READERS WRITE BACK
Alan Mackay, an Oregon reader, sent me an email in response to my recent post describing how banks and other credit card lenders are going after people’s Social Security payments. In McKay’s case, it is his home the bank is going after because of unpaid credit card bills–and it is perfectly legal, according to state law. In 2005, he and his wife retired, and bought a modest home at Yachats on the Oregon coast. The house was purchased for cash. There was no mortgage, subprime or otherwise, and, says MacKay, they “were debt free.’’ Then there was a medical emergency and they had to use a Bank of America credit card to pay the bills. In a letter he sent to Oregon public officials, he describes what happened next:.
Although we never missed a payment, never paid late, and always paid more than the minimum, our interest rate rose steadily, without notice. At 27.99%, it is now three times what it used to be. There is no way we can continue to pay our monthly bill.
We never agreed to the usurious interest rates that have put us in this predicament, especially not from a bank that has been bailed out by billions in taxpayer money.
We met with an attorney and were stunned to learn that the bank can seize our home and force a sheriff’s sale to collect from us. This is not a foreclosure, since our house is paid for. It is something that can happen to any Oregonian who cannot pay a debt of any kind, including medical.
A sheriff’s sale would spell utter disaster—even homelessness—for us, and we feel certain that the same is true for rapidly growing numbers of our fellow Oregonians, given our state’s current 12.1% unemployment rate. Some are indeed facing foreclosures. Others, like us, could lose their homes because of other debts. In our case, we could be ruined because our bank has decided arbitrarily, unilaterally, and through no fault or failure of ours, to keep raising the amount of our debt.
Oregon’s homestead law reflects decades-old real estate values, making it easy for banks to seize people’s homes for a small fraction of their real worth. This, together with our bank’s deliberate acceleration of debt, cynically violates everything we teach our children about America’s history and character and about the value of hard work and responsibility.
Congress has passed a law that will forbid exorbitant, unwarranted interest rates, and President Obama is working to put this law into effect before its specified July 2010 date. Even if he succeeds, however, the new law will not help Oregonians whose current consumer debt jeopardizes their homes. Only an immediate update of our hopelessly antiquated homestead law can save them from disaster.
We therefore implore you to issue an immediate moratorium on banks’ confiscatory practices and to halt sheriff’s sales at least until new laws can take effect. Oregon’s homestead laws urgently need to be updated to reflect today’s property values.
Bottom line: The exhorbitant–and ever-changing–interest rates on credit cards can prove another route toward banks foreclosing on a home, without ever holding the mortgage.