Bankruptcy for Fun and Profit

[Shapley]

OT,

From Nate's post: Most credit card issuing institutions are banks and, as such, are regulated by the OCC {Office of the Comptroller of the Currency}. We have semi-annual OCC audits with which we have to comply with OCC mandated risk levels, legal compliance, and service levels. This ensures that we do not assume inappropriate risk {customers likely to default} as well as ensuring that we are not making a windfall profit at the expense of our customers {even if competition would allow it}.

RE: Fair and equal. The cap on SS is designed to make it fair and equal. It is designed to ensure that higher wage earners are not footing the bill for the retirement of a large number of retirees, while drawing significantly less than their "investement". It's not welfare..welfare...welfare...fare...fare...

Sorry, there seems to be an echo in here. I'm sure I've said that before. I'm sure I've said that before.

There are exceptions to laws, for better or worse. That doesn't make the practice right. Why should I, because I served six years in well-paid service to my country, be exempted from the provisions of the law that others who didn't, couldn't, or wouldn't serve have to live under?

V/R
Shapley

[barfle]

Just as an addendum to my earlier post about all the credit card offers I get in the mail.

I have a subscription to an engineering magazine that says they need to send it to a business. Since I don't get mail at work, I simply filled in a made-up name for my "business" and got the subscription, which is useful to me in several ways. And it's entirely possible that I'll moonlight a bit under that name, if an opportunity presents itself.

Yesterday, that "business" got an offer for a credit card. Admittedly, it wasn't pre-approved, but clearly the folks sending out these offers aren't doing their homework.

[NateBrei]

Can't speak to the credit card industry as a whole because some cards are issued by non-banks & they make their own rules. However, within our company, we do have score minimums below which we do not solicit. Even after soliciting (since the process to pull contacts, mail, & get applications in can take months), we again review their scores. Only if they are above our minimums (which are currently above our balance weighted FICO average) will we issue credit. Additionally, over the last year or so, we have begun involuntarily closing accounts that would not now qualify (even if they were really good scoring accounts when they opened).

I know there are some companies that purchase these "bad" portfolios (& actively solicit in these low score ranges), charging very high (sometimes 30+%) interest rates. Their business model is to hopefully collect enough interest income to offset the discounted price they pay before the account charges-off. For the most part, they are unregulated & so have very few restrictions on their operations (except to stay in business). I'm not saying I condone this part of the credit industry. But, it is really no different from the check cashing business for short term floats that takes a piece of the cash off the top that when computed is a huge APR.

Nate

[NateBrei]

Originally posted by Shapley:
I must warn you, you've now crossed over to the dark side, by supporting me, so watch out for those light sabers!

I've been secretly rooting you on, Shapley. I've just not weighed in because you are much more persuasive than I could ever be. Just know that someone is out there sayin' "Right {in both senses of the word} On!".

Nate

[NateBrei]

Originally posted by barfle:
Yesterday, that "business" got an offer for a credit card. Admittedly, it wasn't pre-approved, but clearly the folks sending out these offers aren't doing their homework.

They don't have time to hand select applicants (assuming fair lending laws allowed that). So, as a Commercial Card lender, they do the cheapest thing...Buy Lists. Congrats. Your engineering magazine owners just made more money by selling their subscriber base. And, you'll be getting a whole bunch more offers.

Nate

[NateBrei]

Originally posted by barfle:
I simply filled in a made-up name for my "business" and got the subscription, which is useful to me in several ways. And it's entirely possible that I'll moonlight a bit under that name, if an opportunity presents itself.

Be careful. Did you research that name? Are you infringing on another company's trade name / trademark? You could be headed for legal trouble.

Nate

<small>[ 04-29-2005, 12:43 PM: Message edited by: NateBrei ]</small>

[freshstarz]

After reading this one, I had to reply. This is in response to those that are saying credit should be harder to obtain, in contrast with those saying responsibility should be with the consumer.

My question... who teaches the consumer this responsibility? It's automatically assumed that millions of people are getting some financially fiscal idea of how to run their lives from their parents... because you're sure as hell not going to receive normal day-to-day living lessons from school.

The lower class is naturally subjugated as it is... and you expect these people, who usually have spent generations being poor, to know fiscal responsibility when they are the first generation to attend college and are inundated with credit card offers.... that which their parents were never made privy of? It's basically blaming people for not "knowing" something that you consider common place and logical, when in fact, it is a product of your upbringing and environment.

I come from a decently affluent family, however my parents were both raised very poor... therefore, despite making a load of money, they did not save, spent foolishly and filed bankruptcy themselves twice. By the time most of us got to college (12 children altogether), none of us were prepared for financial responsibility. I'd say our family is 50/50 in its success... 1/2 of us have become fiscally responsible, 1/2 remain clueless... hopefully our next generation will learn more.

Anyway - that was a long response - but I hope it causes some thougth.

[OperaTenor]

Shap,

In your post at the top of this page, you're not telling me anything. There is no agency out there telling banks they have to extend credit to people who are high risk.

You call the cap on SS "fair and equal application" becuase the higher income levels don't need SS(funny how my affluent, retired friends all get it and brag that they're getting it), but then you think it's okay for everyone to pay for school vouchers which will only be used by some?

[Trumpetmaster]

One problem is Credit Card companies soliciting people by sending them a credit cards in the mail and all they need to do is call an 800 number to activate. I can't tell you how many of these I get each year. I just cut up the cards.

If you want a credit card you should apply for one, not receive a solicitation in the mail.

[OperaTenor]

Hi TM,

You're right. The credit card companies share in the responsibility through their predatory marketing practices. However, this legislation did absolutely nothing to address that side of the equation.

It also left all of the loopholes to protect the wealthy and big businesses intact, even though, in theory, the "wealthy" should never need bankruptcy protection, at least in terms of being fair and equal.

<small>[ 05-05-2005, 11:26 AM: Message edited by: OperaTenor ]</small>

[Selma in Sandy Eggo]

Question. If you receive an unsolicited credit card in the mail and never sign any sort of a promise to repay the bank its money, are you legally obligated to repay them?

I get lots of "You Are PREAPPROVED!" solicitations, which go straight into the shredder, as well as "Use our Handy Checks to Pay Off Your Higher Credit Card Balances" offers from existing accounts (those checks are also shredder fodder) but I've never gotten an actual card I didn't sign something for.

[barfle]

Originally posted by NateBrei:
Be careful. Did you research that name? Are you infringing on another company's trade name / trademark? You could be headed for legal trouble.

Nate

If I were actually doing business, I might have done that, but I sure can't see how anyone can say that I'm infringing if I'm not going commercial.

Sort of like a patent (which I know far too much about). Anyone can build a patented invention. They just can't do it for commercial reasons.

[Shapley]

Selma,

Nor have I. I was going to comment on it, but I've been trying to stay out of this one. I have received unsolicited cards from satelite TV providers which can be used to pay the down payment on the system (there's a racket!), and I recieve lots of pre-approved applications and tranfer cheques, but not actual, usable cards (I have recieved plastic card-look-alikes with my name printed on them, presumably to convince me that my name would somehow look better on their card than on the ones it is currently on.

I've had to fill out some type of form for every card I carry, even the ones from electronics shops and clothing retailers.

V/R
Shapley

[Shapley]

OT:

RE:In your post at the top of this page, you're not telling me anything. There is no agency out there telling banks they have to extend credit to people who are high risk.

From my earlier post, which is from Nate's post:

We have semi-annual OCC audits with which we have to comply with OCC mandated risk levels, legal compliance, and service levels. This ensures that we do not assume inappropriate risk {customers likely to default}

According to Nate, they can't. We may quibble over the definition of high-risk, but I really don't think they're lending that much money to people who can't pay. I'm sure that, at the time of obtaining credit, they either had means that are no longer available, or they committed fraud on the application. The first is excusable, the second is criminal. There are remedies for both.

V/R
Shapley

[Selma in Sandy Eggo]

Question. If you receive an unsolicited credit card in the mail and never sign any sort of a promise to repay the bank its money, are you legally obligated to repay them?

I get lots of "You Are PREAPPROVED!" solicitations, which go straight into the shredder, as well as "Use our Handy Checks to Pay Off Your Higher Credit Card Balances" offers from existing accounts (those checks are also shredder fodder) but I've never gotten an actual card I didn't sign something for.

[piqaboo]

from NateBrei "Only if they are above our minimums (which are currently above our balance weighted FICO average) "

If I read this correctly, you are saying the bank calculates the average FICO scores for all its card holders, then accepts only those above the average? And in a later statement you note that the bank is recalculating scores for current card-holders, in order to drop them if necessary. By that standard, the card-holder acceptance cutoff should rise slowly and steadily, because each new customer is better than the average existing customer, and the existing customers are culled to get rid of those with the lowest scores, which have the greatest effect on lowering the average. The rising CO (cutoff) should correlate with risk, payback rates, etc, if FICO scores are indicative (if they are in fact a useful measure of credit-worthiness).

So why has the CO dropped to the point that your bank is writing off such vast sums of debt each day?

<small>[ 05-05-2005, 02:31 PM: Message edited by: piqaboo ]</small>

[OperaTenor]

Hey Shap,

To me, it looks like you're using the quote that proves my point to prove your point.

:p

[Shapley]

OT,

You're saying they don't have to extend credit to people who are high risk, I'm answering that they can't extend credit to people who are high risk, so yes, in essence, by proving my point I prove yours.

What's your complaint?

V/R
Shapley

[OperaTenor]

Hm?

Me? I try to be compliant as often as possible.

[Trumpetmaster]

Originally posted by OperaTenor:
Hi TM,

You're right. The credit card companies share in the responsibility through their predatory marketing practices. However, this legislation did absolutely nothing to address that side of the equation.

It also left all of the loopholes to protect the wealthy and big businesses intact, even though, in theory, the "wealthy" should never need bankruptcy protection, at least in terms of being fair and equal.

OT,
Agreed.
I wanted to make a point that we have a
"Fiscal Responsibility" when getting these solicitations. It seems too easy to get credit.

Regards,
TM