Originally posted by poedxsoldiervet
In the light of this I started to make phone calls to our debtors
Umm, un-stupid question, but don't you mean CREDITORS?
Debtor = someone who owes money.
Creditor = someone who is owed money.
So, you contacted your creditors (the ones who lent you money and to whom you now owe money). They lent you credit, and you are now indebted to them.
They're the creditor, you're the debtor. Now you know, and knowing is half the battle.
Or are you calling people who owe you money in order to lower the rates you're changing them on the money they owe you (such a nice guy!)?
Why would creditors actually lower their rates when they know you have no recourse to do anything? They raise your rates because you'vebecome a
larger credit risk.
It's an idiotic catch-22 situation whereby they raise the rates on account of your inability to pay things back, thus making you a credit risk (IE,
at risk of defaulting and paying nothing back). The idea is to encourage you to STOP SPENDING on account of the higher rate. However, it has the
negative effect of making a difficult bill to pay nearly impossible to pay on account of the insanely high interest rates. Thus in essence your credit
risk gets worse on account of the fact all your interest rates rise on bills you're already ill-equipped to pay, making you even more likely to
default than you were to begin with and more likely to simply walk away from the debt.
Banks are insane. But then again, if they lowered people's interest rates, would the people actually pay off their cards, or simply buy more and
carry a higher balance? So, honestly, what's a bank supposed to do?
If I were them in that situation, I'd assess the risk find it unmanageable and suspend the account, then work with the debtor on a payment plan.
That is to say, I'd lock out further purchases, lower the maximum amount of the credit line, and possibly lower or eradicate the interest rate and
just say "pay it" (AKA, give us our money back, and then don't come back, you suck as a credit risk and we won't do business with you any more).
That way, the customer can't add any $$ to their already unmanageable account, and the bank (hopefully) gets their lent money back over time, even if
they don't make any more interest off it than they've already accrued. At least it's something...
But, banks are dumb and can't figure these things out. It's better to cut a customer off and try to get back what money is already owed, than to
keep adding more and more to a debt and force the customer to walk away from it completely.
Just my opinion.
That and banks SHOULD NOT be allowed to retroactively change the APR on EXISTING balances. It's fine to raise the rate charged on FUTURE balances to
discourage future purchases. But you can't change a CONTRACT after it's already been agreed to by both parties without both parties' consent. Only
in the banking world is that kind of bad business nonsense allowed. It's ridiculous. Utterly and completely.
[edit on 6-10-2009 by mgmirkin]