More Lenders Are ‘Garnishing Wages’ To Get Paid Back

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57. badtoworse, I’m delighted to discuss these issues with you.

I’m sure we’ll find areas where we agree and where our views differ.

You wrote:

“If Citi sold the defaulted loan for $0.03 on the dollar, they lost $0.97 and wrote it off.”

I won’t guess at what they get to write off, but in addition they are picking up .03 for every dollar on a loan funded by investors. That’s simply the price of collection rights and not a reflection on consumers and their performance under their loans.

Next, you wrote about a swap counterparty loss and how ultimately consumers are burdened by the premium costs. I can’t explain how it’s fair for consumers to pay higher interest rates so some other party’s insurance premium is paid. No one pays my insurance premiums except me.

I don’t share your view that the sale of the loan is “irrelevant.” You wrote: “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.”

We’re using Citi as an example so let’s say the consumer had a contract with Citi but they sell the collection rights to let’s say Midland Funding. Neither Citi nor Midland loaned the consumer any money, and the consumer didn’t have a contract with the actual lender or Midland, did they? The consumer though would be lawfully obligated to repay Midland exactly what they paid for the collection rights plus lawful interest, not the original amount of the loan; otherwise Midland would be unjustly enriched.

You’ll delight I’m sure as I state that I believe individuals and businesses should do their very best to repay all lawful and valid debts. In my earlier post I stated that a $20 loan from a co-worker at lunch should be repaid if at all possible.

So let’s now suppose I bought the collection rights to that $20 loan from your co-worker for .60. I’m adding fees and high interest and the new total is now $33.70 which I expect you to pay me. I won’t offer you any evidence of what I paid for the right to collect or any proof of the loan or an accounting of the loan. Really, there is nothing at all to prove you owe me the money, yet it appears you would like people to believe that in this scheme you would lawfully and properly owe me the $33.70 that I claim. My view is that if I could prove the debt and the amount I paid, the .60 is the extent of my damage plus some lawful interest, say .07, and if I was contractually entitled to obtain money from you, you would actually owe me a total of .67.

But then you never borrowed money from me and we never had an understanding, agreement or contract. And if you pay me the $33.70 I’ll put it my pocket which does nothing to return $20 to your co-worker.

In this scheme there is no contract between the actual lenders and borrowers, there are only parties positioned to profit from the transactions and unjustly enrich themselves. The collection of debts simply enriches Hedge funds, banks and debt collectors and does nothing to repay the actual lenders who are investors who knowingly put their money at risk in investments.

In my view, either lawful amounts of debt should be collected from borrowers or the money should be repaid to the investors if the Swaps have paid or are not utilized, otherwise investors would be twice paid.

I believe it’s reasonable for a borrower to expect an honest system and absent an honest system; they should be relieved of no more wealth than is lawful.

No, in the end no one got stuck with a defaulted loan. Investors either came away with some wealth creation or suffered an overall loss. Banks profited from managing securities, selling collection rights, write offs, insurance, collections on loans they never funded, and Hedge funds and debt collection companies collected and kept billions after spending mere millions for debt collection rights.

In the end it all amounts to the transfer of trillions of wealth from the people who work hard and EARN it and create wealth to people who simply devised a means to transfer and amass that wealth without working and earning a cent.