Zero-balancing

A fact of life

Zero-balancing. A fact of life

Let me tell you a story of B and L. B is a private individual who works as a self-employed person; he is a borrower. He is relatively highly qualified in his trade, he holds a number of diplomas and has been established in his business for over 30 years. He is nearing retirement, but he isn’t quite there yet—he has 3 1/2 years to go.

The area of business in which he is quite expert has, to a large degree, fallen victim to artificial intelligence. Computers can now do at the turn of a switch what he spent a lifetime become expert in. B still has clientele but not as much as he used to.

L is a corporate entity, a bank, a lender, with which B banks. The area of business in which L operates is not in decline. It suffers crises from time to time, but L is regarded as so important to the nation that it receives government assistance to help it when times get hard. L has accorded B an overdraft facility of 1,250 euros. Because of the aleatory nature of B’s work, B has dipped into the facility to the extent of between 1,000 and 1,250 euros, depending on the month in question. Note: he is not able to overdraw more than the limit of 1,250 euros.

In order to attract custom, B does a lot of things free. He goes to the post office to send customers paper documents, for which he doesn’t charge them. He prepares texts for computer processing, but he doesn’t charge customers for that. In fact, B doesn’t add any charges intended to cover the running of his business. He can’t afford to do that, because, if he did, he would lose the customers. In fact, there’s a high likelihood that if B actually charged customers the costs of running his business, they would leave in droves, and probably high dudgeon. They pay for the work, but not for the business. It’s an argument that is rarely raised when chocolate companies reduce the size of a chocolate bar by 7.8%, or benefits are cut by the government to pay for extra munitions for the army, or such like. Those costs of doing business get accepted with resignation; the costs of doing B’s business are rejected as a luxury and an imposition.

L, on the other hand, does nothing at all for nothing. If the customers who it has forced to trudge to banking terminals to do their banking, or to download apps so they can do banking “from the comfort of their armchairs” should lose the plastic card that grants them an open sesame to their own money, L charges them to replace it, along the lines of “people really shouldn’t be so careless with our property”, even if it’s property that grants customers access to the services that L also charges them for.

L charges B for the use of the overdraft facility, and he pays interest and charges on every single penny he draws from the facility, on top of the charges for operating the bank account, which L also charges him even if he doesn’t use the overdraft facility at all. There is nothing whatsoever unfair in any of this, because it recognised, by both L and B, that B’s purpose in life is to feather the nest of L. Both parties recognise this and recognise that it works by L offering some kind of service to B, which B has no choice but to go to L, or a company like L, to receive.

The law sees things slightly differently. As is by now well known, the law recognises three kinds of people in society: the elite, who are relieved of many obligations that get imposed on the lower orders, like paying tax or fighting wars; workers, who are there as a necessary evil to supply the elite with their wealth, and may therefore be excused having to fight wars, but not paying tax; and disposables, who are the first to be packed off to fight wars and don’t pay tax in any case. The disposables are worth nothing, beyond their ability to fire a rifle accurately (the prospect of which is why some jurisdictions allow them to own such weapons, even if they have no work; in the meantime, they may be given to practise their aim on other disposables, thus rendering the victims disposed-of and, if they are caught, also the perpetrators, who are packed off to prison (without their rifles, I must add)), but the extent to which a social structure is constructed on compassion and pity may allow it to provide disposables with some kind of living. The disposables must, in return for this living do one thing: try.

They must try to earn money on their own, without benefits and other compassion-based incomes. The more disposables are required to try, the happier elites are. The easier it is to come by benefits, the unhappier elites are. Even if elites are swimming in wealth, they take a great interest in how hard disposables try. In the US right now, that interest is at gargantuan levels: people are far more interested in how hard disposables try than how easy the wealthy come by their millions. It is so; a fact of life.

B, our borrower, has now been told by L, our lender, that he is under a legal duty to pay off his overdraft, a thing called zero-balancing. That sounds as if L wants B to try harder, whereas B is already trying as hard as he can, and is 4 years off retiring, don’t forget. But L is constrained to oblige B to try harder because of legislation. The fact the legislation was introduced at the insistence of L, and other institutions like L, is unimportant. The subliminal message is that, if B tries harder, it should not be a problem to repay the overdraft. But, if he pays back the overdraft, L will no longer receive interest and charges on transactions. So, B paying back the overdraft is not actually in L’s financial interests. However, if he doesn’t repay the overdraft, he will be put on a black list and will never, ever be able to borrow money again. Not ever. It is legislation that, to coin a phrase, hangs the poor out to dry.

So, what will B do? Well, I’ll tell you. B will do exactly what everyone else in this situation does. On the day before the “zero-balance” requires to appear on his account, he will approach a friend of his, or perhaps two or three friends, whose names may be Peter, or possibly Paul, and he will borrow from them sufficient funds to put his account at zero. The day afterwards, he will repay Peter and Paul.

The zero-balance rule has got nothing at all to do with the debtor’s ability to repay his overdraft. That remains the same. What the rule does is establish how much other help one can take recourse to when one is in financial straits. The extent to which such knowledge is useful to a bank, like L, or the government, to which L dictates financial laws, is uncertain. But it simply is so. A fact of life.