More Lenders Are ‘Garnishing Wages’ To Get Paid Back

[badtoworse]

52. In the end, someone got stuck with a defaulted loan.

If Citi sold the defaulted loan for $0.03 on the dollar, they lost $0.97 and wrote it off. If a Credit Default Swap is triggered, then the swap counterparty ate the loss. The swap premium gets rolled into the lenders' or credit card company's cost of doing business which ultimately gets borne by consumers that pay fees on their credit cards. Higher swap premiums mean higher borrowing costs for everyone. The fact is that these losses were triggered by someone borrowing money and not paying it back and you are right, that is not fair.

The fact that the loan got sold is irrelevant, as is its value in the secondary market. You still owe the money and are expected to live up to the terms of the transaction - sorry, but that's just how a contract works. The fact that your loan got sold for pennies isn't a reflection on the lender or the collection agency; it's a reflection of your performance under the loan. If your loan is worth pennies, it's because you're in default. I've never seen a contract where default did not have serious consequences and I don't see why a loan or consumer debt should be an exception.

I do agree with one thing you posted:

"But if you are purchasing a mortgage loan, a car loan or making purchases with a credit card, it would be prudent to understand the full nature of the transaction and how our financial industry operates and how they misuse our courts."

A loan or the use of a credit card is a legally enforceable contract and the onus is on the borrower to understand the deal. The fundamentals aren't that hard to grasp: If you borrow money and ignore the obligation to repay the loan, at some point things are going to get pretty unpleasant for you.

You haven't mentioned anything about the borrower's responsibility in all of this. What do you believe is reasonable to expect from a borrower? Do you think they should be able to walk away from a loan with no consequences?