Predatory lenders have co-opted New York’s court system
bloomberg.com
bloomberg.com
Here in the USA, there is a "statute of limitations on debt". If we fall onto bad times, the laws protect us from aggressive debt collectors. We simply stop paying all debts... and the law cleans our slate fresh after x amount of years (depending on each state). No bankruptcy needed.
Copays are typically (though not always) paid at time of service, not billed after-the-fact. In any case, it takes a long time for a bill to become overdue and get sent to collections; before that, it won't show up on your report at all. Having 20 different overdue bills (of any sort) in collections is definitely an objectively worse sign of creditworthiness than having a single active loan of 20k of any nature.
What many people do not realize is that most charged-off debt is uncollectible. Only a small fraction actually gets paid. Most debtors cannot be located by their collectors, and that's the primary reason why debt collectors will normally settle for less than what is owed.
Checking your own credit doesn't show up on the credit report collectors pull, so they would have no idea you did this. It also costs them money each time they pull a credit report, so they're unlikely to do it very often (or at all) by the time the debt is old enough that it's unlikely collectible.
In the same way that a debt validation letter is a "smell" to the debt collector that the debtor is concerned about their debt (and potential credit status), any indicator that the debtor is evaluating their own credit can also potentially raise the debtor's file with the collector to high-attention (or litigation) status (versus being sold off to another collector).
This is not the same thing as checking your own credit, which is not visible on reports that creditors see.
https://www.experian.com/blogs/ask-experian/credit-education...
I think the safest thing in this case is to only bank with an organization that has no presence outside your home state, like that credit union with 6 branches that my friends make fun of me for using.
When a debtor stops paying debts entirely, it can start a whirlwind of problems. They can be barred from finding housing, certain types of employment, their actual current jobs (certain professional licensing require financial responsibility). Additionally, most debts end up in the hands of collection attorneys (CA) who will sue en masse to obtain judgments. This effectively stops the statute of limitations and gives the CA 10 years, 20 years, or a lifetime to collect the debt. In these cases, a well-timed bankruptcy is (and should be) an option for people. In some cases of debt -- student loans for example -- the debt is presumed non-dischargeable and can create a lifetime of hardship for the debtor.
Unlike the loophole regarding debt acknowledgment you mention, this loophole was an artifact of mercantile law. Terms on negotiable instruments are typically strictly enforced as compared to regular contracts, to ensure maximum efficiency of payment systems. (Or at least the rules for what's enforceable are very brightline, and aren't particularly concerned with fairness. Magical phrases are still very much important.)
"The takeaway from these two cases is that accord and satisfaction can only settle a disputed debt when both parties have knowledge of the outstanding issues to which the debt pertains, and the party negotiating the check has reasonable notice that by depositing the check the dispute is completely settled for the amount of the check."
I wonder if you could put a 'warning sleeve' or something around a check that is sent to someone who may process it automatically.
They are only allowed to call to locate you, and they aren't allowed to tell people why they are calling.
Since the debt is past the statute of limitations, there's no reason to hide from them. You can send them a cease and desist letter to make them stop contacting you.
>Collectors can (and will) put a new records on a person's credit report, preventing most debtors from rebuilding their credit.
They can’t change the date the item went into collections. If they add an item and say that it’s new debt you can dispute it.
Of course debt collectors can always break the law and do whatever they want, but if they violate the FDCPA you can sue them for actual damages and statutory damages.
>Additionally, most debts end up in the hands of collection attorneys (CA) who will sue en masse to obtain judgments.
Yes, this is the real problem if you stop paying. You can still go bankrupt after this point though.
You sound like you have a lot of first-hand experience in this area. Mind sharing how?
How is this admissible?
I'm not American.
Didn't read this particular article but read a different one earlier this week on this topic so not sure if it's covered here but it's a really old law/tool and has been outlawed almost everywhere. I believe it's outlawed in the entire country for personal dealings because of laws regarding due process and consumer protection. However, it is still allowed in a few states for business dealings which is why these loan places use this legal process exclusively for business loans. They don't have the same level of protection that an individual has, even though a lot of these businesses are run by 2-3 people who put up their own assets against the loan.
But if it's a seller's market what are you going to do? Live under a bridge? Live in the sewer? Live in New Jersey?
I think the real problem here is that people either don't read or don't understand what they sign. I mean you would think that a document labeled confession of judgment might alarm people, but apparently not. I recently moved and during the mortgage process for our new place I raised a number of issues regarding the accuracy of the information that was filled in. Nothing fraudulent or terrible on their part - just errors. When I raised these issues (including a math error on the loan disclosure and the omission of a loan credit I was promised) so they could correct and reissue before I signed them, the loan officer said, "You really read through these documents, huh?" and I was like "Well yeah. Who the hell wouldn't read through critical documents like this that put them on the hook for hundreds of thousands of dollars?" and she responded, "Basically everyone. They all pretty much just sign without reading. That's why we had to have that recorded phone call for documentation on our side to prove you actually understood at least the basics of what you signing." I mean I know almost no one reads EULAs, but mortgages?! That's just depressing.
If you are looking for real problems, that's way on the back of the line. The top one I can find is, how can somebody simply sign away their right to access the Judiciary system? How can those huge contracts with incomprehensible be binding for normal people? How come people have no alternative to signing them?
That solution is anything equivalent to a 'standard library' of contracts in which the consumer and the party they are interacting with agree to a single page configuration that defines the standard variable arguments.
It would also be much nicer to make a 'payment schedule' table standard for nearly all non-lump-sum contracts.
And technically, they do have an alternative - refuse to sign them and don't do business with them. No one is saying these businesses are required to take these loans on these terms. The owners simply don't understand what they are signing. Anyone who actually is a good risk for a loan and refuses to sign these documents shouldn't really have a problem getting someone to agree to omit that as part of the paperwork.
I really think this is at least partially a matter of due diligence on the part of the business seeking the loan. If I ran a small company and found out that an officer/exec authorized to do business under the company name took out a loan and signed one of these confessions, there's a pretty decent chance they would be fired regardless of any pending legal action. If legal action was indeed filed, they would definitely be fired for a lack of due diligence on the documents that resulted in signing away company rights.
One of the scary things about moving abroad, is that I signed mortgage papers in a language I couldn't read. Sure there were helpful tables summerizing the rates, and an amortisation table, etc. But the finer details? I had to trust that they were "typical".
(I did have my local-wife read everything, but even so it was a scary moment, which didn't get any easier the second time I bought a place.)
For instance, in the common commercial code passed in nearly identical form by all 50 US states, a promissory note comes with the rights of presentment and notice of dishonor baked in. The right of presentment means that the owner of the note has to show it to you when demanding payment; this ensures that you are paying the correct person, so that if the original owner of the note sells it to someone else (as it is a negotiable instrument), you won't get demands for payment from the new owner as well as the old. You can look at the note at the time of presentment and demand, to check the endorsements, paying only the last owner recorded on the note (or the bearer, if it has been converted). The right of notice of dishonor means you must be informed in a legally-conformant way if someone to whom you are legally indebted is not satisfied with a payment you have rendered.
These are commonly waived on the notes backing home mortgages. Without them, the bank can put the note in a filing cabinet somewhere, and just send you a letter when they sell it to a new owner. You never see the note again, which means the finance industry can get up to all kinds of shenanigans with MERS, obfuscated ownership, and separating the beneficial ownership of the note from enforcement of the security instrument. And waiving right to notice of dishonor means that the owner can start foreclosure as soon as you miss a payment, rather than first informing you that you missed a payment.
While the rights are reasonable, hiring people to carry notes around to show them and demand payment all the time would make servicing of loans much more expensive, and therefore puts an uncompetitive floor on the interest rate for notes that do not waive those rights. Waiving the rights works, but only as long as you can trust the owners to honor the system....
In the case of the confessions of judgment, the loans cannot be made profitable without them, because the default risk and average cost of litigation is too high. One might argue that we should prefer that such loans not be made at all, rather than made only with waivers of critical consumer rights, but the state of New York has decided to allow the predatory loans to exist, and to profit from them and their lenders. The borrowers bear the burden of assessing their own risks; the state will not protect them.
The remedy in a representative democracy would be to vote out of office those officials that support the practice.
“In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.”
The real issue is that contract law permits waiving many of these long before any dispute arises. A body of law arose to limit the detrimental effects (unconscionability, etc), but Federal law (statutory and case law) have increasingly made these state law-based safeguards ineffective.[1] Federal law lacks many of these safeguards, and instead principally relies (if at all) on regulatory agencies to police abusive behavior. But that doesn't do much to remedy injustices in the context of individual disputes.
We should be hesitant to enshrine things in the Federal Constitution. Often times doing so results not only in fixing a limit on how narrow your rights, but also as a practical matter how expansive they can be, depending on the political bent of the Supreme Court.
[1] And then, of course, there's the glaring loophole of New York's confession of judgment. But that issue also involves some complex conflict of law issues. It's possible states could unilaterally shield their residents from New York's policies, but I don't know nearly enough to be able to say with any confidence what the best strategies might be. Also note that the same issues can exist across international jurisdictions. For now that's mostly a concern of the very rich and multinationals, but once upon a time these cross-state conflicts were also only the concern of the rich and large businesses.
Didn’t stripe also resently start doing this? Does anyone know if they gearing up a business as a predatory lender as well?
Might not happen today. Might not happen this decade but eventually someone will snap. It might not come to that. The legislators might catch wind of it and change the law in a different way but the risk is always there.
Or could it be that all NY politicians have been paid off by these entrepreneurs?
The only proper way to judge the actions of these crooks.