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Equifax removed the $125 claim payout option after millions submitted claims (twitter.com)
600 points by pavel_lishin 20 days ago | hide | past | web | favorite | 441 comments

We're all supposed to take it as just a fact of life now that we need a monitoring service for a service none of us opted in to.

And who runs these monitoring services? Why of course, it's the credit reporting companies! Who else would it be. So not only do they know when fraud is happening to you, but they will happily ruin your life while knowing and charge you for the privilege of knowing this is happening to you. And maybe, if you're lucky and the tiny font legalese text is in your favor, you can stop the flow of awful things happening to you at any given moment in time. Events which may just have all been started because Equifax didn't give a damn in the first place about the security of your private information.

In France we don’t have credit scores and credit monitoring companies, but everytime you take a loan you are asked for a ton of proof of solvability, and basically give your full bank statements to the credit lender so that they can check your incomes vs spendings (and see what you spend on btw). Don’t know what’s worse.

This is a great 99% Invisible episode about how credit cards came about, and what it was like beforehand, where you would be interviewed at length by a store before being given credit to buy, for example, a piece of furniture. Credit cards were designed to outsource checking of credit-worthiness, stop intrusive interviews with stores and avoid embarrassment of being rejected in-store. Lax digital storage of information and consolidation in the credit rating industry seems to be the problem here, not credit ratings per se.


Everyone seems to like the idea of friendly local stores these days, but I also remember reading an interview with someone who was around when large chain supermarkets were starting. They loved the fact that they were relatively anonymous so people weren't able to gossip about you buying, for example, condoms.

There's clearly a balance to be struck here, and it's well away from a sensible middle ground at the moment.

Coming from Europe, it would never occur to me to buy furniture on credit, is this something common in the US ?

I'm also European, but buying furniture on credit is perfectly normal in my country - indeed, it would be quite unusual to buy any big-ticket item and not be offered credit terms, usually with an interest-free option.

I'm also a human being from planet earth, and if I'm ok with paying X in cash to buy something, and the other persons offers me paying it in interest-free rates, it would be stupid for me not to.

Worst case, I move the cash to a 2% interest rate bank account and let it sit there. Best case, there are other investments I can make now with that capital, and end up paying less overall for whatever I was buying because having the money has made me money in some other way. Lucky case, the company bankrupts and I don't end up having to completely pay for the thing at all.

Being also European, it is rare to be offered interest-free financing, and when you are, is because you are already paying a premium and could find the stuff cheaper somewhere else. But occasionally, some shops do have the cheapest price and still offer interest-free rates. I always take it, and have no idea why I wouldn't do that.

> if I'm ok with paying X in cash to buy something, and the other persons offers me paying it in interest-free rates, it would be stupid for me not to.

Disagree. This severely complicates my economy.

Instead just having X funds less available, I still have the same funds at disposal, but have to remember I owe X to Y which must be paid by Z.

Even just once this makes the simple question “How much disposable funds do I have?” hard to answer.

More than once and I will need a system to manage my own personal economy. That’s horrible!

When asked for credit I always answer no, because the small savings of delayed payment does in no way make up for the extreme complexity it adds to day-to-day economics.

This is not a hard problem to solve... Personally I use YNAB[1], but there are plenty of other options out there.

[1]: https://www.youneedabudget.com/

What I do has worked great for >10 years: - Direct deposit paycheck into checking account 1(the main account) - automatically transfer spending money to checking account 2 (I call it the Petty Cash account) - auto transfer $x for the large recurring or known but infrequent bills into savings account 3 (I call it the Escrow account) - Only issue bill payments from the main account - Only walk around with debit card for petty cash account. I also use this for online purchases, Amazon etc - As needed, transfer from escrow to main to pay off something big, like property tax or car insurance.

Play with the transfer amounts to suit your budget. This helps you not have to think about spending money, or if you have enough to pay rent that month.

Back to the furniture example from grandparent comment, I simply ensure that main has enough in it each month to cover the monthly expenses. HTH

> Disagree. This severely complicates my economy.

Some online banks have virtual subaccounts, which let you 'hide' money from your main account, if that's the way you are tracking funds available.

> More than once and I will need a system to manage my own personal economy. That’s horrible!

You already have a system, and it sounds like it's 'ask the bank how much money I have'. In the not too distant past, checking accounts came with a checkbook that included a register for you to track your expenses, but I guess humanity has declined.

You're going to need a "system" to manage your finances no matter if you buy furniture on credit or not.

In fact, if you aren't buying on credit your finances are more complicated because you have to plan ahead make sure you've got future major expenses covered.

> a 2% interest rate bank account

I'm fascinated by this. Where do you find these sky-high interest rates in banks?


Make sure you go past the "featured" ones :-)

There are several floating around right now.

Ally Bank, wealthfront etc.

The key is to make sure they're FDIC insured.

In this case they make they money with people that forget about it, or do it late and pay huge premiums. I don't want to encourage this business model, that's why I don't do it.

No, they offer the credit to incentivize you to make the purchase right now, don't think about how to pay it now, because ... you can just pay it over a year.

And it's perfectly okay for example if you just bought a new flat and you're broke as fuck, because you spent all your cash on must-repair stuff, like getting the plumbing in order, but you also fancy a new bed, because you have none, so interest free bed it is!

Of course if you barely make enough to live month-to-month, then it's unlikely you'll be able to pay the monthly installments of the loan. (And usually you'll be declined even the in store zero-interest loan too.)

But why do the banks do it if they don't get any interest? It seems they are just loosing money here.

Have you seen eg. Germany's bond yields? They are negative. People love safe money parking, they don't want to take risks, manage investments, oversee companies, fiddle with product development, bet on innovation, think about market fit. So they do the next best thing, try to come up with minimal risk minimal profit financial products, and that's what these furniture/fridge/oven loans are.

Furthermore the shop pays some service fee to the loan provider, and thus they scrape by.

I'm also European and I know, within my own country, one group of people who would fin it completely normal to buy TVs and furniture on credit and another group that wouldn't. The former is low income and the latter is high income.

People in low income communities find it very normal to buy on credit, often allowing you to buy now, pay in a year. My friends from higher income communities think this is a strange thing to do.

What I'm trying to say is that some of these customs might not depend on country, but even on groups within countries.

On a related note, I've personally noticed that here in the Netherlands, there's a pretty clear split between low income and high income, very tightly connected with education. In 'High School', lower and higher education are split in different classes and often different schools. So friendships are often formed within these groups and not across them (sports begin the exception). Because of this, a lot of people think something is normal in the Netherlands, but it's actually normal in their environment.

Being offered whether actually planning to buy on credit are different things. I'm German and would never buy furniture for which I don't have the money (exception maybe if the oven breaks and I don't have enough at hand) - but I'd never buy a sofa paying as instalments.

Culturally, Germany seems to have a strong aversion to personal debt. In the UK and Ireland, consumer behavior is very much in line with the US.

This is absolutely the case for Germany yeah. We only take credits out for cars and houses mostly. Taking out a credit for common or ordinary items is very uncommon and looked down upon. It "shows" that the person can't handle money well or lives above their means.

Each time I've got a sofa I've done it on credit. It's always been 0% interest and it seems sensible to keep money liquid if someone wants to give me credit for free.

I had the exact same thought. Making credit easier to obtain is taken as 'good' but I only see that as beneficial for something major like a house or car but the idea of going into debt for disposable items seems really weird

Unfortunately, it’s deeply ingrained in US culture to rely too much on credit. It’s just one of many barriers that separates the wealthy from the poor.

Payday lenders don’t have limits on the amount of interest that they can charge for a given payday loan. Worse yet, loan applicants don’t have to demonstrate ability to pay the loan during the application process.

Legislation was recently passed to require payday lenders to loan only to those who could demonstrate ability to pay, but this was recently reversed after intense lobbying by the payday lenders.

Credit access is vastly predatory in the US, and feeds into our consumerist culture that believes in nice phones, watches, cars, whatever, and has created generations of debt slaves owing interest in excess of 20-30% that they’ll likely never be able to repay.

A former coworker once said to me: “those who understand compound interest earn it, and those who don’t understand compound interest pay it.” And generally, I’ve found this to be very true.

For low income families, furniture is something major.

Low income families need to buy furniture at the goodwill, not taking out loans for a leather sofa.

And people who can't afford to pay cash for cars should buy used cars.

Sometimes cash flow is more important than final price. I haven't experienced it myself, but I heard that this is especially true for low income people who live paycheck to paycheck. The $300 couch you can get on a credit for 24 easy payments of 30 dollars is easier to afford than the $100 used couch.

I find this to be an interesting quip.

I do agree with you, since I've done it myself. I've also taken furniture friends were going to trash. But I refinished and cleaned them. However I know not everyone has those skill sets.

But, is it right to say someone can't have something moderately nice? I couldn't afford to in the past and lived like that. I didn't like it, obviously. But I also had an "exit strategy" to that situation, which has decently worked out.

I'm just curious how I'd feel if it didn't work out. Even though I agree with you, that comment kind of stung oddly... I don't know...

> is it right to say someone can't have something moderately nice

If they can't reasonably pay for it, I don't see what other option there is for a responsible adult. Perhaps that is my cultural background speaking.

They often rent it at Aarons or Rent A Center

I haven't financed furniture but my impression is that if your credit is decent that the cost of financing it is basically the same as paying cash.

Furniture is high margin, low volume so furniture retailers have an incentive to spread out cash-flow and get consumers to buy more expensive furniture than they would if paying all at once.

That said, I suspect if your rand the numbers you'd find that the overwhelming majority of furniture (by units sold) is bought cash from Walmart, Ikea and the like by people paying cash.

Furniture can often be sold on credit or with payments, because it can be a pretty big investment (e.g. a good bed). Mind you, can be - chains like ikea offer products at a price that should be payable from savings.

But it's also pretty common for cars and houses and the like.

>it would never occur to me to buy furniture on credit

Ikea, and nearly any reasonably sized furniture store, has a financing arm. So I assume it's common (and a money maker).

Thing is, often these places offer 6 months interest free and what not, so as long as you pay off your debt in the allotted time, it's smarter than paying cash.

Those loans can be a profit center as they make it really easy to miss a payment, and then instantly jack up the rates to ~20% APR. Think short window to make a payment and no automatic payments available. It’s probably not worth it for effectively a sub 1% discount.

>It’s probably not worth it for effectively a sub 1% discount.

The discount is small, I agree. But it's always worth it. It's riskless if you have the cash anyway.

It's worth it until you miss a payment and run in the absurdly high interest rates. Which makes it not riskless, because your risk of missing a payment is non-zero, even if you think it is zero.

And regarding having cash: if you set aside the full amount in cash at time of purchase in order to reduce the risk of not being able to pay the rates, then you did win absolutely nothing. Opportunity cost of not having that cash available for profitable investments in case of paying in cash is what could possibly be the reason for the credit variant being cheaper in the end, but that of course depends on you investing the cash and divesting just when it is necessary to pay a rate.

It's not always worth it. If you have to spend 1 hour to set it up initially, sign the paperwork and then an extra 15mins per month paying it, it might already be very much not worth it.

The fact that these constructs exist and only make money when people make mistakes should tell you that enough people make mistakes to make it profitable. This makes it not riskless at all. It makes it predatory.

These constructs also helps people buy more expensive items than what they could afford without credit. I wouldn't jump to that conclusion just because it exists. Credit companies also take small fraction of the transaction. The store is willing to pay that fees because it increases their revenue.

If they can't afford it without credit, they can't afford it with. And vice-versa. There is no credit construction that will make this different, except if it has a negative interest rate. To me this is obvious because if they can afford the credit, they can afford to save.

It’s up to you how many hoops you want to jump through for ~10$. Just be aware some companies do things like destroying mail without opening it.

Many places offer interest-free deferred payment. For example, Design Within Reach, through Synchrony Bank, lets you pay in equal installments over 24 months (or less, if you want) [1]. APR around 20% kicks in if you go past the time limit.

[1] https://www.mysynchrony.com/mysyf/paymentestimator.html?intc...

Back when I was younger I bought about $1500 in furniture from Art Van on credit, and did not pay it all off within the 18 or 24 months

Then I got smashed with a HUGE interest charge, they charge you ALL of the interest from the 18/24 months at the end of that time if you have a blance

I buy $300 couches from the clearance center now, in cash.

If you have the $300 in cash, why would you not put it on a credit card that earns you cash back or points?

Would you possibly be in the top 20% household income percentile? For such households, it's generally not required to buy furniture in credit in most markets. Credit for these sortse of things generally is for people with lower income

In my country lower income people usually save money first (even if they need to save for a long time, like a year or two), then buy expensive items, like furniture.

Typically it works like this: people simply try not to spend their whole income, and save at least some part of it. Then, when they arrive at a significant amount of it they sit down and think: what can we do with those money? buy a new car? redecorate our living room? And if they decide to redecorate they buy furniture or whatever is needed with cash. Buying stuff on credit is pretty much unheard of.

What's the difference between saving money for a year and buying on interest free credit, with the "saved" money going to payments for that year?

Yes. There are even large chains where you can rent things like furniture and TVs.

Why was that interview so lengthy? Usually, in Europe, if you can show a bank statement for the last ~3 months that shows you get regular payments from a company, and/or a statement from your employer that you're a regular employee (not just started, not already halfway out of the door) then you're good to go.

In the US you still have to provide the same amount of paper work for large loans like mortgages or for renting an apartment even though they already have all the information they need.

I wouldn't compare the paperwork involved in a mortgage to the fairly simple rental applications I've seen.

Hm, here (Hungary) landlords just ask for a deposit (usually ~2 month in advance), no credit is involved.

The interviews sucks, but do you think those credit bureaus (+ your bank + your credit card operator) don't have that exact same information?

I might add it's one thing to buy a car or house on credit, another, very different is to gouge on credit cards and have them topped up beyond your repayment capacity.

In the UK at least the Credit Reference Agencies don't have any information except debts and re-payments.

The best of them (Experian) can see that I have a credit card and I pay it off every month. They can see I don't have any unsecured loans from major banks, and that I'm registered to vote (information available for personal inspection to anybody but supplied in bulk only to CRAs)

None of them has any idea that I own property, or that I have a large amount of savings, or that my salary is many times more than my expenditures. That's invisible. I could prove it if I needed to do so for some reason, but it isn't passively collected (in the UK at least).

Unfortunately, most of us did opt in. If you look at the credit agreements we sign when we buy cars, open credit accounts, enter into a mortgage, we give the lender the privilege to share our data with these credit reporting companies.

I'm aware this is legally the case, but I think this is yet another sign that default opt-in isn't a legitimate agreement, society has become pretty litigious and I think some of the understanding around default opt-ins during enrollment for other services and third party data sales need to be revisited.

I find them to be highly unethical and to generally result in a contract negotiated without compensation and any communication in good faith.

This is not "default opt-in", like having the "Subscribe to our email newsletter" checked on an online order form. The sharing of credit worthiness information is the cornerstone of your ability to get credit. It's not a hidden extra, it's not something you can choose not to get, there's no "opt out". It's a condition of doing business with the credit grantor. It's like opting out of having a driver's license. If you want to drive, you have to have one.

> The sharing of credit worthiness information is the cornerstone of your ability to get credit. It's not a hidden extra, it's not something you can choose not to get, there's no "opt out". It's a condition of doing business with the credit grantor.

No, this is only true because the law does not meaningfully restrict abusive contracts. Sure, a credit card issuer should [0] be able to ask some agency for information on your credit risk. It does not follow at all that the issuer should have permission to give information back to the agency.

[0] Even this is debatable. One might reasonably argue that the use of inscrutable conditions for the issuance of credit cards is discriminatory and should, as a matter of public policy, be disallowed. As a simple example of how this could work, all credit card issuers could be required to instead issue prepaid cards with identical terms, benefits, and usage from a merchant’s perspective, and credit could be an opt-in extra feature.

How would 'some agency' have anything to say about your credit risk if issuers of credit weren't feeding them information about your credit performance?

What's more bothersome to me is that these companies are scooping up every bit of information they can about me and selling it to anyone. Did I consent to TheWorkNumber? I definitely did not with the first few employers / payroll processors who have sold out my payroll data.

I Google my full name and the first hit is some background check site that shows my birthday, most of addresses I've had since the mid-90s, every family member I've shared an address with since 1999, information on two vehicles I presently own and one former, and that's just the bait to get someone to pay for whatever else they know about me...

'Credit' information is the tip of the iceberg.

> my birthday, most of addresses I've had since the mid-90s, every family member I've shared an address with since 1999, information on two vehicles I presently own and one former,

Your existence in the world isn't a secret. Every scrap of that is public information. You have a postal address to get mail, you register your car with your state to pay taxes on it, etc.

Well, your point overlooks the points I was aiming for.

1. Any of those scraps of data have negligible value by themselves, but when they're aggregated and traded their value is vastly increased.

2. I don't have any choice in how those scraps of data were originally gathered and shared. Should I not to have an address? Pay my taxes? Register my vehicles?

1. Yes, that's true. The value increases, in that the more data that's available, the better the decisions that can be made.

2. So? Why should you have a choice in it? Those things are classified as public records, available to anyone.

But it really doesn't need to be.

Maaaaaybe birth certificates should be public, but why should who owns what car be public? Or who lives at what address?

At the individual level nothing stops me from maintaining a list of people I think are trustworthy or noting prior acts for evidence of such.

There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.

> At the individual level nothing stops me from maintaining a list of people I think are trustworthy or noting prior acts for evidence of such.

> There’s no opt-in required because you’re not the one providing anything. The customer of the credit agency, the company extending you credit, is opting in to share what they know about you.

Until you get too large, powerful, and rich, then the government regulates you. This is the purpose of regulation, to control the abusive use of power.

> It does not follow at all that the issuer should have permission to give information back to the agency.

The agreements you sign when requesting and getting credit explicitly grant that right.

Nothing is really “explicit” when it’s buried in pages of small print legalese. If everyone just read (forget understood, just read) everything they ever signed or agreed to thoroughly, life would slow down significantly.

Take a look at a CC application and see where the information on going to a CRA is. I just went to a random online store and started a CC application. Down in the legal section, right in the first couple of sections, clearly visible:

"Credit Reports: You agree that we have a right to obtain a credit report in connection with our review of your application and after we establish an account, to administer the account. You agree that we may report to others our credit experience with you. At your request we will provide the name and address of each consumer-reporting agency from which we obtained a report about you."

Was it plastered across the very top of the form in bold type? No. Was it "buried in pages of small print legalese"? No.

Many CC contracts I have signed (not US or EU banks) have explicit section and additional (mandatory) signature specifically for sharing data with credit reporting company.

Credit checks are often required in job applications and almost always when renting a home; it’s not like you can opt out of those.

They check all kinds of things, not just credit. Criminal record, job history, salary history, education, etc. How much of that should a prospective employer be "allowed" to check before deciding to hire you? Or a renter check before letting you live in their house? In both cases, they are taking on real risk. How else can they reduce that risk, without doing checks?

That’s beside the point of my post, which was to counter the claim that essentially stated, “you are only opted in to credit bureau tracking because you made the choice to take advantage of a product that is not essential in life”

But the requirement for the credit check is from the bank, renter, employer, etc. They aren't being forced to do that, other than the economics of risk.

The tenant pool in lower income areas tend to have more issues. This is why landlords require background checks, pay stubs, credit score, references etc. Even start all of this, you can still get horrible tenants, but it certainly decreases the likelihood by a huge margin.

i have been renting in several countries, including the US and i have never been asked for a credit check, i have never seen or heard about that for jobs either. why would a job need a credit check? all i care is that you can do the work.

> why would a job need a credit check?

So they can weed applicants out. This is very common in the fire service. Applications can be 40 pages long and they want you to list each financial account, balances, limits, etc. It's ridiculous. But I know just why they're doing it. I also think such requirements are weeding out minority applicants.

sounds like a very shady and likely illegal thing to do

you'd think so but it's really quite common.

at least most agencies have stopped asking you to write down all of your social media accounts & passwords. or requiring you to add HR managers/etc as friends.

It's a recent thing, in the last 30/40 years and I also thought that I read it's efficacy was quite questionable, but could be wrong.

It is, in a word, extortion.

Saying "I'm not going to loan you money if I can't be sure you'll pay it back" is not extortion.

They are saying “nobody is going to loan you money if you don’t play our games”. There is no other party you can go to if you don’t like their behavior.

A loan is shared risk. If it wasn’t there should be no interest payments above inflation and labor.

Where is the line for invasiveness? I mean, if I knew a couple was having issues and they were in counseling, but they didn’t start until eight years in, that’s a bad sign and any therapist will probably tell you so. If a bank is allowed to know everything about you they will say no to a loan, probably killing the relationship once and for all. Similarly if they know he has a doctor appointment to look at the lump on his testicle. Predicting people’s lives are about to get very difficult and then forcing it to happen by rejecting or calling a loan is movie villain cruel.

If I were their friend and knew about the marital strife, and they wanted to borrow money from me to do something expensive, my reaction would be no. It was always going to be no because I don’t loan money to friends unless I don’t want that friend. But what I’m going to say is, “besides, those two aren’t gonna be together in three years so how would I get my money back?”

You want banks in your bedroom? Because by their logic this is useful information and if it’s available it would increase their profit margins...

Just because you can do something doesn’t mean you should.

That's not strictly true. You just can't get reasonable terms unless you participate.

Credit used to be much, much harder to get, and more expensive. You got loans from friends. You shopped at a particular store for years and built up your reputation before they would offer you credit. You pawned something. Or you just saved your money and paid cash.

>They are saying “nobody is going to loan you money if you don’t play our games”.

Completely untrue. But if you want good loan terms, yes you will need to participate in the system of sharing credit terms, because reputable banks don't want to deal with bad debt.

I'd prefer if we, as a society, could just establish better and more reliable legal consequences for delinquency - potentially with a system for a pooled assurance fund to pay out on bad debts that can't be collected while punishing those who took on such risks in bad faith.

Yes and no.

Yes because it is. No because you want something that someone else has (£€¥$) and that someone needs some kind of assurance that they could ever get their money back.

There is certainly no meeting-of-the-minds when it comes to EULAs, car loan applications and other such contracts.

> society has become pretty litigious and I think some of the understanding around default opt-ins during enrollment for other services and third party data sales need to be revisited

Are you saying these two ideas are related? If so, I don't quite see the connection -- can you expand a bit?

Not that poster, but I believe what they're saying is that because we heavily use the law to structure society, it's time to use the law to remove an undesired aspect: default opt-ins.

Credit reporting companies should burn.

Is a Standard Car Dealership or Mortgage Lender going to support you redlining an agreement, crossing out the sections you don't like (which include oversharing every and all morsel of data they can fetch from you)? No. The salesperson/CSR is going to be confused, and not even know how to proceed.

In none of these cases did I opt in. And I decidedly couldn't opt-out.

It's even worse: On several occasions I didn't sign a contract or an addendum because I had questions about it and the other party didn't even check whether I actually signed it. So, even if you don't sign the agreement there's a good chance that your data is sent anyway because nobody checks for that.

Of course that could be grounds for a litigation, but at that point the data is already gone and, other than being a PITA, suing wouldn't really be worthwhile as that hardly counts as damages.

A car dealership or mortgage lender is not going to write you a loan with no information on your creditworthiness, or no deterrent to nonpayment. If they do, it will be at a rate that reflects the enormously elevated risk. Information about creditworthiness is essential to credit’s wide availability.

Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a good credit risk or not.

That's not an unfair request on their part.

Don't want to participate? Then don't ask for a loan.

> Yes, if you want to borrow money, the person loaning you money is generally going to insist that you opt into the system that helps them understand if you are a good credit risk or not.

That's not really what they care about. They don't even get to choose whether you previously borrowed money only from people who agreed not to report anything to Equifax et al.

What they really want is to be able to inform on you to their competitors as leverage in getting you to do what they want, like pay false charges instead of disputing them because then you refusing to pay them allows them to ding your credit score. Which in turn raises the interest rates on all your existing variable rate debt and can put your whole life into a downward spiral.

Whereas without it, lenders would be more wary to lend money, but that would be true universally. So the result would be that things like housing and education would be more affordable because it wouldn't be so easy for everyone to borrow money and bid up the prices, and people wouldn't be paying such a high percentage of their salary for loan interest.

Which leads to the conclusion that the whole system is corrosive and we would be better off without it.

> Don't want to participate? Then don't ask for a loan.

It's a collective action problem. Everyone is better off if nobody takes a loan to buy a house and then the same people get the same houses but everybody pays less, but if you refuse the loan and the competing buyer doesn't, who gets the house?

Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash.

I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.

> Existing land owners, home builders, and mortgage lenders are most certainly not better off if people only buy houses with cash.

The existing land owners are probably the biggest real opposition now, though they wouldn't be any worse off if we had done the right thing to begin with, because then they'd have paid less from the start too. It could be worth a one-time cost of paying them off in some way.

It's debatable whether the home builders would actually be worse off, because most of what people are really bidding up is the land, since construction has a lot more supply elasticity than land. They may even get more work in the long term as people aren't paying loan interest as much, so they ultimately end up with more money that can be used for home improvement projects.

And I don't think people have a lot of sympathy for the plight of the mortgage lenders.

> I also think that whatever the lowest rung on the economic ladder who could plausibly buy property may also be made less well off by shutting them out of the housing ownership market entirely.

Why would it do that? There would still be the same amount of land, so approximately the same people would have it. If it costs less by the same amount as the credit which is no longer available, the main difference is the interest you're no longer paying to the bank. If anything that should benefit people at the bottom of the ladder, who would have had to take loans with higher than average interest rates.

People who are buying houses with 3% down payments are unlikely to be able to buy a house for cash for 3% of current prices. That's the sense in which they may be shut out of home ownership.

One of the most consistent and reliable means to lift oneself from the low end of middle class to squarely middle class has been the leveraged purchasing of property in a city that continues to grow. Taking a 3% or 5% downpayment and having housing appreciate at inflation or slightly higher than inflation is a tremendous wealth creator when that equity is created with leverage.

People buying houses with 3% down payments are generally paying such high interest rates that they don't get to enjoy the home price appreciation because they're paying it all in interest to the bank. Meanwhile they're taking the risk that the house doesn't appreciate faster than inflation, or at all, as was the case for people who bought homes in cities like Detroit. And the bank will want enough interest to cover the risk that the home value declines and they default on the loan, which means many such people are paying more to own than they would to rent, even after including the accumulation of equity.

Homes appreciating faster than inflation is also an unsustainable trend in general. The result has been for housing costs in those areas to increase as a percent of wages, which obviously can't continue indefinitely because the result would be housing costs that don't leave enough for other necessities like food, or that exceed wages outright.

It's true prices probably wouldn't fall to only 3% of what they are now and so the same people couldn't purchase the same house immediately, but rents would fall along with housing costs. The combination of lower housing costs and less paid in interest on huge high-risk loans would allow the same people to own the same house outright in less time, even if it meant renting it for some period of time first. And of course the money they intend to use to buy the house could in the be earning interest before they reach the threshold to buy the house without a loan, which (if the efficient market hypothesis is correct) would give the same risk-adjusted returns in the meantime as investing the same amount in home ownership.

Houses don't have to appreciate at higher than inflation in order for them to create wealth; they just have been in many areas due to the overall economic expansion. They can appreciate more slowly than inflation and the effect of leverage can still give them cash-on-cash returns higher than inflation or alternative investments.

On a conventional mortgage with 20% down, if the house appreciates at 1% per year in a 2% per year inflation environment, a $100K house goes up by $1K each year. Someone who bought that house with $20K down sees a $1K gain on their $20K cash investment, for a 5% cash on cash return. They also have a place to live typically substantially cheaper than they were paying in rent. Obviously, where they increase even faster than inflation, this is wildly beneficial and if they decline much at all, it's terrible.

3% down mortgages seem to cost around 1.25% more than 20% down mortgages. It's about 1/8-1/4% on the base interest rate and 0.5%-1% for PMI. With a base interest rate on a 30-fixed around 4%, paying 5.25% on a 3% down mortgage is still a good deal IMO.

If landlords had to pay cash for rental properties, I'm not convinced that you'd see such a surplus of rental properties such that it would drive rents down significantly. Rents are driven by ability and willingness to pay. Many small landlords would be forced out of the supplying housing to others work. If landlords could borrow money to buy houses but owner occupants couldn't, I think you'd see a massive defection of the housing economy in favor of landlords.

Obviously, anyone could borrow on unsecured terms. It seems likely that medium and large landlords could exploit that (borrowing against the projected cash flows, but without using real estate as collateral for the loans) and that would also result in a large shift of power away from owner-occupants and small landlords.

> Don't want to participate? Then don't ask for a loan.

This is not pragmatic advice. I needed to take out loans to go to college. My phone company did a credit check before they'd let me sign up for a plan. So did my landlord before they offered me a lease. When I buy a car or apply for a mortgage on a house, they'll also check my credit. This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.

> This system is deeply ingrained in our society; there's not really a way to opt out and still have a relatively normal life.

And this is what needs to change. I’ve known many successful people that moved to the US and then had problems getting services because they had no “credit history”.

> Then don't ask for a loan.

Translation: Don't participate in the economy unless you're independently wealthy.

Conveniently left out: Don't ever apply to rent a house or an apartment. Instead, buy a home. In cash, of course, because you're independently wealthy.

Oh, and also: Don't apply for a job. Because, you know, independently wealthy and all that.

The idea that non-participation in the credit racket is anything but an exercise in extreme economic privilege is laughable.

Er... this is exactly how it works in developing / third-world countries.

My parents managed to obtain a loan for their first apartment thanks to my grandparents offering their house as colllateral. This is how pretty much everyone from my parents' generation got their first apartment.

Credit pretty much didn't exist in my parents' generation - loans were generally reserved for houses and cars, because of the strict conditions. Everyone saved up lump sums and paid cash. It's ineffficient, but far from "not participating in the economy".

It may be possible to negotiate different conditions on receiving credit, but I don't know if you can demand a modern economy without any drawbacks.

It's difficult to participate in an economy like the US where the prices of home purchases (and, by extension, rents), are driven up by competing buyers who have access to copious amounts of cheap credit.

That is hardly relevant to this discussion about modern United States economy and society. Your story even involves needing grandparents who own property to use as collateral.

I think it's a good argument that you shouldn't need to do this but like everyone my age got their first car loan and apartment with their parents cosigning. It's super relevant to the the US economy today.

It's possible to get credit without someone else but you'll get an absolutely terrible interest rate -- if you have someone in your life with good credit that trusts you (like family) you're leaving money on the table by not 'borrowing' their good credit.

We're told from an early age that we need to be college educated to be economically viable in the world of today and tomorrow. This may or may not be true, but public schools put a non-trivial amount of effort into convincing us it is. Most of us need loans to go to college. To me, this feels like a form of coercion to enter the credit system, either by way of economic realities, or heavy marketing to young people who are not equipped to defend against it.

What's unfair is the pretense that this is a market transaction between two equal parties. The "person" loaning the money is quite frequently a large corporation with access to resources allowing them to leverage the credit bureau system and the legal system to achieve an outcome in their favor. Most consumer borrowers don't have the resources to retain counsel or sue.

There aren't any other options though. No one is going to set you red-line their contracts. No one.

I have personally walked away from work agreements for jobs when they wouldn't remove non-compete clauses, but not everyone has that option.

There is no "meeting of the minds" here in any real sense.

You wouldn't expect to be able to redline the part of a loan contract where you have to pay the money back. This is similar to that.

Just because you don't have options to cut essential parts of the contract out doesn't mean there is no "meeting of the minds."

Don't want to participate? Then don't ask for a loan.

The Bible tells us that Jesus drove the money-lenders out of the temple. Which means that loans predate credit reference agencies by thousands of years. Therefore we have historical record that they are superfluous.

Actually it was money changers not lenders. The temple in Jerusalem had its own currency separate from the local and Roman currencies and all purchases around the temple required its use. It was essentially a a mix of extortion and racketeering, where if the people wanted to fallow their religion and fulfil their religious obligations they had to buy sacrifices (sheep, oxen or doves depending) from the temple in temple money which had a horrible exchange rate. Technically the people could bring their own but if they did that it had to be inspected approved to be healthy clean etc, and if it didn't meet standards it could not be used as a sacrifice. However The temple would buy it off at a cut rate as it has obviously inferior...

Just be rich!

Rich people depend on credit more than anyone. They call it 'leverage.'

A genuine alternative is to be able take your custom to one of the MANY other providers who aren't forcing you agree to conditions that are ridiculous. As soon as there is no alternative it's an industry cartel and we need to look at regulating. What is appropriate to determine credit worthiness? How about a blood sample? How much melanin do you have? Who did you vote for and we'll need that verified with a photo of your ballot. There's a million more totally unreasonable ways of determining your credit worthiness, some legal, some not but should be and you would choose not to submit if you could.

You have agree to pay interest, on time and pay the loan back. -- ok that's not something you can reasonably opt out of and hope to get a loan.

You have to agree to to have your life ruined on a whim or by incompetence because you borrowed $1k and paid it back in full with the interest? -- no, definitely not ok.

In between the extremes are all the cases that need looking at. This is a standard case of market failure where you as a consumer have zero market power to effect your preference and your preference is more than reasonable. The GFC was one occasion where such a market failure really came home to roost. There are others, some are trivial, some are huge, most in between. Where it can ruin your life, utterly needlessly and the lives of others, possibly systemically across the whole economy, we tend to want to regulate it so that doesn't happen. There are many such examples in finance which is why we have regulated it in so many ways for so long. Sometimes the regulation will be effective, sometimes not, sometimes it will be fair, sometimes not, sometimes it will be captured by the powerful, hopefully mostly not. Without it, eh, we head for some big trouble, at worst class and civil warfare.

(Separate but somewhat related note: "You need to agree to all future changes to this contract by your counter-party in all circumstances" - OH HELL NO that's not ok and should not be considered remotely legal, yet there it is in every single click through you've ever bothered to read and fail to understand on the internet because the click throughs (not contracts for mine) are simply not capable of being understood without the assistance of layers of courts, lawyers and judges - the law on them is not settled anywhere on earth as far as I'm aware. Unconscionable conduct in such things is the norm, pretending otherwise is silly no matter how libertarian I want to be about it and life in general.)

it's an industry cartel and we need to look at regulating

There are ALL KINDS of regulations around banking and credit reporting. All of the wacky things you mention are already not allowed.

no, not all things that are wacky are disallowed and that's the point. I chose examples that are hard to disagree with to show why regulation is already used and is necessary in the presence of market failure. This is market failure, clearly.

You can't take your business elsewhere if you don't like the provisions on account of the fact that they ARE wacky. You can't renegotiate wacky contract provisions. Market failure.

I read or heard a phrase for this recently and it's "consent theater".

Free to make any choice, as long as its the choice already made for you.

See also, "manufacturing consent"

That’s more of a term for propaganda as a tool of modern society, based on Chomsky’s work.

Of course.

But do you want to live without a house, a job, running water, electricity, internet, a cell phone, a car, etc.?

Point a gun to my head and I'd still feel like I had a better chance of getting out of that situation than opting out of credit reporting.

Actually, that's an interesting thought - in areas where hookups to utilities are required by laws (usually described as "Grid Defection") for a residence to be legally occupied... if all that is true then is this opt-in really an opt-in even in an abstract legal sense - it would be illegal to reside in a detached house in the state without opting in to such a service.

In general, I would say that this consent isn't informed and it's coerced, because you have to consent to do all those things and more which, in sum total, cannot realistically be avoided.

Of course the courts are unlikely to fall on my side because the consequences for contract law would be apocalyptic but I believe it is true in my heart, and that's what really counts.

So I'm consenting by needing electricity? Water? a bank account?

I though consent required option.

Think of the other use of the word, generally reserved for sexual intercourse. Imagine that 'consent' having strings attached.

Want to go to college? Consent. Want electricity? Consent.

I think we can all agree this would be ludicrous. That Consent would not be real. It would be viewed for what it is: taking by force.

It's why we don't even allow many actions when power is involved (subordinates). We view the power imbalance as so extreme, that invisible strings can form, thereby removing the ability for the subordinate to truly freely consent.

As an American society, I think this is understood. We value consent in many places. Yet for some reason, the financial institutions can redefine consent as they see fit, blatantly attaching strings to basic survival needs.

Yeah, I guess you could take it further and say we all opted-in to be screwed over in various ways throughout life when we were born too. Doesn't mean we shouldn't fight back against it.

The credit score is a form of behavior modification tool. Some unseen force defined it, and then imposed it upon us. Comply, ideally excel, or be a social outcast (read: screwed).

We had no say. We certinly had no vote. Yet it's a simply ubiquitous tool that cleanly defines the behaviour of some man.

A relentless normalized nudge. The Man and his System FTW.

> We had no say. We certinly had no vote.

Why should you? It's the credit grantors who use it. They say "when I grant credit to someone with a score of 800, I'm much less likely to lose money. If they have a score of 600, I'm far more likely to lose money." It's their money, your only say is whether you accept their terms or not.

Because clearly the borrowers are not the only ones capable of being untrustworthy and yet the trustworthiness of neither the lender nor the credit bureau is held to account in this system.

And this is related to the reality that individuals are at a distinct disadvantage for being largely unorganized and unable to bargain collectively, or else they probably would blackball bad lenders and credit bureaus for a history of untrustworthiness.

But they can't; their only tool is the democratic process. We ought to ruin Equifax to the same degree any one of us would be ruined if we had been so careless.

> their only tool is the democratic process

That's why we have the FTC, GBLA, FCRA and all of the regulation associated with both credit industry, CRAs, banks, etc.

Take a moment to re-read what I said. Give it some thought. It will make more sense when you step back and think broader, and pay less attention to conventional wisdom

Are you saying that you should be able to borrow someone else's money, even when they deem you risky? Credit score is a proxy for a lender to determine your credit worthiness. You don't need one if you don't plan to take on credit.

I'm saying there is a difference between lending/borrowing money and a perversion of the Surveillance State.

They current "credit tracking" systen has massive over-reach. So much so that if there's a breach/hack thousands if not millions are subjected to those mistakes. __And__ we have no choice but to say "Thank you sir. Can I have another?" We have __zero__ alternatives. Normalized or not, that's unacceptable.

There is a differnce between evaluating my credit worthiness and mitigating your risk, and imposing a monopolistic over-reach program that controls the fate of so many.

> They current "credit tracking" systen has massive over-reach. So much so that if there's a breach/hack thousands if not millions are subjected to those mistakes.

Why are you singling out "credit tracking" here? There have been other, much worse breaches from companies unrelated to the credit industry. Where's the $125 from Marriot? Or Yahoo!?

No, it still doesn't make much sense.

> you could take it further and say we all opted-in to be screwed over in various ways throughout life when we were born too

This is already a widely accepted theory usually called the "Social Contract".

It seems to me that social contract theory is only valid if one can choose which society to live in or opt out of living in society. However, neither of those are the case in the modern world since there is no unclaimed land and immigration laws prevent people from changing societies.

There's no much of choice, really. You can opt out by basically choosing to not partake in modern society.

What is more unfortunate is that we're just okay with these practices.

But did you have the option to remove these onerous parts from the credit agreement? If not, you did not "opt in", you were coerced.

Do you have an example? I don’t think they need this language legally, and I have not seen it in these agreements. Further, companies that buy debt make reports to credit agencies without having a contract with the individual.

Granted, I could just not understand what’s in the contract.

The problem isn’t credit but the companies issuing loans without doing their due diligence. If they were routinely required to meet the normal levels of legal proof that you signed a contract or were liable for false claims, the entire system would change overnight. The awareness campaigns about identity theft, monitoring, etc. are all a distraction from the companies originating loans trying to shift the cost of their lax practices to everyone else.

The entire model of consumer loans is predicated on everyone else paying extra money to cover defaulters.

It's one thing to price default into the risk of a note (this is cost of business as a lending institution). It's entirely another thing to price in egregious, arguably fraudulent business practices such as not properly verifying who you're lending to.

It's perfectly reasonable if you know there's no downside risk because the government not only will not punish you, but taxpayers will bail you out. Welcome to what they call capitalism these days.

One should not be surprised when their economically rational but morally reprehensible business practice is regulated away.

They also refer to it as a “breach of customer data”. That’d only be true if there was a breach of their actual customers (i.e. the companies to which they sell your financial data).

The best part? The "monitoring service" isn't protecting your money for the most part. You aren't responsible if someone defrauds a bank or credit card company with your information. If my credit card company thinks a service like this is valuable they should pay for it, I'll take whatever cash is on offer.

Monitoring services should be baked into any online system that stores personally identifiable information. The GDPR requirements are a good example of what should be required by law.

Any system you are required to provide information to should also allow you to see when your information is accessed and by whom. In most cases you should also have the option to deny access unless specifically granted.

Unfortunately not providing access could result in not getting credit, insurance, or work as no company will take on the risk - but you have the choice to opt-out.

Credit reporting services provided by the likes of Equifax and Experian particularily commercial rather than personal credit are critical to the current speed of the economy. Shutting them down would have a devestating effect on the economy.


Credit scores are bs. My credit isn’t good. I’ve paid a lifetime total of approximately 10c (attempting to convert to $US) interest on credit cards and have never missed a bill - I pay them off before they arrive. 90%+ of my payments are credit card. My score reflects something other than my likelihood of paying back debt.

Have you tried asking for credit limit increases on all of your cards? You may be going over your utilization ratio (typically anything over 30% will deal I your credit score down) of your credit limits are too low.

I have actively tried to keep the limit low, as I don’t need even halve my current limit, so maybe this is the problem.

I like the limit to be low as it limits the potential for damage if anyone gets hold of it and the bank doesn’t cover the loss. Possibly a needless concern though.

Update this post if you ever default on a loan. Otherwise, you are a good credit risk.

He may be a good credit risk. But he's not s profitsble customer (if I'm reading the post correctly.) If you pay credit cards off early each month and don't pay interest, your score will be horrible. Nobody wants to lend to someone why merely pays back the principal... all the profit is made off the interest and late fees.

My credit score was precisely 0 for many years. I didn't know until I went to buy a car. There was an incentive to get a spoiler and leather seat upgrade if I financed. But, the finance guy st the dealership said I didn't qualify due to a credit score of 0. Shook my head st the absurdity of this. Wrote a check and paid in full. Didn't get the free spoiler and seats. Insane that I can pay for a new car cash, yet don't qualify to finance it.

> If you pay credit cards off early each month and don't pay interest, your score will be horrible.

I have paid no credit card interest for many, many years. I paid a few dollars once many years back after paying a large income tax bill.

My credit scores are quite good.

The issuing bank is still making money on the fees to merchants. That’s more than enough to cover the cash back they pay me. I’m not the most profitable customer probably, but I am still profitable for them.

Can you provide a citation for your claims? I've never paid credit card interest in my life and have more than an 800 credit score. Mortgage rate is low as hell and the highest rate I've paid for a car is 1.9%.

This is false. Paying my credit card on time for several years boosted my score by a ton. It took my score from 0 to 700s in about two years after opening my first card, then two more, then increasing my credit limits on all of them and load balancing my expenses to keep under the 30% utilization rate. As a business owner, a good credit score is worth its weight in gold.

The honest don't like being treated like thieves.

>We're all supposed to take it as just a fact of life now that we need a monitoring service

Yes. You do. Until China (in this case) and other nations stop hacking US companies.

Surely the FTC and Equifax saw this coming? 150m people were included in the breach. Only 31m USD was allocated to give anyone who claimed 125 USD? How on earth did they do this math?

Why does it even matter how much they allocated? If I allocate $10 to pay my rent, that doesn't mean my rent check will need to be adjusted.

They need to allocate more, and if it puts them into bankruptcy (it won't), there are legal processes for handling their liabilities.

To put this into perspective:


3.36 billion USD


Probably the same math they use to calculate our credit scores and everything else they screw up.

The math behind credit scores is quite good. They're very effective at predicting credit risk.

This statement, which is currently greyed out, is an objective statement of engineering fact about one of the most important technologies introduced in the last one hundred years.

I hope I have bought enough street cred to say the following by ghostwriting hundreds of letters to the credit reporting agencies to fix their problems, which are numerous and essentially inevitable given their model and present operations.

Credit scores are important because they allow banks to do standardized, automated underwriting for effectively free at 2 AM in the morning, which is what makes credit abundantly available in the United States and one of the reasons why it is so cheap to the middle class. (This routinely escapes the notice of people in the middle class, but the ordinary operation of banks is to advance well-organized people money for free and pay you to be chosen to do so, partly due to credit scores making this a derisked proposition and partly due to interchange revenue.)

Credit scores decimated the costs of unsecured consumer loans, as is readily observable by seeing what loan availability, pricing, and the "credit box" looks like when they're not available for underwriting. (This is a term of art in consumer credit that I provide for your future Googling pleasure, not having enough time to explain it at the moment.) Compare the cost on a cash advance on any card in your wallet to a payday lender. That delta is substantially (not solely) due to credit scores, both in improved understanding of default risk and in reduced operational cost (of underwriting and servicing, both enabled by the scoring infrastructure).

Credit scores are an important justice-enhancing technology because they make the inputs to an underwriting decision objectively observable and for the first time in history those inputs provably do not include race, religion, etc.

There is an argument which is not immediately dismissible that credit scores are based on borrower behavior which reflects the socioeconomic realities of the United States and therefore somehow effectively encode race, but it is an obvious improvement that banks now mechanically reach the same decision on similarly situated white and black borrowers. Regulation did not make that happen. FICO did.

I think well-off computer programmers should understand that there is a societal tradeoff which buys "middle class black Americans have the same access to credit you do" at the cost of Equifax knowing your credit limits; understand that if you are advocating for rolling back the second you should accept that ceteris paribus we will experience material disimprovement on the first.

(Obligatory disclaimer: personal opinion here.)

Sorry, I am not that confident about that. I live in Europe, and to my knowledge we do not have that kind of credit score companies (there are databases about people who have defaulted their debts, though), and to my knowledge it is banks themselves that do the credit evaluation.[1] And credit for middle class is to my standards pretty cheap enough here as well.

[1] More than happy to be corrected here with sources, I just have not ever heard about Equifax-like company in Europe

Of course they do (exist in Europe).

Most companies giving you a credit of some sort (banks, phone contracts, ...) are required to do vetting of you.

To help them do that, they use credit rating bureaus.

In Europe, you as a private person just don't know it and don't have access to your own rating. But you are likely to be rated anyways..

Here is one danish example (at least three exists)


> In Europe, you as a private person just don't know it and don't have access to your own rating. But you are likely to be rated anyways..

In the E.U., there are no private organisations who can process your personal data without making it available to you on request.

In Ireland, there's a state-run Central Credit Register, to which lenders must submit any consumer credit agreement above €200, and which they must check by law before issuing credit. Anyone can apply online to get their credit history from the CCR, and make submissions to correct inaccuracies.

There's also the Irish Credit Bureau, a private organisation with a similar purpose. They are also required to reveal data held about you on request, and correct inaccurate data held.

In the US you can request your credit score once per year from each credit rating angecy at no cost.

The thing you can request once per year from annualcreditreport is your credit report, which doesn't include your score. Your score is accessible for free from websites like creditkarma or through most credit card online accounts, usually once a month although I have seen ones which update twice a month.

In Italy there is a Centrale Rischi, but is a government/public service (run by the Bank of Italy):


and I believe that in the end (now it is partial/experimental/in the works AFAICU) there will be an European Registry at the BCE (Anacredit):


Though there is no "public" access to the data in the Centrale Rischi, you can have it going in person to the Bank of Italy, the issue is that - if you find an error/mistake - it must be corrected by the bank/agency/whatever that made the erroneous entry, and this can sometimes be a nightmare, not so much with banks, but with smallish financial service agancies (that might have - in the meantime - changed property or going in default, etc.).

AFAIK the KreditRegisteret you linked to is required because Denmark, not part of Euro, does not have access to AnaCredit. So it's more of a tool for financial stability, and not private loan estimates. What is EU's AnaCredit?

> AnaCredit is a dataset with detailed information on individual bank loans in the euro area. The name stands for “analytical credit datasets”. The ECB launched the project in 2011 – together with the euro area and some non-euro area national central banks. It uses data and national credit registers to achieve a harmonised database that supports several central banking functions, such as decision-making in monetary policy and macroprudential supervision.

In Denmark I'm mostly aware of RKI, which seems to be owned by Experian now. If you fail to pay your loans, you end up on that bad payer list. Otherwise getting a loan is a private matter between you and your bank unless you want to use a third party lender

I'd like to get some further sources. Below is what Wikipedia has to say about Danish credit scoring[1] (emphasis mine) I know there are databases the store your information if you have defaulted your loans, but that is (to me) very different thing to actual credit scoring, which obviously any entity in credit business is and should be doing. I would be very keen to know (some of) the companies that sell actual credit scores of individual people in (mainland) Europe, and possibly shoot a GDPR request at them.

The Wikipedia snippet:

The credit scoring is widely used in Denmark by the banks and a number of private companies within telco and others. The credit scoring is split in two:

    Private: The probability of defaulting
    Businesses: The probability of bankruptcy
For privates, the credit scoring is always made by the creditor. For businesses it is either made by the creditor or by a third party.

There are a few companies who have specialized in developing credit scorecards in Denmark:

    Experian (generic rating for business)
    Bisnode (generic rating for business)
The credit scorecards in Denmark are mainly based on information provided by the applicant and publicly available data. It is very restricted by legislation compared to its neighbouring countries.

[1] https://en.wikipedia.org/wiki/Credit_score#Denmark

Banks in Norway use Experian to check your risk. Anytime you apply for a loan you'll get a letter in the mail from Experian a few days later letting you know who made the request and what their response was.

Does Experian response with an actual credit score as opposed to information whether you have defaulted some of your loans recently or not?

The UK is in Europe (for now) and has Equifax and the other credit reference agencies.

The UK imports all the shitty things from the US, instead of looking at what the european are doing: - No national ID, so identity theft is easier - For a long time, no pin code on credit card, so that theft is easier Basically they keep the stuff which trick the consumer, whereas in Europe they make law to protect consumer.

I really hope they leave the EU and stop bothering us with their shitty ideas, credit reference beeing one

>No national ID, so identity theft is easier

We don't want national identity cards; the Blair government tried to introduce them in 2006 and failed due to massive public opposition. We think it's a bit weird that other EU nationals are so tolerant of the government having a massive centralised database tied to a single token.


>For a long time, no pin code on credit card, so that theft is easier

Most of our debit card market is Visa/Mastercard, so we switched to Chip and PIN in 2006 - the same time as most international markets. Some European markets had their own local debit card schemes but these schemes were far from perfect.

>Basically they keep the stuff which trick the consumer, whereas in Europe they make law to protect consumer.

Last time I checked, we were still in the EU and still subject to EU law. We implemented the GDPR (and our regulator is one of the most proactive in actually enforcing it), we implemented the Consumer Rights Directive and we were well ahead of the curve in many areas, particularly distance selling and consumer finance.

You have drivers licenses and bank cards and passports already. Having a national ID just makes a bunch of stuff easier and identity theft harder.

A national ID card is a single point of failure. If I need to verify my ID for something important, I'll usually be asked for two forms of ID documents which may be subject to additional verification.

How do any of your examples 'trick' the consumer?

It’s effectively for free, except for the massive society wide risk of fraud that they’ve foisted upon all of us. The stuff looks cheap because, like any polluting industry, the price does not reflect the true cost.

Surely there’s some third alternative other than “incompetent credit bureaus enable fraud” and “minorities have bad access to credit because lenders are super racist”?

Also the existence of a centralized credit system increases the cost of not participating in the system. The lack of real competition (eg. for middle class credit) is what essentially leads to a polluted industry.

> It’s effectively for free, except for

Also except for the risk that financial problems will force a cardholder into accruing interest, and often that interest will get a lot worse if payments are missed a 5% card changes into a 22% card if more than some number of payments are late and some number may be just 1.

Why do you believe lenders are super racist?

Most of what you say is correct but it's wrong to say that regulation isn't responsible for race being absent from FICO calculation. It's fair to say that lenders would use factors like race in a heartbeat if it weren't illegal, but it is illegal to do that. If FICO were race-based, using FICO would be depending on race indirectly, but explicitly, to make loan decisions. Thus FICO can't be dependent on race.

I just wanted to say thank you, because this is exactly the kind of HN discussion that I find valuable (and increasingly rare in public discourse). It's so easy to get on the "credit bureaus are evil" bandwagon, especially in this story where Equifax's statements are honestly downright insulting, and your comment made me put away my pitchfork for a second and reflect on the benefits that credit scores give us. Yes, there are certainly arguments that one can have about the respective costs and benefits of credit scores, but it's good to know we can have informed debate about those pros and cons.

Very thoughtful and interesting. From the perspective of credit monitoring though, while they provide a social good with credit scores and risk assessment, they do so for a profit on the back of consumer information. For something like fraud monitoring, it seems almost an ethical imperative (in the social contract sense) to share information about potential fraud with the people whose information powers your business.

I’m sorry, but it’s pretty absurd to boldly claim that credit scores are provably objective with regard to race, etc. I’d recommend reading _The Big Test_ for another history of a supposedly objective measurement of merit (the SAT) which turned out to be highly discriminatory. Removing discrimination from a system is not as simple as removing such info from its inputs.

I had a recent 30 day delinquent payment reduce my credit score by 80 points. And this was because the letter in the mail was mid-delivered. Not that the credit card issuer, nor the credit agencies give two shits. This was after about 5 hours of calls ping-ponging between the two.

Credit scores change constantly. What your 80 point drop told creditors is "This person might not have enough money to pay their bills, or is careless or forgetful.". You are perceived as higher risk because, statistically, you are a higher risk. Those of us who maintain excellent credit do it in part by making sure our money gets where it's supposed to. I check online to make sure payments post, or hand in payments in person, or call in the rare case these days when there's no other way to check.

Fortunately, credit scores usually recover rather quickly from one-off delinquencies if you stay current afterward. And I bet you'll be paying more attention to your bills now, won't you?

The credit score is doing exactly what it's supposed to.

I was surprised how much they change constantly, for silly things like how much balance you have on your credit cards.

My wife & I both have excellent credit scores, and we pay all of our bills in full every month. Nevertheless, I've noticed a ~50 point swing in credit scores from month-to-month, all dependent on whether airline tickets, furniture, or charitable contributions happened to make it onto this month's bill. Our debt-to-liquid-assets ratio is something like 0.1%, so there's never any real risk of not having money to pay it off, but of course the credit bureaus don't have information about our assets, so they evaluate us against what other people our age have, which (being Millenials) is not very much.

Knowing how the system works, we can take steps to game it, like not putting any major purchases on credit card in the 3-6 months before getting a mortgage. But still, it's slightly ridiculous that something that's supposed to measure your creditworthiness can swing so much over short time periods.

It's not that weird. If your score is, say, 750, 50 points is about a 7 percent change. My finances very easily vary 7% from month to month!

50 points also isn't likely to make much difference, especially if your score is already good. Loans basically go off tables. Essentially if you're between A and B, you get this rate for this losan, C and D gets this rate, etc.

Once you're past 700, you're already getting good interest rates and banks will fall over themselves to loan you money if your income supports the loan size. When I was at 780, the loan officer couldn't give me a lower rate on a mortgage - I was already getting a fraction of a percent over prime.

You can eliminate credit score swings by never generating a credit card statement with a balance. You can do this by paying your card off prior to the statement date.

I spend between $1000-$2000 on credit cards a month and collectively I generate statements with less than $10 spread across 4 cards. My credit score is rock solid from month to month.

If you have six figures of liquid assets (what 0.1% debt vs liquid assets implies) this should be no problem at all.

We usually just set all our cards on autopay-in-full and forget about it. Is there a way to have them autopay before the statement date, or do you need to proactively check every month and make a payment right before the statement date?

Being proactive is the only way, unfortunately.

You also believe the stock market is nonsense, because valuations fluctuate?

It's worth remembering that an important aspect of your score is your value as a customer. Risk is one element. Carrying a balance gives you more value than if you never carry a balance.

It's the other way around - your credit score is higher if you have a lower balance on your cards.

That is not correct. A small balance raises your score more than a zero balance. But you want to keep it under a third.

This is an oft passed around urban legend, but it's not true. You can try for yourself by opening up a free CreditKarma account and seeing what happens if you zero out all your balances.

I'd take that with an entire shaker of salt; you are assuming CreditKarma knows the FICO formulas. Even the prediction engines used by the actual credit bureaus are notoriously unreliable at telling you what will happen given a particular change in inputs. Probably not accidental, they don't want to expose the algorithm.

> we can take steps to game it, like not putting any major purchases on credit card in the 3-6 months before getting a mortgage

I wonder how much your ability to game it indicates whether you are likely to be a good or bad debtor?

Foisting responsibility onto customers with more important things to worry about, rather than into organizations whose only purpose is to keep track of these things?

It is not my job to go out and manage my customer's finances and take their credit cards or write myself checks from their accounts, and I'd be quite rightly arrested for theft if I tried.

It is, or should be, your responsibility to notify them when payment it due.

Ah, but there is no indication they didn't. What happened is that the check was sent, but did not arrive. In other words, the customer and his agent (the postal service, probably) in the exchange did not fulfill their job of getting the money to the business. That is not something the business can control, and if you try to make it their responsibility, they will simply start refusing payment by mail, since it would be a constant and high level source of fraud.

But making it the customer’s responsibility is cool?

In any case, I read this as the notice that payment was required is what got lost, not the payment itself.

Ah, you may be right, but even that still makes the report valid.

Let me tell you what I hear as a business person if you tell me my letter to you was misdelivered: "My mail delivery is unreliable so it's your problem."

Well, no, you didn't tell me it was unreliable, so I couldn't adjust my risk perception or take special precautions. And if you ever want to do business with me again, you're going to come in and execute the transaction on site and not leave with the goods until the bank confirms it's cleared.

On top of which, most billing contracts specify that payment is due whether or not you were notified. You are supposed to keep track, too.

And yes, this is okay, because until we have a proper socialist system, it is, in fact, our responsibility to pay our debts. Don't like it? Don't incur debts.

As a business person, you’d put a customer through the wringer for one missed payment due to communication problems? I hope you have a monopoly in whatever market you serve, because otherwise that’s a great way to lose all of your customers.

Anyway, we’re back to making it the responsibility of the customer with a thousand more important things to think about, rather than of the business that’s dedicated to the stuff.

And if you think it should be that way, great. But it’s obvious to me that it is that way because of the power imbalance, not because it’s right.

If the customer is using it as an excuse, yes I would. They’re trying to weasel out of their responsibilities, responsibilities they almost certainly incurred voluntarily.

If you don’t make payments as agreed, your credit score goes down. If you do, it goes up, and will soon recover from the perfectly reasonable dip it took from your mistake. It’s pretty simple.

So if the customer's cheque doesn't get to you, that's the customer's fault, but if your letter doesn't get to the customer, that's also the customer's fault?

> The credit score is doing exactly what it's supposed to.

policing people and make the poor to pay more.

If you don't pay your bills, I think it's entirely reasonable for businesses to tell each other about that so you don't defraud them out of a lot of money.

>the entire banking system promotes systematic moral hazards and has lowered the purchasing power of stagnating wages for most people

"Why are people defaulting on their bills!?"

The whole notion of transfer of majority responsibility to an individual is one of the slimiest things in this society. We get monitored by an array of hidden surveillance measures and algorithimic judgement we have no way to properly counter or defend ourselves against. Meanwhile central credit gets to borrow money and get bailed out.

Give me a fudging break.

This isn't complicated. You incur a debt, you pay it. If you can't, people aren't going to want to do business with you, and will quite reasonably refuse.

You are trying to make everyone else responsible for my finances and I'd damn well thank you to stop, since they're mine.

I understand that clearly. But clearly there are classes of institutions and people who...

1. Make a mockery of prudent allocation of money and get bailed out when their games get messed up

2. Mess up the purchasing power of any money you possess far more than any individual defaults or even class of individual defaults

3. Impose grave and hidden responsibilities on individual borrowers and mass surveillance...

They are messing up your finances far more than the most reckless individual borrowers ever could. *

PS - How is finance going to deal with the multitrillion dollar pension bomb? With prudence or with a combination of a game of musical chairs and chickens until stuff gets serious? How is your financial discipline, as an individual, going to protect you from manmade tsnumais?

What are these "grave and hidden responsibilities" you're talking about? Paying your bills is hardly an obscure pastime.

As for your PS, I don't respond to conspiracy theories.


Is the World Economic Forum a purveyor of conspiracy theories? Is our reduced purchasing power at the level of food and rent a conspiracy theory?

Edit: My apologies, here's the actual WEF press release https://www.weforum.org/press/2017/05/global-pension-timebom...

Pffft. The WEF is a celebrity getaway in the Swiss alps for the same people who caused the 2008 crisis and got away with it. If they’re making that prediction in good faith, it’d be a preemptive confession of guilt. If not, it’s just a distraction from their routine crimes.

> statistically, you

Is an oxymoron. Statistics exist when "you" is unknown.

"You" have statistics attached to you. Default rates, lifespan, cancer risk. Given people A and B in similar life and financial situations, A or B might defy the statistics that say they'll both pay or default, but they probably won't. The only way a bank or anyone can predict this is statistically.

I've had credit card companies call me and straight up say "If you pay this right now over the phone with me and pay the $15 telephone transaction fee, this won't hit your credit report"

Between the "Pay for Delete" scams and the gamifying of your credit score through services like CreditKarma I really questions how close these scores are hitting anymore in relation to relative credit risk.

> I've had credit card companies call me and straight up say "If you pay this right now over the phone with me and pay the $15 telephone transaction fee, this won't hit your credit report"

Does that not qualify as extortion?

The contract you agree to for credit cards or other forms of debt you choose to take on will specify things like late fees and that it's up to the company's discretion whether they report you a late payment to the agencies. If they didn't have this clause, you'd just be complaining that they report everyone indiscriminately rather than giving people a break when it seems appropriate.

> The contract you agree to for credit cards or other forms of debt you choose to take on will specify things like late fees and that it's up to the company's discretion whether they report you a late payment to the agencies. If they didn't have this clause, you'd just be complaining that they report everyone indiscriminately rather than giving people a break when it seems appropriate.

Thanks for making ridiculous assumptions and putting nonsense in my mouth. Nobody opined on anything in the first place. I was merely asking a legal question, because calling someone to demand an immediate payment to avoid direct harm to them sounds an awful lot like extortion, whether I like the approach or not.

If you want to know whether I'm impossible to satisfy or whether I think the company could in fact cut people slack while getting their $15 and avoiding potential extortion, you could just ask me. Yes, I think that's perfectly possible. Call the person up, tell them you'll waive the credit report if they make a payment by the end of the day, and optionally remind them that according to their contract, there is a $15 fee if they pay by phone. There. Now the person gets to spend more than 5 seconds thinking about it to make an informed decision. No need to put nonsense in my mouth.

But you're putting nonsense in the creditor's mouth. You don't know what the conversation was like, you only have the summary of one person who feels wronged.

mehrdadn 20 days ago [flagged]

All I did was I took the story at face value and asked a legal question without saying anything else about anyone. You felt I was somehow "putting nonsense in the creditor's mouth". OK, so why make a ridiculous response instead of just telling me I should wait to hear the other side's story? Or even better, maybe asking what I was thinking in the first place instead of putting your own nonsense in my mouth?


mehrdadn 20 days ago [flagged]

I didn't accuse anyone. I asked. Because it sounded like it could be, but I legitimately don't know. You see the difference?

This doesn't solve the problem that already happened, but I would take this as a sign that it might not be a bad idea to just opt into e-statements and avoid snail mail. The world is electronic now. If nothing else, you'll at least save some carbon, paper, etc. from being consumed along the way.

I have autopay set up on my Google store Synchrony account, this last bill, for whatever reason, it did not attempt to withdrawal the money then sent me an email saying I was overdue and I now had to pay DOUBLE so I did manually, two days later I get an email saying my adjusted auto-pay had applied.

Guess what popped up on my report this week?

A late payment.

It does not let you pick the autopay date, and instead puts it on the date the bill is due, otherwise I'd have it auto pay at the first of the month weeks before it was due. However, it is not worth my time to call and probably have to deal with a call center for an hour before I get someone that will promise to remove it and then have to write three letters to send off to the CRBs to dispute it and wait another couple of months for it to possibly get removed.

Your anecdote is interesting but does not constitute data on the overall predictive powers of credit scores.

It does when millions of people have similar anecdotes, and when the system is literally set up for it.

Places can report whatever they want to. And you can dispute it, but the person who report it will just say "no, we're right" and it'll stay up.


I've been fighting with Equifax and TransUnion for 5 years to remove 30 year old reports on my credit history (which are clearly not me because im less than 25 years old)

This is amazing. How are you running into trouble with this for 5 years? What is their counterargument?

If you could build a better algorithm to do underwriting, you could make billions. Companies try all the time like zest finance.

Not being the worst is not the same as succeeding.

Following that logic the Burj Khalifa is a space elevator because no one has been able to build a better space elevator than that.

I have general objections to this sort of underwriting assessment being an ethical business for a private organization to begin with due to the immense amount of possibility for discrimination it opens up.

On the contrary, the modern credit scoring system has been a huge success when it comes to fighting discrimination. Previously banks left underwriting decisions to the whims of individual bankers. Unsurprisingly, many of these whims were based on things like the color of an applicants skin.

While there are certainly some arguments to be made about disparate impact under our current system basically everyone agrees that access to credit for minorities is much much better than it used to be.

Why? Why feed into it? This is the mentality that kills me.

Why double down and try to make something that is already being gamed? The very definition of insanity is doing The same thing over and over again and expecting a different result.

There is no right to operate a business that exposes everyone to risk they have no choice in whether to accept or not. Centralizing excessive amounts of data with obtuse and dubious control mechanisms/capacity for redress is a disaster waiting to happen.

Publicizing the risk, and privatizing the profits at it's finest.

It wouldn’t put anyone at risk if we held lenders to a legal standard of proof that YOU signed a contract asking for money. It might be inconvenient but not compared to being stuck with debts you never agreed to.

The problem with that, is the story doesn't stop at "You" when another person can get enough information to act as you in a legal sense.

To me, this entire industry reeks of people engaging in risky behavior, but trying to externalize the costs/risks of said risky behavior, and consequemces be damned. Furthermore, they want the agency that gets externalized to "make money", something which encourages the minimum amount of investment humanly possible in making sure they are actually solving the problem in a way that doesn't merely create new ones.

Furthermore, it seems to me that the financial sector is eating the bloody world; as the metrics they gather are being gleefully used as discriminators in far more than just loan granting.

The system is either so critical to the way the economy works, that we should be willing to "sink" money in the interests of making the system as effective as possible (I.e. no dark pattern B.S., easy to use controls, easy to manage all interactions with, and maintained to the highest degree of security), or it isn't, and a discussion needs to be had whether having such valuable pots of exploitable data is something we should even tolerate as an acceptable exercise.

To be quite honest, I've seen more harm than good come out of the system given the ubiquity of the Credit history "bootstrap" problem, and now the compromise of a huge portion of the American population's personal data.

Trying to couch this as merely a case of "oh, we just need more contracts" without addressing the central problem of your identity essentially being hijacked by a bunch of for profit involuntary surveillance companies operating under an incentive structure pushing minimum viable effort in protecting your data, ensuring it's correctness, and restricting access to only appropriate reasons.

Throw in the failure of the FTC to clearly levy a strong enough penalty leaves me feeling this industry is a social liability in it's current form.

Better for whom?

I’m sure the existing credit bureaus are great for the people who give them money. They sure suck for the rest of us, though. Fortunately for them, we get zero say.

Market is efficient. If underwriting wasn’t efficient, a company could utilize better algorithms and offer better rates and better determine risk to minimize default. This a multi billion dollar opportunity. People don’t care about who is underwriting their car or home loan, they care about rates.

Equifax and their brother businesses give us low rates in exchange for exposing us to fraud risks whose monetary value is probably literally incalculable.

The thing is, we don’t get to choose whether we’re exposed to those risks. It happens whether we like it or not.

So let’s say I start a company that offers better TCO: my rates are a bit higher but this is more than made up for by a much lower fraud risk. Do I win the market? No, because Equifax’s fraud risk hits my customers just as much, so I’m not competitive.

Credit bureaus give us low rates because they externalize the costs. Since the costs are externalities, competition can’t beat them. It’s the financial equivalent of making cheap electricity by poisoning the community with emissions.

There are underwriting systems that don't pull credit reports. The loan rates are around 20% and go down as you develop a history with them. People have choices.

They don’t really. Let’s say I choose to avoid the traditional credit system and go with one of these other things. Then some fraudster opens an account in my name with my info and suddenly I’m in Equifax anyway. Then Equifax gets breached and even more fraudsters use that info. I’m stuck trying to prove my innocence to creditors despite having supposedly chosen not to participate in that system.

"Your kneecaps are your collateral..."

Why do you say that? I’ve seen some of their criteria and while I can’t remember a lot of specifics, it was a bunch of ad-hoc rules, not updated since before computers were a thing, only stuff you can calculate with pen and paper and all of it totally arbitrary.

Your statement is interesting but does not constitute nor provide any substantive information that is backed by evidence. Backup your 'anecdotal' claims.

Banks and credit card issuers all pay hefty sums of money to the reporting agencies to use in underwriting their loans. They wouldn't do this if they weren't helpful in modeling risk.

I was speaking to a loan officer recently, and the purpose of the credit score seems only vaguely related to how well it actually predicts risk.

The gist was that if all their rates are based on a standard formula with no individual discretion, they are safe from regulation around (1) discrimination, (2) risky lending such as led to '08. That sounded more important to them than actually accurate risk modeling, especially since their competitors are all using the same formulas.

(edit: In particular, even if you offered them access to much more effective/predictive data points than the credit score, they would not use them because of (1) and (2) above.)

The majority of people on this board work in tech - just because money is exchanged for a service does not mean that the service purchased is worth that money... so can many attest about terrible highly paid consultants.

Large organizations are astoundingly good at finding inefficient ways to spend money.

Large financial organizations have teams of analysts whose entire job is to relate consumer information, such as credit scores, to statistical outcomes. If the credit scores weren't giving them useful information, that would show up rather quickly.

I’m suddenly reminded of the ratings used to fuel the subprime mortgage crisis.

That was something subtly different. The banks more or less knew they were taking poor risks, the problem is it wasn't their risk to take. They quietly packaged these bad mortgages along with others and resold the mess to less sophisticated investors (like pension plans). Then the bubble burst, the well dried up, and banks started collapsing. It wasn't a mismanagement of risk, it was criminal fraud writ large.

I would argue that credit bureaus leaking all your information to criminals and then charging you money to protect you from those criminals is also criminal fraud writ large.

That doesn't seem relevant to the question of whether credit scores are statistically useful.

We've established that sufficiently advanced fraud can overcome the ability of organizations to vet the info that’s given to them. If the credit bureaus are actually organizations dedicated to fraud, then the fact that many other organization fall for it doesn’t tell us too much about their accuracy.

If Osama bin Laden's ghost appears to you and says "There will not be a terrorist attack in New York tomorrow.", and then there is, and this repeats a few times, the fact that his statement is, facially, a lie, and the fact that he can't even exist doesn't matter. You have an input that correlates with a certain output. The intent of the person who provided you the input, or even how nonsensical you think the input is, doesn't change its statistical usefulness.

So how did all these sophisticated financial organizations get taken by subprime mortgage bundles in 2008?

They didn't. Pension plans and individual investors are not sophisticated financial organizations. They rely on those that are to do their job in a non-fraudulent manner. They didn't.

Bear Stearns? Lehman Brothers? AIG? The hundreds of banks that went under?

Committed or were complicit in the fraud and got in too deep to recover from the inevitable crash. This has all been widely and loudly reported on for a decade. There's a reason people are pissed that the executives who ran these institutions into the ground and fucked up the economy were barely prosecuted.

I'm sorry, but is the reason that Equifax isn't in the same class as these guys because Equifax was totally upstanding, never cut corners or fudged numbers and were absolutely upfront when this security breach happened? Because if that's so then I'm curious about the breach they detected three month prior that they tried to cover up.

Equifax is just as shady as those lenders - more so IMO because they have absolutely no obligation or business relationship directly with the individual's whose private data they compromised.

So in addition to the info being valid or the organization evaluating it being too stupid to evaluate it correctly, we also have the possibility that these organizations are involved or complicit in the fraud.

Why am I supposed to take it as a given that if these organizations use the info it must be useful, then?

If it's not, they're wasting money for no reason, and someone will come along and do the same thing without giving the credit bureaus any money. They're not actually legally obliged to use credit bureau data. They could just throw money at people in the street and hope they get confused and throw back more.

A bank isn't an individual who is lending his own money. It is an organization that lends other people's money and needs a veneer of justifications for the choices they make, and credit reporting agencies are a perfect choice. You mentioned earlier that banks have statistical teams making these analyses, but most simply don't because that provides counter-information that undermines the whole value of credit reporting agencies (which is that they outsource the politically fraught choices and makes it easy to say "well we just followed their ratings, just like everyone else").

Regarding the subprime crisis, the biggest victims were the largest banks -- the most sophisticated being put completely out of business -- so not sure what the bit about pension plans comes from (many of those made a lot of money on it).

"They wouldn't do this if they weren't helpful in modeling risk."

This isn't necessarily true.

A counterargument is that credit scores offer banks an easy way to outsource what often ends up being a very contentious, politically-fraught process. Yet many analyses have found credit scores barely better than random dice -- the guy with the perfect credit score has a perfect credit score, until he doesn't and there is a wake of delinquency in his wake.

It's also helpful to assess real world motivations. Extraordinarily few of the employees, including at the executive level, at a bank are legitimately concerned about the long term risk to the bank. Success is measured at the quarterly interval, and if you can justify your actions on a quantifiable measure -- even if it's a measure that has little predictive value -- then that's just perfect.

The biggest indicator that someone is a credit risk is that they are maintaining or growing higher interest borrowing products, such as carrying a balance on a credit card. This is an absolute flashing light indication that someone is over-extended, yet the credit monitoring agencies would not bite the hand that feeds them by making too big of a deal about this. Indeed, gross over-borrowing is barely a blip on a credit report, because the people who lend the money ensure that it isn't. The world is absolutely awash in cheap cash and banks are desperate to lend it.

In the wake of the subprime crisis everyone said "oh yes, of course there's a problem there it was the credit agency that was just marking these all wrong", but exactly the same thing is happening on personal credit reports. Of course it is, because the credit reporting agency is there to legitimize whatever the bank wants to do.

This is a fallacious argument. Just because banks use credit scores doesn't mean they are accurate (see argumentum ad populum).

What we'd need to demonstrate your claim is for example some data linking credit scores at time of loan to default rate, adjusted for income and loan terms.

Maybe just go upthread to patrick's comment on the topic. He's a much better writer than me.


They’re coincidentally offering a $125/year service that does the thing that you have to sign up for to get reimbursed the $125 dollars. So basically they’re not offering $125, they’re offering a year of free credit monitoring service. So yeah, $31 million, but they intend to recoup all if not most of it in fees, and then make money the year after when people forget to cancel.

Any evidence that this "10 years" of credit monitoring automatically renews at $125/year?

This seems to be a more frequent occurrence in the last few years with class action settlements going “viral” for lack of a better word. I believe it’s called dilution of class. In theory I think the judge is supposed to consider the number of class members & their estimated recovery before granting final approval but I suspect by that point nobody cares.

Judges so rarely reject class settlements that treating them as a check on collusion between class attorneys and defendants is a joke.

150 million * 120 = eighteen billion... or about 6x their yearly revenue.

would've put a dent in their wallet and hopefully caused them to go bankrupt.

>would've put a dent in their wallet and hopefully caused them to go bankrupt.

IOW, good luck getting any money from them?

Probably they assumed that most people don't have credit monitoring yet and only a few people would go for the $125 option.

In any case, I'm not going to trust any of these greedy doddering fools with my information. Their job ALREADY involves monitoring my credit.

Their job does not include notifying you of negative changes to your credit though.

Doesn’t Chase offer this for free?

If so, Chase pays a fee to one of the big three credit reporting agencies to monitor this. The fee is still paid to the ones that hold the data.

Doesn't almost anyone with a credit card have credit monitoring now?

My guess is they start asking people who already signed up for the $125 for the proof of their credit monitoring. The settlement agreement and the terms we agreed to when accepting the $125 allowed them to do this, and they would probably see the number of claims go down.

FWIW Credit Karma just sent out an email that they qualify as a credit monitoring service for this purpose.

I would guess the kind of person who is paying enough attention and was willing to spend the few minutes it takes to sign up for this settlement right away, is also using some kind of service like Credit Karma (or Mint might qualify now as well). So a lot of these people might actually have it covered.

I think even if people are covered, they may be counting on people finding it exhausting to jump through yet another hoop. Maybe they’ll even make us fax it :/

I have credit monitoring through Chase through my Saphire Reserve card. They gave it to me for "free" and I never asked for it. I have to wonder how many others are out there, like me, who are just getting it as a matter of course as an add-on to one of their accounts.

The same way airlines oversell seats, they don't expect everyone to turn up. But for these claims, they expect the majority not to.

Maybe they didn't expect most people to follow up on this?

That's obviously the case, which just proves that neither party intended to actually reimburse consumers for our breached data, and the effort to mitigate identity theft.

The amount of money they set aside only allows for 248,000 people to claim the $125 compensation. That is roughly 0.2% of the total 147 million. Seems a bit off to me, but then again I am not familiar with these kinds of things.

What’s more likely: that they didn’t realize that more than 0.1% of the 150 million people affected might sign up for this, or that they don’t give a shit?

This all sounds terrible but there are going to be zero consequences.

Online is just too easy for people to follow up. Most class-actions require mailing in a form so probably have much lower participation rates.

It's very simple. Do you allow a low budget Chinese state sponsored hack to wipe out your country's blue chip company? Do you?

Because the purpose of the 31m USD was to compensate people who had bought credit monitoring, spent time dealing with credit reports, freezes, locks, etc. Out of the 147m people who were potentially affected, what percentage actually incurred any real costs vs. the number that rushed to file a claim after the headlines blared "$125 to everyone!"

I don't recall $125 requiring actual previously lost time.

I could be mistaken...I thought there was a clause allowing you to claim up to $125 without having to provide detailed breakdowns of the time and expenses.

You could claim up to $20k due to provable loss in addition to the $125 due (if you had existing credit monitoring).

Edit: I missed my final line, “So you are right.”

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