Ass-backwards bankruptcy

The Wall Street Journal posted an article about an alternative method of debt collection. Debt collection companies are issuing credit cards to consumers whose debts have expired under state debt collection laws. As a condition for getting a fresh start on being a good credit citizen, recipients of the cards agree to pay a portion of the expired debt.

Sounds like a low cost alternative to the consumer filing for bankruptcy, assuming they can endure the calls and letters from debt collectors during the three to ten year period between the last debt payment and the statutory limit for collecting the debt. Yes, the card issuer should make it clear that part of the terms and conditions of getting the card is that part of the old debt must be repaid. If that transparency requirement is met, then the government should stay out of this market.

What do you think? Should government get involved in this trending market?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
This entry was posted in consumer protection, Credit Cardholders Bill of Rights, debt, Economy and tagged , . Bookmark the permalink.

One Response to Ass-backwards bankruptcy

  1. Kenneth J. Ciszewski says:

    “Yes, the card issuer should make it clear that part of the terms and conditions of getting the card is that part of the old debt must be repaid.” Assuming this “clarification” is written in 72 point type (that’s type that’s one inch high!!) and is the first and last thing the credit card applicant sees, and the language is so clear a first grader can understand it, then maybe. I admit I don’t trust this kind of situation–credit card companies have a long history of writing contracts that exploit their card users that is down right shameful, and I have no doubt they will find a way around this requirement..I feel that once a debt is written off by law, it should be over with. You can argue that since state law has erased the debt, that any contract that tries to reinstate the debt is null and void–most contracts have a clause stating that if any portion is in violation of law, that that portion is null and void, while the rest of the contract stands.

    It would be better just to issue “refillable prepaid” cards that draw on money deposited by the card user, and leave it at that.

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