Banks Clamp Down Harder on Credit Card Borrowers

[TexasLawyer]

A posting on Naked Capitalism, citing to a Business Week article:

http://www.nakedcapitalism.com/2008/03/banks-clamp-down-harder-on-credit-card.html

Banks Clamp Down Harder on Credit Card Borrowers

An article in Business Week, and a related discussion on the blog Credit Slips, highlight a new and nasty trend: banks are refusing to give overstretched borrowers who negotiate repayment plans through credit counselors the interest rate breaks they once did.

In the old days, banks would reduce interest rates on balances due, sometimes to zero, to customers who worked out a repayment plan via not-for-profit credit counselors. But now the creditors have taken a page from Scrooge:

Until recently issuers often agreed to ratchet down interest rates permanently, to as low as 0%, for those working with credit counselors. That has been a critical concession, says the industry, since it makes monthly payments more affordable and helps ensure the principal is getting paid down. But now some credit-card companies are balking. Discover Financial Services, (DFS) counselors contend, won't cut rates below 17.9% for clients, while Capital One Financial (COF) is holding firm at 15.9%. At least 5 of the 13 largest issuers are offering smaller breaks on rates than they did five years ago, according to a study by the Consumer Federation of America....

Some companies are still willing to deal. JPMorgan Chase (JPM) announced a year ago it would cut rates to 0% for consumers who agree to a formal debt-management plan. Bank of America will drop to the low single-digit level or even to 0% in some instances.

Meanwhile, counselors are fretting that they aren't getting paid for their services as they did in the past. The credit counseling agencies historically have collected 15% of the total debt that's paid off. Today banks are forking over less than 8%, notes the National Foundation for Credit Counseling, the umbrella group for 1,500 counselors. That money goes to fund operations, so counselors worry they may have to skimp on services given the cutbacks....

http://www.businessweek.com/print/magazine/content/08_11/b4075038438661.htm#%23

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[Warpy]

1. If you have credit card debt, expect the monthly minimum payment

to keep escalating. Expect your interest rate to rise. Banks need to be paid and they need to be paid NOW because a lot of things they had in their "assets" column have evaporated into thin air along with the bad loans that were backing them.

Banks aren't paying credit counselors now because they expect to do the job, themselves, by raising interest and repayments.

[N4457S]

4. Yeah...

...that's why we've been whitling our debt down over the last year.

We have the money in the bank to pay what we owe but didn't want to deplete our savings.

[Warpy]

5. How much are you earning on your savings?

How much interest are you being charged on your debt?

While it might be a great idea to keep a cash reserve that will tide you over 6 months of unemployment, anything above that should really go to getting you out of debt.

Debt is poison. A lot of people out there are about to learn that lesson the hard way.

Congratulations on having the foresight to whittle yours down, and welcome to DU.

[N4457S]

8. We Have...

...several zero percent credit cards, and that's where the debt is.

You are correct. That's why we're doing what we're doing.

We've seen this movie before, in the Rust Belt during the seventies. I feel like I'm there again.

[roguevalley]

6. someone called suzy orman and said they have the money to

pay off their debt but wanted to keep their savings. she said pay. you earn so much in interest that you will screw yourself royal otherwise. I did. I feel like heaven for it. Now I can save again.

[N4457S]

9. I Gotta Tell Ya...

...for 57 years old, she's a very attractive lady and SMART.

I will also tell you not all guys are neanderthals, as she seems to feel they are. A lot of them are but not this one. The only vices I have are my foul mouth, my gut (which I'm working on after being taken to task by the flight surgeon) and my flying. That's it.

[Skink]

2. the new bankrupcy law has made it easier for banks to do this.

[hadrons]

3. HSBC has been giving my brother hell for his CC debts ....

he was unemployed and the debts he ran up were medical, but they don't care.

And I'm sure the bank big-shots are against universal health-care to boot.

[N4457S]

10. You Do Know...

...HSBC is a Chinese owned bank, right?

[superkia]

12. I am in a similar situation like your brother, I had a bad motorcycle...

accident and was bed ridden for quite some time and had no insurance. I ran through about 16k in savings and have ran up a large debt on my credit cards that I lived off of. I am finally back to work but the minimum payments are so high, along with my regular bills and I don't know how I am going to get myself out of the situation with prices of everything rising fast. In the past, before I learned my lesson with credit cards, I was around 11k in debt but was able to budget myself and get out of it in 15 months. Now it looks like its going to be a little harder.


I actually was considering destroying my credit with bankruptcy, which is pretty good (I think FICO score 785?)but with the law that our government changed in 2005, I would be looked at as committing fraud? The worst part for me is, I cant help my mother anymore with her insurance (or lack of) or food. Its going to be a tough road ahead for us all!

[Trillo]

7. It's terribly difficult to cancel a Capital One credit card account with zero balance.

Recently, we did just that, and it took something like five or more contacts with them, each time we're assured it's been closed, then a new statement comes indicating it's still open and active, with new charges added for the 'next year' fee. In fairness, it finally was possible to close the account, but the people we were dealing with we felt were deceptive with strategic silences at odd points that should have resulted in simple answers, and it seems information was withheld until a direct question was asked that was phrased precisely correct, then we were often countered by negotiations to lower the interest rates, but only temporarily: attempting to close the account was more than just such a demand for termination, it was more like a game of chess until they finally relented and closed the account like we originally requested.

I wonder how many times such bullying tactics results in customers who figure it's easier to keep the account open rather than call them one more time just to have it followed by them getting it wrong five more times. It seems a wear-down technique. Bullying. Lack of Cooperation. It's a big FU. Right back at'cha.

[Bozita]

11. Reminds me of folks trying to quit AOL a few years back