I'm Gonna Get Back That 50c I Loaned Jimmy In 2nd Grade, Too!

by Jacob Davies

You can tell from the first sentence that this story isn't going to end well:

Timothy McCollough freely admits that he stopped making payments on his Chase Manhattan credit card in 1999. He says he did not have the means to pay after he was disabled by a head injury that cost him his job.

The nice thing about the passage of time is that, eventually, all that stuff you did - you know what I'm talking about - gets to just be something that happened a long time ago that nobody cares about any more.

In 2007, he was sued a second time over the debt, and this time the suit contended that he owed significantly more: $3,816 in credit card debt, plus $5,536 in interest and $481 in legal fees. As he did the first time, Mr. McCollough sent a handwritten note to the court explaining that the statute of limitations on the debt had passed... [C]ollectors are not supposed to file lawsuits to pursue out-of-statute debt, some consumer lawyers say it happens routinely.

Well, maybe not. But at least there's some good news for bank shareholders, who are recovering significant amounts of money from losses written-off long ago:

[On an] $8 million portfolio of Bank of America credit card accounts...the expected asking price is $16,000, or two-tenths of a cent for every dollar owed.

Oh. There's something unseemly about that: like a banker in a fine suit, groveling in the dirt for a dropped penny. Someone at Bank of America is paid a good salary to do this. If I was that person - or that person's boss - I'd find this story rather embarrassing. But then, I don't work in banking.

Comments

[russell]

It's weird, my understanding is that the banks are sitting on a lot of cash, but they are looking for every dime they can find.

I just got a notice from one of my credit card providers that they want to raise my rate to, basically, prime plus 14%.

I doubt they even pay prime for whatever they borrow, so they're looking for a clean 14 or 15% from me.

And I have a freaking great credit rating.

The result of this is that they are going to lose a customer. It doesn't make sense to me.

But then, like Jacob, I don't work in banking.

[Jacob Davies]

russell: It's weird, my understanding is that the banks are sitting on a lot of cash, but they are looking for every dime they can find.

They're broke, and desperate to build capital reserves any way they can. From what I can tell just from reading around, the big US banks are not in a position to deal with another big dip in house prices. But prices are still too high. Frankly I think that everyone knew that and were just hoping that high growth and a little inflation would show up and sweep it all away.

As an entirely inexpert outsider just trying to figure out what is going on, it seems like a major second crash in house prices with accompanying bank failures/bailouts is almost inevitable without major action on jobs & deflation. But what do I know.

[CharlesWT]

It doesn't help that a lot small commercial properties—less than 5,000 square feet—were financed with home mortgages. Oops!

[John Thullen]

It's fracking by other means.

[Mike Schilling]

In return for granting corporate persons First Amendment rights, flesh and blood persons should be given the ability to transfer their outstanding debts to subsidiaries created for the express purpose of going bankrupt without affecting the assets of the original person. It's only fair.

[John G. Spragge]

This seems to have less to do with the big banks, who have willing buyers for old bad debts if the banks will sell it cheaply enough. But it does say something very disturbing about the prevailing American economic paradigm that people think it worthwhile to buy up expired debt and harass people to collect it. It reflects a seriously distorted view of money as a real thing rather than a surrogate for thought, invention, services, energy, resources, and all the other things that make up the actual running of the oikos, or household, where humanity lives and from which we derive the English words economy and ecology.