NYT: Credit Card Companies Slashing Card Balances

[flpoljunkie]

June 16, 2009
(Great, if you can afford it! Wonder how widespread this is.)

Credit Issuers Slashing Card Balances

By DAVID STREITFELD

The banks were bailed out last fall, the automobile companies last winter. For Edward McClelland, a writer in Chicago, deliverance finally arrived a few days ago.

Mr. McClelland’s credit card company was calling yet again, wondering when it could expect the next installment on his delinquent account.

It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.

As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed.

The practice started last fall as the economy worsened. But in recent months, with unemployment topping 9 percent and more people having trouble paying their bills, experts say this approach has risen drastically.

They say many credit card issuers have revised internal guidelines to give front-line employees the power to cut deals with consumers. The workers do not even have to wait for customers to call and ask for a break.

http://www.nytimes.com/2009/06/16/your-money/credit-and-debit-cards/16credit.html?hp

[nc4bo]

1. Something is better than nothing but the customer will have a cellar credit score

and an even tougher time getting approved for any sort of credit for the next 7 years or so and the bank continues business as usual.

How about they quit raising the interest rates and stop with all the asinine extra fees and interest rates on these accounts while they're at it.

Some blood is better than no blood from the turnip, I guess.

[flpoljunkie]

2. You make very good points. Banks have until next February to keep raising rates without notice.

After that, they just have to give you notice. Congress could have done a lot better, like passing Bernie Sanders' usury amendment--which failed miserably with only 33 yes votes. Chris Dodd says he's going to resurrect it. He's up for re-election in 2010, of course. It's probably just talk, and he doesn't have the votes--even if he could avoid cloture.

It's way past time for campaign finance reform. Congress puts special interests before the public interest, time after time. It is discouraging, at times, to think it will ever be better.

[customerserviceguy]

4. If you're already getting calls from a debt collector for a credit card company

you can kiss your formerly high credit score goodbye for awhile, if you had one to begin with.

I'm glad that people who have been living under crushing debt have a chance to settle a $5.5K debt for about $2,800, but you have to wonder why and how they have that much money sitting around to be able to do it.

And you have to wonder how that credit card company is going to turn around and screw it's full-paying customers because they had to do this. I'm keeping a close watch on my monthly B of A statement, right now they're still charging the agreed-upon 11.75% after my zero-rate period ended, but if they pull any stupid tricks, I'll be more than happy to refinance the balance with my credit union.

[flpoljunkie]

3. Part of paragraph left out of OP. It's in bold below.

Mr. McClelland’s credit card company was calling yet again, wondering when it could expect the next installment on his delinquent account. He proposed paying half of his $5,486 balance and calling the matter even.

It’s a deal, the account representative immediately said, not even bothering to check with a supervisor.

[uponit7771]

5. They have to, defaults have shot up to record rates..."record" meaning worse than 80s & 90s

...recessions

[K Gardner]

6. Got a letter from Chase yesterday, on an account with ZERO balance. They're

raising my rate to prime PLUS 17%, with a $60/yearly fee just to hold the card.

My options? Accept or decline the rate increase. Rate increase applies to even existing balances. If I decline the rate increase, they cancel my card and report it to the credit bureau, which lowers my credit score. Damned if you do, damned if you don't.

I expect this won't be the last case of this.. and through nothing I've done, my credit score will start to slowly.... fall.