credit | Financial Crooks

I’ve never thought of myself as someone who is highly ethical or ‘honourable’ but as I read more stories of bankruptcies and people trying to dodge paying their bills, I’m beginning to wonder if perhaps I am. I was raised by parents who believed that if you borrowed money you paid it back. To them, defaulting or not paying back your credit card debt is not different than robbing a bank.

Would You Rob a Bank If You Could Get $65,000 for Free?

Let’s say you’re not a violent person. You would never stick a gun or knife in a teller’s face; you would never threaten to detonate a bomb; you wouldn’t even use an explosive to blow open a safe after hours.

But what if you came into a branch and realized you could vault the counter, clear out a till, vault back, and get away. What if you knew the cameras were deactivated and that the only person working was unable to see you enough to recognize you again. What if it was in a town you would never pass through again and from which you could escape from with no problem immediately.

Would you take that jump?

If not, what would stop you from putting all those crisp (well, actually slippery plastic if you’re in Canada) bills in your pocket and running?

Is Refusing to Pay Your Credit Card Bill, Personal Loan or Overdraft OK?

I understand that people can end up in bad situations temporarily due to illness (mental or physical), job loss and various catastrophes. They may be unable to pay their bills or even pay the interest on their loans while they steer through the storm.

Fine.

In time, many of these people successfully navigate back to calmer waters. Once a person is well again and has income coming in again, slightly above what is needed to survive, they need to decide how to handle their debts.

The ones like me would work to put a plan in place to gradually pay off those old debts. It’s the right thing to do. It may take a long, long time. It may mean not getting to follow my dreams. But when I borrowed that money, I knew it wasn’t mine to keep and once I could pay it back, that’s what I’d do.

So I find it quite surprising to read that others have a totally different viewpoint.

Is the Only Reason to Settle Your Debts to Repair Your Credit History So You Can Borrow More?!

I’ve read several anecdotes on financial advice chat boards that made me read them a second time to make sure I wasn’t missing something. (And yes, I know anecdotes can be fake: but the details of some of them suggest they aren’t all lying.)

The common thread is the writer is upset that they have a terrible credit rating because they skipped out on their bills. Usually they had a (somewhat) reasonable reason for going into default. Now that times are better, though, they aren’t interested in setting up a repayment plan. They want to know:

How long does it take for their past bad behaviour to become invisible on their credit reports?
How little can they offer to pay the companies holding their debts to get them discharged?
Can they “buy” a clean credit report by paying some “credit repair firm” to send in letters saying it was all a misunderstanding?

These are people who admit they could pay off the debts in full. They want to get these black marks off their records *so that they can borrow more money!*

How can they justify this to themselves? Don’t they think they should pay back what they owe? Don’t they think future lenders should know the bad way they’ve handled their loans in the past?

Defaulting on Debt Is a Victimless Crime

It’s pretty obvious that these people don’t care that they have stolen money from the businesses from which they borrowed.

Perhaps they justify it to themselves by reading about the “obscene” profits banks make. And the “outrageous 1%” salaries that the bank executives earn.

They may even justify it by saying that credit cards deserve to get ripped off since they charge 20% interest a year on outstanding balances.

I think quite a few of these people would never consider walking into a bank and robbing a teller. But to them, refusing to pay their debts isn’t the same. It’s a victimless crime.

But Just Whose Money Did They Steal?

There’s a common general feeling that “banks have huge amounts of money.” They certainly hold and manage huge amounts of money.

But it’s not *their* money. That mortgage money the bank lent you is actually my money that I invested in GICs at that bank. That credit card loaned you money which you were supposed to pay back when you received your statement. If you don’t pay it back right away, the institution backing the credit card is using money loaned to it by investors to cover your debt.

Banks aren’t using their own personal money to manage debt. They’re balancing what people invest in and through them with what they loan.

When someone defaults on their credit card bill, they are in a real sense robbing the rest of us.

Why Do You Think Credit Cards Can Charge 20% a Year on Balances?

Believe it or not, credit card interest rates actually are reviewed by the government. It may seem like they can charge whatever they want but they actually can’t. (Which is why one of the Payday Loan type places in Ontario is being forced to shut down: they were trying to charge too much money to customers by disguising interest charges under fancy names like account set up fees; account access fees; repayment processing fees, etc.)

The reason the government is permitting these outrageously high credit card interest rates is because the card issuers can show proof of the huge number of people who default on their bills and never pay them.

That’s right. If you are one of those people who skip out on your credit card bills, you are part of the reason why everyone else in the country is stuck with these high interest rates even though they are gradually paying off their own bills.

It’s not a “victimless” crime. It’s a crime that hurts all of us.

Do I Think Credit Card Companies and Banks Are Innocent?

No. I understand that they grant too much credit too easily to too many people. That is a recipe for defaults.

When I was in university, you couldn’t get a credit card until you graduated unless you had a proven steady job.

Now, students are flooded with offers for free credit cards even though they have no steady stream of income to pay them back.

I also see people making minimum-wage being given credit limits in the thousands of dollars. Some will manage that credit very carefully and well. Some will end up impoverished by it.

But I don’t think bad management choices by credit card companies give anyone an excuse to default on their debt.

If you borrowed money and promised to pay it back, you should stick by your word.

What About You? Would You Rob a Bank? Would You Default on Your Loan? How Are Those Actions Different?

I’m genuinely interested in hearing other people’s opinions on this. Do you think it’s ok to default on your credit card or personal loan debt? Do you really think that any reference to that poor behaviour should be removed from your credit history so that future lenders don’t know?

Is it significantly different to rob a bank than to default on credit? Why? How?

Please share your views with a comment.

Related Reading

Earlier this year one of our credit cards was compromised. My card was charged thousands of dollars in electronics and other online gear which was delivered to someone living in another province. I reported the fraudulent activity and had to complete some paperwork for my credit card company. Much later, I realized I probably should also check my credit file to make sure no one had asked for a loan or a new credit card using the information from my compromised card. So as year end approached, I phoned Equifax to request my free annual credit file report. Here’s what was in it.

A Free Equifax Credit Report Does Not Include Your Credit Rating or Credit Score

First I’ll mention what’s not in it. The free report does not include my credit rating or my credit score.

I don’t know if I have 500 points or 800. I don’t know if I’m BBB or AAA. To find out that information I’d have to pay money. Since I’ve never done anything to damage my rating and I’ve done lots of things that should improve my rating I don’t really care what number they have on file. If you do care, you’ll have to pay for it.

Who Has Been Inquiring About My Equifax Credit File?

Apparently I’m just as unpopular with financial institutions as I am with regular people.
In the past two years only two institutions have inquired about me:

One was PC Financial when I opened my chequing account.
The other was BMO when I got a US dollar MasterCard (which I’ve since cancelled.)

There is also a short list of inquiries “from authorized parties to update their records regarding your existing account with them.”

I have no idea what that means either!

The “parties” are two banks I deal with only. They don’t really seem to be on any particular dates and they only made their requests a few times over the last three years. I have no idea what they were looking for in my file. I have dealings with two other banks that have not made any inquiries.

In the notes it says they may “update their client information prior to making a promotional offering.” I don’t remember receiving any chance of a lifetime promotional offers that match the inquiry dates either.

My Credit History And/Or Banking Information in My Equifax Credit File

This section lists information

reported to Equifax by the organizations listed
the info is received every 30 days from most “credit grantors”

What’s listed?

Well, each of my whopping 2 credit cards is listed.

On my report, none of my bank accounts, savings or chequing, is listed.

For each credit card, the Equifax report states

when the last report was made
a code, in my case, R1 which is defined as “paid as agreed and up to date”
whether the account is joint
the last reported balance on the account
a small part of the account (card) number
when the account was opened
the date the last payment, purchase or cash advance was made
if the card has been terminated, the date it was closed (remember I cancelled our USD MasterCard)
how many times the account has been 2 payment periods past due; 3 ditto; 4 ditto
for the past 48 “reportings” for a monthly payment card, how many “reportings” were paid as agreed

What If I See Something Wrong in My Credit File?

Equifax includes a form called the “Consumer Credit Report Update Form” that you can fill in to report errors and omissions.

What’s the Security Like to Protect Me If This Equifax Credit File Letter Gets Stolen?

You may be reluctant to request your credit file report if you think the letter might get stolen and the thief might get your credit card numbers, name, address, SIN number, driver’s license number and other valuable information.

I have to admit I’m a bit uneasy about that too.

Equifax has made a token attempt to protect my info. In the letter, they only give

part of my date of birth
part of my Social Insurance Number
no bank account numbers
a very small part of my credit card number
no credit card expiry date numbers
no credit card “back of the card extra security code” numbers

I’m a bit dismayed, though, that they list

my entire Driver’s License number and
my entire (now invalid) Passport Number.

If I can find the energy, I may be writing them about that and suggesting they mask part of those numbers as well.

If you are requesting your report, I suggest you consider applying by telephone. You will have to tell them your SIN number (but they already know that anyway) but you won’t have to give them your Driver’s License or Passport Number like you have to if you apply in writing. Then (if you haven’t provided them in the past) those government ID numbers will not be on your Credit File or in the letter that they mail to you.

Miscellaneous Odd Stuff in My Equifax Credit Report

Other odds and ends they included in the report

My file was opened the year I graduated.
I don’t know exactly why. The file opened months after I moved into a new city and a new apartment; obtained a MasterCard; started work in a permanent full-time job; and opened a new bank account at a different bank. I’ll never know why all of those previous items didn’t cause them to open a file.
They list my previous and last two addresses.
They have the street name wrong for my oldest address but I’m not planning to fix it because I lived there more than 19 years ago.
They have my Birth Date and SIN number correctly on file.
They know my telephone number but they only found out what it was in 2010. I’m not sure why they found out then either as we neither contacted Equifax nor changed our number.
They know my Driver’s License and Passport numbers from when I applied in writing a few years ago. I applied by telephone this time, so they don’t know my correct Passport number which has changed. (Yes, I let my Passport expire accidentally. Oops.)

They also list definitions of the following terms: (It takes a full page.)

credit score
credit inquiries to the file
credit history and banking information
voluntary deposit
registered consumer proposal
bankruptcy
judgments, seizure of movable/immovable, garnishment of wages
collection accounts
secured loans
What is an inquiry?
Why was I denied credit?
Why is something I paid off still on my credit file?
What can be done if I suspect I am a victim of identity fraud?
Credit clinics

Phew. There seems to be a lot of terms that aren’t applicable to our account for which I am exceedingly grateful.

There is a final heading of “Consumer Department” but nothing following it. I’m not sure if that’s supposed to represent the signature closing the letter or if they just randomly stopped printing definitions at that point!