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The more irresponsible the better. Good grief!
Credit card relief?
Banks, which are losing billions because many card holders aren't paying anything, seek OK to forgive up to 40% of strapped consumers' debts
THE ASSOCIATED PRESS
November 1, 2008
With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills.
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
"There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling. "We absolutely support the proposal."
In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.
Credit cards now look to be the latest domino to drop in a financial crisis that started with subprime mortgages and continually takes new twists. Amid rising job losses, consumers - even those with strong credit records - have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises are bleeding tens of billions in red ink from the losses.
Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures.
The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program.
WHAT'S IN THE CARDS?
CREDIT CARD MESS. Consumers, even those with solid credit records, have been defaulting at high levels on their credit cards. Banks battered by the mortgage and credit crises are losing tens of billions of dollars from the unpaid debt.
UNUSUAL ALLIES. Big banks have joined with consumer advocates to urge the government to allow a pilot program in which up to 40 percent of an individual's credit card debt could be forgiven, with the remainder to be paid over several years.
HOW IT WOULD WORK. The program could involve as many as 50,000 people. On a case-by-case basis, the amount of debt to be forgiven would rise in sync with the severity of the borrower's financial situation.
- The Associated Press
Banks, which are losing billions because many card holders aren't paying anything, seek OK to forgive up to 40% of strapped consumers' debts
THE ASSOCIATED PRESS
November 1, 2008
With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills.
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program, which the banks hope will become permanent, could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
"There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling. "We absolutely support the proposal."
In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.
Credit cards now look to be the latest domino to drop in a financial crisis that started with subprime mortgages and continually takes new twists. Amid rising job losses, consumers - even those with strong credit records - have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises are bleeding tens of billions in red ink from the losses.
Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures.
The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program.
WHAT'S IN THE CARDS?
CREDIT CARD MESS. Consumers, even those with solid credit records, have been defaulting at high levels on their credit cards. Banks battered by the mortgage and credit crises are losing tens of billions of dollars from the unpaid debt.
UNUSUAL ALLIES. Big banks have joined with consumer advocates to urge the government to allow a pilot program in which up to 40 percent of an individual's credit card debt could be forgiven, with the remainder to be paid over several years.
HOW IT WOULD WORK. The program could involve as many as 50,000 people. On a case-by-case basis, the amount of debt to be forgiven would rise in sync with the severity of the borrower's financial situation.
- The Associated Press
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