Do you have ZOMBIE debts?
The term “zombie debts” usually applies to debts that “haunt you” for a long time after you thought they were dead. These may include debts that are no longer owed because they were paid out or even statute barred debts. But in fairness the term should equally apply to credit card debts from Canadian chartered banks.
We recently helped a client who had a credit card from a Canadian chartered bank with repayment terms that allowed minimum monthly payments over a period of 375 years.
Read that last sentence again.
That’s right, the bank issued credit card statement allowed the debtor, a senior citizen, three hundred and seventy-five (375) years to make minimum monthly payments. You would likely agree that lending on such terms is at the very least unethical, but what is more problematic is that it is legal. Canadian banks can legally lend to unsuspecting customers on terms that can never possibly be repaid in five lifetimes.
We know that no one is going to live long enough to make those payments, well except zombies, the banks know it and the government is willfully blind to such practices. Maybe the banks are hoping to cash in on insurance policies or estate asset sales to eventually be repaid.
Canadian’s do not have strong consumer protection from lender exploitation. It has been well documented in the media that banks pressure their staff, through quotas and bonuses, to fudge information allowing more people to qualify for debt they simply cannot afford. A recent CBC Marketplace exposé of Canadian banks resulted in head offices changing sales scripts, but even more needs to be done.
The federal government does require that credit card issuers show how long it will take to pay credit card balances using minimum monthly payments. But does that help? Check the fine print on the bottom of your credit card statement to see what terms you have. You will see estimates for repayment ranging from decades to hundreds of years. More and more consumers are carrying these zombie like debts without much hope of paying them off.
How long will you be in debt? Can you only pay minimum monthly payments? Do your creditors keep increasing your limits to ensure you don’t default?