Sunday, February 25, 2007

Credit companies keeping the Poor, Poor

I read an article yesterday;

For one reason or another, there’s people who can’t pay their bills. Job loss, illness/injury, even over extending themselves financially. For anyone who hasn’t had to deal with this, the system is brilliant and simple. When a person defaults on their credit payments, the account gets sold to a collection agency. That’s right, SOLD, to the collectors. The idea is that they buy the account, at a reduced price, from the credit card companies, with the idea that they can hound the affor mentioned debtor, until they’re ready to draw the blood from their own veins to clear their debts. This goes on and on with one of two possible outcomes; 1. the debt is paid to the satisfaction of the collection agency, or 2. they lose track of the debtor whereby they attack the person’s personal credit rating as listed with the credit bureau.
The irony is, that even if the debtor meets the the first criteria, his credit report is sullied with a derogatory comment that could seriously hinder his possibility of future loans for many years to come. Needless to say, if, god forbid, the debtor does not pay off his loan, he/she can forget about credit for a long, long time. No credit cards, car loans, or mortgages. This person’s future is destroyed, at least for the next 7 years, when their debts come off of the books. If, however, the creditors contact the debtor before the 7 years are up, that time is extended another 7 years from the date the contact was made. This creates a vicious cycle where, someone who has dug themselves into this hole, even with good intentions to reimburse these companies, is left with a bad credit score, limiting them financially, and can seriously alter their lifestyle. These days, it’s common to go through a background check when applying for a new job. A negative credit rating can mean that someone qualified for a skilled position is left working a minimum wage job simply to get by. It’s somewhat like a double edge sword, where job loss causes the debt, and the debt prevents the person from acquiring a new job. Even renting an apartment in the shadiest of neighbourhoods is difficult at best, and would require some substantial deposit.
It’s not the fault of the companies. They’re simply looking out for their own best interests. It isn’t their fault if we cannot pay our debts. They have a business to run. The fault lies solely with the credit reporting system, and the penalties imposed. The fact that our entire, financial, lives can be traced through our social insurance numbers, and can be broken down into a few lines on a sheet of paper. This sheet of paper stays with us our entire lives, clearing every few years, but never allowing for someone to fully free themselves of it’s grasp. The system, in this country needs to be amended, if we are to redraw the poverty line. We need to create a system for loan/debt forgivness where the poor can appeal these derogatory remarks on their record, and start a new life, possibly with better pay, and more opportunities. Punishing a poor person for being poor is a crime in itself, and we do them an injustice by allowing this to continue.
If we want to redraw the lines, we need to make changes. We need to stop punishing people this way, and allow, those that earn it, a way to redeem themselves.

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Blogger • · ° · • L i N z E e • · ° · • said...

I believe in second chances. I also believe they must be given with the general effort to make things right again. 90% of people have wracked up there credit cards with stupid things such as buying high fashion clothes for parties or fancy cars for reputation. However what about the people who legitimately need extra cash fast. What about the son who couldnt afford his fathers funeral and needed a grand to settle the arrangements for a coffin. What about the 80yr old woman on a $200 month pension who racks up her credit card for medication to keep herself alive. How can anyone believe they must be penalized in the same category as the latter? Its both disturbing and sad.
I think everyone should be allowed a second chance. If you do, your credit card score becomes neutral and not negative. There is a difference. Once says "you've done wrong" the other says nothing. It could suggest you screwed up but could also suggest you never had a credit card to begin with. The minimum payment option they provide is redundant. By having the minimum payment option, creditors and banks are already saying to you "you're highly likely to screw up, so here is some financial help...but with intrest." It's an open door with a path leading straight down. The best you can do is not to look back or down, but rather ahead on the other side.

February 26, 2007 at 6:36 PM  

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