Unfortunately, most of us did opt in. If you look at the credit agreements we sign when we buy cars, open credit accounts, enter into a mortgage, we give the lender the privilege to share our data with these credit reporting companies.
I find them to be highly unethical and to generally result in a contract negotiated without compensation and any communication in good faith.
Are you saying these two ideas are related? If so, I don't quite see the connection -- can you expand a bit?
No, this is only true because the law does not meaningfully restrict abusive contracts. Sure, a credit card issuer should [0] be able to ask some agency for information on your credit risk. It does not follow at all that the issuer should have permission to give information back to the agency.
[0] Even this is debatable. One might reasonably argue that the use of inscrutable conditions for the issuance of credit cards is discriminatory and should, as a matter of public policy, be disallowed. As a simple example of how this could work, all credit card issuers could be required to instead issue prepaid cards with identical terms, benefits, and usage from a merchant’s perspective, and credit could be an opt-in extra feature.
The agreements you sign when requesting and getting credit explicitly grant that right.
"Credit Reports: You agree that we have a right to obtain a credit report in connection with our review of your application and after we establish an account, to administer the account. You agree that we may report to others our credit experience with you. At your request we will provide the name and address of each consumer-reporting agency from which we obtained a report about you."
Was it plastered across the very top of the form in bold type? No. Was it "buried in pages of small print legalese"? No.
There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.
> There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.
Until you get too large, powerful, and rich, then the government regulates you. This is the purpose of regulation, to control the abusive use of power.
What's more bothersome to me is that these companies are scooping up every bit of information they can about me and selling it to anyone. Did I consent to TheWorkNumber? I definitely did not with the first few employers / payroll processors who have sold out my payroll data.
I Google my full name and the first hit is some background check site that shows my birthday, most of addresses I've had since the mid-90s, every family member I've shared an address with since 1999, information on two vehicles I presently own and one former, and that's just the bait to get someone to pay for whatever else they know about me...
'Credit' information is the tip of the iceberg.
Your existence in the world isn't a secret. Every scrap of that is public information. You have a postal address to get mail, you register your car with your state to pay taxes on it, etc.
Maaaaaybe birth certificates should be public, but why should who owns what car be public? Or who lives at what address?
1. Any of those scraps of data have negligible value by themselves, but when they're aggregated and traded their value is vastly increased.
2. I don't have any choice in how those scraps of data were originally gathered and shared. Should I not to have an address? Pay my taxes? Register my vehicles?
2. So? Why should you have a choice in it? Those things are classified as public records, available to anyone.
Yes because it is. No because you want something that someone else has (£€¥$) and that someone needs some kind of assurance that they could ever get their money back.
A loan is shared risk. If it wasn’t there should be no interest payments above inflation and labor.
Where is the line for invasiveness? I mean, if I knew a couple was having issues and they were in counseling, but they didn’t start until eight years in, that’s a bad sign and any therapist will probably tell you so. If a bank is allowed to know everything about you they will say no to a loan, probably killing the relationship once and for all. Similarly if they know he has a doctor appointment to look at the lump on his testicle. Predicting people’s lives are about to get very difficult and then forcing it to happen by rejecting or calling a loan is movie villain cruel.
If I were their friend and knew about the marital strife, and they wanted to borrow money from me to do something expensive, my reaction would be no. It was always going to be no because I don’t loan money to friends unless I don’t want that friend. But what I’m going to say is, “besides, those two aren’t gonna be together in three years so how would I get my money back?”
You want banks in your bedroom? Because by their logic this is useful information and if it’s available it would increase their profit margins...
Just because you can do something doesn’t mean you should.
Completely untrue. But if you want good loan terms, yes you will need to participate in the system of sharing credit terms, because reputable banks don't want to deal with bad debt.
Credit used to be much, much harder to get, and more expensive. You got loans from friends. You shopped at a particular store for years and built up your reputation before they would offer you credit. You pawned something. Or you just saved your money and paid cash.
So they can weed applicants out. This is very common in the fire service. Applications can be 40 pages long and they want you to list each financial account, balances, limits, etc. It's ridiculous. But I know just why they're doing it. I also think such requirements are weeding out minority applicants.
at least most agencies have stopped asking you to write down all of your social media accounts & passwords. or requiring you to add HR managers/etc as friends.
In none of these cases did I opt in. And I decidedly couldn't opt-out.
That's not an unfair request on their part.
Don't want to participate? Then don't ask for a loan.
You have agree to pay interest, on time and pay the loan back. -- ok that's not something you can reasonably opt out of and hope to get a loan.
You have to agree to to have your life ruined on a whim or by incompetence because you borrowed $1k and paid it back in full with the interest? -- no, definitely not ok.
In between the extremes are all the cases that need looking at. This is a standard case of market failure where you as a consumer have zero market power to effect your preference and your preference is more than reasonable. The GFC was one occasion where such a market failure really came home to roost. There are others, some are trivial, some are huge, most in between. Where it can ruin your life, utterly needlessly and the lives of others, possibly systemically across the whole economy, we tend to want to regulate it so that doesn't happen. There are many such examples in finance which is why we have regulated it in so many ways for so long. Sometimes the regulation will be effective, sometimes not, sometimes it will be fair, sometimes not, sometimes it will be captured by the powerful, hopefully mostly not. Without it, eh, we head for some big trouble, at worst class and civil warfare.
(Separate but somewhat related note: "You need to agree to all future changes to this contract by your counter-party in all circumstances" - OH HELL NO that's not ok and should not be considered remotely legal, yet there it is in every single click through you've ever bothered to read and fail to understand on the internet because the click throughs (not contracts for mine) are simply not capable of being understood without the assistance of layers of courts, lawyers and judges - the law on them is not settled anywhere on earth as far as I'm aware. Unconscionable conduct in such things is the norm, pretending otherwise is silly no matter how libertarian I want to be about it and life in general.)
There are ALL KINDS of regulations around banking and credit reporting. All of the wacky things you mention are already not allowed.
You can't take your business elsewhere if you don't like the provisions on account of the fact that they ARE wacky. You can't renegotiate wacky contract provisions. Market failure.
I have personally walked away from work agreements for jobs when they wouldn't remove non-compete clauses, but not everyone has that option.
There is no "meeting of the minds" here in any real sense.
Just because you don't have options to cut essential parts of the contract out doesn't mean there is no "meeting of the minds."
That's not really what they care about. They don't even get to choose whether you previously borrowed money only from people who agreed not to report anything to Equifax et al.
What they really want is to be able to inform on you to their competitors as leverage in getting you to do what they want, like pay false charges instead of disputing them because then you refusing to pay them allows them to ding your credit score. Which in turn raises the interest rates on all your existing variable rate debt and can put your whole life into a downward spiral.
Whereas without it, lenders would be more wary to lend money, but that would be true universally. So the result would be that things like housing and education would be more affordable because it wouldn't be so easy for everyone to borrow money and bid up the prices, and people wouldn't be paying such a high percentage of their salary for loan interest.
Which leads to the conclusion that the whole system is corrosive and we would be better off without it.
> Don't want to participate? Then don't ask for a loan.
It's a collective action problem. Everyone is better off if nobody takes a loan to buy a house and then the same people get the same houses but everybody pays less, but if you refuse the loan and the competing buyer doesn't, who gets the house?
I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
The existing land owners are probably the biggest real opposition now, though they wouldn't be any worse off if we had done the right thing to begin with, because then they'd have paid less from the start too. It could be worth a one-time cost of paying them off in some way.
It's debatable whether the home builders would actually be worse off, because most of what people are really bidding up is the land, since construction has a lot more supply elasticity than land. They may even get more work in the long term as people aren't paying loan interest as much, so they ultimately end up with more money that can be used for home improvement projects.
And I don't think people have a lot of sympathy for the plight of the mortgage lenders.
> I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.
Why would it do that? There would still be the same amount of land, so approximately the same people would have it. If it costs less by the same amount as the credit which is no longer available, the main difference is the interest you're no longer paying to the bank. If anything that should benefit people at the bottom of the ladder, who would have had to take loans with higher than average interest rates.
One of the most consistent and reliable means to lift oneself from the low end of middle class to squarely middle class has been the leveraged purchasing of property in a city that continues to grow. Taking a 3% or 5% downpayment and having housing appreciate at inflation or slightly higher than inflation is a tremendous wealth creator when that equity is created with leverage.
Homes appreciating faster than inflation is also an unsustainable trend in general. The result has been for housing costs in those areas to increase as a percent of wages, which obviously can't continue indefinitely because the result would be housing costs that don't leave enough for other necessities like food, or that exceed wages outright.
It's true prices probably wouldn't fall to only 3% of what they are now and so the same people couldn't purchase the same house immediately, but rents would fall along with housing costs. The combination of lower housing costs and less paid in interest on huge high-risk loans would allow the same people to own the same house outright in less time, even if it meant renting it for some period of time first. And of course the money they intend to use to buy the house could in the be earning interest before they reach the threshold to buy the house without a loan, which (if the efficient market hypothesis is correct) would give the same risk-adjusted returns in the meantime as investing the same amount in home ownership.
On a conventional mortgage with 20% down, if the house appreciates at 1% per year in a 2% per year inflation environment, a $100K house goes up by $1K each year. Someone who bought that house with $20K down sees a $1K gain on their $20K cash investment, for a 5% cash on cash return. They also have a place to live typically substantially cheaper than they were paying in rent. Obviously, where they increase even faster than inflation, this is wildly beneficial and if they decline much at all, it's terrible.
3% down mortgages seem to cost around 1.25% more than 20% down mortgages. It's about 1/8-1/4% on the base interest rate and 0.5%-1% for PMI. With a base interest rate on a 30-fixed around 4%, paying 5.25% on a 3% down mortgage is still a good deal IMO.
If landlords had to pay cash for rental properties, I'm not convinced that you'd see such a surplus of rental properties such that it would drive rents down significantly. Rents are driven by ability and willingness to pay. Many small landlords would be forced out of the supplying housing to others work. If landlords could borrow money to buy houses but owner occupants couldn't, I think you'd see a massive defection of the housing economy in favor of landlords.
Obviously, anyone could borrow on unsecured terms. It seems likely that medium and large landlords could exploit that (borrowing against the projected cash flows, but without using real estate as collateral for the loans) and that would also result in a large shift of power away from owner-occupants and small landlords.
This is not pragmatic advice. I needed to take out loans to go to college. My phone company did a credit check before they'd let me sign up for a plan. So did my landlord before they offered me a lease. When I buy a car or apply for a mortgage on a house, they'll also check my credit. This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.
And this is what needs to change. I’ve known many successful people that moved to the US and then had problems getting services because they had no “credit history”.
Translation: Don't participate in the economy unless you're independently wealthy.
Conveniently left out: Don't ever apply to rent a house or an apartment. Instead, buy a home. In cash, of course, because you're independently wealthy.
Oh, and also: Don't apply for a job. Because, you know, independently wealthy and all that.
The idea that non-participation in the credit racket is anything but an exercise in extreme economic privilege is laughable.
My parents managed to obtain a loan for their first apartment thanks to my grandparents offering their house as colllateral. This is how pretty much everyone from my parents' generation got their first apartment.
Credit pretty much didn't exist in my parents' generation - loans were generally reserved for houses and cars, because of the strict conditions. Everyone saved up lump sums and paid cash. It's ineffficient, but far from "not participating in the economy".
It may be possible to negotiate different conditions on receiving credit, but I don't know if you can demand a modern economy without any drawbacks.
It's possible to get credit without someone else but you'll get an absolutely terrible interest rate -- if you have someone in your life with good credit that trusts you (like family) you're leaving money on the table by not 'borrowing' their good credit.
The Bible tells us that Jesus drove the money-lenders out of the temple. Which means that loans predate credit reference agencies by thousands of years. Therefore we have historical record that they are superfluous.
Of course that could be grounds for a litigation, but at that point the data is already gone and, other than being a PITA, suing wouldn't really be worthwhile as that hardly counts as damages.
But do you want to live without a house, a job, running water, electricity, internet, a cell phone, a car, etc.?
Point a gun to my head and I'd still feel like I had a better chance of getting out of that situation than opting out of credit reporting.
Of course the courts are unlikely to fall on my side because the consequences for contract law would be apocalyptic but I believe it is true in my heart, and that's what really counts.
I though consent required option.
Think of the other use of the word, generally reserved for sexual intercourse. Imagine that 'consent' having strings attached.
Want to go to college? Consent. Want electricity? Consent.
I think we can all agree this would be ludicrous. That Consent would not be real. It would be viewed for what it is: taking by force.
It's why we don't even allow many actions when power is involved (subordinates). We view the power imbalance as so extreme, that invisible strings can form, thereby removing the ability for the subordinate to truly freely consent.
As an American society, I think this is understood. We value consent in many places. Yet for some reason, the financial institutions can redefine consent as they see fit, blatantly attaching strings to basic survival needs.
This is already a widely accepted theory usually called the "Social Contract".
We had no say. We certinly had no vote. Yet it's a simply ubiquitous tool that cleanly defines the behaviour of some man.
A relentless normalized nudge. The Man and his System FTW.
Why should you? It's the credit grantors who use it. They say "when I grant credit to someone with a score of 800, I'm much less likely to lose money. If they have a score of 600, I'm far more likely to lose money." It's their money, your only say is whether you accept their terms or not.
They current "credit tracking" systen has massive over-reach. So much so that if there's a breach/hack thousands if not millions are subjected to those mistakes. __And__ we have no choice but to say "Thank you sir. Can I have another?" We have __zero__ alternatives. Normalized or not, that's unacceptable.
There is a differnce between evaluating my credit worthiness and mitigating your risk, and imposing a monopolistic over-reach program that controls the fate of so many.
Why are you singling out "credit tracking" here? There have been other, much worse breaches from companies unrelated to the credit industry. Where's the $125 from Marriot? Or Yahoo!?
And this is related to the reality that individuals are at a distinct disadvantage for being largely unorganized and unable to bargain collectively, or else they probably would blackball bad lenders and credit bureaus for a history of untrustworthiness.
But they can't; their only tool is the democratic process. We ought to ruin Equifax to the same degree any one of us would be ruined if we had been so careless.
That's why we have the FTC, GBLA, FCRA and all of the regulation associated with both credit industry, CRAs, banks, etc.
Granted, I could just not understand what’s in the contract.