Quote from: Pixie on May 18, 2011, 06:15:11 PM

Quote from: tomcollins on May 18, 2011, 05:57:47 PM

It's much different than the current system. If I default on my car loan, they take my car. If I default on my mortgage, they take my house. If I default on my credit card, they come after me for it and can win a judgment against me.

The first two are secured loans, and require some way of securing which usually is by default local. I can't in country A secure credit in country B using my house/car etc. because they can't get it, if I default (easily).

Secured loans just affect the risk ratio, an easy "takeble" item so lowering the rate you pay interest as collateral.

But take most unsecure loans or a credit card, in those cases essentially they have 3 outcomes
1) You pay
2) You default and they call ballifs to take goods upto the value
3) They wipe it out as bad debt, and make sure you can never get credit again.

3 is for many people what happens, the real reason you want to keep paying your credit bills is so you CAN get credit in future.

As soon as the first bitcoin bank is setup I fully expect a bad debt protocol will come with it, perhaps even a name and shame system (public bad debt record as used in England in the last few centuries).

My thoughts in being a banker, is that I'd accept bad debt will happen sometimes, its part of the business and that risk will be calculated in the interest rates people would pay. Want cheaper interests rates, prove to me your less of a risk (complete loans etc.)

#3 happens, but people often need to file for bankruptcy, and their assets get cleaned out for it. It's not a trivial process. There is the arm of the government legal system that they have that they can use as well.

I think the shame/good name system could work, although proving yourself initially is going to be quite costly. No one will loan to you without really high interest rates (credit cards have quite high interest rates). But you won't want a high interest loan unless you are very profitable, trying to prove yourself and will pay the cost, or are a scammer. It's also easy to create a new identity from scratch, so you could just go through that process a lot. Someone will be creative and find a way to make this work if it's a good idea, though.