Just as an example of why you don’t settle with banks who have shown themselves to be utterly lacking in any moral follow-through or willingness to act in ways beneficial to their consumers, check out this story from Harold Pollack at The Incidental Economist. Pollack tells a tale about the financial challenges of parents who take care of their seriously ill sons and daughters. “When your kid is this sick, you will run out of money,” is the general sense that Pollack gets from talking to these families. The whole system, from the soaring insurance and treatment costs themselves, to the cost of constant stakeouts at hospitals, the parking and meal fees, and so on, moves families toward pennilessness. Lodging for families of sick children at hotels or places like the Ronald McDonald house can add up as well.

And then, there’s a comment down the page:

As a resident manager of David’s House, a beautiful private nonprofit home away from home for families of sick children at Dartmouth Hitchcock Hospital , like a Ronald McDonald House, one of the saddest and most frustrating things I saw was student loan collectors that would not work with parents who had run out of forbearance time to reduce or temporarily waive student loan payments despite their medical emergencies. Even the federal government will operate this way when a student loan goes into collections. Will not work with the debtor at all. We had collection agencies tracking down parents at our facility because, of course, parents who were living there temporarily needed to make the phone number known instead of keeping it confidential. The student loan crisis: another problem that you economists should address.

I haven’t yet been able to contact this commenter, so I don’t want to draw too much from this. But it rings very true, and the guy should go to the CFPB with it. Indeed, debt collectors, usually on behalf of banks, partake in the most unscrupulous tactics out there. We know that JPMorgan Chase recently suspended all their court filings over debt collection, presumably because of some truly awful misconduct in which their debt collectors were engaging. Some possibilities include the exact same kind of robo-signing we’ve seen in the foreclosure process – robo-signing that has not stopped, by the way. Also, JPM would sell the debt collection to a third party and massively inflate the amount of the debt, making a killing and passing off the problem to someone else. This just increases the urgency and desperation on the part of the debt collection agencies, and that’s why you see them tracking down families caring for seriously ill children at places like Ronald McDonald houses.

The financial predators do not deserve the benefit of the doubt in being able to choose, as they apparently would in this settlement, which borrowers get principal reduction relief, and for how much. They have shown themselves to be ruthless, and actually unwilling to do modifications they agreed to in prior settlements. Any AG that enters into a settlement with these kinds of businesses should have their head examined.

David Dayen

David Dayen