In the post below, I sidle up to the issue of bankruptcy reform and the credit card industry. A major concern - high late fees and penalty interest are clobbering hapless or down-on-their luck consumers.
Where others see a problem, I see an opportunity. In this case, the opportunity would be a Debt Management Cooperative.
Imagine that Sarah and Jane are close friends who are both financially strapped. Each is barely making their credit card payments, and each is getting hit with late fees and penalty interest rates. What should they do? One approach would be this - suppose they pooled their resources, and paid down Sarah's credit card balances. Ah ha! Now that Sarah is not paying high penalties, their combined budget picture brightens, and the two women can turn to paying down Jane's debt.
This, by the way, is a simple extension of the old financial planning advice that it is generally cheaper to avoid paying penalties to everyone - placating some creditors while stalling others is a time honored tactic. The only wrinkle is that we are applying the tactic across families.
And that is the obvious obstacle. Although the plan makes sense, what is Jane's assurance that Sarah will follow through and help pay down Jane's debts?
The normal sanctions covering debt repayment would be honor, integrity, bonds of family or friendship, the law, and, I suppose, fear of a loan shark's leg-breakers (let's call that "enlightened self-interest"). If the Debt Management Cooperative can come up with some appropriate mix of legal contracts and membership selection, it ought to be able to save money for its members, and pocket a bit of a membership fee. In fact, depending on the size, it might be able to economize by negotiating with lenders for special treatment and by employing its own team of negotiators.
Oh, it's just a stray thought.