More Lenders Are ‘Garnishing Wages’ To Get Paid Back

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83. badtoworse, I’m enjoying our discussion, thank you.

So a borrower signs a contract and obtains a loan. The character of the transaction is not explained or revealed to the borrower and the true lender is not mentioned anywhere in the contract. (I’m old fashioned I suppose but I think the contract should include the actual lenders and borrowers rather than fictitious lenders.) The borrower is actually a party to the loan securitization as Bank of America has admitted but are never informed of their involvement nor do they consent in the contracts.

So we have a borrower in a contract with a party who is actually a stranger to the transaction and the borrower comes away, by design, falsely believing the named party in the contract is funding their loan and will be owed money. At the very least this is a deceptive business practice to me but you have to remember I consider myself an honest and actual business person.

At some point during the life of the loan, the borrower ceases making loan payments. The borrower may have been sending payments to Citi or whomever and has no idea that their money has ultimately been flowing to investors.

Let’s review other matters beyond the view, knowledge and consent of the borrower and beyond the four corners of their contract.

The borrower has no idea if their securitized loan was in the top, middle or bottom tranche. They have no idea how the P&S agreement dictated how payments were applied to the pool of loans and how it impacted their loan balance. The borrower has no idea if a swap is triggered and the investors are made whole and their loan is extinguished. Moreover, the borrower has no idea if a swap also paid to Citi or whomever, a party who derives profit upon the cessation of the borrower’s loan payments.

And yes, somewhere in this scheme there is a counterparty who placed a bet and they fund the swap that makes the investors whole and moves as profit to Citi or whomever. Any subsequent collection success does not reimburse this counterparty for their loss just as it would not make investors whole.

After Citi or whoever briefly attempts to collect, the collection rights are sold to another party, a debt collector who never funded the loan but supposedly obtains the consumer’s contractual obligations. The debt collector actually damaged themselves by willingly paying .03 on the dollar for collection rights and legally they are only entitled to collect the amount to the extent of their damage, not the alleged and false total amount.

The debt was actually extinguished with insurance, remember? The borrower though is never provided a full accounting of the loan and is instead burdened with an inaccurate, partial and false accounting of the loan balance that was intentionally and separately maintained for them. And that false amount is what the debt collector attempts to collect.

By the time a debt collector contacts the borrower, the debt could have been paid a few times over and the actual debt extinguished. But because the borrower signed a contract, and rights passed to another party along with a fictitious loan balance, you believe the borrower should simply trust the debt collector and pay whatever amount they claim is owed.

Here is where your view appears to be that the borrower agreed in their contract to repay the claimed balance and not the actual loan balance which may in reality be zero dollars.

You don’t appear to have any qualms about this securitization scheme and subsequent debt collection practices. To me though, this scheme involves defrauding the borrower, deceptive business practices, unjust enrichment and no good faith or fair dealing. It’s a dishonest transaction and scheme designed so that various parties can be compensated over the same debt, even parties who never funded the loans, while burdening borrowers with the obligation to repay the loan yet again to an even stranger party to the original transaction.

Apart from unlawful practices in this scheme, I find it an unproductive and inefficient use of capital since loans can be funded in other ways without inflating interest rates and fees and without defrauding borrowers.

Billions are siphoned from consumers enriching debt collectors when the money could be put to use by those consumers purchasing goods and services.

Remarkably, this scheme is something you somehow view as business. I’ve got 28 years of experience in business and I believe a debt need only be paid once.

How many times do you believe a debt should be paid?