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Credit Cards Cut Deadbeats More Slack

With unemployment rising, companies modify, reduce debt

By Kevin Spak,  Newser Staff

Posted Sep 10, 2009 9:15 AM CDT
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(Newser) – With unemployment nearing 10%, credit card companies are doing something once unheard of: forgiving debt, or modifying it in the customer’s favor, the Washington Post reports. Companies are loathe to discuss the practice, lest it inspire more delinquencies, but according to one industry report, roughly 3 million people got some kind of modification last year. “Issuers are looking to get something rather than nothing,” explains one analyst.

Modifications include lowering the interest rate or minimum monthly payments, waiving fees, and reducing the amount owed. But consumer advocates complain that upstanding customers are picking up the tab for these breaks, with credit card companies charging soaring rates. Issuers “are treating consumers randomly,” says a US PIRG official. “A small number are getting helped. A large number are being hurt.” There is a downside for those bailed out, as well, the Post notes: Forgiven debt can be taxed, and can blow the borrower's credit rating for up to seven years.

In this July 27, 2007, file photo, signs for American Express, Master Card and Visa credit cards are shown on a New York store's door.
In this July 27, 2007, file photo, signs for American Express, Master Card and Visa credit cards are shown on a New York store's door.   (AP Photo/Mark Lennihan, File)
In this April 26, 2006 file photo, credit card signs are posted outside a New York parking garage.
In this April 26, 2006 file photo, credit card signs are posted outside a New York parking garage.   (AP Photo/Mark Lennihan, File)
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COMMENTS
Showing 3 of 8 comments
bacimom
Sep 11, 2009 3:24 AM CDT
I resent the use of the term deadbeats. People who legitimately used their cards and then lost their income through no fault of their own, and are just trying to stay, housed, fed, insured and alive are not deadbeats. That is a term for people (mainly absent fathers) who refuse to support their children after legally signing an agreement that they will do so. It is good fiscal sense to lower rates and cut out additional fees to get back the principal on a loan. Most, if not all of these companies are doing the adjustments while either suspending or closing the accounts so no further charges can be made. It is good business and more humane than just harassing people as if they were just not paying for the kick of being harrassed. If they play well with their clients they may get their business back at a later date when their finances have improved. If they do nothing all they're going to get is a bankruptcy filing by the customer and zip for the credit card.
odowd80
Sep 10, 2009 7:55 AM CDT
@dawg: their former practices were as crooked as hell. They offer you a credit card with a 8% "fixed" rate. You agree to the terms and take out a loan on those terms. Then they change the interest rate whenever they want on existing balances...even if a payment is 1 hour late. The only reason they're changing now is because of the new legislation and the rampant defaults. There was once a time when usury was illegal in this country and despised by republicans.
godawgs
Sep 10, 2009 4:34 AM CDT
@toon i would be grateful to get the kids photos a back. if they think that it's theft then don't use the credit card.

 
unemployment • credit card • interest rate • consumer debt • financial crisis • loan modification

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