6 Creepy Schemes Companies Use To Bury You In Debt
Unless you come from an obscenely rich family, one of the first things you find out when you hit adulthood is that your future might depend on your willingness to take on debt. Do you want to go to college? You'll probably need a loan for that. Need a car? That's going to require a loan. Ready to put down some roots and settle in a permanent place of your own? Unless your name is Mr. or Ms. Money Bags, get ready to borrow.
And the fact that borrowing is a part of adulthood isn't even the bad news. If you were paying attention as a child, you saw that one coming. The bad news is that your car, education, and house are only the tip of the debt iceberg. Beneath the sea is a whole other landmass of ways the world wants to keep you in the red.
Creditors Will Try To Convince You To Inherit Your Dead Relative's Debt
Imagine it's only been a week or so since your parents died in a tragic white-whale-hunting accident. In the middle of making funeral arrangements and divvying up the good jewelry, you start getting calls from a debt collector. It turns out your father ran up a huge debt by stockpiling hundreds of harpoons, and these guys want to know how you intend to pay everything off.
"Wait a minute," you're saying. "I don't have to pay my parents' debts!" And you'd be right. But if you think that's going to stop debt collectors, we admire your optimism.
One Omaha, Nebraska, woman named Linda Long found herself getting calls from a collection agency on behalf of Bank of America shortly after her husband passed away. The caller explained that she was not legally obligated to pay her husband's credit card debt, but then turned around and recommended that she "get this taken off [her] plate." And the debt collector wasn't talking about spaghetti.
"We're already too big to fail, but if you could help us get even bigger, that would be great."
Since FTC guidelines require that debt collectors tell people when they don't have to pay a debt, creditors and their minions might tell mourners they have a "moral obligation" to make things right before presenting them with the "opportunity" to assume the debt of the deceased. As if the grieving person on the other end of the call won the opposite of the lottery. Additional prizes include constant robocalls -- sometimes up to 48 per day -- reminding the family members that corporate yachts don't buy themselves.
One phone down, the phones of literally everybody you've ever met to go.
Of course, sometimes creditors don't even need to call you to pay the debt off. Instead, they'll demand it from the estate of the deceased, because debt collectors are legally free to get all up in that shit. Money that's managed by an estate must be used to pay off debts before it's distributed to the heirs, even if the entire inheritance disappears to pay off your dead mom's Visa. They can also grab the money in a 401(k) (unless other beneficiaries are listed explicitly), and if your parents received Medicaid, some states will put a lien on their house to try to get those Medicaid payments back, just to pay the debt off.
Basically, not even the Grim Reaper will get in between collectors and what they want.
Banks Make Millions Off Of "Free" Checking Accounts
Many of us assume that free checking accounts are just one of those things banks use to get you doing business with them, like when a pet store hooks you in with a free dog, only to charge you out the wazoo for dog treats. The truth, of course, is that these accounts are free only if you follow all the rules, all the time.
At least the dog will only shit on the floor, rather than all over your hopes and dreams.
Overdraft fees are well known, of course, but there are lots of other lesser-known fees at play, and banks are perfectly happy not telling you about all of them. Or they do tell you, but the fees are disclosed in a 43-page account agreement. For example, you probably know that you're going to get charged something if you overdraft your account. What you don't realize is that you might be charged for not maintaining a minimum balance. Or for a new card if you lose yours. Or for opting to receive a paper statement. Or if you close your account before a mandatory waiting period. Or if you fart in a bank.
"Free Taco Bell gift card with every new account!"
The banks, of course, have their own take on the issue. The American Bankers Association thinks banks "need the flexibility to provide information in a way they believe best suits their products and customers." What, exactly, do they mean by that? Their profits depend on you not knowing how they make money off of you.
Over in the U.K., the government has gotten so fed up with this shit that they are about to force banks to either clearly explain how they make money off of "free" checking or start charging a flat monthly fee to everyone with an account. Up for grabs are "billions of pounds" in hidden fees, according to one former banking executive. And by "pounds," we mean "dollars" in American.
Two-Year Contracts Are The Bait-And-Switch Of The Cable Industry
Nobody is all that happy with cable companies right now, for a number of reasons, all of which are they're assholes. And with the rise of Netflix, Hulu, and other services, more customers are giving cable the pixelated finger and going Internet-only. So, in order to bring customers back in, cable companies are increasingly offering cable-and-Internet bundles at reduced prices. You'll get a special introductory rate for the first 12 months, after which you're perfectly free to switch if ... wait, how long was that contract for, again? Two years. They were just kidding about the 12 months.
In March 2015, the FTC charged DirecTV with fraud for promising special one-year rates, then requiring customers to sign up for two-year contracts. And, of course, they don't keep that rate in the second year: A $20-a-month plan can go up as high as $65 a month. Pissed off and want to switch companies? Say hello to nearly $500 in cancellation fees. DirecTV thanks you for the new island they just bought!
Due to your efforts, Meathead Rob Lowe won't run out of fake tanner for decades.
Kissing $500 goodbye in an early cancellation might actually be the smartest option in the long run. Have you ever wondered how AOL stays in business, when the only thing people know them for are those mountains of installation CDs/coasters? As of a few years ago, 80 percent of their profits came from dial-up subscriptions -- yes, really. Why do people still pay for dial-up with AOL, exactly, especially when their own CEO said that two-thirds of its customers don't even use the dial-up? Apparently, it's because AOL 1) uses automatic subscriptions, and 2) makes canceling a huge pain in the ass. People would rather be lazy than save a few dozen bucks a month, it seems.
Either that, or they're just busy waiting for the Unsubscribe page to load. Any year now ...
And just like with the banks, there are plenty of hidden fees. Back in 2012, one Bruce Kushnick signed up for a $90 Time Warner package and, by October 2014, he was somehow getting bills for a whopping $190.77. On top of a rate increase from $90 to about $150, hidden fees like a "modem lease" and a variety of taxes brought the price up by another 20 percent, until he was promising his firstborn to TWC.
So when you're buying cable, make sure to be smart and shop around ... unless you're like most Americans and have only one choice of cable/Internet provider. Thank goodness for the extra-lube fee they charge you before they screw you!
Phone Companies Are Either Overcharging You Or Imprisoning You
Have you ever noticed how mobile phones cost a couple hundred dollars at a phone company's store, but if you want to buy one on your own, it costs as much as a Lamborghini? This is because the phone company agrees to lower the cost of the phone substantially, as long as you agree to their two-year contract. That great deal must be why customers find it so hard to leave their phone carriers ... right?
What percentage of customers do you think leave Verizon and AT&T each month? Whatever number you thought, it was too high: The real numbers are a staggering 1.08 percent for AT&T and 0.91 percent for Verizon. Their Skeletor-like grip on their customers comes from these two-year contracts, and the fact that phones basically never last for two years anymore. If your phone breaks down with four months left on your contract, you'll be forced to go without a phone or buy out the remainder of what you owe ... unless you'd like to sign over your freedom for another two years?
Should've been a little more calm after the 200th collection call of the day.
This tempting offer of eternal servitude isn't just limited to phone companies: Even Apple is getting in on it with the iPhone. Instead of paying everything up front, you can pay as low as $32.41 a month for two years, with the option to upgrade to the newest iPhone every year, with all the megapixels and brushed aluminum they have to offer. This doesn't even get you phone service, though; you have to go to the phone company and buy that separately. Also, do the math and, holy shit, you just paid $778 for an iPhone.
At least the apps that let you search for restaurants you can no longer afford are free.
"Well, screw that," you say, slamming your fist into the table at Starbucks and standing up. "I'll just get a pay-as-you-go phone instead! No contracts, no bullshit!" And, in that case, you'd be half right; there is no contract, but you're still getting worked over by the phone companies, and a lot more blatantly. Last year, one prepaid phone customer was scrutinizing his phone bill by some miracle or other, and he discovered that he was being out-and-out overcharged by AT&T. Phone companies will always round up calls to the nearest minute, but AT&T was "clarifying" his call records and adding extra minutes to calls for no discernible reason, charging him for time he didn't spend talking.
You'll pay for the privilege of assholes cold-calling you at dinner, whether you want to or not.
So, basically, if you don't want to be screwed, your best bet is two tin cans and a really long string.
Gym Memberships Are Impossible To Cancel, And They'll Strong-Arm You For Fees
Remember when you signed up for a gym membership, telling yourself that this would be the thing that turns your life around? Then you went exactly one time before spending the rest of your evenings on the couch eating Doritos? Odds are you do, because you might still be paying for it.
One gym chain, Equinox, was sued for making its memberships too difficult to cancel. For one thing, the gym demanded that all cancellations be done via certified or registered mail, while the law states that customers should be able to cancel at the gym itself, while spinning around and flipping everyone the bird. Equinox was also required to tell customers up front how much they'd be paying in total, and tell customers that they had three days to cancel. Neither of those things happened, presumably because Equinox didn't feel like telling customers their gym membership could probably buy them a small car.
"You should probably get the car anyway; you'll need a second job as an Uber driver to pay for this."
Meanwhile, someone actually went undercover at a Gold's Gym franchise in California just to see how hard it is to cancel a membership there; the answer, as it turns out, was "basically impossible." Even when following the gym's instructions on how to cancel, they somehow weren't able to, which probably explains the $6 million settlement against that particular franchise. And even if you are able to decipher the ancient runes of your contract and figure out how to cancel, you could still be on the hook for the rest of what you owe, and they will send out collection agencies to extract that straight from your frail, unhealthy body. We hate reading as much as the next person, but maybe it's worth it to make sure we're not being taken for a ride on a stationary bicycle.
Everything About Student Loans Sucks
Let's be real: Most of you have more student loans than you would like. The national student loan debt is at a staggering $1.2 trillion, with most students paying an average of $279 a month, or roughly 4.65 Fallout 4s. And you're stuck with this debt until it's paid off; thanks to some Avatar-level law-bending on the part of the loan companies, it's very hard to make that debt disappear even if you go bankrupt (though it is possible, despite prevailing myths). You'd think that would be enough for the loan companies, but the real world still needs its share of cartoon villains to twirl their villainous mustaches.
A hundred Deathclaws can't compare to one lawyer refusing to leave you the fuck alone.
For example, if you ask companies servicing your loans to put your payments toward higher-cost loans first, you might get the response of laughter, "Yeah, sure, whatever," or the loan company proceeding to do fuck-all. You might also find yourself saddled with late fees for no reason, or having documentation simply "go missing," as if it were abducted by agents in a black van in the middle of the night.
More likely than not, the company servicing your loan won't tell you that there are better repayment options out there. One report found that even though 51 percent of students are eligible for some sort of debt relief, only 15 percent actually take advantage of it. Instead, most companies suggest forbearance, wherein you can avoid payments for six months but interest keeps building up, meaning you ultimately have to pay more. For some reason, the loan companies never sat down and thought, "Maybe we should tell them they don't have to give us all this money?"
"I mean, we were just going to burn it all while starving children watch helplessly.
I'm sure the customers have better ideas."
As a result of all this fuckery, more than a quarter of student loan borrowers are either delinquent or default, ruining their credit and what remains of their Ramen budget. And when you fall behind on payments, the companies will put you through Hell to get that money back from you, as if they're doing their best Godfather impersonation.
"Well, I'll just look around and go with a student loan company that doesn't do that crap!" First off, stop yelling at your monitor; your family is worried about you. Second, no, you won't, because you can't. You're not actually allowed to choose your loan servicer; the government and the loan companies make that decision for you. Your student loan debt will get sold and resold for decades after you sign the paperwork.
"I've lived a full life. I've laughed, I've loved, and the first week of my freshman year
is just about paid off. I'm ready."
In other words, there's an excellent chance you'll produce new humans and send them to college before you actually manage to pay off your own student loan debt.
Be sure to check out 5 Disturbing New Ways Debt Collectors Are Getting Your Money and 4 Things You Should Do When You Owe People Money.
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