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5 Ways Corporate Scavengers Are Making Big Money Off Our Economic Pain

Big business has found a number of ways to profit from the economic suffering on 'Main Street.'

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Creditors will call neighbors and family members in search of the consumer, and reveal information about their debt. They will contact the consumer's place of employment and threaten to get them fired with repetitive calls. They will say harsh and insulting things to force the person to pay.

 "Around 9/11, a debt collector said to my client, ‘After all those people died in the towers, you won't pay your bills,'" said [attorney Ron] Kim. "It was an absurd statement, as if the two were connected, but she was so upset and ultimately ended up filing for bankruptcy."

They've increasingly resorted to filing lawsuits, which are often settled by borrowers who don't have good legal representation, even when the lender's claims are suspect. According to research by the Legal Aid Society, debt buyers filed over 450,000 lawsuits in New York City alone between January 2006 and July 2008, over 90 percent of which ended in judgments against consumers who “likely weren’t aware they were being sued and only 1% of whom were represented by an attorney.”

According to Moe Bedard of LoanWorkout, a newsletter about the loan modification industry, the now familiar robo-signing scam is popping up in the market for consumer debt as well as home-loans.

According to the Consumers Union, the nonprofit publisher of Consumer Reports magazine, collectors are increasingly taking disputes to court without proof that they own the debt in question, or even that the debt is valid.

Consumers Union points to automated software used to file lawsuits by the thousands and the proliferation of “robo-signers” who falsely claim to review and verify debtors’ records before taking legal action.

For a while after the crash, Americans had unloaded debt, but with wages stagnating and unemployment remaining above 9 percent for 21 straight months, the trend has reversed and they're again taking on mountains of debt to stay afloat. All of this means that while the recession takes its toll on the American middle class, the shaky debt industry is booming.

Pay-Day!

So-called pay-day loans are sold as short-term, stop-gap measures for people living paycheck to paycheck, but their interest rates often start at an annual rate of 600 percent – and some go much higher than that.

This recession has been great for the industry. Congress has tried several times to put a cap on their usury, but as the Huffington Post reported last year during the financial reform debate, “The influential $42 billion-a-year payday lending industry, thriving from a surge in emergency loans to people struggling through the recession, is pouring record sums into lobbying, campaign contributions, and public relations.”

It worked, they killed off any meaningful limits on the vig they can charge and business is booming.

A similar ripoff for the working (or the not-working) poor are those rent-to-own schemes that allow people to pick up a couch with no money down, only to end up paying far, far more than they would have otherwise paid. According to ABC News, “The rent-to-own industry has a history few retailers would envy but recent sales most would covet.” And contrary to popular belief, people rarely rent these items in order to own them at the end of the day; industry officials told ABC that “just 5% of their customers end up buying their products; customers are simply looking for short-term solutions when critical appliances go kaput.”

Can't Afford to Pay Back Taxes? There's a Ripoff That's Right for You!

A lot of folks are struggling with all sorts of costs, and some can't afford to pay the property taxes on their homes. The Huffington Post Investigative Fund dug into the problem, and found that Bank of America and a hedge fund called the Fortress Investment Group had “spotted a fresh money-making opportunity -- collecting the tax debts of tens of thousands of people.” What do they do with it? Well, the banksters add interest charges and fees, and then they bundle the debts into securities and sell them off to investors. (Sound familiar?)