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Credit Cards Cut Deadbeats More Slack
With unemployment rising, companies modify, reduce debt
By Kevin Spak
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Posted Sep 10, 09 9:15 AM CDT
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(Newser)
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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.