Fred owes 5k to Bank A for a car loan.
Fred owes 175k to Bank B for a home loan / mortgage.
Fred owes 2k to Bank C for his overdraft / plastic.
The car loan from Bank A was made at an interest rate of 9.5%, the home loan from Bank B was made at a rate of 4.25%, the overdraft/plastic from Bank C is 13.95%
Three separate loans, three separate legal contracts, three separate incredibly powerful potential opponents.
Fred, or Freda, has goldfish memory, he cannot remember ordinary vehicle purchase loans running at 33% APR… I can.
Fred, or Freda, also suffers from massive ignorance, if Bank A sells Fred’s debt to Bank C, then Fred can forget all about any arrangements or contracts he had with Bank A, they all expired, the only thing left is the debt.
Bank C can say to Fred “Pay us in full, NOW!” or they can say “Everything is staying the same, except we are charging you 25% APR interest on your outstanding balance, not the 9.5% you were paying.”
Fred or Freda cannot stop Bank A selling his debt / contract to Bank C, if Fred / Freda doesn’t like it the only real option is to pay off the debt in full, and yes, there will be an extra “arrangement fee” to do that.
Fred or Freda cannot enforce the terms of a contract between Fred(a) and Bank A, upon Bank C, as they are not named in it, Bank C bought the debt from Bank A, Fred(a) wasn’t part of that deal legally either.
Once Bank C hold’s Fred(a)’s debt, then that debt is the only thing that has survived the transition from Bank A to Bank C.
Bank B now notes that Fred(a)’s financial situation has changed, eg loan payments have just gone through the roof, making the outstanding mortgage more risky, and more risky loans = higher interest rates, so Bank B increases the minimum monthly payments Fred must make.
In the “last” recession I had a friend, he had a great business, it employed 12 people, cash flow was good, order books were full for nearly 18 months, he was doing great, naturally enough he used Bank provided finance to make everything simpler and easier and smoother, but see above, cash flow was great, order books were full for the next year plus, all 12 staff were working and making him a profit, he was making all his payments on time and had cash deposits as well.
The Bank called him in, sat him down, and called in ALL his loans, which closed his business, put 12 men out of work and left his customers on the order books having to find a new contractor etc etc
The Bank manager told him, unofficially, plain as day, “Fred, we (the Bank) did not call all your loans in because you could NOT pay, but because you COULD pay… we need the money…”
This, like a certain bank offering me a vehicle loan at 33% APR are not mythical fairy stories, this shit happened in my lifetime not ten miles from where I sit right now.
The fact is people today not only lack clue #1 about the true nature of debt, they also lack clue #1 about the true nature of Contract Law, and they lack clue #1 about the Golden Rule, he who has all the gold makes all the rules…
Fred(a) vs Banks A/B/C in various Courts, arguing that Fred borrowed the money for the car from Bank A, and that should be that, is an unequal battle, a non starter, it is going to do nothing except pound Fred(a) even harder into the ground.
Those of us who are not Fred(a), those of us who always understood that percentage interest on loans is an Exponential Function mathematically speaking, those of us who always understood that the Bank has more lawyers than I have hairs on my head, those of us who always understood that a loan from a bank for a car was a contract, and just as I can sell the car at some future point the Bank can sell my debt at some future point, those of us who always understood that THE LOAN HAS YET TO BE WRITTEN THAT DOES NOT CONTAIN A PROVISION ALLOWING THE BANK TO DEMAND IMMEDIATE AND FULL SETTLEMENT FORTHWITH, are those of us who relatively speaking owe sweet fuck all today, view what the rest of us are doing as some sort of cross between boarding a train that is already involved in a slo-mo train wreck, and jacking yourself up with the latest wonder drug which is nothing more than rat poison with a label stuck on it saying “Wonder drug” and obscuring the rat poison label… barely…
Indentured Servitude is an evil thing, and yet it appears that all those who have the gold have to do is offer the screaming masses a iphone and a large screen TV and a new model Ford on easy easy terms, and Fred and Freda will willingly take the first steps on the short and slippery path to Indentured Servitude.
