I just had the pleasure of reading Duke Law Professor Sara Sternberg Greene's paper The Bootstrap Trap. I highly recommend it for anyone who is interested in the intersection of consumer credit and poverty law. The paper is chok full of good insights about the problems that arise when low-income households strive for the goal of self-sufficiency, which results in the replacement of a public welfare safety net with what Professor Sternberg Green describes as a private one of credit reporting and scoring systems. The paper shows off Professor Sternberg Greene's training in sociology with some amazing interviews, particularly about the perceived importance of credit scores in low-income consumers' lives.
Other respondents referred to their credit reports or scores as “the most important thing in my life, right now, well besides my babies,” as “that darned thing that is destroying my life,” and as “my ticket to good neighborhoods and good schools for my kids.” Many respondents believed that a “good” credit score was the key to financial stability.
One respondent, Maria, told a story about a friend who was able to improve his score. She said, “He figured out some way to get it up. Way up. I wish I knew what he did there, because I would do it. Because after that, everything was easy as pie for him. Got himself a better job, a better place to live, everything better.” Maria went to great lengths to try to improve her score so that she, too, could live a life where everything was “easy as pie.”
Credit scores have become a metric of self worth and the perceived key to success.
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Clearly, the biggest surprise in consumer borrowing since the crash has been the explosive expansion of student loan debt. It has surpassed both auto lending and credit card lending. And, since it ties with Payday Lending and pre-crash sub-prime mortgage lending for the thinnest underwriting there are defaults aplenty.
Consumer advocates are rightly urging the Department of Education to provide simpler and clearer paths forward for consumers with student loans in default but many people still need a helper. As defaults in mortgage loans and on credit card loans have fallen, providers who live on the profits of counseling people who default on those loans have turned their attention and their advertising and marketing to consumers who are in trouble on their student
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Tell me the truth. Does this sound legal? Crystal has $12,000 in credit card debt, and ABC Debt Settlement Company advertised that they can settle credit card debts for 50 cents on the dollar. We’ve all heard the ads “Do you have more than $10,000 in credit card debts? Banks got their bailout, now it’s time for yours.”
When Crystal contacts ABC about the program, ABC advises her to stop paying her debts in order to show the credit card companies whose boss. ABC has her sign a $515 a month electronic funds transfer from her bank account. This money will be put into an account to use to settle with her credit cards, but guess what? ABC has no agreements to settle anything with anyone. But they keep collecting the $515 a month.
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