If you get taken to collections over a trivial amount (<$100), its not into taken account for your credit score (latest FICO model fixed that).
Have to go to court for collections? The first words out of your mouth need to be, "Verify the debt." Ask them to produce the document you signed and agreed to. In the vast majority of cases, without this, your case will be dropped with prejudice. This is based on research I did while dealing with a personal mortgage "issue".
http://www.thisamericanlife.org/radio-archives/episode/532/m...
Some companies (like say gym membership) have internal collections departments that can be quite aggressive. They would certainly be able to back up any lawsuit.
In general, you really want to try to avoid being sued.
4 states prohibit wage garnishments at all, and other states set the maximum at between 15-25% of your disposable income: http://www.walkawayfromdebt.com/worksheets&charts/wage-garni... (Disclaimer: Colorado SUCKS. They permit up to 75% of disposable income to be collected).
I've helped negotiate away quite a bit of unsecured debt for close friends. Its easier than you think.
Debt is a contractual issue, not a moral one. As HackerNews entrepreneurs should keep in mind, its the ability to easily shed debt (and not be shackled to those debts for decades) in the US that creates the environment for startups to take the risks they do.
If you borrow money for any reason with the understanding that you'll pay it back, but you secretly intend to keep it all along, then you are doing something wrong (morally if not legally).
We are in complete agreement then. To do otherwise would be, in my opinion, fraud.
Keeping one's word is always a moral issue. The bad practices of others (businesses or individuals) do not change the value of my word.
Changing terms after the fact, dark patterns, charging for things the customer didn't agree to, over billing for cable services in the hope the customer just doesn't notice or gets worn down by trying to fight it.
There are a lot of times the corporation is unequivocally in the wrong, but they already billed your card and you have to fight to get it back. Being able to cancel the card first and force the corporation to take you to court and prove their case could help put the consumer on a more level playing field.
The interest rate is set by the fact that money-NOW is worth more than money-in-a-few-months-or-years. This is also the case if it's certain you will get the money.
I never considered that risk would also be a factor in interest rates. It makes sense, but I really doubt it's a very big factor. Since in most cases debt means you will eventually get the money back, the risk is very little (depending on economic health, I guess). But the "money now vs money then" factor is always present.
Can anyone with a little more insight into these matters inform us whether risk of not being paid back actually represents a substantial amount of the interest rate? Cause I doubt it.
> There's nothing at all immoral about choosing to suffer the hit on your credit rather than repay as both options are expected possible outcomes in the original deal.
Is that how it works in America? Because as an outsider, this sounds very weird to me.
Say you have a debt with me, you fail to repay me but instead you opt to "take a hit on your credit score", which is, I presume, some sort of abstract "score" number kept by agreements between cc-corporations, banks and such? (or is it a government thing? probably not)
So this credit score determines whether you can get certain loans at banks, interest rates for your credit cards, stuff like that yes?
In the mean time there's me. What do I care about your credit score? Do I get to think, "hey I didn't get my money, but at least that guy is going to have a shitty time securing loans from now on and having a stable financial future". How does that help me? You still screwed me over by not paying me back, and the simple fact that, in the process, you also screwed yourself over doesn't help me at all. I'm not the vindictive kind, and some abstract revenge credit score "punishment" you suffer in your standing with other institutions won't get me my money back.
See, this doesn't make it moral, at all.
The fact that we both know, if you don't pay me back, you'll be screwing yourself over by means of credit score, just means that I might be more likely to believe you that you'd rather pay back your debt than suffer that hit. Meaning less risk for me. But if it turns out that not paying and suffering the hit is in fact a serious alternative option for you (instead of a deterrent), you may as well say "I'll pay you back or I stab myself in the eye"--what do I care? (well in fact I would prefer if you didn't, because in my personal ethical framework, such deals themselves are immoral)
Spoiler Alert:
You can't.
Put yourself in the shoes of a lender. On one hand is a doctor, $300k salary, looking to borrow $30k for a new boat. 780 fico. On the other is Trevor, a bartender who makes $25k a year, has a 680 fico with some late payments and a cable bill collection from 2 years ago and wants $30k for a new car.
Would you lend to them both at the same rate? Both will have the same time value effects....
No, interest rates are a measure of risk; the bigger the risk of default the higher the interest rate. Bad credit score equals very high interest rate.
Secondly, stop pretending you're the lender, we're talking about banks here, not personal loans from friends.
When you take out a loan with a bank, it's a business deal with explicit exit strategies baked in: pay off loan, or default loan. Both options are valid exits according to the contract. Morality simply isn't a factor in this equation.
"At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the LORD's time for canceling debts has been proclaimed."
(http://www.biblestudytools.com/deuteronomy/passage.aspx?q=de...)
It's interesting to imagine a world where there was no legal recourse to someone not paying back debt: easy to imagine some first-order consequences, harder to see how it'd change the grand scheme of things. I suspect it would end up being a much better world, but I come from a very anti-debt perspective.
I think it sounds scary. If I enter into a contract that says I have to do something in exchange for something else, I'd like a court to honor that contract, and not -- somewhat arbitrarily I'd say -- declare debts in the contract invalid after seven years.
Imagine no one being able to issue debt with a maturity of more than 7 years. That would be the consequence of such an interference into the market. This means our economy as a whole would become even more sensitive to interest rate volatility, as you can't secure the interest on a loan for more than 7 years at a time.
I'm not saying that having a bunch of debt is good. But imagine where you'd be right now if you couldn't get a student loan for an education. Or finance a car or a house. I'm pretty sure I would not be where I am now if I hadn't gone to school... which I would not have been able to do without a student loan. And I never would have been able to get a house without a loan.
I think it's also easy to overstate how much loaning would decrease. The widespread use of credit scores when issuing loans belies the idea that it's only state violence that ensures people pay back debts.
Maybe it'd make sense in a totally anonymous world, but why not just do business with people or entities you can trust? Think web of trust. That's what consumers and businesses de facto do nowadays anyway.
You could still issue debt; it's just you can't expect to have violence to back it up. Past decisions and alignment of lender and borrower self-interest determine the likelihood of it being paid back.
If you borrow money, and you agree to pay it back, there should be a good faith effort to do so.
But that is only one type of debt.
In the US, where I live, Apartments are incredibly bad about charging fees after you move out, and give you very little recourse before sending you to collections.
Parking tickets, and red light camera tickets are huge sources of revenue for the city, and Seattle uses them when they need to increase city coffers.
I look at it this way, if they're not going to play by the rules, I won't either.
Also, I don't like paying for stuff.
I'm sorry for your loss. But this is why we should all strive to repay our debts... even to corporations[1]. I would imagine that some of your customers that stiffed you may have had the very attitude you described when you said "But from a corporation? Their losses are priced into their interest rate." They, too, may have assumed that your loss was priced into your rates. It must not have been. Perhaps other businesses don't either. It makes you wonder just how many people/business get totally screwed by people defaulting on debt to them. You suggested that chasing might understand differently if s/he had lost a business. Of course you are also entitled to your opinion. But, honestly, I'm a little sad that you don't see the other side of it, having been shattered by people not making good on their debt to you.
[1] I understand that Corporation ("big C") is generally directed at the big, huge things like Walmart and Chevron. But corporation ("little c") is just a legal term and can still be the small business down the street.
Unless you take things from people. People are different. Then you should pay for those things by bleeding all over the snow or whatever. (I don't know how money works in your country. In the US we usually just use dollars. There's not much snow right now and having everyone's blood everywhere can lead to public health problems. See also: Ebola.)
Anyway. Thank god there are no people at corporations. And thank god all corporations are the size of Walmart and can easily withstand financial losses due to non-payment.
Well, you should care, because they factor it in by increasing prices for consumers. You're just getting everyone else that shops at Walmart to cover your debt. That's irresponsible, and I see no difference between owing Walmart $10 and owing your friend $10.
This[1] is the type of situation where I believe the victims(yes, I'm using that word) deserve to have their debt removed.
1. http://www.npr.org/2014/09/15/347957729/when-consumer-debts-...
It is really a fabulous book, and can help explain why many people in many cultures feel as you do, who benefits from that belief, but also how debt has never historically been about moral obligations but has always been a contract between two parties, with limitations on both party's obligations.
In reality, companies will do almost anything to avoid suing you for small amounts of money. The financials don't make sense. E.g. how much gym debt would it take to justify a lawyer's fees to pursue you? Not less than several thousand dollars, probably much more.
I'm pretty sure the big gyms that have in-house collections. I would imagine people signing a year contract and then changing their mind and trying to get out of it happens quite often.
In any case, if you're wilfully and knowingly taking on debts you can't repay and using a card like this to CYA, your bigger risk in some places might be getting arrested for criminal fraud. Good luck ever getting credit again whatever the CRAs say about you if you've also got a criminal record for a fraud-related offence.
Here's how the process plays out:
When you owe a debt what happens is the lender will contact you a few times and then, if you don't pay, they will sell the debt on to people who are in the collections business. And over the course of a year or two your debt will likely change hands multiple times, at incredible devaluation. (Listen to the This American Life episode, it's great in this regard.)
These companies will make all sorts of outlandish claims about what might happen if you don't pay. In reality, nothing at all will happen outside of the hit your credit rating will take if they take the issue that far. All things considered, that's a non-issue for most people facing debts they have no way of repaying.
In the not very likely event you are actually summoned to court, what will happen is that the lawyers working for the current owner of your debt will try to strong-arm you before you go before a judge. They'll say 'let's settle this now before things get serious in there' etc., and will offer to accept a fraction of what the paper says you owe.
That's when you ask, 'where is your witness?'. The chances of the 2nd or 3rd collection agency to purchase your packaged debt being able to haul into court the very same loan officer who witnessed you sign for a loan years ago approaches zero for cases involving less than seven figure sums.
Source: advice given to me by a debt counselor during my own business loan default 'issue'.
Update: the idea of bad debt ruining your credit score is a myth. I defaulted on a high-five-figure debt and two years later qualified for a six-figure mortgage with a mid-five-figure income. Most of the talk of 'this will go down on your permanent record' is FUD.
On point #2, also false. Bad debt impacts your FICO score - often severely - but that impact is lessened with time. A 90-day or 120-day late (effectively a charge off) can ding a score 20 - 150 points easily depending on other credit factors. Shrugging your shoulders and saying "this won't be that bad" is not a good policy. While the record is not "permanent" (7 years for standard debt, 10 years for bankruptcies), they can have a significant impact.
This is after 3+ years of daily collections calls from half a dozen companies pursuing a high five-figure debt.
The takeaway being: debt is a business phenomenon and discussions about it are a negotiation. I negotiated hard; when my offers of partial repayment were refused I never answered their calls again. In fact I created a special, looong outgoing voicemail message that sounded like I was answering the phone ("Hello? What? Hello? Are you there? Okay, a large pizza? We don't do gluten free!") and forwarded any unrecognized number to it straightaway. Just maybe that made someone laugh and they decided to toss my file.
Had I gotten a summons, I was advised by a lawyer to demand a witness. I never tested that tactic, but I do suspect that if someone had the means to extract money from me they would have, and they did not.
It's all about recoverability and risk over return. Most of the time a 5-figure debt will be worth the effort. When you start getting into $5k or less debts, it's sort of a crapshoot. The original owner of the debt will often sell it for pennies on the dollar, at which point a collector will do their best to get as much as they can out of people without a civil case, because civil cases are expensive and there's no real guarantee of return (people with no money, people on the verge of bankruptcy, etc).
The general advice is not to negotiate at all with creditors. Once something's gone into collections, you will see no benefit to resolving the debt other than mitigating your risk of a law suit. And even at that point, the first phase is a mediation option wherein you'd again be able to throw out a number, do a payment plan, etc.
Lenders do not update to the latest Fico version the way we all buy new iPhones. Many lenders integrate Fico scoring into proprietary models.
Having ANY collection will hurt you, period. Even under $100. Even if it doesn't drop your fico, American Express for example won't open you an account with an open collection. Any mortgage lender would make you settle the collection before closing. So in summary, i think your advice here is very bad. Yes, if you have a collection, you MAY be able to have it removed from your reports without waiting 7 years. But it's not black and white.
Risk profiles at a company like Amex are sophisticated. But you're somebody who apparently is sharing his high-earner status here, but you don't think that was an important caveat to your original post? It's like you're saying "CREDIT DOESNT MATTER*" and in fine print you're saying "if you have enough cash to put 50% down on things and have a high income!"
It's bad advice to give, which was my point, and one I'll standby. Nothing personal of course.
Despite filing disputes, it remains on my report as a $500 non-payment.
I have been able to get other items removed using your strategy but it doesn't always work.
edit: They also had an SMS cash thing where you can "send" cash to anyone, which is really a code you can use at any ATM to redeem cash.
In Europe anyone can send money online to any other account in the EU, given the account number, usually for free.
The fact that the US doesn't have that as commonplace as in Europe is ridiculous
Canada is slightly better, they already are ditching the magnetic stripes off cards.
Whether one can do it online depends on the bank, but most US banks and credit unions now have the ability to allow transfers and payments to anyone given a postal address (to be fair, if its just to a person, the bank may issue a paper check instead of a true electronic transfer. Sigh). They mostly call this "online bill pay" or other names, but it's become pretty full featured. In addition, most US banks are allying themselves with various person-to-person payment systems (Popmoney, though archaic and painful in use, is used by many US banks including Ally, Bank of America, TD Bank, Citibank, Fifth Third Bank, PNC, Regions, Suntrust, US Bank, and Wells Fargo, for example; Chase has it's own system as do some others. ClearXchange, Dwolla, Venmo, Paypal, and a slew of others are also gunning for this space).
So, yes, lots of problems, but I don't know if above is entirely a fair statement.
- This money transfer system works if you have (any) bank account. If you have a bank account that's all it needs (and no sign up)
- It does not depend on any action on the receiving part (so no depositing a cheque or something similar).
- It takes a couple of days tops
- A fee is acceptable, if it's something like $5 at most
- It works for large amounts (for buying a car or a house for example)
- It is trusted. If the money shows in your account that's it (unlike a cheque)
If it has this features, great.
Every time my cleaning lady comes, I just leave a check for her on the counter. I could leave cash but then I have to make sure I have that much cash on hand every time. I could probably get an account number from her and do some sort of transfer each time. But honestly, that doesn't sound at all easier for me than just writing a check. I think that is the only check I write on a regular basis anymore. I used to send my gardener a check but I started paying his invoice online through my bank. And I'm pretty sure they actually print a check and mail it to him on my behalf. :)
That may be true but most people seem to have decided that the convenience of not needing to transfer a physical item outweighs those problems.
You already give your acc number for your job.
I do that (sending and receiving money) and guess what, most of the people never changed bank acc numbers (including me). If it changes it's a non-issue.
Especially because payments either happens frequently (paying rent, for example) or it's a one-off thing.
I don't get why should I have to write a check to a landlord when they could give me they account number and let me set up a recurring payment (that's exactly what happens in Europe)
Cost to go online and have my bank mail someone a paper cheque: $0 and I need their name and address.
Guess how I send people money?
Here, transfers are free and any "paper" business such as check cashing/bill payment has steep fees.
How can your banks provide you with the labor intensive service for free and charge for what is cheaper to provide? Aren't they creating a customer behavior they don't want?
The wire, however, including the account (the routing number can be looked up by your bank; it just saves time if you already have it) is a very specific approach to transferring money in a certified manner. It's older, and has some overhead and history in how it's tracked and managed, if for no other reason than that the funds are guaranteed. As such, there are still fees on it (and that's probably true in most countries, btw, unless you have a balance over a certain amount).
Most folks paying their babysitter $40 aren't concerned about a certified transfer, and assume they will have funds to cover the check when cashed, so they don't need to pay any fees and will just do a regular "check". And I would bet that the banks are working on ways to do a better job of making electronic links to reduce their need to print those checks (for example, perhaps if I keep paying my babysitter 2 or more times, the bank could automatically check the clearning house for the deposited check, and, in the future, autonegotiate a direct link with the babysitters bank and account for payment or something clever like that; I don't know if that would really work but sounds cool).
I'm not sure what the costs are for wiring as it is usually packaged. I pay $30-40/year for Internet bank w unlimited wiring including p2p through phone number (yes guaranteed/negotiated transfer to the babysitter!). Meanwhile cash-paying a bill or cashing a check is probably $10 a pop, simply because banks are trying very very hard to get rid of two things: cash and staff. that makes a lot of sense from a business perspective.
The easy manner of depositing means that it is still quite common for them process cheques.
By the way, I live in a small German town that only got its first EC card (or cash card POS) about 10 years ago.
I don't get bills on paper, much less pay them that way. I come from the future though. You'll love it. You won't believe this but I'm typing this very message on a palm sized computer/telephone device.
I mean each insurance company etc. can't each be setting up their own solutions for online payments, right?
Why not ditch checks and just set up a reliable/cheap money transfer system? It's peculiar how the country that is at the epicenter of the world economy and the Internet doesn't actually use the Internet for money related things (tax returns, banking, insurance...).
Because that's what terrorists would do.
I don't use the magnetic strip (only chip) and I don't without pin. Online use of MC/Visa passes through SecureCode/Verified by visa to ensure that leaking the CC details from a third party shouldn't be causing any skimming of my account. It's not fool proof but I'd say it's at least safer than cash and checks.
The same here, but then I encounter more and more places where they offer you to type your pin only in an open and insecure manner. This sadly makes the pin usage a joke and something of a hassle compared to the older magnetic strips.
united states in general enjoyed some time where people did little to defraud system and therefore number (and later exp date, later - cvv) was fine. You can't rely on people's integrity and morale now as a safe-guard for system. Same applies to paper checks by the way.
In case of turkey I bet that defrauding was problem from beginning, that's why it was first thing to solve too.
If anything, it just tells that doing tech business in usa will be more fictitious than it could be otherwise.
Would appreciate if you could give some examples for non-US customers, at least for another point of comparison.
That said, I don't think it has an Android app, just a mobile website. The app that shows in Google Play is just a shortcut to the website (built by an unaffiliated developer).
And of course, it doesn't even any of the notification stuff, it's just a gateway to your regular bank account. Nor does it have physical cards.
MBnet is made by SIBS, the same entity that controls all the ATM.
I am reasonably sure ING and unicredit did that too some years ago.
Hi,
Definitely not impossible, but if you are following the ISO you might end up running out of numbers somewhat quickly or having to reuse them, which I'm not sure it's very safe. But it really comes down to how many users you will have.
The IIN (first 6 digits) are fixed and only one can be issued for each company, etc.
I built a small gem that implements the ISO if you want to have a look: https://github.com/eduardordm/iso7812
> This is something I have been asking for since forever! People on here claimed it was "impossible" because of how credit cards work, I guess not...
My Bank of America Visa had a "temporary number generator" feature that I used when buying from sites that I thought were sketchy. I haven't used the card in some time so don't know if it still exists.
It exists still, but you have to login to the site to use it, and the card generator is written in Flash.
Aside from that, it's very good. It ties the number to the merchant and you can set a limit and expiration date.
I use it for a lot of recurring subscriptions, and "sketchy sites" purchases.
Can you provide URL/directions? I'm not kidding. As far as I could tell, they used to have such a service but didn't anymore; but maybe it's still hidden somewhere but just not advertised, and I couldn't find it?
ApplePay and other phone wallets do something similar, generating new numbers for the payment but leaving the original number on the device or in the account. This is indeed more transparent to the user, but it doesn't give the control of capping or other levers.
Doing it via the card is clever, if that's what they are doing; if they are just doing it via the mobile app, that's somewhat old news... except for the other features, and the elegant giving of control to the consumer.
I previously worked at a web hosting company where people would pull this kind of thing. Generally we didn't bother with collections because it was often more hassle than it was worth (the biggest part of our cost was the support and anti-fraud process, not the actual service), but nonpayment would get accounts deactivated and blacklisted automatically, so they'd have to call in to us (and get recorded in our tracking system in case of repeat incidents) to pay and get things turned back on.
I had some sympathy for people dealing with accidental credit card expirations, but there was always a weird minority of people who would knowingly and sometimes repeatedly cancel cards or dispute payments and yet get angry at us for the audacity of turning off their websites.
I do this all the time with PayPal. It's way easier to just sign up for a free trial then immediately deactivate the recurring payment than having to remember to cancel it later.
> Don't like your ISP? Just cancel the CC number, then 12 months later get a bailiff turn up and seize your stuff...
Cancelling payments like that is what a lot of UK banks do advise their customers to do. Particularly with (but not exclusive to) insurance services. I've known banks actually recommend cancelling the payments through them instead of trying to cancel via the company itself.
Services like internet / phone lines, gas and electric would be different though since they're paid in arrears.
In general, the way recurring payments are setup seems really bad.
Not only is it not impossible, Paypal did it for YEARS, I loved it, it was a great service. http://www.quora.com/Why-did-PayPal-discontinue-their-one-ti...
The programmer in me tells me "this just can't be secure", and the only hope I have that my card number is never stolen is, well, hope.
So the point is technology and the idea is pretty old but finally someone has implemented it right.
Why not just cancel the subscription? If you remembered you are getting charged for a subscription, and took the effort to cancel that card number. Why wouldn't you just cancel the subscription in the first place?
This is something I have been asking for since forever! People on here claimed it was "impossible" because of how credit cards work, I guess not...
> Tired of your monthly yoga pants subscription? Or a two-week "free" trial that lasted four months? Just deactivate that card number. It's that easy.
They need to be careful what they advise. That advice could (and likely WILL) result in people getting taken to collections.
Don't like your ISP? Just cancel the CC number, then 12 months later get a bailiff turn up and seize your stuff...