'It's crazy': Chase forgiving all debt owed by its Canada credit card customers
cbc.ca
cbc.ca
If they write off this debt, they probably also get to claim a deduction somewhere on money that they would never be able to collect.
(At one point, one of these ilk of companies offered my grandfather the "privilege" of taking a lump sum settlement for his black lung payments. I calculated what principal I expected they needed to reserve to provide his payments, discounted it slightly and hoped that they wanted rid of the accounting and maintenance in order to give him the lump sum. Alas, they weren't desperate enough to get him off the books and we never heard from them again.)
They can certainly take a deduction for some money they wouldn't be able to collect successfully. But they can deduct the entire balance now, rather than writing off small portions over the next so many years. Of course, they're simply not getting taxed on money they didn't earn (since it's a deduction, not a credit).
The mathematically optimal solution is certainly not to write everything off. They could have sold it to a debt collection company and made a larger profit.
I wonder did it affect my credit rating, but where I am, credit ratings really aren't all that important compared to the US (and reset over a few years anyway).
I don’t how much the positive PR is worth, or how much additional costs do they eliminate by renouncing to recover anything. But arguments of the “losing money is good for companies because they recover a small part of it as tax savings” kind do not make a lot of sense in general.
Couldn't find it in the article anywhere.
Chase announced they were closing these accounts in April 2018, and tried to have them closed by March 2018.
The reason was that Chase was getting out of it's relationship with J.P. Morgan.
It's now over a year later, and due to contractual obligations can't legally force people to pay their full balances all at once.
Other than continuing their relationship with J.P Morgan until all cardholders payed off their balances in full, this was the only other option.
Huh? They're the same company, "JPMorgan Chase & Co."
And if you were a business that couldn't pay your 27.99% credit card for 16+ months, you have losses to count it against.
If they could simply "loan" their child $100k (with no intention to ever get paid back), then forgive the debt tax-free, they'd have successfully gotten around the gift tax.
The same thing could be potentially be used by an employer: instead of paying wages, they could just "loan" (again, not intending to be paid back) their employee money, then forgive the debt tax-free.
It sure feels like your government is shitting on you during an already tough situation.
* Granted, you can usually arrange to pay a large tax bill over time, but that is basically debt which you'll be annoyed/surprised to find yourself back in...
[1]
profit = revenue - cost
= 0 - $100
= -$100Normally, you'd sell that on for more than the original 100 dollars.
For those unaware, an umbrella company acts as the "employer" of contractors for places like the NHS. It's often required (or perhaps phrased strongly enough as such by the recruiters that it's difficult for a layperson to know whether it's true) to have one, and they charge a fee + withhold income tax and national insurance contributions + pay the salary of the contractor.
The sketchy ones have determined that they can pay the contractor minimum wage + a small "loan" each month of the remainder which is promised (verbally only, of course) to be forgiven entirely, and this way charge a higher fee and remain competitive because the contractor is paying minimal tax.
IR 35 is what a lot of these companies claim to shield you from ... but it’s notoriously complex.
The astounding thing about this is that as I understand it, the nurses and doctors who're being screwed over aren't generally the ones who benefited financially from this scheme - it was the NHS (effectively the government) which did. The companies running it witheld the tax the employees should've paid but kept it and used it to fund the cost of running payroll plus their profita, meaning the NHS didn't have to pay those costs. A bunch of existing employees were forced onto the scheme in order to keep their jobs too. (There were similar schemes for wealthy individuals in other industries which did cut them in on most of the tax savings though.)
On your second point, from my personal experience (we investigated the scam when it was offered to us before avoiding it based on the bad smell it gave off), my instinct would be to disagree.
When we did the calculations, we would have been hundreds of pounds per week better off under the conditions of the scam than if we had paid tax directly as a contractor or under an umbrella company who reported the full salary as a salary. I don't have much doubt that these nurses and doctors didn't benefit financially by only paying [tax and NI on minimum wage + the slightly higher umbrella fee] rather than [tax and NI on their full salary + a smaller umbrella fee]. Although that's not to say that they thought what they were doing was shady, or even that they actively chose that particular umbrella company.
I dont see the benefit to the NHS either. If the NHS pays the contractor's salary of £1000/month (under subcontract conditions) to:
- Umbrella company A, who then subtracts a fee + withholds (for HMRC) NI and tax for minimum wage before paying the contractor minimum wage + a loan of whatever remains from the £1000
and
- Umbrella company B, who subtracts a fee + withholds NI and tax for the full salary before paying the contractor the remainder
My understanding is that to the NHS both scenarios look the same (a cost to them of £1000/month), but in scenario A the contractor and umbrella company (through their ability to charge a higher fee than their competitors and still attract clientele) benefit from money which otherwise would have gone to HMRC.
For most/many of the people going through a financial crisis that caused them to default that negates the tax effect.
I still feel great for the people who were in serious financial trouble and are not anymore. Let's just hope they see it as an incentive to never be in that situation again.
Their only users remaining were those who've been carrying a balance for the past couple years.
I overpaid my last bill by a cent in hopes they would waste their time and money to cut me a cheque, but they did not.
Their Amazon card was pretty decent: no foreign exchange fee and no annual fee. It was my "daily driver" for non-CAD$ transactions like domain names, hosting, Paypal, Aliexpress.
Such a pain for me when they got rid of it.
Similar to Chase Amazon: no forex charge. No annual fee.
Pro: Includes roadside assistance and rental collision insurance, 1% cashback
Pros/Cons: Doesn't support tap/RFID payment.
Cons: Application can take forever (not sure about current state).
Cons: Higher foreign ATM withdrawal fee than Amazon (1.5% vs 1%, with similar minimum fee
Home Trust has a few annoyances too, most notably a 10-transaction per day limit that you can run into when travelling.
Otherwise Scotiabank Gold Amex recently dropped their forex fee and might work for you depending on spending habits.
4% cash back in a foreign currency
2% cash back on Rogers' services
1.75% cash back otherwise
Rental car insurance
Airport lounge access
No fee
I dont know what infrastructure amd employment levels they would have had to maintain to service the accounts. I'm sure they probably ran the numbers, compared what they'd receive to cost of operations and probably realized itd either be a wash or a money losing proposition and decided to take the cheaper/expedient way out.
Personally, I'd love this deal. My CC is closed, but still paying down a very large sum. Got married, assumed my wife's debts and struggling to get our heads above water. Should be clear in another 4 years sigh, maybe sooner if I can get a few good bonuses in the next few years.
Don't be afraid to shop around for jobs too. I'm about to transition to a new company making 50% more after putting 5 years in at my current job. Luckily, I liked the job so I had time to really search for another one that would be a good fit culturally as well and that paid more.
Now we're going to be debt free hopefully by Christmas 2020 and making $110k/yr and 26 y/o at that time. Not to mention bonuses and raises for both of us in the next 18 months. My wife has only been out of school and working for 2 years as an engineer, so she has plenty of room left to move up and I can keep working for software companies with great work/life balance and people that I like.
Win win! Rooting for you :)
To be honest, this has probably been my single biggest stressor since getting married, and my wife's apparent mental block that finances are tight (when they shouldn't be) and she keeps buying non essential items.
A lot of this is self inflicted, then complicated with medical issues on shitty insurance. I mean, the year before I got married, I was debt free, even after been unemployed for 6 months (and I didnt file for benefits, stupidly).
We spent too much on our rings, but not on the wedding (we did a JOP wedding and a nice dinner afterward with just my wife, 2 step kids and myself). But, we had to move out of my 1 bed + den apartment into a 3 bed, 3.5 bath townhouse. More than doubled rent, but was necessary.
I mean, I make good money, but on my salary, we're struggling, living paycheck to paycheck, in large part of debt I assumed from marriage and medical issues. Kicker is I have the savings to cover it, but cannot get to due to compliance issues.
Legitimate news articles like this are irresistible to the 419 scammers.
The extent to which this is necessary varies from context to context. For example, whenever I've been at an airport location, the rental companies have said they can only use a debit card if you have an itinerary with a return flight. Presumably you're a lower theft risk or something.
I'm sure it's all negotiable and/or there are a dozen other conditions where they will accept a debit card. Things like having a rewards membership or good rental history, purchasing insurance through them, using AAA, etc. Honestly even within the same company, the specifics seem to vary by location.
Presumably some rental companies don't have such a policy at all because low-credit individuals are a large portion of their customer base.
Sure but then you will be missing that cash until that protection can be dealt with. On a credit card, it's not your cash that has been stolen, you don't have to care, you move to your debit card.
On the other hand, your cash got stolen, you have to wait until it's handled to get a refund, and you need to use credit instead with cash that you don't have.
I also get 1% cash back on my credit card.
The problem with debt is when you use it purely for consumption instead of investment or increased efficiency of your consumption. But in general, debt and leverage are a very powerful thing and essential to an efficient market.
Interest helps a small portion of people, while harming the majority.
>It’s just important that you pay off the card before the 18% rates kick in.
If enough people did that banks wouldn't bother.
>The problem with debt is when you use it purely for consumption instead of investment or increased efficiency of your consumption
No, it merely mitigates the risks, if your business venture goes sour you will not be in a good place. There's also the question of 'what counts as an investment' although this is a minute issue compared to the aforementioned.
Would you rather that no one could get access loans? If you truly believe that position, it would very much undermines the autonomy and choice of the people without capital: businesses, individuals, start-ups, whatever.
If you think that interest is a bad thing, what is the alternative? Sharia finance? You wanna go back to times of usury laws? Or that Christians can't loan to other Christians?
What about government? You think there should only be negative interest rate bonds? What about the federal funds rate, LIBOR, T-note yields, etc? Do you have a coherent system that could replace these financial instruments?
If they had interest then yes.
>If you truly believe that position, it would very much undermines the autonomy and choice of the people without capital: businesses, individuals, start-ups, whatever.
Without interest the amount of capital those groups would need would significantly decrease. I'm willing to sacrifice a reasonable amount of autonomy in order to stop people burning themselves and devaluing the earnings of others.
>If you think that interest is a bad thing, what is the alternative? Sharia finance?
The alternative is a number of things working together, sharia finance yes, the end of fiat currency, guaranteed minimum income to get those without capital to a point where they can contribute to society and a restoration of trust based society so that those with close bonds will be more likely to loan to each other interest free and out of good will (this is probably the most difficult of the three but I have some ideas).
If so, I'll give you my bitcoin address.
The time value of money is so fundamental, and so obvious, that you must be being deliberately obtuse to not understand it. Money today is worth more than money tomorrow.
I have no reason to trust you.
>The time value of money is so fundamental, and so obvious, that you must be being deliberately obtuse to not understand it
No one's saying time doesn't have monetary value, it's a variable many businesses depend on, but that shouldn't mean you simply get to do the direct conversion and sidestep creating meaningful longterm value and make it more difficult for those without money to get anywhere without being under your thumb.
By this I mean people will now just point to Canada and demand a bailout without really committing effort to passing laws that will prevent exploitative interest rates and pricing schemes by private universities.
That said, I don’t think it will lead to bailout. Debt forgiveness is a rare but standard practice in trying to rebuild credit scores, is my understanding, and a way of getting some return rather than the zilch you’d get from a personal bankruptcy. It’s just that bankruptcy doesn’t affect student loans in the US, so folks are absolutely stuck there...
I mean, in theory (wink), you could always pay off your student loan debt using other forms of debt, and then go bankrupt.
If this is constituted as a preferential payment, the clawback period is 90 days, if it's considered fraud, it would be longer. However, if someone lets you borrow money unsecured and you use it to pay a non-dischargeable debt, and you can't make the payments on the new debt, that's most likely the new lender's poor judgement.
Of course, there is no lender who is going to give a an unsecured loan the size of your substantial student debt to someone with said loans and no other assets, for obvious reasons.
Because it's fraud. Taking on big debts you never intend to pay right before a bankruptcy will get you in a lot of trouble.