Makin' Money

Hard-core tactics backfire

Chris Farrell Jan 5, 2011

You think so? The National Taxpayer Advocate Nina Olson has issued a report saying that the use of “hard-core” collection tactics by the IRS is backfiring.

The IRS routinely puts liens on delinquent taxpayers. The legal step damages their credit report and credit score. We all know that a low credit score can hurt people looking for a job, trying to rent an apartment, or qualify for insurance–let alone getting a loan.

Knock people down and its harder for them to pay back what they owe.

But this is really a slice of a much bigger issue: The debt collection industry is out-of-control. As a nation, starting with the Bankruptcy Reform Act of 2005 and through the Great Recession, we turned our back on the idea that people deserve a fresh start and a second chance. Instead, we’re turning into a country of debt harassment and debt servitude. Not good.

Global food prices hit a record high in December. The rise in prices is a disaster for families in much of the world. Here in the U.S. it means food will pinch our budgets. Prices certainly seem poised to head higher throughout the year–and beyond.

Tess tweeted on the rise in bank fees earlier this morning. The banks are determined to pick your pocket and hike their fee income.

To counter that lost revenue, banks are thinking about imposing annual fees of $25 or $30 on debit cards, according to people familiar with bank strategies. Some also considering limiting the number of debit-card transactions that a customer can make each month, these people said. Another idea circulating in the industry: Limiting the size of a purchase that a customer could make with a debit card. At the same time, reward programs for debit cards are likely to get the ax, these people say.

Here’s my question: Why do business with the Big Banks anymore? The fee hikes are largely confined to the biggest banks, lumbering behemoths that got bailed out by taxpayers during the recent crisis.

I keep wondering when will money flow of the big banks and into credit unions, community banks, and community development banks, fleeing the fee-hungry Big Banks. I know I’m in a minority, but I don’t believe the we-can-raise-as-many-fees-as-we-want is a sustainable business model. My guess is that two to three years from now the bigger banks will have learned that consumers won’t put up with the strategy. We’ll see.

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