I was listening to WAMU on the radio as I drove back from driving my daughter to school this morning, and I heard a story about elementary schools that are now teaching financial management classes to their students. The schools are even setting up their own credit unions so students can learn how to manage their bank accounts. I'm curious to know whether credit card management is a part of this education, and specifically, whether they're teaching kids about all the ways in which credit card companies can take advantage of unwary consumers. If I were teaching such a class, I'd issue credit cards to all the students, and then employ the same methods that real credit card companies use to squeeze more dollars out of each consumer. Late payments, cash advance fees, over-limit fees, foreign currency exchange fees, the works. Well, maybe not in elementary school, but certainly by the time they reach high school. By the time they're freshmen in college, it's way too late because the credit card companies are already lining up at the door of the student union building ready to issue the cards and ruin bright futures.
I got a call the other day from a collection agency, and while I was talking to the guy who called me, I could hear all these voices in the background, as if the agents were sitting on top of each other. One particular voice came through loud and clear. The guy was yelling into the phone, as if parodying a loan shark in a bad television movie, "A hundred bucks a month just doesn't cut it, buddy! You better come up with something better than that. Don't waste my time!" I couldn't believe it. I proceeded to make an offer of settlement for a client, and the guy I was talking to mumbled something to the yeller (who turned out to be his superviser), and the yeller grabbed the phone from him and started shouting at me in the same manner. When I calmly asked for information about his identity and location, he bellowed into the phone that I didn't need know that. I guess there's nothing in the Fair Debt Collection Practices Act about tone of voice or demeanor. Collectors have to be careful about the kinds of threats they make over the phone, but are they free to yell and scream and sound like mafia? I wonder if the ability to sound threatening is a job requirement in this particular company. If you can say "Have a nice day" in a way that conveys the idea, "I'm coming over to break your leg," you're hired. Recently, I heard from someone who couldn't pay his debts because his wife became very ill for a long period of time. One night, he ended up giving a collector permission to empty out his bank account. When I heard that story, it astounded me, but now I understand a little better how that could have happened.
Until recently, I was not much aware of what life is like for people in the aftermath of financial disaster. I imagined that once the storm has passed, and the bankruptcy discharge has been entered, life goes on as usual. Maybe for a few lucky people who have high incomes (yes, wealthy people end up in bankruptcy too), life can go on as usual, but for the majority of working people, life isn't the same again, ever. They're denied credit for years afterwards because unpaid debt, whether it's reduced to judgment, settled, discharged in bankruptcy, or simply left unpaid, remains on their credit records.
Take my friend Elizabeth*, who is divorced, the mother of a teenage girl, and making ends meet with no support from any outside source. She filed for bankruptcy under chapter 7 a few years ago. Since then, she's lived without credit. While she makes enough income to pay her basic living expenses, she can't buy a house or a car, or get a bank loan to start a small business. To make matters worse, she found out long after her bankruptcy case was closed that a tax debt incurred by her ex-husband is part of her credit record. Recently, she went to a car rental business where she'd rented cars many times before, only this time they ran a credit check and told her she was denied the rental. She was mortified. She wasn't even charging the rental to a credit card (she doesn't have any credit cards), she was paying cash. Luckily, another employee there recognized her from her prior rentals and took care of it. She runs into these situations all the time, never able to take for granted that she'll get respect when she tries to engage in the most ordinary financial transactions.
If you've ever had a credit card charge denied at a restaurant or a store, you know what it feels like when your financial credibility is questioned. You could be having the most pleasant exchange with the person behind the counter when, suddenly, that person looks at you differently, assumes certain things about you. You feel like you're standing there naked, or worse, wearing tattered underwear.
There's very little help out there for people who need to get back on their feet after their credit has been badly damaged. Sure, credit repair services are offered by various companies, but who knows which ones are legitimate. Even under the best of circumstances, it's a very slow and arduous process to fix a poor credit record. Items of history that are legitimately in your record can't easily be done away with. People who've been through financial hard times find that in the modern commercial world, which is not kind to those without "good credit," they are second-class citizens.
*My friend's name is changed to protect her privacy.
Thanks to Chi, a very talented designer who lives in New York, my blog has a new look and lots of nifty features that I still need to learn how to use. The discussion boards are not up yet, but will be coming soon (right now, if you click there, the comments page comes up instead of the discussion boards). Additional information pages on credit reporting and other topics will also be up soon. I'm still getting used to this new system. That last entry about bankruptcy was written by me, even though it says it's written by "maxedo." We're one and the same person. I just went in with the wrong user name and now I don't know how to change it.
Comments about the new site, and any suggestions on forum topics and information you'd like to see would be appreciated. I hope my friends at creditboards.com check in from time to time.
Thanks a million, Chi.
Almost everyone who's ever considered filing for bankruptcy wonders how publicy mortifying the experience will be. "Will I have to go to court?" is the way the question is usually stated. People worry that their friends and neighbors, and maybe even their employer, will find out about it.
Normally, in a routine chapter 7 case, you don't go to court. But there is a public proceeding which can feel like going to court. After the case is filed, the court schedules a "meeting of creditors" which is conducted by the trustee appointed to your case. Your creditors are invited to attend and to ask you questions about your debts and assets, though in most consumer cases, creditors don't bother showing up (and when they do, it's not always the ones you'd expect to be there). The trustee asks a series of routine questions about the property listed in your bankruptcy schedules and the nature and extent of your debts (for instance, questions about what you used your credit cards for, whether you have property not shown on your schedules, whether someone has died and left you an inheritance). Occasionally, someone from the U.S. Trustee's office (an arm of the Justice Department), will also show up if there's suspicion that you might be committing "bankruptcy abuse." And all of this takes place in a room full of other debtors and their lawyers, and anyone else who cares to show up, so it is very much a public proceeding. Usually, it's not a horrific experience and, usually (I'm talking about the straightforward, routine chapter 7 case) it lasts just a few minutes, and then you're free to go.
The process is demoralizing enough that no one would do it just for kicks, contrary to the belief held by many that hordes of people go around charging up their credit cards with the knowledge that they can easily turn around and get rid of the debt through bankruptcy.
I was deleting the latest spam sent by debt counseling companies when I noticed something new -- Christian debt relief. Many people, when faced with financial tragedy, will turn to God for comfort and answers. So, it wouldn't surprise me if someone seized upon this vulnerability as a new angle for competing in this business. I checked with the Better Business Bureau, and to my surprise, found that this particular company is a member of the BBB, and has no negative, unresolved reports. So, who knows?
I went to the FTC website and filed a complaint about the travel service subscription that my father was automatically signed up to because he neglected to send back an offer from American Express with the "decline" box checked. Here is the initial response I received by e:mail:
Thank you for visiting the FTC's web page and for using our NEW electronic Talk To Us form. Here's what happened to your information after you sent it to us:
One of our consumer counselors reviewed the information you sent us. If it was related to the FTC's law enforcement responsibilities, we entered it into our shared law enforcement data system. We share this data system with law enforcement agencies throughout the United States and Canada. Attached is your electronic response, which includes your reference number. Any enclosures can be found at www.FTC.GOV under the News Releases, Publications, Speeches option.
Information from consumers like you helps Federal, State and Local authorities investigate possible illegal practices and enforce our laws. Someone from the Federal Trade Commission or another law enforcement agency may contact you if they need additional information to help them in an investigation.
Thank you for using our Talk To Us form, and please continue to use the FTC's web page, www.ftc.gov, to get free information to help you avoid costly consumer problems.
Who knows if I'lll get any follow-up response, but I think it's important to file these sorts of complaints. If a significant number of complaints are filed regarding the same scam, it's more likely that the FTC will take action to stop it. It's a slow process at best. The only power consumers have is the sheer force of the great number of us out who are out there making the economy look rosy and sweet and keeping those in the credit industry solvent.
This morning, my mother showed me this notice of outstanding debt that was sent to my father from T&L Elite Traveler. She was about to throw it out because she thought it was junk mail. It said that my father had a past due payment of $79.00 owing to this company. He never signed up for this service, doesn't even know what it is. So, I called the number on the bill and demanded that this service or whatever it is be cancelled immediately. When I asked how in the world my father came to be registered with Elite Traveler, the customer service representative nonchalantly explained that "oh, he probably just neglected to check the 'decline' box on the American Express offer he received in the mail." So, now we have to read every piece of junkmail in case there's an offer that becomes effective immediately if we don't check the "decline" box and send it back? What is this? Now, I'm wondering about all the magazines I never subscribed to that keep coming to me in the mail. Did I simply neglect to check the "decline" box? Which of my credit cards is is being billed for these subscriptions?
It ain't easy, and it's only going to get harder. In the jurisdictions where I practice, consumer bankruptcy lawyers typically charge $600 to $1,000 for a "simple" chapter 7 bankruptcy case (many cases turn out not to be simple). That covers the initial meeting with the client, preparation and filing of the petition, schedules, and statement of financial affairs, appearance at the mandatory meeting of creditors, and responding to inquiries from creditors. If a lawyer charged on an hourly basis for "simple" chapter 7 cases, a single case would often result in legal fees of $2,000 or more. Big firms don't represent consumers because they take a loss on each case (considering they commonly charge hourly rates between $300 to $500 or more for an experienced attorney). Small firms that specialize in consumer bankruptcy can profit only if they have a high volume of cases, with most of the work being handled by paralegals and secretaries. So, if the pending bankruptcy reform legislation -- which promises to make the whole consumer bankruptcy process alot more complicated -- becomes law, there will be a crisis in this profession. Lawyers who specialize in consumer cases will have to either charge more (in which case many consumers simply will not be able to afford bankruptcy protection) or switch to a different practice area. With consumer bankruptcy lawyers out of the way, ruthless credit card companies and the vultures that dominate the credit counseling industry will have a field day.
How exactly did it come about that in the last couple of years, it suddenly became appropriate to tip everyone we come in contact with? Of course, I'm used to tipping waiters, hairstylists, cab drivers and porters, but now it seems like there's a tipping jar everywhere I go: the carwash, the coffee shop, the ice cream store. Even my bill for the newspaper every month has a blank space for including a tip amount. I'm in favor of decent wages and would rather pay a little extra for these services over being pressured to drop an undetermined amount of money into a bucket after I've already paid for the service, especially as I have no assurance that the tip will go to the person who handed me the ice cream cone. Increasingly, I find that I'm reluctant to deal with human beings in the real world because it's so much simpler and cleaner to transact business over the internet, and this tipping phenomenon makes it even harder for me to get over this antisocial tendency. When I travel to other countries, I don't enjoy going into markets where the price of everything is negotiable. I feel ill at ease when there are no price tags. When I see a tipping jar, I know that the price of what I'm buying is just a starting point for what I'll pay. Sure, I could just ignore the jar, but who wants to leave a place of business feeling like a dirt bag who doesn't want to help the poor kid behind the counter pay for college?