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In a society where people are pulled in to debt by the most skilled marketeers that money can buy I can't find much sympathy for the card companies.

I avoid debt like the plague it is but I can see people that are less financially aware fall in to these traps very easily.

All the debt collecting agencies have to do to avoid this particular trap is to comply with the law. All the time.

No need for them to be sued or to sue in the first place.

I sincerely hope he gives them hell, they've given enough people down on their luck hell themselves.

In some cases, I can agree with you. There are predatory practices that shouldn't even be legal.

But this guy went out and borrowed $100k to put directly into risky investments. He also bought four houses at zero down, maximizing his risk of default. He wasn't suckered into this, it was a calculated move to try and get rich quick. Then it blew up in his face, and while that is not his fault directly, he's clearly smart enough to have known the risks. Now that his (not so) little bet has gone against him, he doesn't want to pay it back?

I call bullshit.

Not really. Banks have a fiduciary responsibility to lend out their money with some caution.

The banks colluded because they too wanted to make a pile of money quickly, then when it all blew up they went after all the collateral leaving the private individuals holding the debt after the foreclosure.

Yeah I'm really split on this myself. On the one hand he should have known better than to take on that much debt. On the other hand, the people offering him such easy credit should have to face the consequences of the risks they were taking by lending money to overextended borrowers.

I don't disagree, but that doesn't absolve him of responsibility. He is as much a perpetrator of this as the banks are. If he'd needed the money, that would be one thing, but he took unnecessary loans to do speculative, risky investing.

I doubt he understood that he was doing speculative, risky investing.

Mid-bubble, I can't count how many people told me that the market can only go up, or who looked at me like I was insane when I said I was watching month-over-month sales to try to avoid getting creamed when the bubble inevitably burst.

> he's clearly smart enough to have known the risks.

I'd say the opposite: he was too smart for his own good.

He was an Economics major(like me). He was likely taught economic theory based on rational behavior.

During those years, credit card companies sent absurd numbers of 0% offers to everyone over 18. If he didn't borrow money at 0% and reinvest it, that would have been irrational and gone against everything he was being taught in school.

I'm assuming he had a few things working against him:

- Limited knowledge of the world and no first hand experience of a recession.

- Dangerous knowledge from Economics class that teaches you people act rationally, without emotion, according to a simple utility maximizing function.

- Employees in the financial industry who earned their incentives based purely on the amount of money being borrowed in the short term, with no consequences if the debts turned out to be bad.

- Very limited understand of probability and statistics. I've met very few people in my life who have adequate schooling in these subjects.

I had a similar experience(though luckily on a smaller scale) my senior year of college. I was given a $50,000 line of credit from Bank of America, despite the fact that I'd never held more than a summer job or made more than $8,000 in a single year.

If I had walked into my local bank and asked for that kind of loan, my banker would have laughed in my face. But Bank of America gave it to me just by filling out a form and making a phone call.

The system was absurd and many people were screwed. Banks should have known better. They've been around for hundreds of years while myself and many others have been around for about 20.

The lenders should have been smart enough to have known the risks.

It's quite a stretch to paint him as a victim here. If he'd needed the money, that would be one thing. But he took unnecessary loans to do speculative, risky investing. Sure, the "system" should have known better, but so should he.

I was also an Econ major. At no time did I become so out of touch with reality as to actually believe that people behave rationally when it comes to economic decisions. Calling that information dangerous is just disingenuous.

The banks failed at risk management, that we know. But there is individual responsibility as well. Every person who got a mortgage with a payment that was more than their take home pay is equally culpable in the subprime crisis. And people like this guy are even more to blame. I know people are bad at probability and statistics, but we shouldn't give them a pass on basic arithmetic.

The fact that it is easier (less expensive) for a company to settle a case for $1K, rather than fight and win a case while costing themselves $10k gives the companies no incentive to fight back. Also, The plaintiff is already in debt and is having trouble paying, so what would a company get out of counter suing?

The right incentive is for enough people to do this that the companies find it cheaper to train their phone collectors about what they're legally allowed to do.

IMO, morals are for dealing with human beings. The actions of a company will tend toward whatever is legally and economically possible, so a person in a conflict with a company should act within that framework if they want a fair outcome.

Go this guy for pursuing open source litigation. Anyone who reads John Robb will immediately recoginze the scenario of decentralized community vs. bureacracy as 4th generation warfare.

> The fact that it is easier (less expensive) for a company to settle a case for $1K, rather than fight and win a case while costing themselves $10k gives the companies no incentive to fight back.

Of course, that works both ways -- debt collection agencies frequently pile on their own fees to the original debt, which for small debts can double the amount the consumer pays back. Most people don't fight these charges because it's too much trouble to do so. This is just giving them a taste of their own medicine.

1) On the surface I agree. However, the collections agencies must do this math themselves, and decide that n settlement tradeoffs is still profitable on the whole. Further they have probably done the math saying "if I let my employees break the law in X way, ill have $Y in extra collections, and $Z settlements/suits for breaking the law". Then it is a matter of maximizing $Y - $Z. In that respect I am in favor of more people filing suit -- there is no reason for a company to go beyond what has been deemed appropriate for debt collection. Such laws were in place when the debt was incurred (risk was taken), and when it was traded, they should be reflected in the "debt transfer" price and the initial risk interest rate.

2) Plenty of people had high credit limits. Then, because some bankers screwed up the economy, were let go of their jobs. At this point they had no incoming cash, and plenty of credit. How do you propose they take care of their necessities if not the credit cards? Not saying this is every case, just proposing that sometimes debt isn't over luxuries.

Statements like - "Katz doesn't believe that people are morally obligated to pay back their debts."

I'm not sure I disagree -- "Usuary" used to be thoroughly illegal/immoral/etc didn't it?

... and "People are brainwashed to think that paying a credit card is more important than paying for the necessities of life." - Maybe if people spent more time worrying about the necessities of life and less about luxury they wouldn't be in debt in the first place.

I definitely believe credit cards are less important than basic necessities.

Usury was forbidden by the Bible, if memory serves. Still, that doesn't make accepting the loan moral and offering the loan immoral. Presumably both sides are breaking the old Biblical prohibition.

The bible prohibits any interest, not just excessive interest. A loan is supposed to be charity, not a money making opportunity.

If someone needs money to open a business or the like, then the lender is supposed to partner/go into business with him, not just lend at interest.

You can get around the prohibition by structuring the partnership into something that acts like interest, but the intent of that is for business, it's not intended to replace charity loans.

I think the point is that most people don't run up massive credit card debt on 'the basic necessities of life.'

> I really feel like this guy, Craig, who is suing the debt collectors is a hacker for finding the information about possible violations and pursing it legally.

I dont know. The more I read it it sounds like a guy who took a risk and lost big - and now is scrabbling round for "get out of jail free" cards.

With that said; I dont find much sympathy for the individual (his motives dont sync with me) but that's something worth "enduring" if he can actually help to impact the industry. shrug