Tuesday, August 25, 2009



Two weeks ago, a student loan creditor (I have many) sent me a letter. It was basically a computer-generated message disclosing some vapid stuff about interest rates, new policies, a self-righteous-sounding commitment to green issues, contact information and other gibberish. But vacuous as it was, it still took up eight whole printed pages. I think it even mentioned the bank's "concern" about the "financial crisis;" yet it did not provide any debt relief. To help borrowers cope with these "difficult times," the bank suggested "paperless statements" and even went so far as to open a telephone payment center for "borrower convenience."

What generosity! Who knew the bank cared about me so much that it offered a new way for me to pay my existing debt! Wow, I feel so loved!

But this wasn't the most important thing in the bank's eight-page letter. The most important thing lay buried somewhere in the fine print on page six or seven, I can't remember which: A "Voluntary Opt-Out Provision." Essentially, it said that the bank "shares information about me" with "affiliated and non-affiliated entities" in order to provide "more effective financial services products" and to "offer better opportunities for consumers (like me) to enjoy financial services products."

In other words, the bank was telling me that it tells every other bank about me so those banks can bombard me with unfair loan offers, credit card applications and (naturally) look into my "personal credit score" to determine whether I am a "responsible commercial actor." Thanks to this "Voluntary Opt-Out Provision," however, the bank said I could FORBID them from sharing anything about me with any other bank, "affiliated" or not. I just had to check a couple boxes, sign my name, get a stamp and send in the page to some god-forsaken "processing center" in Nebraska.

I opted out, signed my name and mailed the form to Nebraska quicker than you can say: "Would you like capitalized interest with your loan, sir?"

When it comes to frustrating banks, I'm all over it. The "Voluntary Opt-Out Provision" gave me a chance to stop a bank from making even more profits from my debt. It gave me a chance to wield some power--however insignificant--to prevent the bank from exploiting my economic inferiority for even more gain. The bank already has a lien on my financial lifeblood. They get enough. It sickens me to know that they can make even more from me by selling off my name and address to other banks who just want to do the same thing to me. Generally, the bank holds all the cards over me. When I get a chance to tell the bank "No," I take it, even if it doesn't really change anything. I like knowing that I can strike back once in a while, even if only symbolically.

I know that banks are important. They lend money, which encourages private enterprise and risk-taking. That, in turn, increases the amount of goods and services in a free market economy, blah blah blah. But I don't care about all that. All I know is that I had to assume virtually unending debt to (drumroll, please) learn about contracts, torts, corporate law and civil procedure. I don't regret my legal education. I just think the bank winds up getting a lot more from the relationship than I got. After all, the bank sent a check or two to help me pay my tuition over three years. In return, the bank got a legal right to demand cash from me every month until the year 2036. By that time--if I'm still alive, which I doubt--I will have paid ten times as much as I received in 2003-2006.

Is this fair? Does it matter? The law certainly doesn't think so. The law calls such results "informed commercial bargaining in a free market system." I call it pure economic tyranny. But I'm a radical and I have no power. Plus I signed a paper and the law favors the bank. So the bank wins.

Banks get away with everything. Few things arouse my cynicism as much as banking practices. Even the concealed "Voluntary Opt-Out Provision" shows how much banks hoodwink people. After all, banks assume they can share information about you with their profit-hungry partners-in-finance. They assume you don't know you have a right to opt out. So they conceal an "opt-out" provision in some long, boring letter that most people will simply throw away without reading. That lets them just get on with "business as usual," namely, peddling off your identity to other banks for a fee. When you are in debt, banks have you by the throat. They control the information you receive and sell everything they know about you. If it weren't for Democrats in Congress, you'd never even have the illusory right to opt out from squalid "information-sharing" like this. If banks got their way, you'd never know about their "secondary market" for "borrower information." But banks get around your rights easily enough; they just bury them in fine print and claim "they sent you a letter about it." Getting around laws is easy; you just need to read them.

Debt is a pernicious relationship. Banks exploit the relationship to the fullest. I have friends who recoil in horror when they hear about all the insolent little things that banks do to "screw them," like charging "overdraft fees," "stocking fees," "late fees" and "extra interest charges." They wonder how such unfairness is possible. Without shrugging, I explain that banks get away with everything because they can. It is very simple, actually. Before a bank lends money, you must sign a contract it wrote. That contract essentially empowers the bank to do anything it wants to you after you take the money. The common law evolved to vindicate the rights of creditors--like banks--against debtors. Fairness has little to do with it. Once the bank establishes its debt relationship with you, it assumes a massively superior position. It can knock you about with legal impunity. It can charges any fees it wants. After all, you took its money. From the law's perspective, that entitles the creditor to take virtually any liberty with the debtor. Prostitutes can't complain about mistreatment after receiving a patron's money, either. Like a whore's patrons, banks pay; and they play.

I don't even know who my creditors are anymore. When I started law school, I had to borrow from several lenders. This was the only way for me to cobble together the amount I needed. I had four separate banks. Since then, a few of those banks sold off their accounts to other banks. A few others changed their names or merged with other banks. I sometimes got letters about these changes. But sometimes I didn't. I had nothing to say about it. The banks just sold off my debt like an old shoe, leaving me wondering to whom I actually now owed money. Sometimes a new bank would threaten me with collection action because I didn't send payment to the right place. I would call and stay on hold for 90 minutes in order to say I didn't know they were my creditors now. Then, a year later, that bank would sell my account to another bank and I'd have to repeat the procedure. If my credit goes to hell, it won't be because I didn't pay my monthly tribute to the bank. It will be because the bank shuffled my debt to someone else, and I didn't get the message.

Yet sometimes I face bright moments. "Voluntary Opt-Out Provisions" represent such a "bright moment" in my endless scuffles with creditors. In the usual case, I am a worthless maggot in the bank's eyes, a despicable "account." I am not "Balthazar Oesterhoudt," the man who writes a satirical blog every morning and tries to fend off bills. I am "file number 5670-AC," an "account receivable" worth $413.28 per month until 2036. In short, I am inferior. The bank can squash me if I fail to pay. It can obliterate my credit rating and garnish everything I own. It can even break out the moral invective and call me an "irresponsible delinquent," even though it has no real authority to morally judge me. In the usual case, the bank gets to toss me around, scold me, take my money and do whatever else it pleases.

Yet in "bright moments," I get to say "Fuck off" to the bank--and get away with it. When I opt out, I assert my own power against the bank, maggot that I am. I might be a mere "account receivable" to the bank, but when I opt out from its "information sharing programs," I deny the bank a profit from selling my name and address to some other bank. That is oddly satisfying. After all, the bank is already making a hefty profit on me every month. It is accustomed to taking my money and even making a few extra dollars by selling my information to credit card companies. It is accustomed to doing what it wants with me. But when I opt out, I get to say: "No. You can't do whatever you want with me. Now I get to assert my own power over you. I hereby stop you from using me for your own gain."

This probably makes no difference at all. But I do it anyway simply to show that I am Balthazar Oesterhoudt, not just an "account receivable." I like the idea that I can say I am not for sale, no matter what the bank thinks.

When it comes to unfair power relationships, I OPT OUT. Banks can devour my property, but they'll never break me.

Two years ago, I learned that there is more to life than property and bodily comfort. If you understand that, there is nothing a bank can do to hurt you.


SteveW said...

I don't want to nit-pick (yes I do :D ) but I think your estimate of what the bank gets out of your education is WAY off.

First - assuming they charge 8% interest on your student loan (which is probably too high), they will collect only 2.64 times the amount you paid over a 30-year term, not "ten times." Further, if the interest is only 6% (mine is actually 3.5%) then the amount is only 2.15.

If we live in a background inflation environment of 2.5% (which I think is optimistic given our current monetary policy), those factors are reduced to 1.85 and 1.51, respectively.

I.e. for you to get the benefit of an immediate cash infusion (which you chose to use to educate yourself), the bank gets 51 to 85 cents back on the dollar, over a period of the next 30 years.

Sorry, the bank is not screwing you.

Balthazar Oesterhoudt said...

Perhaps you're right mathematically. But it sure seems like they're screwing me. You know me: I'm all about rhetoric, and rhetoric focuses on appearances as much as--if not more than--realities. If it sounds good, it works.

Mild screws can be profitable, too, when you consider that banks have millions of other "file numbers" beyond mine.

It's better to mildly screw 500,000 students than to totally screw 5.

SteveW said...

But it's even easier to screw just one entity - and a nameless one at that. Think of how much easier it is for the banks to get a tax break from the government to the tune of billions, or a "bailout" to the tune of tens of billions. And all this can be had for the low-low price of sending a hot lobbyist in to tell a legislator she likes to be spanked. That's way more efficient that skimming from a bunch of students over a long period of years. I'm thinking that the main activity of banking is just a front for mugging the government.