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Eliminate the "legal" loansharking

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Johnny View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 13/November/2007 at 12:22pm
Here is something to think about:
 
If it is against the rules to place excessive and unnecessary pressure on a debtor, how is it that legal action is allowed? If a financially enabled person is flatly refusing to pay a debt, and is frustrating the system, then the action would be reasonable, yes? However, people are being sued who "appear or are made to appear" financially able when they are really not. as a result, the collection agencies will sue because they know that people FEAR LEGAL ACTION, and the associated consequences and encumberances.
 
So, who should be held accountable for something like this? The collection agency, their client, or both?
 
 
 
  
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

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Bateman View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Bateman Quote  Post ReplyReply Direct Link To This Post Posted: 13/November/2007 at 1:25pm
Quote So, who should be held accountable for something like this? The collection agency, their client, or both?
 
It depends on the nature of the collection agency's relationship with the client.
 
If collection agencies accept delinquent accounts on contingency and collect a commission fee for each loan collected then it would be both.
 
If delinquent accounts are sold to collection agencies at a discount and then they get to keep everything they collect then it would be just the agency.
 
Quote If it is against the rules to place excessive and unnecessary pressure on a debtor, how is it that legal action is allowed?
 
Because no court is ever going to find that legal action is unnecessary pressure. If something is specifically allowed by legislation then the judiciary is not going to over rule that.
 
Quote If a financially enabled person is flatly refusing to pay a debt, and is frustrating the system, then the action would be reasonable, yes?
 
Given my current situation I'm going to pass on this one.
 
Quote However, people are being sued who "appear or are made to appear" financially able when they are really not. as a result, the collection agencies will sue because they know that people FEAR LEGAL ACTION, and the associated consequences and encumberances.
 
I know collection agencies threaten legal action a lot but do they actually follow though on the threat? I was under the impression most of the time it was a bluff.
 
Taking legal action against someone who really can't pay is fairly counterproductive.  Getting a judgement is one thing but when it comes to the enforcement of that judgement if there is nothing there then they get anything.
 
I'm trying to figure out what the motivations would be to take this route. Maybe they think if they scare people enough they will do something desperate to get the funds. But they would only need to put on a convincing bluff for that to work. I guess if the collection agency wanted to be purely punitive then that would make sense but that is the only reason I can think of. That is kind of disturbing.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 13/November/2007 at 2:40pm
The motivations are described up in my previous post. Collection agencies threaten legal action, and there are certain agencies that I am aware of that follow through with it more than their competition does. Bottom line, people are being sued by collection agencies for the purpose of commission earning rather than serving the best interest of their client. Fact.
 
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Bateman Quote  Post ReplyReply Direct Link To This Post Posted: 13/November/2007 at 3:04pm
So if I'm understanding you correctly a collection agency gets paid a commission on a judgement even if the judgement is never enforceable?
 
That is an awful policy. The only party who benefits is the collection agency. Both the lender and the borrower end up worse off.
 
My hope would be that these collection agencies would lose clients over time since they clearly are not acting in the client's best interest.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 13/November/2007 at 4:32pm
They earn a commission on anything they have carriage of. Collection agencies are protected, Bateman. They are also embedded within the system.
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Ferren Quote  Post ReplyReply Direct Link To This Post Posted: 18/November/2007 at 3:09am
Actually, compound interest is the norm in banking and financial systems. If you check out the National Student Loans Service Center (CanLearn) and test their student loan repayment calculator you will find that it is based on compound interest.  This is pretty straight forward stuff.
 
A $10,000 loan charged 12% simple interest over 5 years would have a total payback of $16,000. Very easy to calculate. Simple to calculate the payment too. Just divide by 5 for annual or 60 for monthly. This is why they call it "simple" I suppose.
 
The same loan being charged compound interest would have a total payback of $18,167 assuming no payments made over the 5 years. Not quite as easy to calculate but does explain the confusion that arises when one attempts to understand how the present balance of the loan was derived.
 
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 19/November/2007 at 6:33am
Interest is calculated on the principle amount  for a student loan, Ferren. Not the principle and amount of interest in arrears. If it were accruing interest on principle, and principle with interest to date, then it would be compounding. The daiy rate on a student loan of $10,000 does not suggest that it is a compounding rate.
 
 
Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Johnny Quote  Post ReplyReply Direct Link To This Post Posted: 19/November/2007 at 10:46am

FYI - When the principle descends, so does the amount of interest because the interest is calculated based on the principle outstanding. There is no compounding. What you are stating is something that can spread panic among the borrowing community, Ferren.

 

Solve Student Debt specializes in solutions for students and graduates in student loan default, and those at risk of defaulting.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote administrator Quote  Post ReplyReply Direct Link To This Post Posted: 19/November/2007 at 10:54am
Ferren, compound interest is not the norm... perhaps if you do cash advances on credit cards... if you use the PMT function in excel and you'll see that the payments do not use compound interest. Johnny has appropriately commented on your post.

I think that even with simple interest, the 11.5 % is way too high!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Ferren Quote  Post ReplyReply Direct Link To This Post Posted: 23/November/2007 at 10:39pm
Your right. I pulled out my old student loan statements and checked out the math. Interest is charged on principal only!
 
I still hold on to those statements and my settlement letter from the collection agency. It's been 5 years now and I am still affected by my experience. Even after I paid it off I had to go through a Revenue Canada reassesement of my income taxes to explain the large interest deduction I claimed. Of course it was legitimate but still rankles. It was a very long 6 year process. I emphathize with anyone who has had to endure the unpleasant experience of collection agencies, particularly with respect to student loans. I know what it's like not to be able to get a credit card, mortgage, personal loan or credit of any kind. hard to imagine in these times of easy credit. I remember the constant banter with tricky collectors using every trick up their sleeve to get an emotional response.
 
But the thing I remember the most and is always in the back of my mind when I hear similar stories, is that things will get better. That is almost a certainty if you are willing to believe it. The trick is to carry on with your life during the crises and not let it impede you as you live your life and grow as a person. If you can do that then you will be truly successful in life.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote msdieckman Quote  Post ReplyReply Direct Link To This Post Posted: 02/January/2008 at 6:45pm
Yes you are absolutely correct. All student loans offer to the Canadian Government a secured and steady income at the expense of the working poor. These tactics are no better than those of loan sharks. I believe that Canada has been on the road to anarchy for quite some time. I even had the department of Political Science at the University of Alberta scream and shout at me through the phone - "Where when you look out your window do you see mayhem?", he shouted. Unbeknowst to him, much of the anarchy is clandestine - taking place behind closed doors. I once worked for a Medical company. The owner took Canada's money, with the help of prominent Alberta politicians, and of course his own employees who helped with the scam, over to Japan and started a Japanese Medical Retail company. Isn't that just wonderful that Canadians paid lock stock and barrel for him to become rich in another country?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote paulaffleck Quote  Post ReplyReply Direct Link To This Post Posted: 06/January/2008 at 4:35pm

People have trouble paying off their student loans and this leads you to proclaim, "ANARCHY!"

 
Please. 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Sammy44 Quote  Post ReplyReply Direct Link To This Post Posted: 02/June/2009 at 6:07am
I can't understand why Canada does not do like some other countries, where if you are a native of that country, your post secondary training is free.  I think something like that would stimulate the economy more than putting people in debt.  You would also have more people with higher education and better jobs, which means more money, which means more spending and therefore a better overall economy.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Madmorrigan Quote  Post ReplyReply Direct Link To This Post Posted: 02/June/2009 at 10:55am
Indeed, but then the citizens might be free to do what they will with their money, thereby eliminating the financial slavery that keeps the lot of us compliant with the government's ridiculous policies.

Slaves don't have the luxury of being able to question the master, lest they be beaten and starved.

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