrow the use of real property.
The virtue in Islamic banking seems to be that it has a healthy skepticism of financial derivative products, preferring to invest directly in physical assets and businesses. This probably avoids a great deal of risk (trading off the upside too).
1. https://www.guidanceresidential.com/resources/faith-based-fi...
Some credit card companies - in the UK at least - specifically target people with poor credit scores with rates up to 99.9%(!)
And it's normal practice - but utterly perverse logic - to increase the rate of anyone who starts missing payments.
Debt collectors can get a court order to put a lien on property, and then get another court order to force sale of that property and repayment of the debt.
Of course the collectors bought the debt for some tiny percentage of its nominal value, so this is immensely profitable.
The outcome is that if you lend to poor people with poor credit scores there's an excellent chance you'll be able to secure a supposedly unsecured debt on their property and make them homeless, with a huge margin of profitability.
There are also ambiguous and murky connections between the debt collectors and the credit card companies which allow the latter to distance themselves from the harassment and aggression of the collection companies.
At the same time there's an incredibly toxic combination of wages decreasing in real terms, exploding property prices (both renting and buying), exploitative health care costs, constant ad noise promoting pointless lifestyle spending, and constant reinforcement of the belief that if you're in debt in a glorious economy of freedom and opportunity it's entirely your own fault.
It's a perfect storm of financial servitude. The credit industry is just one part of it.
At least in the US, this is state dependent. Liens are allowed, but many states will not allow a forced sale of your primary residence.
Debt crisis followed by debt relief is historically normal. Prompting Graeber to wonder if capitalism is inherently unstable.
Maybe capitalism somehow requires debt relief (eg jubilees, bankruptcy). Then we should codify it. Instead of continuing to treat them as unanticipated, unfortunate one-offs.
Our recurring bubbles and bailouts seem to be keeping with Graeber's thesis.
Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
It’s not a problem of capitalism, it’s a problem of reality.
I'm really not sure about that.
> Of course it requires debt relief, things go _wrong_ all the time, that’s just life and how the world works.
Yet funnily enough the people on top of all these vast structures sail away from their sinking ships on parachutes of gold (if they're even sinking: a lot of times they just sit and collect vast sums of unearned wealth because they had a lot of wealth already).
If debt is such a bad business why are so many massive institutions in it, not discharging debt, and raking in the profits by the shovelful?
> Debt relief is also necessary for a peaceful society. If you can’t legally discharge debt in some manner we’d have companies hiring enforcers like a shark loan would.
This however we can agree on. As the amount of debts that can be accrued and not discharged (student loans being the biggest) goes up, the economy seems ever more unstable and unsustainable. As it turns out when you strip mine your consumers wallets from every angle, eventually they seem to be unable to buy things for some reason. Then demand craters and your economy stalls.
And just to head off this reply I always get in these discussions about useless degrees and STEM and etc. etc., I think to be frank, if indeed we're only interested in financing "worthwhile" educations, then that should be enforced by the financier, no? A bank wouldn't loan you $200,000 to buy a single-wide trailer on rented land, the asset is not now nor would it ever be worth that, so why is a student able to borrow six figures for a again in quotes, "worthless" literature degree, and be strapped to that one decision they made for life?
We could talk about the inequalities built into the system, but that would be a different conversation.
TLDR: They're all ancient.
Graeber doesn't try to define capitalism much less Capitalism. He cares about social structures and relations, not finance and monetary policy.
But absolutely do not take me as an authority on Graeber or these subjects. He spent decades researching and refining. I'm just relating my noob understanding of his writing.
We need debt relief (AKA bankruptcy) to avoid actual debt-slavery, which is what preceded bankruptcy laws.
Which is why corporate media has apoplectic fits whenever interest rates go up or unemployment goes down.
In reality most people carrying significant debt are people who are strongly affected by inflation of the prices of goods and services, and most people and institutions who are in a position to lend are not as affected by such inflation.
The most at-risk people are those who are both in a lot of debt and also affected by the rising cost of goods in services. This can be anyone carrying a significant mortgage payment (as a % of income) and supporting a family simultaneously. High inflation hits these people especially hard because pay raises and real-debt-dilution often do not keep up with the rising costs of goods and services.
This can cause a great deal of financial fragility in the short term, even if the individual has good long term prospects due to inflation-based debt dilution.
1. https://en.wikipedia.org/wiki/Marginal_utility#Law_of_dimini...
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.
https://guilfordjournals.com/doi/10.1521/siso.2015.79.2.318
The hope is that others will manage to pick up the thread of inquiry and somehow integrate his historical and anthropological observations into a more truthful type of economics.
[1] There are always exceptions. A tiny number of economists do seem to grasp the nature of debt and money better than the vast crowd regurgitating banalities.