THIS OPERATIONS MANUAL—WRITTEN BY AN ANONYMOUS COLLECTIVE OF RESISTORS, DEBTERS AND ALLIES FROM STRIKE DEBT AND OCCUPY WALL STREET—IS FOR ALL THOSE BEING CRUSHED UNDER THE WEIGHT OF DEBT. IT AIMS TO PROVIDE SPECIFIC TACTICS FOR UNDERSTANDING AND FIGHTING AGAINST THE DEBT SYSTEM SO THAT WE CAN ALL RECLAIM OUR LIVES AND OUR COMMUNITIES. IT CONTAINS PRACTICAL INFORMATION, RESOURCES AND INSIDER TIPS FOR INDIVIDUALS DEALING WITH THE DILEMMA OF INDEBTEDNESS IN THE UNITED STATES TODAY AND ALSO INTRODUCES IDEAS FOR THOSE WHO HAVE MADE THE DECISION TO TAKE COLLECTIVE ACTION.
THE DEBT RESISTORS‘ OPERATIONS MANUAL
OCCUPY WALL STREET
Project of STRIKE DEBT
Debt Resistors Preface
This operations manual—written by an anonymous collective of resistors, defaulters and allies from Strike Debt and Occupy Wall Street—is for all those being crushed under the weight of debt. It aims to provide specific tactics for understanding and fighting against the debt system so that we can all reclaim our lives and our communities. It contains practical information, resources and insider tips for individuals dealing with the dilemma of indebtedness in the United States today and also introduces ideas for those who have made the decision to take collective action. The system of mafia capitalism has made it difficult, if not impossible, for us to meet our basic needs, whether we have debt or not, whether we pay it back or not. We recognize that it is not easy to fight this system, that it is not easy to withdraw consent from a financial world gone mad. Make no mistake: the odds are stacked against us. Laws surrounding debt lending, collection and buying are notably complex, designed to keep debtors confused and afraid. This manual is not designed to provide legal counsel; it is a political act of mutual aid. We are not lawyers; you may want to consult one before doing anything that you think might be illegal. Look seriously into any of the options we present before taking action. Be smart. As with any operations manual, this is a living document. We don’t claim to have all or even most of the answers regarding debt. To produce this manual, we have reached out to our networks to the best of our ability. Some sections barely scratch the surface and in fact deserve their own book-length treatment. Researching debt has uncovered many connections we didn’t expect, and we know there are types of debt we haven’t addressed. It is our hope that readers will have their own strategies to contribute to future versions of this manual. The contributors envision this first edition not simply as a document that we
have made for you, but rather as the beginning of a project that we will all build together—a collectively written manual for collective action. An online version will be updated frequently and available at strikedebt.org. Any ideas, plans, tips, corrections, resources, schemes—legal or otherwise—should be sent to [email protected]; anonymity is the norm by which we operate. Because there is so much shame, frustration and fear surrounding our debt, we seldom talk about it openly with others. An initial step in building a debt resistance movement involves sharing the myriad ways debt affects us, both directly and indirectly. You are encouraged to share your experience at Debt Stories, occupiedstories.com/strikedebt. Remember, you are not a loan!
VI | THE DEBT RESISTORS’ OPERATIONS MANUAL
PREF ACE INTRODUCTION I II III IV V CREDIT SCORES AND CONSUMER REPOR TING AGENCIES CREDIT CARD DEBT MEDICAL DEBT STUDENT DEBT HOUSING DEBT
iii 1 3 13 23 30 38 52 53 70 84 92 102 108 113 119 121
INTERLUDE VI VII IX X XI MUNICIPAL DEBT
FRINGE FINANCE TRANSACTION PRODUCT AND SERVICES 58 S DEBT COLLECTION BANKRUPTCY PROSPECTS FOR CHANGE
VIII FRINGE FINANCE CREDIT PRODUCTS AND SERVICES
APPENDIX A APPENDIX B APPENDIX C APPENDIX D
AN ODE TO THE DEBT RESISTOR
Everyone is affected by debt, from recent graduates paying hundreds of dollars in interest on their students loans every month, to working families bankrupted by medical bills, to elders living in “underwater” homes, to those taking out payday loans at 400% interest to cover basic living costs, to the teachers and firefighters forced to take pay cuts because their cities are broke, to countries pushed into austerity and poverty by structural adjustment programs. Everyone seems to owe something, and most of us (including our cities) are in so deep it’ll be years before we have any chance of getting out—if we have any chance at all. At least one in seven of us is already being pursued by debt collectors. We are told all of this is our own fault, that we got ourselves into this and that we should feel guilty or ashamed. But think about the numbers: 76% of Americans are debtors. How is it possible that three-quarters of us could all have just somehow failed to figure out how to properly manage our money, all at the same time? And why is it no one is asking, “Who do we all owe this money to, anyway?” and “Where did they get the money they lent?” At the same time, we keep hearing about financial capitalism: the fact that most of the profits on Wall Street no longer have much to do with producing or even selling anything, but are simply the fruits of speculation. This is supposed to be very complicated—“Somehow they have just figured out a way to make money out of thin air; no, don’t even try to understand how they do it”—and very distant from our everyday concerns. In fact, bankers are allowed to make money out of thin air—but only if they lend it to someone. That’s the real reason everyone is in debt: it’s a shakedown system. The financial establishment colludes with the government to create rules designed to put everyone in debt; then the system extracts it from you. Overseas it operates through financial scams that keep cheap goods flowing into the United States in a way that would never be possible if not for the threat of U.S. military power. Here at home it means endlessly making up new rules designed to put us all in debt, with the entire apparatus of government, police and prisons providing enforcement and surveillance. Instead of taxing the rich to generate money to build and maintain things like schools and roads, our government actually borrows money from the banks and the public pays the interest on these loans. As we’ve learned through scandal after scandal, this process is riddled with fraud, rigged from the start to steal money that should be going to social necessities. Financial capitalism is mafia capitalism. We gave the banks the power to create money because they promised to use it to help us live healthier and more prosperous lives—not to turn us into frightened peons. They broke that promise. We are under no moral obligation to keep our promises to liars and thieves. In fact, we are morally obligated to find a way to stop this system rather than continuing to perpetuate it. This collective act of resistance may be the only way of salvaging democracy because the campaign to plunge the world into debt is a calculated attack on the very possibility of democracy. It is an assault on our homes, our families, our communities and on the planet’s fragile ecosystems—all of which are being destroyed by endless production to pay back creditors who have done nothing to earn the wealth they demand we make for them. To the financial establishment of the world, we have only one thing to say: We owe you nothing. To our friends, our families, our communities, to humanity and to the natural world that makes our lives possible, we owe you everything. Every dollar we take from a fraudulent subprime mortgage speculator, every dollar we withhold from the collection agency is a tiny piece of our own lives and freedom that we can give back to our communities, to those we love and we respect. These are acts of debt resistance, which come in many other forms as well: fighting for free education and healthcare, defending a foreclosed home, demanding higher wages and providing mutual aid. The fact is, most debtors dare not reveal their names nor show their faces. Those who struggle to stay afloat or who have fallen into default are told that they are failures, inadequate and abject, and so they do not speak out. There are literally millions of people who cannot pay the enormous sums that the financial elites claim they owe. They are the Invisible Army of Defaulters. Instead of a personal failure, refusing to pay under our current system is an act of profound moral courage. We see our situation as connected, and we can look for ways to step out of the shadows together. The Debt Resistors’ Operations Manual is an attempt to assist this invisible army and all other debt resistors in this struggle.
I. CREDIT SCORES AND CONSUMER REPORTING AGENCIES:
SURVEILLANCE AND THE VICIOUS CYCLE OF DEBT
Having a credit score is like having a tattoo of a barcode on your forehead, and the tattoo artist is like a consumer reporting agency (CRA). It’s actually perverse—we all agree to be watched, located, defined, classified and evaluated. And if we don’t? Financial banishment—we’re thrown to the credit wolves and loan sharks. This arrangement creates a caste system fueled by fear and exclusion. Financial surveillance is a corrupt and impersonal machine, not a system that genuinely determines people’s trustworthiness. Can’t make a credit card payment because of health costs this month? It’s recorded. Got laid off and couldn’t pay tuition? It’s recorded. Tried to pay a mortgage fee with an already-low checking account? It’s recorded. And who records all of this? The agencies, bureaus and companies that are watching over us: Equifax, TransUnion and Experian; ChexSystems and TeleCheck (to name only the biggest). This chapter is about how these agencies control us—their methods, their mistakes, their profits—and how we can maintain dignity despite their power.
WHAT IS A CREDIT REPORTING AGENCY?
There are three major national credit reporting agencies—Equifax, Experian and TransUnion—as well as many smaller ones. In 2009, the big three CRAs had combined revenues of more than $6.7 billion dollars.1 These agencies collect your information from creditors, store it and send it out to those who request it in the form of a “credit report.” They also compile it into a “credit score” or “credit rating,” a much simpler number that allows for the ranking of people. These agencies started in the 1950s as regionally based companies that would track the personal details of your life—when you got married, if you got a ticket, or if you committed a crime. Before technology allowed for the tracking of massive amounts of data, these companies could only compile information about a particular type of credit—like your regional banking history or your mortgage—so data was not shared across industries. Over the last forty-five years, however, CRAs have come to play a crucial role in our ability to get access to even the basic requirements of life in our society. If you need anything more than just a small purchase—heating, gas, a phone line, medical care, education, personal transportation, insurance— someone has to scan your “tattoo.” A number comes up on a screen. This person can see the screen and you can’t. If they say your number is good, then you can go ahead and buy what you need. If they say the number is bad, things will become a lot more difficult for you. And the reach of CRAs is expanding: recently, a new phenomenon has emerged that has been described as “mission creep.” Many landlords require a credit score, which means that credit agencies have a power over your ability to find housing. Insurance rates are starting to factor in credit scores too. Hospitals have begun to charge patients and determine access to health care according to their credit scores. And finally, employers have begun demanding that job applicants provide credit reports. A tremendous amount of power over the daily lives of people is given to organizations that operate almost entirely outside of public oversight, with next to no democratic accountability.
- In recent studies, more than 20 million people found material errors in their credit score calculations.
- The government currently regulates very little of this entire process, including who can send information to the people who compile your score and who can access the information once its compiled.
- Those in communities with higher concentrations of people of color are twice as likely to have low credit scores as those in other areas. Higher fees and interest rates are imposed on those with low credit scores, ensuring that class divisions along racial lines remain unchallenged.
- It can seem difficult and futile to investigate or repair your credit score, but it isn’’t. There are ways. Keep reading to find out how.
THE DEBT RESISTORS’ OPERATIONS MANUAL: THE MISTAKES
A SyStem Riddled With mistakes As for how the system works, there are problems on every level. On the ideological level, credit scores are crucial in creating and maintaining a culture of debt. How does this work? In order to qualify for most housing, for example, you need to have a good credit score. And in order to have a good credit score, you need to have, guess what? Debt. You might think that being free of debt would qualify you for a good credit score, but that is not the case. You will only have a credit history if you have existing debt. In yet another way, the system forces you to enter into debt just to be able to provide for your basic needs. In addition, many credit reports are just plain wrong. A 2004 Public Interest Research Group (PIRG) study revealed that 79% of credit reports contained errors; 25% of these mistakes were serious enough to result in a credit denial. More than half of all credit reports contained outdated information or information belonging to someone else.4 With this number of mistakes, you have to wonder what this system is really about. You might think that because the rich actually use credit so much more, they would be the ones mainly affected by these errors—not so. In fact, the poorer you are, the more likely your credit agency is to make a mistake that influences your rating. UndeRStAnding yoUR CRedit SCoRe The scoring models are endlessly complicated, and different agencies use different ones, so it’s never entirely clear what you can do to improve your score. With that said, the most commonly used model is “FICO” (Fair Isaac Corporation), and we do know that that score is comprised of the following: 35% payment history 30% amounts owed 15% length of credit history 10% new credit 10% types of credit used Although we don’t know exactly how these areas are evaluated, making regular payments, not having too many credit cards or other lines of credit, and keeping the ones you do have well below their limits will always help.
Some things We Can do
- Demand accountability. The Consumer Financial Protection Bureau is now an operating governmental body. We should ask if it’s doing its job when it comes to credit scoring. If it isn’t, why not? If it is, can it do more?
- Demand regulation. Seven EU countries and seventeen Latin American countries have public credit scoring agencies. Why don’t we?
- Demand transparency. Although they’re hugely important to us, we have little say in how or why our credit scores are calculated. Can there be a democratization of credit scoring?
- Check your numbers. We can change this system, but we have to know it first. This is how to do it: Go to: Annualcreditreport.com Call 877-322-8228 or Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Service P.O. Box 105281 Atlanta, GA 30348-5281 In order to receive your free report, you’ll need to provide your name, address, Social Security number and date of birth. You may need to give your previous address if you’ve moved in the past two years. For security reasons, you may also have to give additional information like an account or a monthly payment you make. Beware of scams: those charging to get your score or signing you up for “free” services in order to access your score. And beware of those offering to help your score; there is nothing they can do that you can’t do more effectively and free of charge.
- Demand accuracy. There are laws that protect debtors from unfair and inaccurate credit score practices: the Truth in Lending Act, Fair Credit Reporting Act, Fair Credit Billing Act and Equal Credit Opportunity Act. All guarantee protection and the possibility for citizen-directed credit scoring and reporting.
- Reject the system. It is possible to live without a good credit score. If you can muster the time and energy to make some life changes, you can go totally off-grid. Below are some recommendations on how to live without the benefits of a good credit score:
- Prepaid cell phones are always an option.
- For housing utilities, if you have a roommate, you can ask them to put the accounts in their name. If you live alone, ask a relative or friend.
- Opt for services that don’t require credit checks. If a company requires a check, try to talk them out of it. Build up an old-fashioned trusting relationship by spending time talking with the person. They may choose to bypass the credit check.
- Create your own credit report: put together a portfolio showing you are a trustworthy person (reference letters, job history, life narrative).
- Check listings for housing, cars and other necessities that are informal and don’t go through brokers or other formal agencies.
- Offer to put down larger deposits in lieu of a credit check.
- Build networks of mutual support in your community so you rely less on outside services. DIY credit repair It is best to repair your bad credit score yourself. This helps you avoid scams and fly under the radar of the CRAs who are looking to block credit repair companies from gaming their system. There is a host of books, websites, articles and other resources dealing with this issue. Below are the steps we recommend taking:
- Get a copy of all three of your credit reports.
- Review your credit reports and note every single error. Note incorrect spellings of your name, inaccurate data and any “derogatory” information.
- Write letters disputing negative information and errors to the corresponding agencies.
- Describe in your letter how you found out your credit was bad and how shocked you were at all of the errors the agencies have been reporting. Then ask them “per the Fair Credit Reporting Act (FCRA) enacted by Congress in 1970,” to either provide physical proof of their claims or delete the mistakes immediately. Include your name, current address and Social Security number on your letter. You should not include any additional information. Simply list the entry that you are challenging and briefly explain why you are challenging it. You only need to write a couple of words to do this—less is more. Say things like “this is not mine,” or “this record is inaccurate.” Be sure to make the letter sound unique to you. If you do not, you may find that the CRA responds by saying that your claim is “frivolous.” This is the way they get rid of credit repair companies, and why you should not use one of them. There are competing theories on whether or not you should challenge everything on your report all at once. You are legally entitled to have each item you challenge verified at any point in time.
CREDIT SCORES AND CONSUMER REPORTING AGENCIES
When sending your letter, request a “return receipt” or “delivery confirmation.” The CRA has 30 days to respond to your dispute. If they do not respond within that time frame, you will have evidence that they are in violation of the Fair Credit Reporting Act. 5. Don’t give up after the first round. Within a month, you will receive a response from the CRAs. Typically, they will only state whether or not they were able to verify an item. For any items they claim to have verified, you should contact the creditor directly and demand that they provide proof that the debt is yours. You can also continue to challenge the entry with the CRA. (See Appendix A for sample letters.) If you play this game, you really can win (eventually). Keep pressing on and hammering them with letters demanding they correct their mistakes and they will eventually get sick of your letters and start deleting negative trade lines from your report just to shut you up. Assume that you will be writing letters for six months to a year, but you should see a substantial improvement to your credit report and score within three months. As usual, the person who yells the loudest for the longest wins. And don’t forget, repairing your credit score is not necessarily about regaining validity in the eyes of the system: it is about challenging an exclusionary and unjust surveillance machine.
CONSUMER REPORTING AGENCIES FOR CHECKING ACCOUNTS
The credit score is an essential piece of economic surveillance, but it’s not the only one. There are other ways of watching us and keeping us in check. Everyone has a credit score; many people also have a checking account. Just as a series of private corporations monitors your borrowing activity in the economy, a different group of private corporations monitors your checking account. And just as the credit score companies make a profit from calculating your score, consumer reporting agencies monitoring checking accounts make a killing when you overdraft or miss a payment. ChexSystems and TeleCheck are two examples. Financial institutions report instances of “account mishandling” to them. TeleCheck primarily deals with bad check writing while ChexSystems, used by over 80% of banks in the United States, deals with that and more: non-sufficient funds (NSF), overdrafts, fraud, suspected fraud and account abuse. Retailers can report bad checks to Shared Check Authorization Networks (SCAN), which can in turn report to ChexSystems. When someone tries to open an account elsewhere, the agency notifies the institution about that applicant’s history. Unlike the seven-to-ten–years timeframe observed by credit reporting agencies, checking information remains in the system for five years, unless ChexSystems or TeleCheck is forced to remove it earlier. Another difference is that ChexSystems, unlike credit bureaus, only provides negative information in their reports. Therefore, a single banking error can result in losing an account and cause immense difficulty trying to open one up elsewhere. Something as inconsequential as failing to rectify a deliberately confusing overdraft fee is enough to negate decades worth of “responsible” banking. Avoiding ChexSyStemS/teleCheCk There are some steps that can be taken to avoid triggering a ChexSystems or TeleCheck report in the first place. Of course, there’s no guarantee because you’re not exactly dealing with trustworthy institutions. But it certainly doesn’t hurt to know your balance before writing checks to make sure they won’t bounce. And if your checkbook ever gets stolen, report it to your bank or credit union immediately. When you are closing an account, be sure to discontinue all automatic payments, wait until you’re certain that all checks you’ve written have cleared and formally close the account instead of simply taking all of your money out.6 Fighting ChexSyStemS/teleCheCk Suppose that, in spite of your best efforts, you still end up with a report from one of these consumer reporting agencies. There are a number of possible approaches, with varying degrees of desirability. The first is to try to live without an account. As Chapters VII and VIII will illustrate, this can be difficult, but many people have no option but to survive “unbanked.” Another approach would be opening an account at a financial institution that does not use ChexSystems or TeleCheck. A state-by-state directory is available at nochexbanks.org. This approach, however, is not available for those who do not live near any of these banks or credit unions. In some states, you can take a six-hour “Get Checking” course, upon completion of which you can open an account at a participating financial institution. But there is a $50 course fee, and guess who sponsors the program? A parent corporation of ChexSystems by the name of eFunds.7 It would seem that simply paying the bank for the debt you ostensibly owe might alleviate the situation. In actuality, you may be worsening your situation. This is because the bank can report activity to the agencies five years from the date you last paid. If you have a debt from 2010, it would be removed from your report in 2015 if you ignored it. This would present its fair share of problems, but if instead you paid the debt four years down the line, then it might haunt you until 2019. That’s four more years of struggling to open a checking account than if had you done nothing.8 In other words, the older the debt, the less worthwhile it is to pay back. A final option for consideration here is to actively fight the reporting agency as well as the bank that reported you. The first step is obtaining a copy of your report.
Getting a report Regardless of your account history, you are entitled to a free copy every twelve months. If you are denied an account because of your report, you are entitled to a free copy within sixty days from the consumer reporting agency that is responsible. To request a copy of your report, go to consumerdebit. com for ChexSystems or firstdata.com for TeleCheck. When making a request, only provide information that is necessary, such as your name, Social Security number, address and possibly a previous address. They may ask for a work address or phone number, or your current checking account number, but you do not need to provide them with this information. You can simply say that you’re currently unemployed and/or don’t have a current checking account.9 If the agency refuses to provide you with a copy of your report or you fail to receive it within sixty days of being denied an account, you can submit a complaint to the Federal Trade Commission (FTC) at ftccomplaintassistant.gov. Then send a letter via certified mail to ChexSystems or TeleCheck notifying them that they are in violation of the Fair Credit Reporting Act and that they have fifteen days to send you a copy of your report. Let them know that you are willing to pursue legal action and that you have already contacted the FTC. Writing angry letters If it turns out that a debt on your report is from more than five years ago, do not file a dispute. Instead, send a letter requesting the debt be removed on the grounds that it is over five years old. In other instances, you should write a letter disputing negative information contained in the report. First, send some angry letters to the reporting agency: 1. Send an initial dispute letter to ChexSystems or TeleCheck (see Appendix B, sample letter #1). Send it via certified mail with return receipt requested. Make copies of the letter and send it to your lawyer if you have one. If your dispute is based on an annual report, then the agency must reply within forty-five days of receiving your letter. If your dispute is based on a report that resulted in you being denied an account, then the agency must reply within thirty days of receiving your letter. If they respond, they must state in their response whether they were able to contact someone to verify the information contested in the report. If you do not contact them during the thirty/forty-five days after your first letter, they are less likely to respond, which in turn means it is more likely that they will be forced to remove the disputed information on your report.
THE DEBT RESISTORS’ OPERATIONS MANUAL: CHECKLIST
- If they were able to verify, then it stays in the report.
- If they were unable to verify, then the information must be deleted.
- Send a “demand for removal” letter (see Appendix B, sample letter #2). Within fifteen days, they must provide you with the address and phone number of the financial institution that they contacted. If they do not respond to your “demand for removal” letter within fifteen days, send a procedural request letter (see Appendix B, sample letter #3).
- If they do not respond to your initial dispute within thirty/ forty-five days, then send a “procedural request” letter (see Appendix B, sample letter #3).
- If you can prove that there was an error and prove that their failure to remove the disputed information has caused you financial harm (i.e., you cannot open a checking account), then you can pursue legal action.
- You can also present your side of the story in one hundred words or less, which will be attached to your report. When banks are making a decision about letting you open an account, they will at least get to see your statement too. Then, send some more angry letters to the financial institution:
- Banks are legally required to be 100% accurate in their reporting. Look for any type of error: incorrect name, Social Security number, address, dollar amounts, date of last activity, date account first became negative. If a mistake is found, send a “demand for removal” letter to the reporting institution’s manager or executive.
- If the bank or credit union has reported account abuse, suspected fraud or fraud to ChexSystems or TeleCheck, see Appendix B, sample letter #4.
- If the bank or credit union has reported NSF to ChexSystems or TeleCheck, see Appendix B, sample letter #5.
CREDIT SCORES AND CONSUMER REPORTING AGENCIES
Carreon and Associates (carreonandassociates.com) ChexSystems Victims (chexsystemsvictims.com) National Consumer Law Center: Credit Reports (nclc.org/issues/credit-reports.html)
Shawn Fremstad and Amy Traub, “Discrediting America: The Urgent Need to Reform the Nation’s Credit Reporting Industry,” Demos, 2011 (tinyurl.com/ DROMFremstad). “Information on Free Credit Reports,” NEDAP (tinyurl.com/DROMNEDAP05). Mark Kantrowitz, “Credit Scores,” FinAid!, 2012 (tinyurl.com/DROMKantrowitz).
NO TES 1. Gale Group, “Credit Reporting Services Market Report,” Highbeam Business, 2012 (tinyurl.com/DROMGale). 2. Shawn Fremstad and Amy Traub, Discrediting America: The Urgent Need to Reform the Nation’s Credit Reporting Industry, (New York: Demos, 2011) (tinyurl.com/DROMFremstad). 3. Board of Governors of the Federal Reserve System, Report to Congress on Credit Scoring and Its Effect on the Availability and Affordability of Credit, (Washington, D.C.: GPO, 2007) (tinyurl.com/DROMFed). 4. Malgorzata Wozniacka and Snigdha Sen, “Credit Scores: What You Should Know About Your Own,” PBS Frontline, November 23, 2004 (tinyurl.com/DROMWozniacka). 5. myFICO, 2012. “What’s in my FICO Score.” (tinyurl.com/DROMFICO). 6. Rob Berger, “ChexSystems: The Banks’ Secret WatchDog is Watching You,” Dough Roller, June 18, 2011 (tinyurl.com/DROMBerger). 7. Don Taylor, “Negative ChexSystems Report Nixes Account,” Bankrate, March 8, 2006 (tinyurl.com/DROMTaylor). 8. Mary, “ChexSystems Help?,” ChexSystems Victims, 2011 (tinyurl.com/DROMMary). 9. Mary, “Free ChexSystems Report,” ChexSystems Victims, 2011 (tinyurl.com/ DROMMary2).
II. CREDIT CARD DEBT:THE PLASTIC SAFETY NET
Although American workers continue to lead the world in productivity, we haven’t had a raise since the early 1970s. Over the last four decades, we’ve been working longer and longer, trying to keep up with the rising costs of living— housing, healthcare, education. Yet we haven’t actually managed to keep up without plastic. In the early 1980s, U.S. household debt as a share of income was 60%. By the time of the 2008 financial crisis, that share had grown to exceed 100%. So, despite all our exertions over the last four decades, the 99% have only gone deeper into the red, in debt to the 1%. The reason is clear: we’re in debt because we’re not paid enough in the first place and there’s barely any “welfare state” left to pick up the slack. This setup is called financialization. Credit cardholders are one of the many categories of debtors being asked to pay for Wall Street’s disaster. You should prepare by setting up your own disaster recovery plan. Although fewer Americans continue to hold credit cards than before the crisis, most still do—and some hold lots of them. One in seven Americans had ten or more, according to one recent survey. With nearly 700 million credit cards in circulation, it’s fair to say that having a wallet full of plastic has now become one of the defining features of American life—our plastic safety net. Another defining feature is debt, almost $1 trillion of it being credit card debt. The average American household with at least one credit card owes nearly $16,000 in credit card debt. This doesn’t mean we should be grateful to the credit card industry for throwing us “lifelines.” These lines of credit aren’t designed to save us, but to reel us in. The standard practices of today’s credit card industry come closer to pimping or drug dealing than old-fashioned prudential lending. Credit card companies make most of their money from people who are “disconnected”—socially, emotionally, residentially, etc.—and lack social support. In a financial system characterized by lack of transparency, credit cards are the most complicated and perhaps the most hazardous product of all. Whereas auto loans, student loans, closed-end bank loans and most mortgages have one or two price terms (fixed or tied to an index), credit cards feature a multiplicity of complicated fees. Adam Levitin, a legal scholar and leading expert on bankruptcy, warns that in addition to these explicit price points there are many hidden fees in the form of credit card billings. Added up, these “gotcha” fees cost American families over $12 billion a year.1 Think about it. That’s $12 billion stolen from struggling American families through trickery. And where does that money go? To banks, to the financial sector. Money that could have been used to improve the quality of people’s lives, to purchase goods and services in local, real economies is going instead to service debt, which means it’s going to Wall Street, to the 1%. Although total national credit card debt is small in comparison with mortgage debt, effective APRs (annual percentage rates) are at least five times as high. The moment consumers get into trouble, the card companies pounce, imposing penalties, even retroactively. These practices are clearly unfair and abusive. And there’s considerable doubt that the regulations specified in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 will be able to stop them.
HISTORY IN REVERSE
The credit card industry used to make its money on interest rates, but that never amounted to much. When they were first introduced in the 1960s, universal credit cards such as Visa and MasterCard were offered as loyalty rewards only to banks’ best customers. This group was limited to upper-middle-class and upper-class white men, who typically paid off their monthly balances. The appeal of the cards was convenience and prestige, not a need for credit. Banks lost money on the product, but the idea was to build loyalty in order to do even bigger business down the road. The banks got something in return as well: the wealthiest, most powerful men served as walking advertisements for the cards every time they used one. A series of legal changes (effectively eliminating usury laws by allowing all lenders to register in South Dakota, where no such laws existed) and the growth of computer networks that could trace credit ratings led to an explosion of credit card use in the 1980s. Interest-rate deregulation helped transform credit cards from banks’ loss leaders into profit engines. New programs made it possible to unearth the most lucrative “revolvers,” those who often carry high balances but are unlikely to default. Card companies figured out how to use so-called “risk-based pricing” to charge women and people of color more to use their cards.
CREDIT CARD DEBT
In the 1970s, it was difficult for a woman to get a credit card without her husband’s signature—even harder if she were single or divorced.2 According to the National Council of La Raza, Latino/as are more likely to have higher interest credit cards.3 Card companies claim that interest rate charges are based on “risk.” But there is an abundance of evidence that risk ratings are largely determined by where you live. This is just a continuation of “redlining” (assigning risk on the basis of location). In the past, redlining was used to deny residents and businesses in predominantly Black neighborhoods access to credit, without using explicitly racial/ethnic criteria. Today, high risk ratings are no longer used to deny credit but to charge more for it, which sets up a self-fulfilling prophecy: being designated financially “risky” actually further exposes one to unfair and abusive financial practices. As more people acquired credit cards throughout the 1980s and ’90s, the “free” credit used by the wealthiest households was subsidized by the high rates and fees paid by the most financially distressed households. This is sometimes called “risk pooling,” although typically pooling involves those with more subsidizing those with less; here, it’s exactly the reverse. According to Robert D. Manning, founder of the Responsible Debt Relief Institute and author of Credit Card Nation, “A carefully guarded secret of the industry is that about a quarter of cardholders have accounted for almost two-thirds of interest and penalty-fee revenues. Nearly half of all credit card accounts do not generate finance and fee revenues.”4 Today there are more than five thousand credit card issuers, but a majority of these (and the debt they manage) are owned by—you guessed it—the big banks. The top three—Citigroup, Bank of America and JPMorgan Chase— control more than 60% of outstanding credit card debt.5 We’re talking about the same giant “too-big-to-fail” institutions that ruined the economy through their own irresponsible financial machinations. In the years before the financial crash, the industry grew exponentially, starting in the ’90s when credit card companies first figured out that they made more money lending to people who carried monthly balances on their cards than to customers who promptly paid them off. From 1993 to 2007, the amount charged to U.S. credit cards went from $475 billion to more than $1.9 trillion. Late fees have risen an average of 160%, and over-limit fees have risen an average of 115% over a similar period (1990–2005).6 American households have been swimming in debt and losing a significant portion of their total income to penalties and fees. Adam Levitin calculates that a single repricing due to a billing trick can cost a family between an eighth and a quarter of its discretionary income. After the crash, families scrambled to get out of debt. Some were helped by the useful, if limited, regulatory reforms prescribed by the CARD Act of 2009. Credit card debt is down by perhaps 15% overall and cardholders are on to the industry’s old tricks. The problem is, card companies are busy devising new tricks. The total amount of credit card debt remains staggeringly high, and card issuers are still free to charge whatever rates of interest they like (only nonprofit credit unions are required by Congress to abide by an interest rate ceiling of 15%). In the nine months between the passage and implementation of the CARD Act, credit card issuers did their best to jack up interest rates, reduce lines of credit, increase fees and water down rewards programs. For millions of unemployed and underemployed Americans it may be too late. Their credit scores are already shot and their borrowing costs are through the roof. And now that credit scores are widely used as a screening tool for job applicants, these workers face even greater challenges in finding employment. the tRiCkS oF the tRAde From risk rating to pricing to credit limit determination, industry policies are extremely opaque and seem designed to keep cardholders in the dark. Analysts at the website Credit Karma, however, were able to analyze a sample of over 200,000 credit cards. An examination of the relationship between credit scores, income and credit limits indicated that higher credit scores get you higher credit limits, regardless of income. Low credit scores, no matter your income, keep credit limits low.7 A history of compliance with minimum payments is more important to issuers than current ability to repay. Credit card companies don’t mind if you’re late paying your bill or if you maintain a balance, as long as you go on paying your monthly minimum. Cardholders who never carry balances on their cards have long been known inside the industry as “deadbeats,” money-losers. Since almost all of the industry’s profits come from late fees and interest rate penalties, it depends on your slipping up. This is why monthly statements are intentionally designed to be confusing. If they change the design of your statement—say, by moving a box to the left, or making the print a little smaller—in such a way as to cause even one cardholder out of a thousand to misunderstand and miss a payment, that’s millions of dollars in additional profit for them. In the past they would trip up consumers by intentionally making the due date fall on a Sunday or a holiday. This enabled them to extract even more from late fees, the whole time insisting it was all your fault. The CARD Act outlawed several predatory practices that companies used to trick you into paying more. For instance, in the past, companies needed to give you only fifteen days notice before upping rates or making other changes to your contract, leaving little time to negotiate. Now companies are required to notify you forty-five days in advance.8 However, this notification will most likely be mailed to you, so make sure you read everything your credit card company sends you. Since the 1990s, credit card pricing has been a “game of three-card monte,” according to Adam Levitin. “Pricing has been shifted away from the upfront, attention grabbing price points, like annual fees and base interest rates, and shifted to back-end fees that consumers are likely to ignore or underestimate.”9 If consumers are unable to gauge the true price of products, how can we be expected to use them efficiently and responsibly? For a credit card company, the perfect customer is one who charges up a very large amount of debt impulsively, sits on it for a year or two so as to build up maximum high-rate interest charges, finally feels guilty and pays it all back without asking any questions. That’s why they used to besiege high school and college students with free card offers: credit card companies calculated that students were likely to spend impulsively, attempt to avoid the problem and eventually call their parents to foot the bill. The CARD Act restricts extensions of credit to those under twenty-one unless they have a cosigner or a proven means of income. Credit card companies are no longer allowed to hand out free gifts at or near colleges or college-sponsored events.10 Since credit card companies make so much of their profits from binge behavior, for them to lecture consumers on the moral duty to repay is a bit like drug dealers chiding their customers for becoming addicted to heroin. Goading you to sin while trying to make you feel guilty for giving in is the industry’s modus operandi. Of course, the overwhelming bulk of credit card debt isn’t driven by impulse spending at all, but by the predicaments of people trying to make ends meet. That’s why the average carded household owes nearly $16,000 on their card(s). For example, one survey found that 86% of people who lose their jobs report having to live, to at least some degree, off of their credit cards until they find new jobs. Similarly, nearly half of American households owed money on out-of-pocket medical expenses on their credit cards. According to a recent survey, medical bills are a leading contributor to credit card debt, affecting nearly half of low- to middle-income households; the average amount of medical debt on credit cards is $1,678 per household.20 The examples are endless, and they reveal textbook predatory behavior. Banks, card issuers and collectors exploit our precarity. They take our money any way they can, often using unethical, illegal and extra-legal means—mafia-style.
WHAT CAN YOU DO?
Obviously, no one wants to sit on a huge pile of “revolving” credit card debt accruing interest at usurious rates every month. Unfortunately credit cards are the double-edged sword of the credit score world. If you have cards with high balances, your score goes down. If you have no credit card, your score goes down. Having a low credit score can keep you from receiving things like a mortgage loan. Do you see the Catch-22? If you don’t buy on credit, then banks will see you as “risky,” and will not loan to you. On the other hand, if you have a credit card but you spend too much, then you will be denied a loan. If you can’t avoid having the cards, you can sidestep the traps they set for you by actually reading the fine print.
Websites such as Card Hub (cardhub.com) and Credit Karma (creditkarma.com) offer free tools to help you understand and navigate credit reports and credit scores, and to compare credit cards; Card Hub even provides customized disclosures for different cards. Think about how important your credit score is to you, and how strongly you are committed to preserving it. Consider the risks. This involves looking into the future, which always makes things more complicated and multiplies the “unknowns.” Start by finding out where you currently stand. Get your free credit report (see Chapter I) and make sure it’s accurate. So what can you do? There are a number of options, ranging from legal action to bankruptcy to simply refusing to pay. going to CoURt You may have seen those lawyers who appear on late night TV promising they can get you out of debt. Surprisingly—since the world is full of scam artists—some of them actually can. This is how the honest ones do it: What most people don’t realize is that legally, there’s nothing special about owing money. A debt is just a promise and, contractually, no promise is more or less sacrosanct than any other. If you sign with a credit card company, both you and the company are agreeing to abide by a contract that is equally binding on both of you. The small print applies to both sides, so if American Express has failed to fulfill any of its contractual obligations, for instance its obligation to alert you promptly of a change of policy, that’s just as much a violation of contract as your failure to pay the agreed-on sum. Knowing how this industry works, any skilled lawyer with a copy of the contract and access to all relevant correspondence is likely to discover half a dozen ways the company has violated its contractual obligations to you. In the eyes of the law, both parties are guilty; therefore, you need to renegotiate the terms of the relationship. This usually means the judge will knock off half or even three-quarters of the total sum owed. The fact is, this process is riddled with fraud on a scale that is only now beginning to be revealed. “The same problems that plagued the foreclosure process—and prompted a multibillion-dollar settlement with big banks—are now emerging in the debt collection practices of credit card companies,” the New York Times recently reported. “As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous robo-signed documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.” Lenders are “churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers.” One judge told the paper that he suspected a full 90% of lawsuits brought by credit card companies were “flawed and can’t prove the person owes the debt.”11 In some cases banks have sold credit card receivables known to be inaccurate or already paid. In a series of 2009 and 2010 transactions, Bank of America sold credit card receivables to an outfit called CACH, LLC, based in Denver, Colorado. Each month CACH bought debts with a face value of as much as $65 million for 1.8 cents on the dollar.12 The cut-rate pricing suggests the accounts’ questionable quality, but what is remarkable is that the bank would even try to sell them and that it could make money from them. Over the last two years, Bank of America has charged off $20 billion in delinquent card debt. An undisclosed portion of the delinquent debt gets passed along to collectors. Once sold, rights to such accounts are often resold within the industry multiple times over several years. Other banks have also admitted that their debt sale contracts may be riddled with inaccuracies. The lesson is, always keep copies of everything. Always keep the option of legal action open and make sure the credit card companies know that you’re doing so. WhAt hAppenS iF yoU JUSt don’t pAy? After ninety days, your account goes into default and the credit card company has the option of sending it off to a debt collection agency. They don’t really like this option, because they will be taking a huge loss. That’s how debt collection agencies make their money. They buy up the debt at pennies on the dollar, often through brokers, and then try to collect the whole thing, plus fees for the cost of collection. The original lender takes a loss. No doubt they can get some of it back through tax accounting and no doubt they figure a certain percentage of that loss into their business model, but ultimately, they would rather this didn’t happen. Obviously this is a bad thing for you as well: it means you will be hounded by a collection agency and your credit score will take a major hit. If you want to borrow in the future, it might not be possible. If you are able to borrow, you will be charged much higher interest rates. If that isn’t a concern, then go ahead, default: it’s free money! But for most of us, it is a problem, so we must turn to other expedients. negotiAting With yoUR CRedit CARd CompAny Since credit card companies don’t want you to default, you can usually negotiate. They will often offer a substantial reduction on what you owe them if they think your defaulting is the only other option. Remember: even if you offer them ten cents on the dollar, that’s more than they would be getting if they sold it to a collection agency. On the other hand, they don’t want to set a precedent—they know that if everyone just held out and negotiated a 90% reduction their business would be ruined. So they are being pulled in two different directions. This is important to bear in mind when you negotiate. If you’re seriously thinking about negotiating, see carreonandassociates. com for the exact sequence of procedures for how to do it. deFAUlt veRSUS bAnkRUptCy If you declare bankruptcy, your credit card debts may be wiped out or lessened; however, it is a complex process which can very well backfire. If you are thinking of declaring bankruptcy, please refer to Chapter X of this manual. In addition, bankruptcy will affect your credit rating for the next seven to ten years. The statute of limitations on defaults—the amount of time creditors or collectors have after you default to try to get it back legally—differs from state to state, from as little as three years to as many as ten. But after it’s over, you’re entirely off the hook and it’s easy to wipe the default off your record. Which option to choose will vary with circumstances. Try to get all information about the different possibilities in your state of residence before you decide. WhAt AboUt thoSe people Who USe one CRedit CARd to pAy inteReSt on AnotheR? There definitely are people who have figured out the ropes—the way that your credit score interacts with multiple credit card accounts, and so forth— so well that they can live off their credit cards for years before defaulting. It can be done. The major proviso we would offer is: this is basically a scam, and scams like this tend to be extremely time-consuming. Making your living this way is not all that much easier than making a living in a more conventional way and it has the disadvantage of ensuring you have to think about credit cards all the time. If you don’t mind that, and have figured out all the possible legal ramifications and accept them, then go ahead. But going “off the financial grid” is probably easier.
Card Hub (cardhub.com) Carreon and Associates (carreonandassociates.com) Credit Karma (creditkarma.com) Credit Slips (creditslips.org)
Kimberly Amadeo, “Consumer Debt Statistics: Consumer Debt’s Role in the U.S. Economy,” About.com, July 19, 2012 (tinyurl.com/DROMAmadeo). “Landmines in the Credit Card Landscape: Hazards for Latino Families,” National Council of La Raza, February 20, 2009 (tinyurl.com/DROMNCLR). Leslie McFadden, “8 Major Benefits of New Credit Card Law,” Bankrate, August 20, 2009 (tinyurl.com/DROMMcFadden). Jessica Silver-Greenberg, “Problems Riddle Moves to Collect Credit Card Debt,” New York Times, August 12, 2012 (tinyurl.com/DROMSilver4). Amy Traub and Catherine Ruetschlin, “The Plastic Safety Net: Findings from the 2012 National Survey on Credit Card Debt of Low- and Middle-Income Households,” Demos, 2012 (tinyurl.com/DROMTraub).
NO TES 1. Senate Committee on Banking, Housing and Urban Affairs, Enhanced Consumer Financial Protection After the Financial Crisis, testimony of Adam J. Levitin before the Committee on Banking, Housing and Urban Affairs, July 19, 2011 (tinyurl.com/ DROMLevitin). 2. Bryce Covert, “The Double-Edged Sword of Credit Cards for Women and Minorities,” Huffington Post, March 16, 2011 (tinyurl.com/DROMCovert). 3. Landmines in the Credit Card Landscape: Hazards for Latino Families (Washington, D.C.: National Council of La Raza, 2009) (tinyurl.com/DROMNCLR). 4. Robert D. Manning, “Five Myths About America’s Credit Card Debt,” Washington Post, January 31, 2010 (tinyurl.com/DROMManning). 5. Manning, “Five Myths.” 6. U.S. Government Accountability Office, Credit Cards: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers, (Washington, D.C.: GPO, 2006) (tinyurl.com/DROMGAO). 7. “How a Credit Card Limit is Determined,” Credit Karma, September 23, 2008 (tinyurl.com/DROMCK). 8. Leslie McFadden, “8 Major Benefits of New Credit Card Law,” Bankrate, August 20, 2009 (tinyurl.com/DROMMcFadden). 9. Senate Committee on Banking, Housing, and Urban Affairs, Modernizing Consumer Protection in the Financial Regulatory System: Strengthening Credit Card Protections, testimony of Adam J. Levitin before the Committee on Banking, Housing and Urban Affairs, February 12, 2009 (tinyurl.com/DROMLevitin2),
10. Connie Prater, “What the Credit Card Reform Law Means to You,” Creditcards. com, June 13, 2012 (tinyurl.com/DROMPrater). 11. Ann Carrns, “Medical Costs Contribute to Credit Card Debt,” New York Times, May 22, 2012 (tinyurl.com/DROMCarrns). 12. Jessica Silver-Greenberg, “Problems Riddle Moves to Collect Credit Card Debt,” New York Times, August 12, 2012 (tinyurl.com/DROMSilver5).
III. MEDICAL DEBT:
AMERICA’ ’S SICK CREATION
WHAT IS MEDICAL DEBT?
If you’re having trouble paying medical bills, you are certainly not alone. About 62% of all personal bankruptcies in the United States are linked to medical bills or illness, and three-quarters of those bankrupted had health insurance when they got sick.
- That’s about one medical bankruptcy every ninety seconds. Medical debt is debt that individuals accrue when they are charged, but don’t or can’t yet pay for, out-of-pocket health-care-related expenses charged by the hospital, clinic or doctor (provider). As soon as you pull out the plastic and put it on your credit card—something strongly advised against when trying to manage medical bills—it becomes personal or consumer debt. There are many ways you can incur medical debt. According to the American Journal of Medicine, “Among medical debtors, hospital bills were the largest medical expense for 48%, drug costs for 19%, doctors’ bills for 15%, and insurance premiums for 4%.”
- Dr. David Himmelstein, M.D., founder of Physicians for a National Health Program, states ’”private health insurance is akin to an umbrella that melts in the rain. It simply isn’’t there for you when you most need it.”
- U.S. pAyS moRe FoR heAlth CARe, bUt getS leSS People in other industrialized countries have no concept of medical debt. That’s because they have a system of universal healthcare that spreads risk across the population. U.S. health care does exactly the opposite; the financial burden is placed on the most vulnerable individuals, while the cost of care increases and coverage becomes skimpier.
- Health insurance is supposed to guarantee that you get the care you need without going bankrupt, but in the U.S. health system, it may very well do neither. The World Health Organization places the United States health care system first in spending (per capita) and 37th in quality of care.4 Spending was estimated at over $8,500 per person (or 17.9% of the GDP) last year.5 At the same time, the United States ranked last among “high-income” countries on amenable mortality—that is, deaths that could have been prevented with access to effective health care.
- Why does health care cost so much? One of the largest driving forces of health care cost lies with the high overhead expenses of health insurance companies, such as advertising, underwriting costs and lavish payouts to executives and shareholders. These expenses absorb at least 12% of premiums—amounting to billions of dollars a year that could otherwise be spent on health care. Medicare’s overhead, meanwhile, is at 1.42%.7 Even with the passage of the new health reform law, the Affordable Care Act, there will be an expansion in the role of private health insurance and for-profit care with an increasingly rapid transfer of public money to private hands leaving patients in the dust.
HOW TO BETTER UNDERSTAND AND MEDICAL BILLS
’”A few months ago, I was in the hospital for a week. I’’m still getting bills. There are so many bills, and they are from different departments in the same hospital! How can I tell them apart? ’”
When you receive a medical bill:
- Keep every bill.
- Separate doctors’ bills from the hospital’s bills. Not every service provided during your hospital stay will be included in the hospital’s bill.
- The origin of the bill is a significant factor in determining whether you’re entitled to a discount.
- Different account numbers on the bills may help indicate the different providers.
- Ask the hospital’s billing office for an itemized bill. This bill will separately list all hospital charges. You have a right to know what you’re being charged for.
- If you have trouble understanding which services you’re being charged for and by whom, call the telephone number listed on the bill to help clarify.
- If you’re insured, review your insurance policy to better understand the expenses for which you are responsible versus those covered by the plan.
- In addition to making sure you receive coverage that you’re eligible for, avoid putting medical bills on your credit card. Doing so converts your medical expenses to consumer debt, which puts you in an even worse place. Having credit card debt instead of medical debt likely means greater fees and penalties, and greater difficulty securing a job or mortgage. You can challenge your hospital bills for many reasons:
- If you believe the bill was not calculated correctly.
- If you believe you’re being charged twice for a single service.
- If you believe your insurance—either public or private—should have covered some or all of the charges for which you are being billed. pRivAte inSURAnCe billS Be careful about referrals! Sometimes patients admitted to an in-network hospital by their in-network provider incur huge bills as a result of out-ofnetwork referrals during their hospital stay. This is because commercial insurance plans do not require their in-network doctors to refer patients to other in-network doctors. If you have a plan with limited out-of-network coverage, or with none at all, tell your doctor not to refer you to out-of-network doctors. Ask each specialist who treats you in the hospital whether they accept your health plan. Anesthesia bills can be very costly; request an in-network anesthesiologist who accepts your plan and ask to have this request written in your chart. doCtoRS’ billS Call your doctor right away if you think your bill is wrong.
- Find out what the bill is for. You may be responsible for co-pays or deductibles, depending on your plan.
- Make sure that the doctor has all of your insurance information. If you have coverage from multiple sources—private insurance, Medicare and/or Medicaid—make sure that the doctor knows about all insurance plans and has sent claims to all. Some insurance sources require payment to be made in a certain order, so if the doctor fails to submit a claim to all sources, your claim may be denied. For example, Medicaid pays last; as a result, Medicaid will deny payment if the claim was not first submitted to your other insurers such as Medicare or commercial plans for payment.
- If you receive care from an out-of-network doctor, you may have to pay up front and submit the claim yourself. Clarify this with your doctor. For help submitting a claim, call the unsurer.
- Most insurance plans have time limits for submitting claims. Make sure not to miss these deadlines.
Persuading doctors to reduce their bills
- Tell your doctors if you’re having a hard time paying a bill. You can ask for a discount and offer to send recent financial information such as proof of income, recent bank statements and proof of major expenses.
- If you received financial aid for your hospital bill, ask the private doctor if they would be willing to reduce the bill on that basis.
- Ask your doctor for an installment plan instead of sending the bill to a collection agency. If the doctor agrees to an installment plan, ask for it in writing. However, if you can no longer afford the payment plan the account may be sent to a collection agency. ChAllenging mediCAl billS in ColleCtionS The best way to challenge a medical bill in collections is to simultaneously ensure that your privacy rights under HIPAA (Health Insurance Portability and Accountability Act of 1996) have not been violated. You can ask for the debt to be validated with a fee breakdown. This is almost impossible to provide without a violation to your rights under HIPAA. See Appendix C for a sample letter for this purpose.
WHAT DO YOU DO IF YOU NEED CARE NOW?
Going to the emeRgenCy Room If you have to go to the hospital, you cannot be turned away from the emergency room. All you can do is get the care you need and figure out how to pay for it later. If you receive a bill that you cannot afford, go as soon as you can to the hospital’s financial aid or billing center. Some hospitals can lower your payments based on your level of income. Be persistent. Stories of lying about identity to avoid emergency room bills have been reported to us confidentially. You could consider changing your identifying information so they cannot track you down to bill you, but use extreme caution to avoid getting caught. FRee CARe In the New York City area, the Coalition of Concerned Medical Professionals works to connect people who have been denied care with medical professionals who will donate their services. They can be reached only by phone at (718) 469-5817. In a future version of this manual, we intend to devote considerable space to discuss meeting basic needs at little to no cost, including but not limited to health care.
How to Choose A Hospital
There are different types of hospitals with different types of programs in all fifty states. Many states offer “urgent care” or “free clinics,” which provide very basic services, but you may still need insurance to access even these services. Private and public hospitals also have different programs. Public hospitals receive more state and federal funding and should be able to help you find ways to lower your medical bills. If you know this information in advance, you can request which hospital to be taken to if you end up in an ambulance. The National Association of Free and Charitable Clinics (nafcclinics.org) allows you to find free clinics near you. denied tReAtment? Protest to get the care you need. Corporations want to avoid bad press. If you are denied health care, you can organize public demonstrations to demand that you’re given the care you need. Once public controversy is created, corporations may reverse their decision to withhold care.
END MEDICAL DEBT BY FIGHTING FOR UNIVERSAL HEALTH CARE
The only real solution is to change the system from its current for-profit model to a nonprofit model, which has proved sustainable elsewhere in the world. Of the thirty-three countries with a UN Human Development Index of 0.9 or higher, the United States is the only one without universal healthcare. Half of the remaining thirty-two nations have single-payer healthcare— that is, the state provides insurance and pays for all expenses except co-pays and coinsurance.10 This could happen in the United States by lowering the age of eligibility for Medicare from sixty-five to fifty-five and up, then to forty-five and up and so on, lowering the age every couple of years until everyone has access to comprehensive coverage. Some states are experimenting with moving to single-payer systems. Vermont is working on implementing a publicly funded universal health care system. This could prove to be a model for the nation in reversing the trend towards greed and profit that dominates our health care. Join the fight for single-payer universal health care and help build the movement to end medical debt! • Activists and advocates can contact Healthcare-NOW! at healthcare-now.org. • Health professionals can contact Physicians for a National Health Program at pnhp.org. • If you’re in a union, contact National Nurses United at nationalnursesunited.org. • Organize with Occupy Wall Street. Contact Healthcare for the 99% or Doctors for the 99% at owshealthcare.wordpress.com.
Healthcare-NOW! (healthcare-now.org) National Nurses United (nationalnursesunited.org) Healthcare for the 99% (owshealthcare.wordpress.com) National Association of Free and Charitable Clinics (nafcclinics.org) Physicians for a National Health Program (pnhp.org) Stephanie Barton, “How to Avoid Medical Debt,” Investopedia, May 4, 2011 (tinyurl. com/DROMBarton). Brian Grow and Robert Berner with Jessica Silver-Greenberg, “Fresh Pain for the Uninsured,” Bloomberg Businessweek, December 2, 2007 (tinyurl.com/ DROMGrow). “How to Prevent and Fix Medical Debt: A Handbook for Community Advocates Assisting New Yorkers with Medical Debt,” Legal Aid Society, February 5, 2010 (tinyurl.com/DROMLAS). Galen Moore, “Mixed Response for Companies that Buy Hospital Debt,” Boston Business Journal, November 30, 2009 (tinyurl.com/DROMMoore). Jessica Silver-Greenberg, “Medical Debt Collector to Settle Suit for $2.5 Million,” New York Times, July 30, 2012 (tinyurl.com/DROMSilver2).
NO TES 1. David U. Himmelstein, et al., “Medical Bankruptcy in the United States, 2007: Results of a National Study,” American Journal of Medicine 20, no.10 (2009) (tinyurl. com/DROMHimmelstein): 3. 2. Himmelstein, “Medical Bankruptcy,” 4. 3. Mark Almberg, “Illness, Medical Bills Linked to Nearly Two-Thirds of Bankruptcies,” EurekAlert!, June 4, 2009 (tinyurl.com/DROMAlmberg). 4. The World Health Report 2000: Health Systems: Improving Performance (Geneva: World Health Organization, 2000) (tinyurl.com/DROMWHO), 155. 5. National Health Expenditure Accounts: Methodology Paper, 2010: Definitions, Sources, and Methods (Baltimore: Centers for Medicare and Medicaid Services, 2010) (tinyurl. com/DROMCMS), 5. 6. Ellen Nolte and Martin McKee, “Variations in Amenable Mortality: Trends in 16 High-Income Nations,” Health Policy 103, no. 1 (2011) (tinyurl.com/DROMNolte), 47. 7. Medicare Trustees, The 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (Washington D.C.: Department of the Treasury, 2012) (tinyurl.com/DROMTrustees), 10. 8. The content in this section is primarily modified from: How to Prevent and Fix Medical Debt: A Handbook for Community Advocates Assisting New Yorkers with Medical Debt (New York: Legal Aid Society, 2010) (tinyurl.com/DROMLAS). 9. Stephanie Barton, “How to Avoid Medical Debt,” Investopedia, May 4, 2011 (tinyurl. com/DROMBarton). 10. Praveen Ghanta, “List of Countries with Universal Healthcare,” True Cost, August 9, 2009 (tinyurl.com/DROMGhanta).
IV. STUDENT DEBT:
FORECLOSING ON THE FUTURE
These days, everyone is telling you that a college degree is the only way to get a decent job. Fear of an uncertain financial future drives many of us toward higher education, especially into exploitative for-profit colleges. Lenders are making profits off of that fear, and so education has become one of the biggest debt traps in our society. Not only have college costs continued to skyrocket, but increasingly you are told that a bachelor’s degree is just not good enough; now you need a master’s degree too, and these are often the most expensive of all with few grants available to those who are scrambling to enroll. Two-thirds of students leave college with an average of $27,000 in debt. With too few jobs on the horizon, it’s no surprise that default levels are rising like floodwaters; 41% of the class of 2008 is already delinquent or in default.1 This gives rise to a different kind of fear—that our futures have been foreclosed—leading many into depression and even suicide. In 2012, total student debt in the United States surpassed the $1 trillion mark. This is higher than credit card debt or any other kind of consumer debt with the exception of mortgage debt. Some analysts think there is a student debt bubble about to burst. This might not be a bad thing for debtors. After all, they can’t repossess your degree or your brain. Or at least not yet. But while hedge funds might bet on the outcome, you probably shouldn’t. This section explains how student debt was created, who profits from it and how you can survive as a debtor. Above all, you should know that you are not alone if you are facing default. There are ways of resisting, especially by acting together. In the long term, we need to put the United States back on the sizable list of countries (many of them less affluent) that manage to fund free higher education.
HOW IT GOT SO BAD
Going to public college used to be pretty affordable, especially for those on the GI Bill, or those who went to public colleges like CUNY or the University of California. Starting in the early 1980s, state funding began to erode— public college costs have risen by 500% since 1985.2 Neoliberal policy-making has transferred the financial burden onto individual students. This means your future salary will be used to pay back the debts you got stuck with to prepare yourself for employability in the first place. Having to pay for education through debt is a form of indenture. And unlike traditional forms of indenture, it can take a lifetime to regain your freedom. Wall Street has made a killing on this system, especially the queen of student lending, Sallie Mae. How did this happen? Bear with us—it gets complicated. Created in 1972 as a government agency, Sallie Mae has since been fully privatized. Sallie Mae has a hand in both types of student loans: federal and private. They also profit by originating, servicing and collecting student loans.3 Between 1972 and 2010, loans were considered federal when originated by financial institutions (including Wall Street banks), but guaranteed and subsidized by the government. In 2010, the Obama administration cut out the middlemen so that any federal loan taken out is now originated directly by the federal government. But don’t be fooled, these “federal” loans are still serviced by a group of select private institutions, including Sallie Mae. In addition, federal loans have unjustifiably high rates of interest (6.8%). Is the government profiting? Yes, and the proceeds are used to pay the bill for wars and Wall Street bailouts. Furthermore, federal loans rarely meet the full cost of education, leaving most students with no choice but to take out private loans to make up the difference. Even though only 20% of all current student loans are private, in ten to fifteen years they will have surpassed federal loans. These private student loans are subject to different terms and have much higher interest rates. Chances are your university financial aid officials are in cahoots with private lenders. A 2006 investigation by the New York State Attorney General’s Office concluded that the business relationship between lenders and university officials amounted to an “unholy alliance.” Lenders paid kickbacks to universities based on the loan volume that financial aid offices steered their way; lenders also gave all-expenses-paid Caribbean vacations to financial aid administrators, and even put them on their payroll. In addition, lenders set up funds and credit lines for schools in exchange for being placed on preferred-lender lists.4 In spite of these scandals, and despite the NYS Attorney General’s recommendation that bankruptcy protections be restored to student lenders, nothing happened. The student loan racket was just too profitable to be reined in by a few regulators. In 1998, federally-backed loans were declared ineligible for bankruptcy, and after prolonged pressure from Wall Street, private loans became ineligible in 2005. As if that’s not enough, the government also granted enormous collection powers to lenders.
They can garnish your wages and seize tax returns without even requesting a legal hearing first. Even Social Security and disability wages are subject to garnishment.5 This lack of protection has made default wildly profitable for lenders. On average, 120% of a defaulted loan is ultimately collected. In fact, in 2003 Sallie Mae disclosed that its record-breaking profits were due in significant part to collections on defaulted loans. In 2001, Sallie Mae was caught defaulting loans without even trying to collect the debt. This rapacious conduct is the norm in some corners of the industry.6 As in the subprime mortgage market, many private loans are securitized—packaged and sold to the highest bidder as Student Loan Asset-Backed Securities (SLABS). These SLABS account for almost a quarter—$234.2 billion—of the aggregate $1 trillion debt. Since SLABS are often bundled with other kinds of loans and traded on secondary debt markets, investors are not only speculating on the risk status of student loans, but also profiting from resale of the loans though collateralized derivatives.7 the SoCiAl impACt The human toll of all this is becoming increasingly visible. For a host of disturbing accounts of student debt, it’s well worth reading Alan Collinge’s book Student Loan Scam: The Most Oppressive Debt in U.S. History—and How We Can Fight Back. And it’s certainly not hard to find student debt horror stories on the internet. A military veteran reports that he has paid $18,000 on a $2,500 loan and Sallie Mae claims the man still owes $5,000. The bankrupt husband of a social worker, bedridden after a botched surgery, tells of a $13,000 college loan balance from the 1980s that ballooned to $70,000. A grandmother subsisting on Social Security has had her payments garnished to pay off a $20,000 loan balance resulting from a $3,500 loan she took out ten years ago, before she underwent brain surgery. These loans increase so rapidly due to compounding interest in combination with deferment and forbearance programs. In fact, only 37% of student loans are in repayment at any given time. The other 63% are accruing interest, adding fees and becoming more and more likely to add to the 5 million student loans already in default.8 During the Great Recession, African Americans lost almost all of the economic gains they made after the civil rights movement. As a result, African American students have borrowed more for education than whites, and they are twice as likely to be unemployed on graduation. Worse still, students of color are much more likely to enroll in for-profit schools, which have high non-completion rates and account for nearly half of student loan defaults. It’s no surprise that the default rate for African Americans is four times that of whites.
Your loan becomes delinquent the first day after you miss a payment. The delinquency will continue until all back payments are made. Loan servicers report all delinquencies of at least ninety days to the three major credit bureaus. As we’ve seen in Chapter I, a negative credit rating may make it difficult for you to meet your basic necessities. Student loans are generally considered in default when you fail to make a payment for 270 days for a federal loan or 120 days for a private loan. If you want to avoid default, try to make at least one payment every 120 or 270 days. If you haven’t defaulted but are alarmed about not being able to pay your student loans, do not panic. If you just graduated, many loans provide an automatic six-month deferment period. And if you have federal loans, you can extend this period on an annual basis either through deferment or forbearance programs. Deferment on certain loans halts interest during periods of unemployment, economic hardship, temporary disability and while the debtor is in school. Although forbearance does not stop interest from accruing, it does allow for some breathing room. But keep in mind that this will cause your loan amount to increase. Typically, the interest is compounding annually, which means that at the end of a year, it will be added to the principal and you will have to pay interest on that too. This can cause loans to mushroom, so check to see if you qualify for deferment before entering into forbearance. It may also be helpful to consolidate all of your loans into one. You can only consolidate federal loans with other federal loans and private loans with other private loans. Often there are incentives for consolidation, such as interest rate reductions for on-time payment or direct debit. It is sometimes possible to ask the originator of the loan to recall it, taking it out of the hands of a guarantee agency and then make arrangements with the original lender. There are a couple of newer programs that may also be helpful: the Income-Based Repayment Plan (IBR) and Public Service Loan Forgiveness (PSLF). Income-based repayment allows you to adjust payment to meet your income by capping payment at 15% of income based on family size. A single individual with no children making under $20,000 would pay 2.4% of income toward student debt whereas a family of four making under $100,000 would pay 9.9% of their income toward student debt. After twenty-five years, any remaining student loan debt would be forgiven. Public Service Loan Forgiveness provides forgiveness of federal student loan debt after ten years of continuous employment by any nonprofit, tax-exempt 501(c)(3) organization, a federal, state, local or tribal government agency including the military, public schools and colleges or while serving in AmeriCorps or the Peace Corps. You may also be eligible if your employer is not a religious, union or partisan political organization and provides public services.
Being in deFAUlt If you are about to default on a student loan, remember that you are not alone. There are approximately 4 to 5 million other Americans that have already done so. While default can be a political act (especially when done en masse), these are the consequences you may be subject to: • Your loans may be turned over to a collection agency. • You will be liable for the costs associated with collecting your loan, including court costs and attorney fees. • You can be sued for the entire amount of your loan. • Your wages may be garnished. (Federal law limits the amount that may be garnished to 15% of the borrower’s take-home or “disposable” pay. This is the amount of income left after deducting any amounts required by law to be deducted. The wage garnishment amount is also subject to a ceiling that requires the borrower to be left with weekly earnings after the garnishment of at least thirty times the Federal minimum wage, per 34 CFR 682.410(b)(9), 34 CFR 34.19(b) and 15 USC 1673(a)(2). • Your federal and state income tax refunds may be intercepted. • The federal government may withhold part of your Social Security benefit payments. The U.S. Supreme Court upheld the government’s ability to collect defaulted student loans in this manner without a statute of limitations in Lockhart v US (04-881, December 2005). • Your defaulted loans will appear on your credit history for up to seven years after the default claim is paid, making it difficult for you to obtain an auto loan, mortgage or even credit cards. A bad credit record can also harm your ability to find a job. The U.S. Department of Education reports defaulted loans to TransUnion, Equifax and Experian (see Chapter I). • You won’t receive any more federal financial aid until you repay the loan in full or make arrangements to repay what you already owe and make at least six consecutive, on-time monthly payments. You will also be ineligible for assistance under most federal benefit programs. • You will be ineligible for deferments. • Subsidized interest benefits will be denied. • You may not be able to renew a professional license you hold.11 These measures are harsh, but you can continue to fight as an individual. Unfortunately, bankruptcy is not an option for student debtors, except occasionally in cases of permanent disability or “undue hardship.” Although it is difficult to get credit reporting agencies (CRA) to remove defaulted student debt from reports, it is not impossible. You can use the strategies and resources outlined in Chapter IX to demand that CRAs and debt collectors prove that the amount of your debt is fully verifiable. This will require a concerted letter-writing campaign, but you may be pleasantly surprised by the results. Often, record keeping is poor and there are no accessible records tying you to a debt. Although a court judgment is not required before your paycheck, bank account or tax return is garnished, you are entitled to an administrative hearing if you request one. If you want to get out of default, you can often rehabilitate your loan by entering into an agreement to make twelve consecutive on-time payments to the original lender or guarantee agency in exchange for the removal of the prior delinquency history from your credit report. Be sure to get this agreement in writing and to be clear about how this will be entered on your credit report. knoW yoUR loAnS As the amount of middlemen standing between you and your loan continues to increase, it can be hard to know who guarantees, originates, services and collects your loans. To find this information about your federal loans, visit the national student loan database at nslds.ed.gov/nslds_SA. It’s a little more complicated when dealing with private loans. FindAid is a great first resource for understanding the different institutions involved: finaid.org/loans/studentloans.phtml. It’s important to fully understand your own situation, since the laws can differ. For example, state guarantee agencies are exempt from the Fair Debt Collections Practices Act, but any private collection agency hunting you down must comply with this law. So be aware of their illegal practices and know your rights. This FinAid page about defaulting on student loans is a good place to start: finaid.org/loans/default. phtml. Abusive debt collection behavior is also highlighted in Chapter IX. We recommend you read it carefully.
COLLECTIVE ACTION TOWARDS CHANGE
If we fight this system alone, the best we can hope for is to keep our heads above water. The good news is that those suffering with student debt have begun to organize. Collective action is the only true solution. At this point, there are several campaigns under way. Student Loan Justice (founded in 2005) and Forgive Student Debt to Stimulate the Economy (founded in 2009) aim at persuading lawmakers to reform the system. Both organizations have pushed for policies restoring bankruptcy protection and partial debt forgiveness. Unfortunately, these reasonable proposals have produced little in the way of legislative change. Four attempts at restoring bankruptcy protection have ultimately failed. And in spite of over one million names on a petition urging Congress to pass a tenSTUDENT DEBT | 35
year partial forgiveness program, lawmakers, heavily beholden to the finance industry, have not budged. Unfortunately, these measures will not de-commodify education nor claim it as a public good. The Occupy Student Debt Campaign (OSDC) emerged in 2011 in tandem with Occupy Wall Street as part of a global uprising against neoliberalism. To fight the debt-financing of education, OSDC proposes diverse collective strategies of direct action, including a campaign of collective debt refusal. For more details, refer to the OSDC website (below). OSDC believes that our public education system must be free, that any future student loans must be offered at zero interest, that all university institutions must be transparent and accountable, and that all current student debt must be cancelled. These principles, or principles like them, should be the foundation of any student debt movement. All of these movements can be found online if you want to find out how to join a larger collective to help effect change.
FinAid (finaid.org) Forgive Student Loan Debt to Stimulate the Economy (forgivestudentloandebt.com) Income-Based Repayment Info (ibrinfo.org) Occupy Student Debt Campaign (occupystudentdebtcampaign.org) Student Loan Justice (studentloanjustice.org) Jerry Ashton, “America’s Financial Institutions and Student Lenders—Attention: OWS ‘Occupy Student Debt’ Committee Has Something to Say,” Huffington Post, November 21, 2011 (tinyurl.com/DROMAshton). Pamela Brown, “Education Debt in the Ownership Society,” AlterNet, June 27, 2012 (tinyurl.com/DROMBrown). George Caffentzis, “Plato’s Republic and Student Loan Debt Refusal,” Interactivist, December 31, 2011 (tinyurl.com/DROMCaffentzis3). Alan Collinge, The Student Loan Scam: The Most Oppressive Debt in U.S. History—and How We Can Fight Back, (Boston, MA: Beacon, 2009). Malcolm Harris, “Bad Education,” n + 1, April 25, 2011 (tinyurl.com/DROMHarris). Brian Holmes, “Silence=Debt,” Occupy Student Debt Campaign, 2012 (tinyurl.com/ DROMHolmes). Sarah Jaffe, “Meet 5 Big Lenders Profiting from the $1 Trillion Student Debt Bubble,” AlterNet, November 28, 2011 (tinyurl.com/DROMJaffe). Anya Kamenetz, Generation Debt, (New York, NY: Riverhead Books, 2006). “Private [Student] Loans: Facts and Trends,” The Project on Student Debt, July 2011 (tinyurl.com/DROMPSD). “Some Options,” EDU Debtors Union, 2011 (tinyurl.com/DROMEDU). Jeffrey Williams, “Student Debt and the Spirit of Indenture,” Dissent, Fall 2008 (tinyurl.com/DROMWilliams2).
ARtiCleS And bookS
NO TES 1. Mark Kantrowitz, “Student Loans,” FinAid, 2012 (tinyurl.com/DROMKantrowitz3). 2. Steve Odland, “College Costs Out of Control,” Forbes, March 24, 2012 (tinyurl.com/ DROMOdland). 3. U.S. Department of the Treasury, Lessons Learned from the Privatization of Sallie Mae, (Washington D.C.,: GPO 2006) (tinyurl.com/DROMTreasury). 4. Doug Lederman, “‘Deceptive Practices’ in Loan Industry,” Inside Higher Ed, March 16, 2007 (tinyurl.com/DROMLederman). 5. Tyler Kingkade, “Private Student Loan Bankruptcy Rule Traps Graduates with Debt Amid Calls for Reform,” Huffington Post, August 16, 2012 (tinyurl.com/DROMKingkade). 6. Alan Collinge, Student Loan Scam: The Most Oppressive Debt in U.S. History—and How We Can Fight Back, (Boston, MA: Beachon Press, 2009). 7. Malcolm Harris, “Bad Education,” n + 1, April 25, 2011 (tinyurl.com/DROMHarris). 8. Collinge, Scam. 9. Julianne Hing, “Study: Only 37 Percent of Students Can Repay Loans on Time,” Colorlines, March 17, 2011 (tinyurl.com/DROMHing). 10. “What are these Programs? IBR and PSLF,” IBRInfo (tinyurl.com/DROMIBR). 11. Mark Kantrowitz, “Defaulting on Student Loans,” FinAid, 2012 (tinyurl.com/ DROMKantrowitz2).
V. HOUSING DEBT:
WHY THE AMERICAN DREAM IS A DANGEROUSLY MEAN PRANK
If you’re living in an “underwater” home (the value of your home is lower than your mortgage), you’re probably thinking, “how did I get myself into this mess?” You’re probably feeling like there was something you could have or should have known. But what we were told about the security of real estate was in fact never true. In reality, the rapid growth of the housing market was an artificial creation based on a secretive relationship between banks and the government. This chapter will explain the long history that produced what we refer to as the “subprime bubble,” and how the system actually operates. When the first wave of the financial crisis hit in 2006, there was no way any of us could have imagined how bad things would really get. But the crisis has exposed the dynamics of the system and produced a potential political force 40 million strong with nothing more to lose.
A LITTLE BIT OF HISTORY
You can’t escape the need for shelter. But in America, this basic need is entangled with our fervent belief in the American Dream. When you hear the story, it sounds like the American Dream existed from the beginning of time, but it was really created in 1934 when the government decided to partner with the banks to create a housing market. Since then, we’ve been believers in a fantasy that has driven the 99% to take on more and more debt just to have a home to live in. Before the 1930s, the vast majority of Americans did not own their homes nor have any hope of doing so. If you wanted to join the 40% of Americans who owned their homes, you would either have had to pay cash, or to have known someone who would lend you the money. The lender could be a bank, but only if you had a good relationship with your local banker. And even then, they would
only allow you to borrow 50% of the property value—and you had to pay it off in three to five years. By 1934, with household income on the rise, the need for public housing allegedly decreased. The federal government came to believe that increased homeownership was the key to unlocking credit and creating new jobs. The Housing Act of 1934 established the Federal Housing Administration (FHA) for the purpose of providing mortgage insurance for residential properties. The FHA also created the Federal National Mortgage Association (a.k.a. Fannie Mae) to provide a secondary market where banks could sell mortgages. In other words, the banks partnered with the government so that they could profit immediately rather than waiting for the mortgage to be paid in full. This combination of insuring and buying mortgages quickly led to mortgages being offered for up to 90% of home value. Payment terms were extended to fifteen years at first, then to thirty. Of course, the creation of the modern mortgage expanded the market enormously—by the 1970s, homeownership had grown to 65%. This partnership between the banks and government agencies continues today with the vast majority of mortgages on the books of FHA, Fannie Mae, and Freddie Mac—in other words on the backs of the taxpayers. In 2011, the federal government guaranteed more than 95% of mortgages.
- the oWneRShip SoCiety The reality of growing ownership was a shifting burden of risk from business and publicly subsidized housing to you, the individual “owner.” In addition to creating a “society of homeowners,” the expanding mortgage market created a society of debtors. Instead of building affordable housing, checked by the ability to pay for a home in a relatively short period of time, prices grew to accommodate the longer payment terms. Although you probably associate the “Ownership Society” with George W. Bush, the concept actually came out of Clinton-era policy.
- The stated goal of Clinton’s “National Homeownership Strategy: Partners in the American Dream” program was to extend homeownership to 8 million low-income buyers. This policy opened the door for the subprime lending industry to develop new products, specifically targeted at low-income people of color. While the burden of public housing was lifted off of the government’s shoulders, mortgage debt was coming down like a ton of bricks on unsuspecting families of color. A steady increase in foreclosures followed. Although the FHA will allow you to put down only 3.5% of home value, they’ll charge you higher interest rates and require the purchase of additional mortgage insurance. The banks designed complicated products including adjustable rate mortgages, interest-only payments, negative amortization and hybrids of all three. And the government never told you that if its agencies weren’t operating as a secondary mortgage market (allowing banks to sell their risk immediately) this would never have been possible. They left you with all the risks and banks with all the gain. Oddly enough, actual levels of ownership only expanded by a couple of percentage points.
- Although wages have stagnated or declined, and the percentage of full-time workers has decreased, more and more of us have been getting mortgages. In some states, 65% of mortgages were originated after 2000. However, the vast majority of mortgages went to those refinancing or trading up. Very few new homeowners were actually created. If you were under the impression that the housing market could grow perpetually, you were not alone. We were told time and time again that, in the housing market, what went up would never come down. Too bad they forgot to mention that the banks wouldn’t lose if you couldn’t pay. And, oops, they also forgot to mention that you would be paying as a taxpayer, even though you also lost everything as a homeowner, since the vast majority of mortgages are insured by government agencies. It’s hard to believe that either the bankers or the government officials believed the market could grow forever. To the contrary, the reason they developed the laws and financial schemes they did is because they knew it could not continue to grow forever.
- The Current nightmare The realization that “ownership” does not instantly occur when you acquire a mortgage has been exposed by the foreclosure epidemic. The reality is that the bank owns the property and you’re really only purchasing an opportunity to become an owner, if all goes well for thirty years. How bad is it? • Approximately 11% of all homes in the United States are empty. • The rate of home ownership in the United States has dropped to 1998 levels. • Between January 2007 and August 2010, mortgage lenders repossessed a total of 3 million homes. • Eight million Americans are at least one month behind on their mortgage payments, and 5 million homeowners in the United States are at least two months behind. • So far 5 million homes have been foreclosed. Last year in California, 1.2 million were foreclosed, and another million are expected to be foreclosed in California in 2012.
- Wall Street analysts predict as many as 7.4 to 9.3 million borrowers will face foreclosure.
- A quarter of African American and Latino/a borrowers have lost their homes or are currently at risk of foreclosure, compared to 12% of whites.
- Over 30% of all U.S. mortgages have negative equity.
- Between 2005 and 2009, the typical Latino/a borrower saw their home equity decline by 51%.
- Industrial cities are turning into ghost towns. For example, in Dayton, Ohio, 18.9% of all houses are now standing empty, and 21.5% of houses in New Orleans are vacant.
- U.S. home prices have already fallen further during this economic downturn (26%) than they did during the Great Depression (25.9%).
WhAt CAUSed the meltdoWn? The common “blame the victim” account of the subprime mortgage crisis ignores the fact that the mortgage industry developed complex financial instruments designed to tempt and confuse borrowers. The most infamous of these loans were adjustable rate mortgages (ARM) and stated income products. ARMs are exactly what they sound like—you receive an initial interest rate that adjusts after several years. These loans frequently allow you to choose whether to pay the full monthly payment or just the interest. They are often combined with home equity lines of credit. These loans can cause the principal to increase if you make reduced payments. Even after the collapse, the predatory nature of the ARM is still being revealed—these rates are set against the LIBOR index, which we now know to have been manipulated by the major banks in a scam to line the pockets of the 1%. Stated income loans (a.k.a. “liar” loans) allow you to simply state your income with no verification. These loans were most often used by growing masses of freelance and precarious workers, many of whom did not qualify for a traditional mortgage. Certainly, ARMs and stated income loans have high rates of failure, but the causes for the financial collapse are much more complex and cannot be blamed on the purchasers of these complicated loans. According to the Federal Reserve Bank of Cleveland, there are ten myths about the subprime market: 1. Subprime mortgages only went to borrowers with impaired credit. 2. Subprime mortgages promoted homeownership. 3. Declines in home values caused the crisis. 4. Declines in mortgage underwriting standards triggered the crisis. 5. Subprime mortgages failed because people used their homes as ATMs. 6. Subprime mortgages failed because of mortgage rate resets. 7. Subprime borrowers with hybrid mortgages were offered low teaser rates. 8. The subprime crisis was totally unexpected. 9. The subprime mortgage crisis was unique in its origins. 10. The subprime market was too small to cause big problems.3 In reality the crisis was caused by a combination of factors that were foreseeable from the early 2000s. Predatory financial products were sold to buyers, who believed that they were entering into long-term relationships with banks. But the banks were securitizing these mortgages, most often by selling them on the secondary market created by Fannie Mae and Freddie Mac, cashing out and shifting the risk to the buyer as the taxpayer. Not surprisingly, the major banks have made enormous profits since the meltdown. Economic hate crimes The patterns of predatory mortgage lending grew out of America’s long history of committing and facilitating economic hate crimes. Starting with the retracted promise of “forty acres and a mule,” African Americans have been unable to break into the white housing market. From steering to redlining to reverse redlining, the African American perception that home ownership benefits whites more than blacks reveals its truth in the actual data.
- Whereas less than 12% of white homeowners are at risk of foreclosure today, 25% of African Americans are still at risk.
- So far, 25% of African American homes have been foreclosed during the crisis.
- Whereas just over 5% of white borrowers received high interest loans despite good credit, over 20% of black borrowers and just under 20% of Hispanic borrowers received bad loans when much better options where available.
- Over 40% of African American borrowers received high-risk loans in spite of good credit.
ECONOMIC POLICY INSTITUTE
’According to the Economic Policy Institute, as of December 2009, median wealth of white households dipped 34%, to $94,600; median African American household wealth dropped 77%, to $2,100.4’
The median household net worth was nineteen times greater for whites than Blacks in 2009. Wealth disparity is far greater now than it was in 1995, when the wealth differed by a factor of seven.5 In 2009 dollars, the median household net worth for Blacks decreased from $9,885 in 1995 to $4,900 in 2009, while it increased for whites from $68,520 to $92,000 during the same timespan. This shocking statistic is in part due to long-term housing disparity. As of 2011, nearly 75% of white Americans were homeowners, compared with only about 45% of African Americans. About 90% of the subprime mortgages taken out from 1998 to 2006 were for homeowners refinancing.6 The vast majority of these mortgages were issued in lower-income communities of color, perpetuating a clear cycle of predatory debt. From the Housing Act of 1934 onward, housing discrimination by banks was conducted through the practice of redlining. Home Owners’ Loan Corporation (HOLC), a federal agency set up in 1933 by Roosevelt for the purpose of preventing foreclosures, initiated this practice of redlining when its agents were asked by the Federal Home Loan Bank Board to create maps indicating the security of real estate investment. The maps were not based on assessment of the economics of individuals in a community, but rather based on assumptions about its racial composition and consequently defined communities of color as unworthy of mortgages.
The practice of redlining shifted as the laws around housing discrimination were strengthened. Clinton’s push to expand homeownership to low-income borrowers led to the current subprime market dynamics, which are based on a predatory strategy of reverse redlining. Reverse redlining occurs when a community is targeted to be marketed high interest or high-risk loans. We now know that this was a common practice across the mortgage lending industry. Most recently Wells Fargo, the largest mortgage lender in the country, settled a reverse redlining case with the Justice Department. The bank only agreed to compensate individual borrowers for $125 million dollars worth of losses. This is a far cry from the true cost of this predatory lending and will not put the victims of this hate crime back in their homes. SunTrust Mortgage settled a similar case and Bank of America also settled a similar suit over its Countrywide Financial unit. The result of the long history of housing discrimination is still apparent today with increasingly racially segregated communities.
Let’s say you’re having trouble making your mortgage payments, maybe you’ve gone into foreclosure, and want to stay in the home. What can you do? It is difficult to generalize since rules concerning mortgages, foreclosures and eviction differ by state. Still, some things do apply to all states. There are many things that you can do to resist foreclosure and try to work out a better deal if you stay in the home. Banks can only remove people after a foreclosure notice has been given in an act of eviction, and this is difficult for them from a legal and physical perspective. Banks can and do reconsider mortgages that are at the eviction point, finding deals that work better for all parties. This only happens when the owner is in the home. At this point in dealing with your mortgage, you will likely be exhausted and want to give up. That exhaustion is one of the banks’ strongest weapons in taking your home, so stand strong. If you are in trouble with a mortgage, there are three major ways of trying to deal with the situation: 1. Hire a lawyer if you can afford one. Legal aid, a bar association or any law practice might have special options if you don’t have the necessary resources. In general, watch for fraud and people looking to scam you and steal your money, while promising to help you with your home. People who want a lump-sum fee upfront are the most notorious. Anyone looking to take your mortgage payment and give it to the bank is untrustworthy; you’ll want to pay the bank directly. In general, anyone who promises you a silver bullet is almost certainly lying. Even the best lawyers know, and should tell you, that this is a difficult situation with no easy answer. 2. A second group is housing counselors like the Neighborhood Association Corporation of America (NACA). The advantage of contacting them is that they have accredited housing counselors experienced negotiating with banks. Sometimes housing counselors have a vested interest in building up their businesses and may be funded by banks; some are straight-up frauds. 3. A third option is getting involved with community-based organizations and Occupy Homes organizations. Occupying is a way of resisting the power of the banks, and saying you won’t leave until a deal has been made. Banks hate public pressure, especially around specific homeowners. As a result, when homes are occupied, there is more leverage. This can amplify some of your other legal options, like home counselors or a personal lawyer. If, at a time of eviction, fifty people are there who won’t leave, the eviction people will usually walk away. Sometimes they will come back in a few hours, but often they wait another month while negotiations continue. In general, banks hate the publicity. The fact is, banks are softer targets than you might expect because so many cases are rife with legal irregularities and outright fraud; it’s not uncommon for customers to be mislead, crucial paperwork lost and documents robo-signed. While banks often refuse to negotiate with individuals, taking advantage of those who are intimidated or can’t afford legal counsel, they often change their tune when threatened with serious scrutiny. Most major metropolitan areas have hosts of community-based organizations that specialize in housing. Unions sometimes do work as well in this area. Occupy groups can also put you in touch with groups doing anti-foreclosure work. Go to occupyhomes.org for help. MERS Mortgage Electronic Registration Systems (MERS) is a national electronic registration and tracking system that tracks mortgage loans. MERS was conceived in the early 1990s by numerous lenders and other entities including Bank of America, Countrywide, Fannie Mae and Freddie Mac. Its stated purpose was to save mortgage purchasers money. In the past, it was your lender that was on the deed as the beneficiary until you paid the loan in full. Your deed and loan note were recorded with the local County Recorder’s office. The recording of the deed and the note created a public record for the transaction. Any ownership change had to be recorded to create a clear “chain of title,” which is like a record of ownership that protects the owner from false claims to ownership. When the banks decided they could make money by securitizing loans privately, they needed a way to manage the paperwork which involved selling of notes and deeds repeatedly. If they actually filed with the County Recorder each time, it would cost them time and money. So they figured out a way around it by cutting corners. Instead of your lender’s name on the deed, you’ll find MERS named instead. The problem with this is that MERS is really not the owner of your loan. How can MERS claim titles to loans they merely track, but do not own? If you find yourself in a situation where your foreclosure has been “robo-signed” by MERS, you may be able to fight back on this basis. WAlking AWAy Of course, you can also consider walking away. The personal finance world went ballistic when Suze Orman advised homeowners who are more than 20% underwater to walk away. But if you’re that far in the hole, cutting your losses may be your best option. Whole communities are finding themselves in a vicious cycle of foreclosures driving down values and reducing property taxes. This increases municipal indebtedness, decreases public services and further drives down property values. This death spiral is often impossible to escape.
Unfortunately, the government has not taken strong action to force banks to restructure mortgages. Banks make their money not on the interest over the course of the loan but on the sale of the asset-backed security. Consequently, they are incentivized to allow a foreclosure and a new mortgage instead of reduced payments. Since the government’s entire housing program has been based on shifting the burden away from banks, why should banks negotiate a mortgage that cannot create a new security? If you are considering the option of walking away, with this knowledge you can do so guilt-free. Or you can follow these steps: 1. Ask your lender to modify the loan by reducing the principal to the actual current value of the property. 2. If they say no—which is likely—then ask for a short sale. A short sale is a sale for less than the amount owed for a property, and the bank takes the loss. Most often banks will say no to this too. 3. The next step is to ask for a deed-in-lieu of foreclosure. This will allow you to transfer the property deed to the bank without going through formal foreclosure proceedings. The advantage for you is that it allows you to walk away immediately and with no attachment to the property. The advantage to the bank is that they may save money and lower the risk of borrower vandalism of the property. 4. Assuming that the bank still says no, you can now walk away with a completely clean conscience.
But the most important thing to keep in mind is that walking away only works if you are in a state where the law prevents the bank from suing for other assets. Many states prevent buyers from strategically defaulting with laws that entitle the bank to sue you for your other assets including money in your bank account, stocks and savings of any form. It is imperative that you consult an attorney in your area to make sure that the bank cannot sue you and place a lien on your other assets. Aside from the loss of your home, the main consequence of foreclosure is the destruction of your credit report and credit score. You can expect your score to drop by 85 to 160 points. The foreclosure stays on your report for seven years and will impact your credit for that period, although it is impossible to know how much the impact will dissipate over time since credit reporting agencies do not disclose their algorithms. Without a doubt though, it will be difficult to get another loan for quite some time. You should certainly dispute the foreclosure with the CRA and make them validate your report. Record keeping is so poor that you should expect that they do not have accurate records—so fight, and don’t give up until they show you your signature on the contract. WhAt AboUt Renting? Although rent is not considered consumer debt, owing rent is certainly a form of indebtedness. This becomes obvious if you do not pay your rent. Your landlord will eventually evict you and you will owe “back rent.” The lack of distinction between owing a bank money for shelter and owing a landlord money for shelter only becomes clear when the bank threatens to take away your home. While renting requires that the tenant typically place a security deposit in interest bearing escrow to guarantee the rent, the bank keeps a down payment in the case of default. A recent Pew study showed that young Americans have soured on buying, and are less attached to the “dream” of homeownership. The next generation of buyers has seen their families suffer with underwater properties and fear the downside of ownership more than they desire the upside. But, if you think that renting will save you from the effects of housing debt, think again. Since the foreclosure crisis, rents have increased. In 2011, rental vacancies hit a ten-year low. Millions of foreclosed families have no choice but to rent, and since it takes seven years for a foreclosure to disappear from your credit report, many families are in it for the long haul. Of course, wages have not kept pace with rent increases. Over 25% of African American and Latino/a families spend more than half their income on housing, compared to 15% of white families. Unfortunately, no one has been immune to the fraudulent practices that led to this mess. Unsustainable housing debt impacts us all.
40 MILLION STRONG
What does all this add up to? American homeowners have been victims of a bank scheme to profit by creating a bubble that could only blow up in individual homeowners’ faces. Since we are all affected by the housing crisis, the potential for collective action is enormous.
There are an estimated 40 million residents of underwater homes today, greater than the entire population of California. In fact, according to the real estate website Zillow, there’s 1.15 trillion dollars in just the underwater portion of mortgages, and 4.8 trillion in total estimated property value of underwater homes.7 Given these numbers, it’s easy to see the potential for homeowners to unite under the threat of strategic default. However, although there is a lengthy history of “rent strikes” to gain repairs and other concessions from landlords, there is little history of mortgage refusal. There are many reasons property owners might be unwilling to strike—from the glorified perception of ownership to the taboo against failing to pay debts, to the fear of bad credit, to the belief that the market will improve. Yet as more and more victims of the housing market understand the complicated details of the game our government played with the banks at our expense, the potential for collective action grows.
Housing is a Human Right (housingisahumanright.org) Occupy Our Homes (occupyhomes.org) Take Back the Land (takebacktheland.org) Chicago Anti-Eviction Campaign (chicagoantieviction.org)
John Atlas, “The Conservative Origins of the Sub-Prime Mortgage Crisis,” American Prospect, December 17, 2007 (tinyurl.com/DROMAtlas). Barbara Ehrenreich and Dedrick Muhammad, “The Recession’s Racial Divide,” New York Times, September 12, 2009 (tinyurl.com/DROMEhrenreich). Ylan Q. Mui, “For Black Americans, Financial Damage from Subprime Implosion is Likely to Last,” Washington Post, July 8, 2012 (tinyurl.com/DROMMui). Michael Powell and Gretchen Morgenson, “MERS? It May Have Swallowed Your Loan,” New York Times, March 5, 2011 (tinyurl.com/DROMPowell2). Maura Reynolds, “Refinancing Spurred Sub-Prime Crisis,” Los Angeles Times, July 5, 2008 (tinyurl.com/DROMReynolds). “The Rotten Heart of Finance,” The Economist, July 7, 2012 (tinyurl.com/DROMEconomist).
NO TES 1. Josh Griffith, “The $5 Trillion Question: What Should We Do With Fannie Mae and Freddie Mac?” Center for American Progress, August 2, 2012 (tinyurl.com/ DROMGriffith). 2. Katie Curnutte, “Home Value Declines Surpass Those of Great Depression,” Zillow, January 11, 2011 (tinyurl.com/DROMCurnutte). 3. Yuliya Demyanyk, “Ten Myths about Subprime Mortgages,” Federal Reserve Bank of Cleveland, July 23, 2009 (tinyurl.com/DROMDemyanyk). 4. Michael Powell, “Blacks in Memphis Lose Decades of Economic Gains,” New York Times, May 30, 2010 (tinyurl.com/DROMPowell). 5. Jeanette Wicks-Lim, “The Great Recession in Black Wealth,” Dollars and Sense, February 2012 (tinyurl.com/DROMWicks). 6. Maura Reynolds, “Refinancing Spurred Sub-Prime Crisis,” Los Angeles Times, July 5, 2008 (tinyurl.com/DROMReynolds). 7. Stan Humphries and Svenja Gudell, “Zillow Negative Equity Report (Q2),” Zillow, June 2012 (tinyurl.com/DROMHumphries).
The chapters on credit card, medical, student and housing debt show us the ways in which we are all made to pay for basic social survival— for the rest of our lives. This is the traditional idea of a “debtor”—a person who borrowed money and owes a sum of money to a bank or government agency. But mafia capitalism means that governments make cuts and the people have to go into debt to survive. The burden of sustaining “life” gets shifted from the state to the individual and household. Most households are drowning in all four of the types of debt discussed so far in the manual. Debt is a way of controlling us— making us weak, afraid and financially unstable. But the rabbit hole goes much deeper. What about those who don’t have debt in the traditional sense? Are they debtors too? Our answer is clear: Yes. We are all debtors, whether we have debt or not. Debt affects us all. But how? The next series of chapters about broader notions of debt, from municipal debt to alternative financial services, only begin to make these connections. Our whole system runs on debt and credit—our households, our cities, our countries and all those who slip between the cracks. From municipal bonds that we never agreed to, to the low-income or unemployed worker forced to take payday loans after being excluded from “mainstream” credit, the whole world has become indebted. This is how the 1% maintains their wealth and power.
Anyone fighting the 1% is a debt resistor. We are all debtors now.
VI. MUNICIPAL DEBT:THE SILENT KILLER
Is your city experiencing a budget crisis? Is your town laying off workers and cutting services? Are local hospitals understaffed and underfunded? Do you worry about whether your child’s school will have enough money to provide students with a quality education? If this is happening in your community, you are a debtor. Over the last forty years, our common goods and resources have been privatized to profit the 1%. In the wake of reduced public funding, cities and towns have taken out more and more private loans to pay for everything from basic operations, like sewers, to large developments, such as sports arenas. Municipalities are forced to partner with Wall Street to tap revenue streams because Wall Street controls access to credit markets. The only way cities and towns can win access to those markets is by issuing tax-exempt municipal bonds. But that means Wall Street profits from those bonds through interest payments and through securitization, as traders repackage bonds into debt bundles which are sold and resold on the global market. Municipalities issue the bonds and guarantee loans by promising that investors will be repaid with tax dollars or with revenue generated by the debt-funded project. In addition, since the New York City fiscal crisis more than forty years ago, federal bankruptcy code has been revised to ensure that many municipal bonds would keep paying investors no matter the costs to communities. Bonds are supposed to be bets on the future. In most cases, however, there is no way the lender can lose the bet, and cities can lose a great deal. After Wall Street’s mortgage-lending practices crashed the economy in 2008, many municipalities were unable to pay their debts. Bond financing is a weapon of the 1% and mafia capitalism. When Scranton, Pennsylvania threatened to default on a debt payment in 2012, Wall Street came down with an iron fist. It cut off the city’s access to money, and Scranton’s mayor responded by slashing wages for city workers down to minimum wage. Scranton dared to challenge Wall Street, and a debt crisis ensued.1 News accounts reported that public employees such as teachers and pensioners were to blame, but this is false—Scranton’s brand of American austerity was a direct result of Wall Street greed. From coast to coast, cities have become completely beholden to big banks. The result is shuttered schools, smaller fire departments and block upon block of abandoned homes in foreclosure. Public transportation systems are also cash cows for Wall Street. In NYC, the Metropolitan Transportation Authority loses $114 million per year as a result of a poisonous interest-rate swap with JPMorgan Chase and other big banks. Rather than refuse this debt, the MTA has cut service and laid off workers. Most people who rely on the subway are working-class New Yorkers, including many people of color and immigrants. The 99% is required to fund the lavish lifestyles of the 1%. Like Scranton, Stockton, California went broke after the housing market went bust in 2008. The result has been a higher crime rate, including murders, robberies and home invasions. When residents call the police, they are never sure if help will come because the police department is stretched to the breaking point. Even CalPERS, the retirement system for California public workers, may not be safe from bondholders demanding payment on defaulted debts. Municipal indebtedness is a tool by which Wall Street demands deep cuts in public spending to enrich investors no matter the cost to communities. Mafia hitmen warn debtors by going around town and breaking a few legs. Wall Street sends the same message: pay your debts, or see what happens.
HOW IS MUNICIPAL DEBT ISSUED?
Bonds for public works are supposed to be approved by voter referendum, yet city officials often broker deals with private partners through backdoor channels to circumvent the democratic process. Officials use political power to zone off “development districts” or declare a parcel of land “blighted” which allows it to be seized under eminent domain and sold off. This means that taxpayers often find themselves stuck with the tab for debt-funded projects guaranteed by city agencies that have no accountability to voters. As one scholar noted, public officials and their Wall Street partners often act as de facto governing bodies “empowered to issue long-term debt without the formal oversight of elected decision makers.” Perhaps the most glaring example of such corruption and graft is in Jefferson County, Alabama.2 In 2011, the municipality filed the largest bankruptcy in U.S. history to contest a $4 billion debt in the aftermath of a sewer project gone disastrously wrong. The story is a familiar one: local officials borrowed vast sums from Wall Street to pay for a treatment plant, which the EPA said was needed to stop sewage from flowing into the Cahaba River in a predominantly African American community. But the project was never completed because corrupt officials mishandled the funds (seventeen have been jailed since the scandal broke). Lenders demanded repayment anyway, doubling each household’s sewer bill in a neighborhood already reeling from poverty, high unemployment and a sewer that still did not work properly. The county’s financial trauma has resulted in public service cuts, mass layoffs and overcrowded prisons. Even a federal judge has stated that Jefferson County’s debts cannot be repaid. hoW ARe inteReSt RAteS FoR mUniCipAl bondS deteRmined? Wall Street’s criminality reveals that there is no such thing as a free market and never was. We recently learned that interest rates around the world have been rigged for years for the benefit of a few large financial firms. Yet the recent LIBOR scandal is not surprising when one considers that municipal bond-rigging has been going on for decades with no public outcry.3 “In May 2011,” reads a report from the International Herald Tribune, “UBS [bank] admitted that its employees had repeatedly conspired to rig bids in the municipal bond derivatives market over a five-year period, defrauding more than 100 municipalities and nonprofit organizations, and agreed to pay $160 million in fines and restitution.”4 In 2012, Bloomberg News reported that “[s]o far, 13 individuals from banks including Bank of America, JPMorgan Chase and UBS have pleaded guilty in the Justice Department’s investigation.”5 In 2011, GE Capital was caught rigging municipal bonds and overcharging cities and towns across the United States. Their punishment? A $70 million fine, laughably low considering the profits involved. In his exposé of municipal bond rigging (which he calls “the scam Wall Street learned from the mafia”), Matt Taibbi explained that Wall Street “skimmed untold billions in the bid-rigging scam” from hundreds of municipalities. After they were caught, banks continued investing in city bonds. “Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again,” Taibbi wrote. “Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.”6
HOW CAN WE RESIST MUNICIPAL DEBT?
Occupy Wall Street makes it possible to imagine that some debts must not be repaid. In Jefferson County, for example, some citizens do not want to renegotiate; they reject such debt outright. As one activist in Birmingham noted, “[the debt] shouldn’t ever have been issued, and therefore it shouldn’t exist. It shouldn’t have been spent. Since it shouldn’t have existed, we’re not going to pay it.”7
Some municipalities are fighting back against the big banks. After their pay was cut to minimum wage, Scranton’s municipal unions sued the city, and their wages were restored. Years of community resistance delayed the construction of Barclays arena in Brooklyn because the stadium was financed with tax-exempt bonds and built on land seized by eminent domain. Baltimore is suing more than a dozen big banks for manipulating LIBOR, the benchmark for interest rates on many financial products. In July 2012, Boston activists held subway turnstiles open to protest Wall Street’s vise grip on their city’s transportation budget. After a toxic interest-rate swap deal sent it off a fiscal cliff, Oakland, California is trying to take the dramatic step of severing its relationship with Goldman Sachs for good.8 These efforts will continue and escalate in the months and years to come. The idea that some debts can and should be refused is a sentiment that is spreading. In Europe, the rallying cry of the 99% is, “we won’t pay for your crisis!” In the United States, we can start a municipal debt resistance movement by asking critical questions and demanding answers. Have you ever looked at your town budget? Do you know how your elected and non-elected officials fund public works? Who benefits? Who really ends up paying for what? Simply posing these questions in your community is a way to strike debt. We must also insist that the 1% is no longer allowed to write the laws dictating how our communities will be financed. We must insist on an end to the debt-financing of U.S. cities. This case for ending Wall Street’s control over our lives should also be made through direct action. We can target the banks profiting from the corrupt bond market with actions such as sit-ins and marches. The most important thing we can do as occupiers is refute the myth that the 99% are to blame for the fiscal emergencies that are declared when the bond vigilantes come knocking.
Jason Hackworth, “Local Autonomy, Bond-Rating Agencies and Neoliberal Urbanism in the United States,” International Journal of Urban and Regional Research, 26, no. 4, 2002 (tinyurl.com/DROMHackworth), 707–725. L. Owen Kirkpatrick and Michael Peter Smith, “The Infrastructural Limits to Growth: Rethinking the Urban Growth Machine in Times of Fiscal Crisis,” International Journal of Urban and Regional Research, 35, no. 3, 2011 (tinyurl.com/ DROMKirkpatrick), 477–503. Gretchen Morgenson, “Police Protection, Please, for Municipal Bonds,” New York Times, August 4, 2012 (tinyurl.com/DROMMorgenson). Halah Touryalai, “City of Oakland Taps Occupy Wall Street to Take On Goldman Sachs,” Forbes, July 11, 2012 (tinyurl.com/DROMTouryalai). “UBS: Expert in Escaping Prosecution,” International Herald Tribune, July 20, 2012 (tinyurl.com/DROMIHT), 8. Travis Waldron, “How the House GOP Budget Would Decimate American Cities and States,” Think Progress, August 9, 2012 (tinyurl.com/DROMWaldron). Rachel Weber, “Selling City Futures: The Financialization of Urban Redevelopment Policy,” Economic Geography, 86 no. 3, 2010 (tinyurl.com/DROMWeber), 251–274.
NO TES 1. Mary Williams Walsh, “With No Vote, Taxpayers Stuck With Tab on Bonds,” New York Times, June 25, 2012 (tinyurl.com/DROMWalsh). 2. Steven Church, William Selway, and Dawn McCarty, “Jefferson County Alabama Files Biggest Municipal Bankruptcy,” Bloomberg News, November 9, 2011 (tinyurl. com/DROMChurch). 3. Steve Weissman, “A Crisis Worse Than 2008?” Salon, July 25, 2012 (tinyurl.com/ DROMWeissman). 4. “UBS: Expert in Escaping Prosecution,” International Herald Tribune, July 20, 2012 (tinyurl.com/DROMIHT), 8. 5. Ellen Rosen, “Municipal Bonds, UPS, JPMorgan, Student Loans: Compliance,” Bloomberg News, July 23, 2012 (tinyurl.com/DROMRosen). 6. Matt Taibbi, “The Scam Wall Street Learned From the Mafia,” Rolling Stone, June 21, 2012 (tinyurl.com/DROMTaibbi). 7. Mary Williams Walsh, “In Alabama, A County That Fell Off the Financial Cliff,” New York Times, February 18, 2012 (tinyurl.com/DROMWalsh2). 8. Halah Touryalai, “City of Oakland Taps Occupy Wall Street To Take On Goldman Sachs,” Forbes, July 11, 2012 (tinyurl.com/DROMTouryalai).
VII. FRINGE FINANCE TRANSACTION PRODUCTS AND SERVICES:MAKING BANK ON THE UNBANKED
As James Baldwin once said, “Anyone who has ever struggled with poverty knows how extremely expensive it is to be poor.” This is true now more than ever. It’s called the “poverty tax”—the surcharge people pay for not having savings or access to “prime” credit and being consigned to “fringe finance.” Fringe finance refers to the array of “alternative” financial services (AFS) offered by providers that operate outside of federally insured banks. Gary Rivlin, author of Broke USA: From Pawnshops to Poverty, Inc., How the Working Poor Became Big Business, does the math; adding up the profits from the AFS sector and dividing by the 40 million households that survive on $30,000 a year or less, the industry receives an average of $2,500 from every low-income household. That’s a poverty tax of around 10%. If current trends continue, it will only rise—unless we reject these predatory financial products and services. The next two chapters break down the major perils of fringe finance into those related to transactions and those related to credit. This chapter deals with transaction products and services: check cashing and prepaid cards. Chapter VIII covers credit products and services: payday loans, auto-title and pawn loans, rent-to-own financing and refund anticipation loans (RALs). Among households without access to a bank account, 62% have used an AFS transaction product or service and 27% have used an AFS credit product or service. About 23% have used both.1 Both chapters offer analysis and information to help you identify the common tricks and traps of fringe finance so that you can avoid them. We consider alternatives to the most expensive products and services, as well as how to save money if you’re “locked in” or have no other options. There is no one-size-fits-all strategy for personal finance.
We conclude Chapter VIII by outlining some general survival strategies aimed to minimize or eliminate our dependence on the current debt-finance system. Venture capital, however, expects the stunning rates of financial extraction in the poverty industry to rise, and it has created funds to invest in start-ups and small firms with big growth potential in the fringe finance sector. The “market” that investors want to tap is the unbanked (people without checking or savings accounts) and the underbanked (people who rely on both “traditional” and “alternative” financial products). Why are venture capitalists so interested in this market? In a blog post titled “Not Unbanked: Untapped,” a venture fund manager explains, “It is fair to say that most of these products are generally more expensive than what most of ‘us’ pay. APRs [annual percentage rates of interest] higher than 30% (if not 300%); transaction costs of $2+; money-transfer costs of $10+; access to payroll check for 2–4%.”2 The payment services segment of AFS has seen some of the most spectacular growth in recent years, where prepaid cards are making inroads and recording profits that rival the always-profitable check cashing outlets. This is the predicament of the poor in our debt-finance system: it costs poor people significantly more to use money—to spend it, to save it, to invest it, to borrow it, to send it “back home”—and you have less money to begin with. If you’re poor, the more you engage with the debt-finance system, the more wealth you lose and the more indebted you become. Meanwhile, AFS owners and investors, who enjoy lower financing costs and have more money to begin with, profit from your loss and acquire pieces of your debt; Wall Street comes to own pieces of your future. These are the workings of a two-tiered financial system: on the bottom are relatively high-cost services marketed to the growing and changing ranks of the unbanked and the underbanked. The unbanked includes the working poor, the unemployed, the homeless, the undocumented, those who do not speak English fluently, those who are or have been incarcerated, those with mental or physical health issues, older people, those working off the books, those hiding from creditors or the “authorities,” those whose homes were stolen by Wall Street, and anyone else to whom “traditional” financial institutions won’t lend. Demographically speaking, the unbanked population is very broad and very diverse, but it is disproportionately comprised of low-income households (71% of unbanked households earn below $30,000 a year), households of color, immigrant households and individuals with negative banking histories.3 (Of course, these categories aren’t mutually exclusive.) People of color are more likely to be unbanked. In general, Latino/a and Black people are respectively six and seven times more likely to be unbanked than whites. Households with an annual income under $30,000 are thirteen times more likely to be unbanked than those with an income between $50,000 and $75,000.4 People of color are more likely to have low and/or unreliable in come, making it more difficult to save enough money to meet minimum opening-balance requirements at banks. There’s another significant commonality: people of color, low-income individuals and immigrants tend to distrust banks. For some households, this mistrust goes back generations. Losing one’s home or hard-earned property—especially in a society focused on wealth accumulation—is traumatic. The effects can ripple over generations of a family, shaping how future generations interact with financial institutions. Poor people, immigrants and people of color also tend to believe that traditional financial institutions aren’t for them; they believe that they don’t meet the requirements or that banks don’t fill their needs. Inconvenient locations and hours of operation often present further barriers for low-income households.5 These barriers tend to reinforce each other and result in alienation from the mainstream financial system.
For many of the unbanked, the experience of second-tier status in the financial system mirrors their experience with the two-tiered justice system. Those who are socially marginalized in one way or another are more likely to occupy the bottom tier of the financial system, which makes it more likely they’ll get caught up in the criminal justice system. The criminalization of poverty, the criminalization of immigration, as well as racial and ethnic profiling, are well-documented trends that push people to the fringes of finance. In at least a third of U.S. states, being in debt can now land you in jail.6 In Washington State, for example, an African American man with mental health issues was incarcerated for two weeks for failing to pay $60 worth of “legal financial obligations” (LFOs). His jail stay, meanwhile, cost Spokane County over $1,500.7 And let’s not forget: the deregulation that led to the emergence of a two-tiered financial system and that enables the 1% to go on looting and indebting the poor was orchestrated by our so-called “elected” representatives.
CHECK CASHING OUTLETS (CCOS)
For nine million households in the United States, cashing paychecks at a bank or credit union is not an option.8 The unbanked do not have bank accounts for any number of the reasons discussed earlier. For many people, a check cashing outlet (CCO) appears to be the only option to transform their paycheck into cash. According to the Federal Reserve, CCOs generally charge between 1.5% and 3.5% to cash a check,9 so for a $500 check, that’s somewhere between $7.50 and $17.50 taken away from you. This is actually a conservative estimate; the Consumer Federation pegs average fees at 4.11%,10 so it might end up being a cut of $20.55. With a checking account, by contrast, this service would be free. If you’re unbanked and you make $500 every week, in one year you might spend $400 if you’re relatively lucky, but possibly over $1,000, just so you can spend your own money. The average unbanked person with a fulltime job can expect to spend more than $40,000 on such fees in their lifetime. That is, throughout the course of one’s life, more than an entire year’s worth of work goes exclusively towards turning one’s salary into cash.11 Between 2000 and 2005, the number of CCOs in the country has doubled, but fees haven’t gone down. In fact, the price has gone up; they grew 75.6% on average between 1997 and 2006.12 Companies like Wal-Mart, Kmart and Best Buy have also tapped into this market by offering check cashing at their stores. Although they charge less to cash a check than the regular outlets, we should harbor no illusions about their motivation; the hope is that people suddenly equipped with cash will spend it right where they are.13
In addition to exorbitant check cashing fees, there are fees for money transfers. Immigrants hoping to send money outside of the United States may lose as much as 20% of the amount in the process.14 While the Consumer Financial Protection Bureau recently introduced new disclosure rules aimed at stopping sudden and unexpected penalties, there’s really nothing that limits the overall fee.15 By contrast, banks and credit unions charge substantially less for this and other services. Services that could cost up to $500 annually at a CCO could cost between $30 and $60 at a traditional financial institution.16 As expensive as CCOs may be, and as much as they target people with lower incomes, if they all pulled up stakes and left, what would happen?
Several alternatives may be available. You could make an arrangement with a friend, family member, or even your employer—that is, someone with access to a checking account—in which you would write your check over to them and they would give you the full amount in cash. If you have exhausted other options and must resort to a CCO, it is important to know how to use it in a way that minimizes harm. For example, ask ahead of time for the fee in dollar amounts as opposed to the percentage. And be sure afterwards to obtain and save an itemized receipt. Costs may vary not just from one CCO to the next, but by the time of day and other factors.17 You can compare receipts to determine the optimal approach.
In an essay on the poverty tax, Gary Rivlin recalls, ’ “A few years back, I attended the annual Check Cashers Convention, where I sat in on a 90-minute presentation dubbed, ’’Effective Marketing Strategies to Dominate Y our Market.’ ’ Speaking to a standingroom only crowd, a consultant named Jim Higgins shared his tips for turning the $1,000-a-year check cashing or payday customer into one worth ’’$2,000 to $4,000 a year.’ ’ Pens scribbled furiously as he tossed out ideas. Raffle off an iPod. Consider Scratch ‘n Win contests. Institute the kind of customer reward programs that has worked so well for the airlines. And for those who are only semi-regulars offer a ‘cash 3, get 1 free’ ’ deal. After all, Higgins told the crowd, ’’These are people not used to getting anything free. These are people not used to getting anything, really.’
First there were credit cards. Then came debit cards. Now there are prepaid cards—and they’re suddenly everywhere. Think about it this way: with credit cards you pay later, with debit cards you pay now, and with prepaid cards you pay early. Credit cards extend credit to consumers for free (with a grace period). Debit cards give consumers free access to funds in their bank accounts. Prepaid cards charge consumers to access their own funds. So when you use a prepaid card you are essentially paying money to make an interest-free loan to the issuer, who then lends your money to other customers. Charging us for the use of our own money is what banks do. They also provide useful services: the ability to store our money, to access cash, to pay for things without cash and to turn checks into cash. Prepaid cards—now used by 13% of Americans—do the same, although they’re not attached to bank accounts. Branded with the logos of American Express, Discover, MasterCard or Visa, they look like other plastic payment cards and provide ATM access and the ability to make purchases. “General purpose reloadable” (GPR) cards let you add funds. However, prepaid cards are usually more costly, less convenient and less secure than comparable services from banks and they tend to have poor disclosure policies and “gotcha” fees, replicating some of the most aggravating bank practices. Nonetheless, compared with a check cashing outlet, getting cash from a prepaid card is usually cheaper. When it comes to making payments, prepaid cards are typically more expensive than credit or debit cards, but not necessarily. Factor in overdraft charges, and debit cards cost more. Factor in high ongoing balances, high interest rates and late payment penalties, and credit cards may cost considerably more than prepaid cards. There is no one-size-fits-all strategy for personal financial transactions. What’s more, the rules governing the prepaid card industry are still in flux. In 2010 the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) took effect, tightening regulations for credit cards and traditional debit cards.20 The new Consumer Financial Protection Bureau (CFPB) is presently considering how to bring the prepaid card market into the federal regulatory framework. In the meantime, barriers to cash continue to grow; transactions for an increasing range of basic services are impossible without plastic. Soon many of us will have no choice but to use these cards when employers, government benefits administrators and even colleges and universities begin to adopt them. There are a variety of prepaid cards, including gift cards, payroll cards, government benefits cards and general purpose reloadable (GPR) cards. Purchasable, usable and sometimes reloadable without identity verification, many prepaid cards offer the advantage of anonymity, which is why they’ve become the preferred means of laundering money and the de facto currency of the prison system.21 For users interested in symbolically projecting their status, branded cards serve as a means of self-expression. The cards are linked to celebrities, heroes and social causes, and tend to be the most predatory corner of the market. Consumer advocates consider prepaid cards just the latest addition to the array of high-cost and inferior financial products for which the poor pay more. Rather than help marginalized groups enter the financial mainstream, prepaid cards highlight and intensify financial segregation. The predicament of Millennials, who appear to be the industry’s latest target, is especially alarming. Not long after the CARD Act restricted credit card companies’ access to college campuses and to customers under twenty-one, prepaid cards began moving in, looking to establish “partnerships.” Now with prepaid cards serving as student IDs, enrolling in college also means enrolling in a bank.
General purpose ReloAdAble (gpR) CARdS GPR cards are the kind that you buy and set up yourself, like a gift card with fees. They range from competitively priced, no-frills cards to premium-priced celebrity cards, which are sold as symbols of achievement or aspiration as much as financial tools. Beyond utility, the latter promise respect, empowerment and freedom. Of course, prepaid cards are not unique in this sense: everything we consume says something about who we are and what we believe. The problem with most celebrity cards is not simply that they don’t deliver what’s promised, but that they’re designed to deliver exactly the opposite of what’s promised: financial marginalization. Consumers Union found many different types of fees for a range of prepaid cards. In addition to monthly fees, they found fees for activation, point-of-sale transaction, cash withdrawal, balance inquiry, transaction statements, customer service, bill payment, adding funds, dormancy, account closure and overdraft.22 Making matters worse, only a few of the fees charged by card issuers are disclosed prior to signing up for the card. Retail displays often contain only purchase prices and initial load amounts, and card company websites frequently require users to click on sign-up pages or registration performance appraisal forms in order to obtain fee information. Consumer Action, which surveyed twenty-eight different prepaid cards, found that twenty of them carry a monthly maintenance fee, the highest being $14.95. Fees for out-of-network ATM withdrawals range from $1.95 to $3. A few cards charge users to reload money. Ten of the cards surveyed charge 50 cents to $2 to talk to a customer service agent and two of them charge 50 cents for automated help. Like the worst practices in subprime mortgage lending, private student loans and payday lending, the marketing and sales strategies of the celebrity prepaid card business are predatory; the best predators have a deep appreciation for the needs of their prey. “Well-banked” celebrities like Russell Simmons and Suze Orman are marketers of prepaid cards that target financially marginalized people. While their marketing suggests they are running charities, Simmons and Orman are managing private companies whose unequivocal objective is to profit from providing financial services to poor people. They deceptively present their enterprises as altruistic projects striving for collective emancipation. Yes, this is how capitalism works.
Over the past 15 years, the federal government and state governments have been gradually replacing paper benefits checks with Electronic Benefit Transfer (EBT) cards. For the unbanked, the shift to electronic payments means no check cashing fees, less need to carry cash, faster payments, the ability to make purchases or pay bills electronically and no ChexSystems screen. But overall, costs and benefits will vary depending on the fees and terms that apply to the particular prepaid card designated for your benefits program. These are administered by different federal and state government agencies, which contract with various prepaid card issuers. California and New Jersey are considered to have negotiated relatively good contracts for their unemployed workers (providing free and ample access to cash and transaction information with no penalty fees).23 Tennessee workers, on the other hand, get slammed with the highest junk fees courtesy of JPMorgan Chase, the bank contracted to service that state’s unemployment compensation (UC) prepaid card program. For recipients of Social Security, Supplemental Security Income (SSI), or Veterans Affairs (VA) compensation, the Direct Express prepaid debit card has much lower fees than other prepaid cards and comes with strong consumer protections. Card accounts are insured by the Federal Deposit Insurance Company (FDIC) and are subject to federal consumer protection regulations (i.e., Regulation E).24 The prepaid card programs administered by the states to disburse UC, as well as Temporary Assistance to Needy Families (TANF) and food stamps (Supplemental Nutritional Assistance Program), are more problematic. They’re generally less beneficial for recipients and more beneficial for banks and states. Forty states now use a prepaid card for paying some or all UC recipients. A survey by the National Consumer Law Center found significant shortcomings in fee structures, access to card information and payment options. Across the board, fees charged to benefit recipients are being used to cover the administrative costs of delivering UC benefits—in violation of federal law. Cards may charge ATM balance inquiry fees, denied transaction fees, $10 to $20 overdraft fees and inactivity fees.25 On top of this, card issuers such as Bank of America, Citibank and JPMorgan Chase earn interchange fees as well as interest on the funds on deposit. Last year, card fees and ATM surcharges cost California welfare recipients over $17 million.26 The bottom line: for those who have a bank account, prepaid cards offer little, if any, advantage over direct deposit. Benefit recipients with checking accounts will save money and time with direct deposit. Those who do not have that option—who lack access to a bank account or who live in one of the six states that have eliminated the direct deposit option—will be forced into the prepaid payroll card program(s) contracted to disburse your particular benefit(s). Since you have no choice about which card to use, familiarize yourself with the terms and fees that apply to the card designated for your program. This information should arrive in paper form with your EBT card. You can also look up the details of the particular prepaid payroll program online.
SURVIVAL STRATEGIES AND RESOURCES
ARtiCleS And bookS General
The Brookings Institution, “The Higher Prices Facing Lower Income Customers,” The Brookings Institution, August 18, 2006 (tinyurl.com/DROMBrookings). Candice Choi, “Reporter Spends Month Living Without a Bank, Finds Sky-High Fees,” Huffington Post, December 11, 2010 (tinyurl.com/DROMChoi). Sharon Hermanson and George Gaberlavage, The Alternative Financial Services Industry, AARP Public Policy Institute, August 2001 (tinyurl.com/DROMHermanson). Dick Mendel, “Double Jeopardy: Why the Poor Pay More,” National Federation of Community Development Credit Unions, February 2005 (tinyurl.com/DROMMendel). National Survey of Unbanked and Underbanked Households, Federal Deposit Insurance Corporation, December 2009 (tinyurl.com/DROMFDIC02). Gary Rivlin, Broke USA: From Pawnshops to Poverty, Inc., How the Working Poor Became Big Business, (New York, NY: HarperCollins, 2010). “The Truth About Immigrants’ Banking Rights,” NEDAP (tinyurl.com/DROMNEDAP03). John Ulzheimer, “Are Pawn Shops, Rent-to-Own and Other Loan Alternatives Worth It?” Mint Life, January 30, 2012 (tinyurl.com/DROMUlzheimer).
Check cashing outlets
Jean Ann Fox and Patrick Woodall, “Cashed Out: Consumers Pay Steep Premium to ‘Bank’ at Check Cashing Outlets,” Consumer Federation of America, November 2006 (tinyurl.com/DROMFox). National Association of the State Treasurers Foundation: Tomorrow’s Money for Young Adults, “Check-Cashing Stores,”, 2012 (tinyurl.com/DROMTMYA).
“Electronic Benefits Transfer Frequently Asked Questions,” NEDAP, December 2006 (tinyurl.com/DROMNEDAP01). “Prepaid Cards: Loaded with Fees, Weak on Protections,” Consumer Reports, March 2012 (tinyurl.com/DROMConsumer02). Deyanira del Rio, “Perils of Prepaid Cards,” NEDAP, December 22, 2010 (tinyurl. com/DROMRio01).
- Federal Deposit Insurance Corporation, National Survey of Unbanked and Underbanked Households (Washington, D.C.: GPO, 2009) (tinyurl.com/DROMFDIC02), 28.
- Arjan Schutte, “Not Underbanked: Untapped. Underserved Spend $45B on Financial Services,” Inside the Underbanked, November 2, 2011 (tinyurl.com/DROMSchutte).
- National League of Cities Institute for Youth, Education and Families, Banking on Opportunity: A Scan of the Evolving Field of Bank on Initiatives, U.S. Department of the Treasury, (Washington, D.C.: GPO, 2011) (tinyurl.com/DROMNLCI), 9–10.
- Preeti Vissa, “Debit Card Overdraft Fees: Reforms Welcomed but More are Necessary,” The Greenlining Institute, April 2010 (tinyurl.com/DROMVissa), 3.
- National League of Cities Institute for Youth, Education and Families, 9.
- Jessica Silver-Greenberg, “Welcome to Debtors’ Prison, 2011 Edition,” Wall Street Journal, March 16, 2011 (tinyurl.com/DROMSilver3).
- “In for a Penny: The Rise of America’s New Debtors’ Prisons,” American Civil Liberties Union, October 2010 (tinyurl.com/DROMACLU), 73.
- Christine Haughney, “City’s Poor Still Distrust Banks,” New York Times, August 17, 2009 (tinyurl.com/DROMHaughney).
- Robin A. Prager, Federal Reserve Board, Determinants of the Locations of Payday Lenders, Pawnshops and Check-Cashing Outlets, (Washington, D.C.: GPO, June 2009) (tinyurl.com/DROMPrager), 6.
- Jean Ann Fox and Patrick Woodall, Cashed Out: Consumers Pay Steep Premium to ‘Bank’ at Check Cashing Outlets, (Washington, D.C.: Consumer Federation of America, 2006) (tinyurl.com/DROMFox), 2.
- William Clinton and Arnold Schwarzenegger, “Beyond Payday Loans,” Wall Street Journal, January 24, 2008 (tinyurl.com/DROMClinton).
- Fox and Woodall, 2.
- Brad Tuttle, “Big-Box Banking: Why the Unbanked are Cashing Checks at Walmart,” Time, February 1, 2011 (tinyurl.com/DROMTuttle).
- “The Remittances Game of Chance: Playing with Loaded Dice?” Consumers International, January 2012 (tinyurl.com/DROMConsumer03), 4.
- Bureau of Consumer Financial Protection, Electronic Funds Transfer (Regulation E),(Washington, D.C.: GPO, 2012) (tinyurl.com/DROMBCFP).
- Tomorrow’s Money for Young Adults: National Association of the State Treasurers Foundation, “Check-Cashing Stores,”, 2012 (tinyurl.com/DROMTMYA).
- Tomorrow’s Money for Young Adults.
- Gary Rivlin, “America’s Poverty Tax,” Economic Hardship Reporting Project, May 16, 2012 (tinyurl.com/DROMRivlin).
- “New Fin Lit Survey: 56% of Adults Don’t Budget,” Credit Union National Association, April 4, 2012 (tinyurl.com/DROMCUNA).
- “Fact Sheet: Reforms to Protect American Credit Card Holders,” White House, May 22, 2009 (tinyurl.com/DROMWH).
- Ben Popken, “Why Money Launderers Love Prepaid Debit Cards,” The Consumerist, May 25, 2011 (tinyurl.com/DROMPopken).
- Michael McCauley, “Consumers Union Report: Prepaid Cards Come With Long List of Fees and Weak Consumer Protections,” Consumers Union, September 15, 2010 (tinyurl.com/DROMMcCauley).
- Lauren K. Saunders and Jillian McLaughlin, Unemployment Compensation Prepaid Cards: States Can Deal Workers a Winning Hand by Discarding Junk Fees (Washington, D.C.: National Consumer Law Center, 2011) (tinyurl.com/DROMSaunders), 19.
- Bureau of Consumer Financial Protection.
- Saunders and McLaughlin, 3.
- “Dos and Don’ts: Choosing and Using a Prepaid Card,” Consumer Action News, Spring 2012, (tinyurl.com/DROMCAN).
CONTINUE TO PART 2 OF THE DEBT RESISTORS OPERATIONS MANUAL