Thursday, March 10, 2005

The New Indentured Servitude

One of the principal means by which many poorer people came to the American Colonies was though a concept knows as Indentured Servitude. The basic idea was that an individual would present themselves as a steerage passenger to a ship captain, who would then sell a bill of labor to a purchasing agent in to colony to compensate the ship owner for the price of the passage. The servant would then owe their contract owner a debt of labor equivalent to the price of their passage. In short, a form of voluntary, not quite, slavery. Once the individual had worked off their passage they would be released from their contract and be able to do whatever they desired.

We also see something along these lines in the illegal immigration business of today. The émigrés are placed in local sweat shops where they work to pay off the cost of their transport. Unscrupulous contract holders charge ever increasing fees such that the Indentured Servant can never work their way out of their debt.

Much like what credit card companies are trying to do to low income consumers today with late fees and service charges.

Over four million pre-approved credit card notices are sent to American consumers annually. These are sent without regard to the income and debt risk of the recipient, and frequently do a poor job of adequately explaining the consequences of overdraft and late fees.

Case in point Josephine McCarthy:

According to papers in her recent bankruptcy, McCarthy discovered at about the time of her husband's death in 2003 that the couple had a $4,888 balance on a Providian Financial Corp. Visa card and another $2,020 balance on a Providian Mastercard.

Over the two years from 2002 until early 2004, when she filed for bankruptcy, McCarthy charged an additional $218 on the first card and made more than $3,000 in payments, the court papers show. But instead of her balance going down, finance charges — at what the bankruptcy judge termed a "whopping" 29.99% rate, together with late fees, over-limit fees and phone payments fees — pushed what she owed up to more than $5,350.

In the case of the second card, the papers show that McCarthy charged an extra $203 and made more than $2,000 in payments, but again fees and finance charges pushed the balance up.

In other words, because she couldn’t maintain the schedule as imposed by her creditor, he balance increased relentlessly, forcing her into bankruptcy just to get ahead of the ball.

The current Bankruptcy bill would remove this option from Mrs. McCarthy, and those like her. It is not terribly difficult to imagine a scenario in which an individual could loose all of their assets in this sort of a scenario, and eventually be forced to having their future wages garnished to pay off their debt.

Just like what is detailed in the current bill.

And what is tremendously not-shocking about this is the widespread bi-partisan support which exists for this bill. If this bill passes Congress will have utterly failed to represent their constituents, unless, of course, Congresses constituents are comprised exclusively of Providian, Chase et al.


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