Michigan Collection Law Blog published By Michigan Creditor Lawyers Nitzkin & Associates

My wife and I are on vacation in New York. She would kill me if she knew that I was doing any sort of work including posting anything to my blog. She is still sleeping, so now I can send this note to you.

Today, there is a very interesting article in the USA Today. It talks about banks lowering credit to credit card holders. If/when a bank lowers a consumer's borrowing limit, it will have the unintended consequence of lowering the consumer's credit score (FICO) score. If you do not already know, your FICO score is made up of a number of factors. The thing that makes this article disturbing is that it is not something that the consumer can control. For example, a consumer's credit necessarily takes a hit when the consumer submits a late payment. In this case, the consumer's credit gets dinged by the bank just for lowering the credit limit.

In my experience a bank will most likely look at a consumer's payment history and look at the balance carried and for how long it has been carried before it makes a decision to lower a consumer's maximum credit. In my opinion, if you are carrying a significant balance on your credit card, I would recommend that you find a way to refinance that balance with another lender. While a home equity loan may be a very difficult thing to do today, you may want to consider tapping into your home to pay off your credit card balances. Just be sure not to rack up a large credit card balance again.

My colleagues at Credit Slips write a blog that generally bashes credit grantors and bleeds left wing sympathy for the poor. OK. I am closer to being a rich guy that a poor one, but so what? I ain't apologizing. I grew up in a nice home, had my parents to pay for my undergraduate and law school degrees. I have thus far had a wonderful and privileged life. I am pleased as G-d has been good to me.

My colleagues at Credit Slips have recently taken to bashing the Payday loan industry in blog entry entitled Predatory Lending: Robin Hood in Reverse posted by Keith Kilty. I don't know Mr. Kilty or the amount of experience he has talking with the owners of these business. I represent one such entity as its lawyer. I can tell you that it takes a lot of money to pay the start up costs of the the business, pay employees, rent, security and other over items. Pushing all of that aside, Mr. Kilty may not know that a good deal of the checks that are written by Payday customers go bad. When they do, someone has to eat that loss. If the business owner were to eat that ENTIRE loss, he would find himself out of business. The Payday loan business owners protect themselves against these eventual and unavoidable losses with a higher interest rate. Hence, everyone pays a premium to cover the losses that are bourne by the business owner due to the relatively high frequency of these Payday loans going bad. If their interest rates were cut by law, many Payday business owners would simply close up shop. Hence, a Payday customer needing cash immediately would have one less available option to solve the pressing cash need. Is that a solution that Mr. Kilty would prefer? While I understand that some state legislatures are beginning to examine the business operations of the Payday loan industry, one can be sure if that interest rates get cut by statute, many of these business owners will close and do something else with their investment. Is this a direction that Mr. Kilty things would be good for the poor? I sure don't think so.

A friend of mine got into deep trouble with his credit cards last year...$100,000 worth of trouble on 2 credit cards (my friends, this is not at typo). He was pursued by American Express for $50,000 and another company. I settled these cases for about $5,000 each (again...this is not a typo). Here is the problem.

I sent a demand to American Express to provide me copies of his credit card statements. Looking over his statements for the past several years, it was painfully clear that he was living on this card. He took large cash withdrawals to pay his mortgage, car note and other general living expenses. He had absolutely no ability to repay this debt. Even if you never met this guy and knew nothing of his situation, you could look at these statements and see that these balances were simply climbing higher and higher. So what's my problem? I'll tell you.

1. If it was obvious to me (and things are rarely obvious to me) that this guy had no ability to repay the draws on this credit, it had to be clear as day to the folks at AE. So why did they lure this poor schmuck into a financial corner? Why didn't they simply cut him off at the point when his interest payments were over $1,000 per month? Did they take advantage of a necessitous borrower or a mentally sick man? In either case, it made me think of how many people are out there that are in this same position but are being bled to death by these credit card lenders. Even as a debt collector, this nauseates me; almost to the point of offering my services free to credit card customers that have been taken advantage of in this fashion...almost...almost....

2. When a credit card customer charges $100,000 to his card and walks away from $90,000 of the debt thanks to great counsel (please forgive that shameless self serving commercial plug), who do you think foots the bill for that difference? You and I do. In the collection business, we have a saying; there is no such thing as an unpaid bill. Again, more injustice.

I tried to find a cause of action to pursue these credit granting vampires who clearly feast at the necks of the weak and poor. However, these monsters of darkness have a very strong lobby and, as far as I can tell, there has not been any successful cause of action against these parasites. Don't get me wrong. I have credit and am very thankful for it. I just don't like lenders that target needy borrowers, put them in a hole and slowly bleed them to death.

Does anyone else feel this way? If you think about, doesn't anger you?

I am not a particular eloquent writer, but Professor Elizabeth Warren is. I would recommend that anyone interested in this article follow her blog "Credit Slips."

This last weekend, I was in Chicago attending the American Bar Association conference on Technology. While in Chicago, I saw the movie, Maxed Out. It is the only feature movie that I am aware of that deals with consumer credit. The movie was a documentary about consumers that got into trouble with their loans and credit cards. I left the movie shaken and I am a collection attorney.

Maxed out was a documentary that pointed the finger for consumer woes on the credit granting policies of the the likes of Citibank and MBNA. For example, two mothers spoke of how their children, new to college campuses, arrived to find the credit card companies signing up college kids who have no income and are probably drowning in student loans. These two mothers found out that their kids received several credit cards and could not pay them back. These kids committed suicide. Extreme? Probably. Is it the credit card company's fault? Who knows. Should credit card companies target college kids that generally have no income to repay debt? Absolutely not!

Professor Elizabeth Warren, from Harvard, commented throughout the movie. She stated that the credit card companies make their money by putting people deep into debt so that people spend the rest of their lives making the minimum payments. In other words $1 loaned usually equals $2 repaid. The credit card companies and banks make their money targeting lower to middle income people. It was absolutely nauseating. I highly recommend Maxed Out. I think it should be required viewing before someone takes out a credit card.

The movie had a lot to say and really exposed the soft slimey underside of predatory lending. In fact, this movie has led me to create a new topic category on this blog that I will call Disturbing Trends in Lending. There has been a lot of controversy regarding predatory lending as of late and I think it is high time that we all discuss it. More to come....