Shameful Collection Practices of American Banks

Previously published on May 8, 2010

In the book of Matthew, Jesus Christ tells a parable about a servant who is ordered to pay the debt he owes of 10,000 talents, or about 60,000,000 years salary for a laborer, that he obviously could not repay. At the threat of his master selling his family, property, and self, he begs for and receives forgiveness. Later that same day, he orders, a slave, who owes him the equivalent of 100 days of a laborer's salary, to repay the debt or stay in prison until he can. Like the parable of the unforgiving servant, the banking industry has graveled at the feet of the US government in their time of need, yet many of these institutes have failed to pass the spirit of taxpayer generosity onto their debtors.

While many individuals facing bankruptcy owe a few thousand to a few hundred thousand dollars, major American lending institutes, which devastated the economies of the world with their reckless lending practices, have received hundreds of billions of dollars from the US government alone. Although they have shed billions in toxic assets, banks have unleashed debt collectors on delinquent Americans to sell what little personal property these people have in a near vain effort to satisfy some of the debt they cannot repay in a time when assets are undervalued and these people's lives have already been turned upside. Certainly, debtors should be responsible for the money they have borrowed as much as banks must be responsible for their reckless lending practices; however, the banks and their managers face far less anguish. 

The reckless collection practices of financial giant Bank of America during the Recession, for example, is one institute that has sparked a great deal of outrage. Not only has this recipient of 45 billion taxpayer dollars been squeezing its debtors, it has done so by engaging in deceptive and unethical practices. Unfortunately, my father, who owes Bank of America a few thousand dollars from various credit card fees, is one of those individuals targeted with these merciless tactics after a combination of overspending and diminished income left him unable to make minimum payments. Although I, as well as other financially responsible people who limit their spending, feel these debtors should be responsible for their behavior, the reckless lending habits of banks lured individuals into endless debt cycles and created the global recession, thus their culpability far outweighs that of individuals.

Furthermore, Bank of America and the rest of these shortsighted financial giants are by far more victims of their own reckless lending practices propagated by executives seeking large sums of compensation than the poor spending habits of Americans. Although debtors should have been far more prudent in their use of credit, banks also knowingly took on excess risk while they fully understood individuals would overspend if given enough opportunity. In fact, banks used default risk as an excuse to charge outrageous interest rates and fees. The goal of many financial institutes was to secure a long time source of income by trapping credit card holders and consumers of other loan products, such as adjustable mortgages, in debt cycles with the use of minimum payments and low introductory rates while saddling unknowing investors with toxic assets. While these practices helped executives justify their inflated bonuses with illegitimate profits, it also left Americans with debt they could not possibly afford.

Furthermore, banks continue their reckless behavior. During a recession, especially the worst one since the Great Depression, incomes are severely diminished and property values deflated, yet banks want to recover quickly so they shake down the American people with foreclosures, repossessions, and illegal threats. The lending practices of these banks have destroyed trillions of dollars in wealth by leading the world into a global recession; however, banks are not going to be required to pay equivalent reparations for their recklessness. At best, they will have to repay funds they received from the TARP program with a small potential profit for taxpayers while organizations like the American Bank Association lobby Congress to absolve them of this small responsibility and inflict more economic pain on the American taxpayer. Americans facing bankruptcy, foreclosure, and financial hardship due to debt they cannot repay have already been punished for their irresponsible behavior with anxiety, humiliation, poor credit ratings, and, at the very least, near financial ruin.

Under normal circumstances, we should expect these people to be financially culpable as well; however, the reckless behavior of lenders deserves far more punitive action. Since banks cannot adequately compensate the world for their behavior and it would only devastate the economy further, indebted Americans deserve the same clemency. Truthfully, financial institutes have experienced a great deal of loss from the global recession, but they can certainly afford to should mercy to their debtors by forgiving debts that will not be repaid anyway without inflicting more pain on debtors. Moreover, writing off uncollectible debt would alleviate a lot of pressure on consumers while the financial sector needs to focus on recovering loses with healthy lending practices versus attacking debtors.
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