Jake Halpern’s noir-ish story in the NYT Magazine about debt collection is scarier than Sin City. Poor Theresa! (We are all Theresa.)
there was little that Theresa could do; she had paid off her debt to the wrong collectors and had fallen into the debt underworld. If anyone was going to help her, it wouldn’t be the state attorney general, or the Better Business Bureau, or the F.T.C., or even the police, but the former banker and the former armed-robber who bought her debt.
The most valuable takeaway from the piece, as underlined by an interview Halpern gives Ira Glass on “This American Life,” though, is that a few magic words can make the whole nightmare go away.
Jake Halpern: [The lawyer] said, oh, well, when a consumer actually shows up in court and says the magic words, then these cases basically evaporate. And I say, the magic words? He says, yeah. Show me the evidence.Ira Glass: Show me the evidence. In other words, show me where you got this number, $3,762.20. The Georgia Legal Services lawyer told Jake that if you’re standing before a judge and you say, OK, I don’t recognize this amount that you say I owe, and I want to see some documentation, I want to see account statements or whatever, because I have no way to know with certainty that this debt is really mine, the judge will usually turn to the other side and ask for the evidence. And in all likelihood, they’ll have no documentation and they’ll drop the case. And this is true not just in Georgia, but elsewhere. Because the way this business works, Jake says, when credit card companies sell these IOUs to debt collection companies, they usually don’t give them any documentation. Usually they just give them a spreadsheet with a long list of people who owe money on their credit cards and their addresses and the last payment and how much they owe, and not a whole lot more than that.
Amazing!! You have the right to remain silent, America, or to use the magic words that will set you free. Think you’ve got it down? Test your skills by playing the game!
Following up on Josh’s post, “We Need a New Kind of Financial Advice,” I’d like to posit the following, to be taught in all schools and financial literacy courses immediately:
For most of us, debt management is part of being an adult.
Right now, the standard financial advice is get out of debt immediately because debt is bad. Or, the more nuanced version: because the longer it takes to pay off your debts, the more you have to pay in interest.
President Obama’s move to help ease the student loan crisis started a cascade of think pieces about student loans over the weekend. Here are a couple of the most interesting:
+ Here’s Why the Student Loan Market Is Completely Insane, via Businessweek. Complete with charts! Oh, and facts, lots of sobering facts:
Default rates at such places as Stanford, Duke, Carnegie Mellon, MIT, and Yale are all less than 2 percent. Not surprisingly, graduates from these schools command high salaries in the job market. At such places as West Virginia, Louisville, South Florida, and Boise State—schools much better known for athletics than academics—default rates are 10 percent. Further down the food chain are much higher default rates at places such as Alcorn State (16 percent), Colorado Technical University (23 percent), University of Phoenix (26 percent), Lincoln Technical Institute (30 percent), and Arizona Automotive Institute (42 percent).
+ Finding Shock Absorbers for Student Debt, via the NYT, also concerns itself with the problem of default, and wants to help cushion students against the risks they incur by paying for college.
The core problem with student debt is that we don’t adequately insure students against the risk of investing in college. While a vast majority of undergraduates have borrowed much less than some headlines suggest — in one study from the last decade, 98 percent borrowed less than $50,000 and four out of 10 borrowed nothing at all — millions are in default or behind on payments. With damaged credit records, they face higher interest rates on car and home loans, rejected rental applications and lost job opportunities. … But how can we help in the short term? We should allow student-loan payments to rise and fall with income, as we do with Social Security and taxes. If borrowers hit a tough spell, payments should drop automatically. If they score well-paying jobs, payments should rise. This is called “income-based repayment.”
+ Perhaps all of this has something to do with why millennials are hoarding cash like dragons?