Reddittors vs Wall Street

[lpm]

I think this discussion shows consumer credit should be taken out of the hands of predatory loan companies of various sorts and assigned to some kind of public entity. Applicants would be assessed as to their ability to pay the loan back and people who would just get into trouble wouldn't be able to borrow.
Interest rates would be as low as possible and no extra hidden fees. There would be no discrimination against BAME or POC people.

That's a very good description of what already happens. The public entity is called the Financial Conduct Authority - FCA - which has strong powers to force every financial company to obey the rules you outlined. No free market exists and although private companies are part of the sector they have to obey the central command authority.

[Herainestold]

I think this discussion shows consumer credit should be taken out of the hands of predatory loan companies of various sorts and assigned to some kind of public entity. Applicants would be assessed as to their ability to pay the loan back and people who would just get into trouble wouldn't be able to borrow.
Interest rates would be as low as possible and no extra hidden fees. There would be no discrimination against BAME or POC people.

That's a very good description of what already happens. The public entity is called the Financial Conduct Authority - FCA - which has strong powers to force every financial company to obey the rules you outlined. No free market exists and although private companies are part of the sector they have to obey the central command authority.

Okay, whatever you say.

[plodder]

Lol, the FCA have all the best people. What's their annual bonus structure like?

[lpm]

Better than the annual bonuses at Wonga, QuickQuid and Brighthouse.

[Woodchopper]

Better than the annual bonuses at Wonga, QuickQuid and Brighthouse.

Yes. An old friend works in the sector. Compared to the rest of financial services it isn't well paid.

And consumer credit it is heavily regulated.

[Herainestold]

And consumer credit it is heavily regulated.

I think that was lpm's point.
It is still a disaster with private companies making profits off the misery of poorer folks.

[nezumi]

Surely the solution to people needing to take loans for things is to educate more about saving and investment and also improving workers' pay and conditions so they don't have to take on risky personal debt.

[Herainestold]

Surely the solution to people needing to take loans for things is to educate more about saving and investment and also improving workers' pay and conditions so they don't have to take on risky personal debt.

Makes too much sense. The banks and building societies and consumer loan industry will lobby against it.

[Millennie Al]

I think I must be misunderstanding you somehow. Why would you want to buy your debt from after it has been sold off? What do you gain from doing so?

Why would I want to buy it from? It's simple.

It avoids me paying back the amount I borrowed, and allows me to also avoid being taken to court and incurring a CCJ.

But in the circumstances where your loan has been sold for a few pennies in the pound there is very little chance you'll pay it anyway - that's why the price is so low. By the time things have got to that stage the lender has already done a lot to try to get you to pay and has decided that further efforts are uneconomical. Taking people to court costs money, so lenders will only do it if they think they can recoup that money as well as at least some of the debt they are owed.

If I were charitably minded I'd also be able to help people who were having their lives ruined from worrying about debt they can't pay off.

There are three broad reasons why someone defaults on a loan:

1. a change in their circumstances that was not reasonably forseeable means they cannot afford to repay the loan
2. they careless or recklessly borrowed money that they should have realised they would not be able to repay
3. they fraudulently obtained a loan knowing that it would not be repaid

For 1 the solution is that the lender just doesn't get paid, or gets paid a fraction of the debt depending on what the borrower can actually afford.
For 2, the solution is probably the same, depending on just how reckless the borrower was (and generally it's seen as the lender's fault for lending to someone who was predictably unable to pay).
For 3 the solution is criminal charges - e..g fraud.

Having a third party step in and pay off some or all of the loan just enriches the lender.

[Millennie Al]

for someone you know you simply get them to authorise the creditor to discuss their debt with you and you then make them an offer. If they were considering selling the debt they will be quite wiling to accept less then 100% as something is better than nothing and they have clearly already reached the point where they have given up on getting all of it.

So. You deliberately miss a few mortgage payments, and you call your bank and tell them that you're sorry, but you can no longer afford to pay.

You authorise me to call your bank to discuss this, and rather than the bank having to take you to court, repossess your home, evict you, sell it and keep the remainder of any profit, I agree to buy your mortgage at a knock-down price.

I then come back to you and we agree a cheaper mortgage, with us sharing the savings.

What's illegal about this?

No bank will sell you a loan at a knock down price because of a few missed payments. And, of course, a mortgage loan is secured on the property, so the lender is more likely to go for reposession than to sell off the loan very cheaply.

But if you're offering cheaper loans, why involve the bank at all - why don't I just get my original loan from you (assuming you're a legitimate busness)?

[Woodchopper]

Plodder, think of it this way. Let’s imagine you have £20 000 in credit card debt.

You could get it all written off. But you’d first need to quit your job, be unemployed for a long period, stop making any payments, lose your assets (eg house gets repossessed), and move back in with your parents.

At that point the credit card lender would probably assume that it can either write off most of the debt or you will file for personal bankruptcy and a court will write it off for you.

So you’ve got £20 000 out of The Man. But you’re unemployed and living with your parents, and no one but the finger breakers will loan you money in the future. Not really worth it.

[plodder]

Sorry, I wasn't suggesting this was a sensible course of action. I was trying to highlight that people find themselves in this position, and are then exploited, perfectly legally, by an industry that through sheer chutzpah, wealth and influence has managed to convince us that they are entirely ethically above board. The way that different rules apply to the little in people in debt, as opposed to the big people, is appalling.

I remember Sarah Ferguson being £4M in debt, yet she had a castle and a helicopter. I was literally £4M "wealthier" than her.

[Woodchopper]

Sorry, I wasn't suggesting this was a sensible course of action. I was trying to highlight that people find themselves in this position, and are then exploited, perfectly legally, by an industry that through sheer chutzpah, wealth and influence has managed to convince us that they are entirely ethically above board. The way that different rules apply to the little in people in debt, as opposed to the big people, is appalling.

I remember Sarah Ferguson being £4M in debt, yet she had a castle and a helicopter. I was literally £4M "wealthier" than her.

Alternatively summed up by saying that if you owe then bank £4000 and cant pay then you have a problem. If you owe the bank £4 million and can't pay then the bank has a problem.

[lpm]

The "little people" are adults and capable of making their own decisions. There are good reasons "little people" go into debt - sudden emergency need like a funeral, replace an essential like a fridge or phone, profitable purchase like new job needing a car to travel to, or a "luxury" like an XBox to enable the kids to have some pleasure in their lives.

Plodder, why do you want to deny these adults access to easy credit, just because for a minority the debts get out of hand? Instead why not offer them convenient deals, such as set weekly repayments? Why not offer the minority a range of ways to cancel their debts when they can't be repaid? Why force the "little people" away from the FCA regulated industry and into the arms of loan sharks?

You keep jumping between opposite positions. Part of the 2008 crash was because mortgages were once reserved for "the big people" while people with lower incomes or unstable incomes were denied the chance to buy themselves a home. Hence in the years leading up to 2008 there was a big push from the left to widen the choices. For years there was celebration that home ownership was on the rise for the lower income deciles. 100% mortgages were considered good, lower rates for the first 3 or 5 years of the mortgage to get people started were considered good, mortgages for the self-employed were considered good, and why shouldn't an exotic dancer get a mortgage, people would ask, merely because she doesn't earn a conventional monthly salary. Are these people who got their own homes really being exploited by the evil banks? Or are they exploiting the opportunities that were denied to them before?

[nezumi]

Again I'll point out that improving pay and conditions and building more houses (or better yet, repurpose all that pointless office space in town and city-centres*) would mean more people in more income deciles would be able to buy houses and therefore nobody would need a 100%+ mortgage.


* I am certain it can be done, it's difficult and expensive as usual, but it is possible, as usual.

[plodder]

People were saddled with a lifetime of unaffordable debt thanks to the reckless lending that lead to the 2008 crash.

If you went to talk to these people about learning how to more prudent you’d get lynched. This lending was driven by the inventiveness of the financial services sector, motivated by greed.

[plodder]

Again I'll point out that improving pay and conditions and building more houses (or better yet, repurpose all that pointless office space in town and city-centres*) would mean more people in more income deciles would be able to buy houses and therefore nobody would need a 100%+ mortgage.


* I am certain it can be done, it's difficult and expensive as usual, but it is possible, as usual.

hmm, bit "fix everything before you fix anything"?

[lpm]

People were saddled with a lifetime of unaffordable debt thanks to the reckless lending that lead to the 2008 crash.

No matter how many times you repeat this it remains untrue. Nobody gets saddled with a lifetime of unaffordable debt. There's a lengthy menu of options for humans to cancel debts and screw the lenders: bankruptcy, IVAs, Administration Orders, Debt Relief Orders, Debt Management Plans... Over 100,000 people a year take this route in the UK, probably more in 2020, because we live in the 21st Century and not your imaginary Dickens novel.

[lpm]

nezumi is 100% right. The real solution is to improve worker's pay and give people liveable benefits. What's more disgusting than the financial sector is a government that leaves people working full time jobs in poverty - let alone people working part time or on zero hours contracts or not employed.

[plodder]

People were saddled with a lifetime of unaffordable debt thanks to the reckless lending that lead to the 2008 crash.

No matter how many times you repeat this it remains untrue. Nobody gets saddled with a lifetime of unaffordable debt. There's a lengthy menu of options for humans to cancel debts and screw the lenders: bankruptcy, IVAs, Administration Orders, Debt Relief Orders, Debt Management Plans... Over 100,000 people a year take this route in the UK, probably more in 2020, because we live in the 21st Century and not your imaginary Dickens novel.

Lol, tell that to the children of the parents who were saddled with that debt. You’ll find them on reddit, swinging from the lampshades.

[lpm]

These children are either lying or haven't a f.cking clue. In the US personal insolvency rates are even higher due to medical debts. If someone on Reddit claims their parents lost their home in 2008 and were pushed into poverty then it might be true. If someone on Reddit claims their parents are still saddled with lifetime debt you are a fool for believing a word of it.

[plodder]

ouch. I appear to have split a hair.

[Woodchopper]

I get the impression that you two differ on what you consider to be 'unaffordable'. Do you mean completely unable to pay it off (lpm's meaning) or does plodder just mean that the debt repayments are too high a proportion of income.

A lot also rides on what the debt was used for. A household spending 40% of its income to service a mortgage and student loans is in a very different position to a household spending 40% of its income to service credit cards, overdrafts and payday loans. The former should be accumulating wealth over the long run, the latter are accumulating wealth for others.

[Woodchopper]

In the US personal insolvency rates are even higher due to medical debts.

Yes, big difference there as people who aren't insured and are unlucky can very quickly end up with tens or hundreds of thousands of dollars in medical debt.

That said personal bankruptcy is even easier in the US. So its not like people are saddled with the debt for a lifetime. Though their credit rating gets f.cked.

[lpm]

I get the impression that you two differ on what you consider to be 'unaffordable'. Do you mean completely unable to pay it off (lpm's meaning) or does plodder just mean that the debt repayments are too high a proportion of income.

It's an unstable equilibrium. There will be nobody whose debt repayments stay the same proportion of income. Either a person will have an underlying surplus each month and steadily eat away at problem till it's gone after a few years. Or they will spiral further down with a shortfall each month needing new debt and extra interest.

The nezumi answer is the best one. Getting an honest day's pay for a day's work gets people out of debt, but people are getting less than an honest day's pay.