The Debt Trap

Have you seen “Brave Heart,” the movie with actor Mel Gibson?

Gibson plays the role of William Wallace, a 13th century common man who rallied his fellow citizens to fight for their freedom against a cruel English ruler determined to inherit the crown of Scotland.

Throughout history, people in positions of power like the English ruler have sought to enslave the common man. The common man, throughout history, has fought to preserve their freedoms. Until now, that is.

We have been tricked and then trapped into a life of financial slavery, and we have chosen to not to fight back.

The Trick:

No annual fee.
Zero percent (0%) interest for the first 6 months!
Transfer your existing balances to the 0% interest account for free!
Access Checks to purchase anything you want, including vacations, dinner and drinks, even a down payment on a new car.
Every time you make a purchase you earn points toward gift cards, frequent flyer miles, or even cash back to your account.

The Trap:

Those all appear to be great deals. Thus, we swipe our credit cards and spend some easy money. Then all of a sudden, WHAM!, we are caught in the debt trap and under the thumb of the banks for life. Once those interest rates kick in after the free trials, we struggle to make a dent in the balances. To ensure we stay in the trap, the banks jack our interest rates up to 29% after we make just one late payment. At that point, we are right where the banks want us to be – paying interest for the rest of our lives. By the time we pay off that new TV, we have already thrown it out and replaced it with another one (on credit of course). It is all a big mirage and the banks are pulling our strings, picking our pockets and tricking us into thinking we are in control and having a good time until it is too late to do anything about it.

This trap has us owing the banks $801 billion in credit card receivables. Are they satisfied with that? No! Thus, they have created a new and more powerful debt trap. The new trap, which offers loans to students, has exceeded $829 billion making it the banker’s most profitable income stream in American history. It has also become the most oppressive, exploitative and egregious debt known to mankind.

This oppression against the common man started when Congress removed bankruptcy protections, refinancing rights, statutes of limitations, truth in lending requirements, fair debt collection practice requirements (for state agencies) and even removed state usury laws from applicability to federally guaranteed student loans. Congress also gave unprecedented powers of collection to the industry, including wage, tax return, Social Security, and disability income garnishment, suspension of state issued professional licenses and termination from public employment. These, and other unprecedented collection tools are now being used against borrowers for the purpose of collecting defaulted student loan debt.

Concurrently, Congress established a fee arrangement for defaulted loans that allows the holders of loans to keep 20% of all payments from borrowers before any portion of the payment is applied to principal and interest on the loan.

As a result of Congress’ actions, twenty three percent of students are currently in default on payment of federally-backed student loans. Once in default, students experience extreme difficulty in bringing balances current since very little of payments is applied to the principle and interest while the balances of debts escalate due to unexplainable fees and interest.

Congress’ intervention has also allowed student loan collection agencies to garnish wages without a judgment or court involvement. Collectors are only required to notice consumers of their right to an administrative hearing to dispute the validity or balance of the debt. Consumers have fifteen days, once noticed, to request a hearing; but otherwise, collectors may garnish up to 25% of disposable income or wages without a writ of garnishment.

You would think the banks would be satisfied with 25% of our income, but no – collectors of student loan debt now have unrestricted access to the full amount of social security checks and income tax refunds. Sadly, the US Supreme Court has upheld this outrage.

This ability to collect student loan obligations without restriction has allowed collectors to abuse students analogous to that of evil rulers in 13th century Scotland. After all, why would collectors be interested working out payments plans when they have free reign to take whatever they want from us?

What are we doing to stop this oppression? Nothing! We have given up. We feel there is no recourse. We do not know what to do, and we do not know whom to trust. As a result, we do nothing and accept the consequences – a life of garnishments and financial slavery.
Unfortunately, my attempts to emulate the efforts of William Wallace have often fallen on deaf ears.

Ironically, viable and affordable remedies exist. In some cases, these remedies are without cost to consumers.

For example, attorneys are available in all 50 states to file suit against collectors of credit card and student loan debt. This nationwide group of litigation attorneys is willing to bear all expenses, including court fees and filing fees. The law suits are based on violations of the collection, credit reporting, billing and bookkeeping laws. The goal of the suits is to accumulate monetary penalties in excess of debt obligations in order to compel the banks to excuse the obligations, discontinue collection efforts and remove negative entries on credit reports. Consumers receive a portion of the settlements with, once again, no money out of pocket.

A secondary strategy is to challenge the banks that originate credit cards and student loans based on the premise that they do not accept liability when they extend credit to clients. An absence of liability presumes no money was lent. This strategy does not require an appearance in court.

Another example of a potential weapon against banks may initially appear as too good to be true. The US Department of Education will pay off government-issued student loans, irrespective of balance due, and establish one new loan with monthly payments based on income. Once implemented, defaulted loans are considered current, interest rates revert to original rates, and garnishments are terminated. The balance of loans may be excused after 10 years of payment contingent upon factors beyond the scope of this discourse. Nonetheless, everyone qualifies for this government program irrespective of credit standing or employment status.

It is important to understand these examples of strategies or weapons against the banks do not require hand-to-hand combat with swords and arrows as in the days of William Wallace. Most of the strategies do not even require effort on our part. Attorneys and other professionals fight on our behalf. Yet, for most of us, we dispel potential remedies or solutions to this oppression with apathy and indifference.

Where would citizens of Scotland be today if they had not listened to and followed William Wallace? Are we to continue feeling helpless and hopeless while doing nothing to defend ourselves?

Doug Johnson