Canadian jubilee

Finally, a good news story about credit card debt.

U.S.-based Chase Bank is forgiving all outstanding debt owed by users of its two Canadian credit cards: the Rewards Visa and the Marriott Rewards Premier Visa. The bank retired both cards last year and said it’s wiping out cardholders’ debt to complete its exit from the Canadian credit card market.

Affected customers can’t believe their luck.

“I was sort of over the moon all last night, with a smile on my face,” said Douglas Turner, of Coe Hill, Ont., after learning he’s off the hook for the $6,157 still owing on his now-defunct Amazon Visa. “I couldn’t believe it.”

After 13 years in the Canadian market, Chase decided to fold its two Visa cards in March 2018.

The bank — which is part of global financial services firm JPMorgan Chase & Co. — wouldn’t say how many Canadians had signed up for the cards or how much debt was outstanding.

Here is more, via Shaffin.


Negative interest rates come to Canadian credit cards?

Or maybe something a bit more legally troubling, though the article does not speculate - 'Credit card rewards expert Patrick Sojka said Chase likely concluded that debt forgiveness was ultimately cheaper than continuing to collect credit card payments in Canada.

"They're still probably paying taxes, paying accountants, and for them, they just probably worked it out and [said], 'Let's just forgive the debt and fully get out of the country.'"

But he's stumped as to why the bank didn't instead opt to sell the debt to a third-party debt collector, which would allow Chase to recoup some cash.

"It is definitely a head-scratcher, for sure," said Sojka, who is the founder of Rewards Canada, a site that tracks reward programs.'

I would guess that the laws in Canada probably are different in regards to 3rd party collection- it would be the simplest explanation.

Seems like 3rd party debt collection, and all the sleaziness and aggression thereof, is more suited to the US than Canada but I have no idea how it works up there.

I'm not sure this is good news. Someone paid. It appears from the story that Canada has laws that are not business friendly. If true than people, Canadian people will be harmed.

How dare banks foster the notion that debt should be forgiven. How will the proles learn morality from their betters now?

I know nothing about Canadian income tax law.

If a creditor (includes credit card issuers) in The Land Of The Free forgives a debt, it is required to report the amount as income to the cardholder with an IRS Form 1099 (I think).

It is probably similar in Canada.

It's not. Per the article:

ollowing the publication of this story, some readers inquired if the lucky recipients would have to pay income tax on the amount of debt they were forgiven. The short answer is, they shouldn't — as long as they used their cards for personal purchases, said Jamie Golombek, managing director of tax and estate planning with CIBC.

Before getting all excited about debt forgiveness, one needs to know how much the bank collected in interest payments from these cardholders. It just might be that the banks came out net positive on this action.

Well, the article does provide an example and some information - '"I was sort of over the moon all last night, with a smile on my face," said Douglas Turner of Coe Hill, Ont., after learning he's off the hook for the $6,157 still owing on his now-defunct Amazon Visa. "I couldn't believe it."

Every month, he said he put $300 toward his big bill, racked up by making purchases on Amazon for items such as electronics and supplies for his six dogs.

Based on his monthly payments and the 19.9 per cent interest rate on his card, Turner estimates he's actually saving a total of more than $7,500.'

Possibly they came out ahead, but why did they give up such a lucrative market, as noted in the article - after all, that debt could have been sold to a third party.

Free publicity in the US.

Possible if Canadian charge-off/default rates and administration/servicing expenses are significantly lower than in the US.

I'm willing to bet the debt collectors probaly see this as very low ROE potential with a high opportunity cost.

Just read the story. An "Amazon Prime" credit card? Who the hell gets those? Desperate people or those with no financial literacy. The people in the story prove it. "I have six dogs so I had to go $6,000 in debt to feed them..."

Take that with the fact that that they decided to fold 18-months ago it's likely half these people would request a consumer proposal (a Canadian legal form of bankruptcy-lite which has only a few years of credit score impact) or would file for bankruptcy outright if there were collection efforts.

I have an Amazon Prime credit card (in the US). The terms are quite attractive if you buy from Amazon. Contrary to your assertion that only "[d]esparate people or those with no financial literacy" get these, I hold a Ph.D. in Economics and work in finance and am not desperate. I also buy off my balance in full each month.

Agree with tisch. 5% back on everything you were going to buy at Amazon anyways beats the ~2% max cash back you'd get with any other card. Pay it off in full every month. I don't see the downside to me?

No downside. I have that same card to get the 5% discounts. Tie it to Amazon with auto payment set up. So, no work for me and 5% discounts.

I have the card also and have set it up so the full balance is paid every month automatically. All I have to do is watch my spending. I even gave my kids full access to the Amazon prime account and the card. They are very trustworthy and frugal.

The unexpected side effect? My credit score rose like a rocket!!!!! 🚀

I have the same card, 5% back at Whole Foods as well. No foreign txn fee, plus all the goodies from Visa Signature (hotel upgrades, auto rental insurance, extended warranty, etc)

If EdR got the card, then financial illiteracy it is!

Thomas Jefferson had a novel idea: abrogate all debt and contracts every generation, which he defined as roughly 19 years. That way each generation could start anew; and absent the weight of the past, pursue new opportunities, build new businesses, move forward not backward. Progress, in other words. I would think Peter Thiel, with his linear view of time, would approve. Alas, Jefferson's friend, James Madison, convinced Jefferson to keep his novel idea to himself lest their peers think Jefferson had gone round the bend.

"Thomas Jefferson had a novel idea": that's an implausible assertion.

Do you have a good source for the "Jefferson Jubilee"?

I found one letter:

Here, Jefferson seemed to say that no generation should take loans that would be paid by later generation. There was no mention of screwing creditors.

The first such jubilee would end the extension of credit by all but complete morons. Since Jefferson wasn't a moron, I am guessing you are misunderstanding or misstating some other writing of Jefferson.

From my link above:

"Funding I consider as limited, rightfully, to a redemption of the debt within the lives of a majority of the generation contracting it; every generation coming equally, by the laws of the Creator of the world, to the free possession of the earth he made for their subsistence, unincumbered by their predecessors, who, like them, were but tenants for life. "

It would be stretching the truth to suggest Jefferson advocated a jubilee, it seems like Jefferson said any moral government should prioritize paying down (redeeming) its debt, so each generation can start unencumbered by debt for causes it didn't benefit from.

The first such jubilee would end the extension of credit by all but complete morons.

How would it be moronic to offer a 5 year car loan or 15 year mortgage in year one?

"How would it be moronic to offer a 5 year car loan or 15 year mortgage in year one?"

19 year cycle last time, 9 year cycle this time? Unpredictability of government.

If a jubilee is actually known in advance, interest rates need to be high enough to pay for the writedown.

And yet people routinely take out loans with variable interest where they have no idea what their rate will be in future years.

They know what the principal will be.

Lenders would lend far less in such a world. And let's say the jubilees were telegraphed as being set at every 19 years? Good luck borrowing money in the last few years of the term (other than loans set to come due before the jubilee).

Basically, if you decree that periodically debts are cancelled, no one would risk lending money. Would you?

Creditors always return, look at Argentina.

Jefferson identified a problem we have today, our kids never voted for any of the crap we bought on debt. They have no moral obligation to pay, and were never a party to the debt.

Government has to use force to get the kids to pay. AOC sold out, she voted for the budget thus promising that her constituents will pay some 4% of their income to cover the interest charges from boomers, for all of eternity, a death sentence.

Jefferson called his idea Generational Sovereignty. Ellis, American Spinx.

Statements like that by Jefferson were made in the context of Hamilton's financial program ("A national debt if it is not excessive will be to us a national blessing"), which Jefferson opposed because he feared that a large government debt would enslave future generations:

"we must not let our rulers load us with perpetual debt. .... a departure from principle in one instance becomes a precedent for a 2d that 2d for a 3d and so on, till the bulk of the society is reduced to be mere automatons of misery, to have no sensibilities left but for sinning and suffering. then begins indeed the bellum omnium in omnia, which some philosophers observing to be so general in this world, have mistaken it for the natural, instead of the abusive, state of man. and the forehorse of this frightful team is Public debt. taxation follows that, and in it’s train wretchedness and oppression."

Who else was in the room where it happened?

The article ignores the most important question Why did Chase decide to leave Canada???

Yes. And while this is surely good news specifically for the people who had debt forgiven, it doesn't seem that individual credit cards going out of business is necessarily a great thing for the world overall.

And more importantly, how can we get them to leave America under the same terms?

That won't happen until we get universal health care. Or, maybe we need to create a coin called the Loonie.

Exactly. To call this "good news" without knowing that boggles my mind. Even highly educated and reasonable people seem to fall for this kind of "feel good" story no matter what the actual facts are...

Chase doesn't owe you an explanation, Mr. XVO.

Canadians can join hands and sing in the words of the old Negro spiritual: "Free at last! Free at last! thank God Almighty, we are free at last!"

And Chase will pass the bad debt onto American cardholders.

I thought the market established prices. If Chase can pass its losses to American cardholders, why do you think it wasn't do it anyway? Actually, why not playing the lottery fully knowing American cardholders won't see the prize no matter what happens, but will pay for the tickets.

Natural experiment?

In most states credit card debt can't be collected after a stated period of time (such as three years). But there's a catch: if the debtor makes a payment, then the time starts anew. So debt collectors trick the debtor into making a payment.

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