Paying debts in the United States is optional for consumers and relies upon consumers feeling “morally bound” to repay the debts, according to an essay that was published last week and is starting to get picked up by different news sites across the country.
The author of the essay is an advisor at Stripe and has built four software companies, according to his website. The essay is a deep-dive into the author’s thoughts and perspective on credit card debt collection — calling the industry the underbelly of finance. He walks through how a debt occurs and what credit card issuers do when consumers don’t pay their bills. The author focuses on debts that are sold to debt buyers, but often mixes the terms debt collection and debt buying.
The former advocate in me will observe that the single most effective method for resolving debts is carefully sending a series of letters invoking one’s rights under the FDCPA (and other legislation) to a debt collector who is operationally incapable of respecting those rights, then threatening them with legal or regulatory action when they inevitably infringe upon them in writing, leading to them abandoning further attempts at collection.
This effectively makes paying consumer debts basically optional in the United States, contingent on one being sufficiently organized and informed. That is likely a surprising result to many people. Is the financial industry unaware of this? Oh no. Issuing consumer debt is an enormously profitable business. The vast majority of consumers, including those with the socioeconomic wherewithal to walk away from their debts, feel themselves morally bound and pay as agreed.
The author recommends that consumers never speak to collectors over the phone under any circumstances. “One’s likelihood of being abused or lied to, including in financially consequential fashions, is high, and one’s ability to counter that is minima,” he writes. “Instead, force them to do all correspondence on paper, where lies are self-documenting, illegal threats are immediately admissible to regulatory processes or court, etc.”
