Profits
Your misery means big profits for your creditors.
Your struggle to pay your debts is more profitable than richer folk's payments.
Here is how it is done. You miss a payment by one day–or one hour. Banks
charge you $39.00 or $43.00 late charge and they bump the interest rate up by 10% to
20%. The penalty and high interest raises the cost to more than 100% per year
for the first month. If you have good credit, you just pay off the card. If not,
your next minimum payment is twice as large. The other credit card banks see
that one card is charging a penalty rate and they use that as an excuse to start
charging penalty rates also. The more cards you have the harder it is to meet
the increased minimum payments. You start transferring balances to dodge the
high interest rates. But your debt snowballs and soon your minimum monthly
payments exceed your ability to pay. Each month you go deeper into debt. It gets
harder to make your payments. Constant phone calls. New credit cards are harder
to get. Eventually you give up. You are beyond the point of no return. Six
months after you stop responding the bank gives up trying to collect and charges
off your debt.
How does this generate profits for the banks? It seems that they would lose
by forcing you into bankruptcy.
Suppose you pay the late fee and higher interest. After a year the rate comes
down. The bank collects a years worth of higher interest and the penalties
increase the cost to more than 100% per year. The bank makes obscene profits on
what started as a zero percent loan. This is called in criminal law "bait and switch"
or "fraud in the inducement". It is a type of fraud, but it is legal if a
bank does it: Legal, but not moral.
If you are forced into bankruptcy, the bank charges off the loan as a bad
debt. This is also profitable because a charge off converts the loan to a loss
and is a tax credit that reduces taxable income dollar for dollar. By the time
the loan is charged off, you have paid at least as much as you borrowed and it
has grown 100 % to 200% in penalties and interest. For a $1000 investment the
bank gets $3000 of credit against income tax and most of the investment is paid
back. But do the banks have profits? Yes, 95% to 97% of all credit cards are
current.
The bank refers to you as a "profit center" not as a customer. I think you
are a "victim."
Providian was caught shredding mail bags full of monthly payments so that it
could charge late fees and penalties. Providian is no more but the rest are
still greedy.
How do you protect yourself from your "friendly" nation wide bank? Avoid it.
Once you get rid of your credit cards - by bankruptcy or otherwise - never get
another. Use cash or Debit cards. If you must get a card, get it from a small
local bank or credit union. See
Daveramsey.com or hear
his show on 1450 AM from 11:00 a.m. to 2:00 p.m. Saturdays.
Some people never miss a payment. Their problem is slower. They don’t notice
that their balances get higher every month for years. They never have any spare
cash and pay for most everything by credit card. If your balances increase every
month no matter what you do, you are on the road to disaster. Eventually you
will realize that you have to borrow money each month to make your minimum
payments.
Let me try to describe it differently - This is the lie that Congress bought
when it passed the New Bankruptcy act. The fantasy is that you borrowed far more
than you wish to pay. The banks lent you money in good faith, expecting to be
repaid with interest. Because you are lazy, uncaring, disorganized, shameless or
cunning, you do not want to pay it back. The bank is honorable and you are not.
The bank is a pillar of society and you are the scum.
The reality is that you borrowed $300 at 8% interest, was late on a payment
and have struggled ever since to catch up. Meanwhile, the bank charges an
avaricious $39 late fee and bumps up the interest rate to 30%. You pay back $900
and still owe $3,000, which is mostly fees and excessive interest. The bank
hires some working stiff to call and torment you with every guilt trip in the
book; appealing to your pride, sense of self worth, your honesty and all your
good qualities and punishing you with shame, contempt and disparagement. The
more you believe this rubbish, the more you struggle and get in deeper. You will
never be able to pay off the debt but the bank still makes money. Notice that
the loan you are stuck with is not the one you expected. This called "bait and
switch." It is a form of fraud. Our tax code enables the bank to charge off
every penny against its profits. The more you struggle and get behind the more
the bank can charge off. Congress pays your creditor to destroy you. Your fate
is sealed the moment you reach for the golden apple of easy credit from the tree
of life offered by your friendly bank.
Congress passed
the previous bankruptcy acts because they were answers to a problem. Jesus
Christ prayed "forgive us our debts as we forgive our debtors." For
more information see Bible & Bankruptcy. Notice that
forgiveness is reciprocal we must forgive the creditors for defrauding us with
bait and switch lending.
Do the honorable thing. Put your priorities in the correct order. You and
your family deserve the fruits of your labor. Bankruptcy is the last resort and
you should take it because there is no other solution. The longer you wait
the more you and your family suffer.
Maybe you own your house. The mortgage you made with your friendly local bank
has probably been sold to investors. The investors let the bank or someone else
service the mortgage for a fee. The fee is $60.00 per year. This is low because
it is very competitive. The investors know how to protect themselves. If the
servicer needs more money, it will not come from the investors. Where will it
come from? It is time to look into a mirror.
The servicer is happy if you get behind on your mortgage payments. It gives
them the opportunity to assess fees against you: statutory fees, inspection
fees, attorney fees, property protection fees and when they run out of names for
their bogus fees, - miscellaneous fees. It is difficult for you to get or
understand information about the fees. They don’t want you to know which fees
are legitimate. Even attorneys have difficulty with this mess.
It is difficult to avoid this problem. I can only suggest that you don’t get
behind on your mortgage payments. Look for a small local bank that advertises
that it doesn’t sell mortgage loans.
I am not even going to start on the closing fees on a mortgage charged when
you buy or refinance.
Another problem you will soon be hearing about are the adjustable rate
mortgages (ARM’s) that are starting to come due - 2 or 3 years after they were
made during a time of increasing interest rates. The "teaser rates" will go up
and so will the payments. This will put pressure on many families that are
already in trouble. ARM’s are another "bait and switch" fraud.
What to look for on credit card applications: "If you default on any credit card,
the bank may (will) raise your interest to default interest. The default rate
will remain in effect until the card is paid off or twelve months." These
provisions are in the section headed Default on the application. |
