Debt Relief News

Debt Lead Company offers & saving tips for debt settlement, consolidation, credit repair
October 29, 2012

Getting Help with Debt While Avoiding Settlement Scams

Author: admin - Categories: Consumer Debt News, Published Debt Relief Articles, Uncategorized
Steve Rhode published a very helpful article in the Huffington Post earlier this month. He offers advice on how to best manage your debt without getting scammed in the process. Selecting the right debt-relief option and debt-relief provider for you is going to be one of the most important things you do in your life. You owe it to yourself to spend some time and follow this guide, step-by-step.

Step 1: Homework- To make sure you are first armed with a general understanding of all of your debt-relief options I’d suggest you first read “How to Get Out of Debt: The Honest and Unvarnished Truth” and “The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy.”
Step 2: Check Out All Options- Use the free How to Get Out of Debt Calculator to review your options. The calculator will give you a rough idea of the pros and cons of each major solution.
Step 3: Tip Toe Contacts- Start contacting a few debt-relief companies that provide the solution you believe is right for you based on what you learned above. Talk to at least three.

Read the original Huffington Post Article.

March 1, 2011

Comparing Debt Settlement to Bankruptcy

Author: admin - Categories: Bankruptcy News, Debt Relief Tips, Featured Debt Articles

When things are looking bad financially, you may be faced with a tough decision: Do you file for bankruptcy? Do you try and reach a debt settlement? What are the differences between the two? Knowing how both a debt settlement and a Chapter 7 bankruptcy can affect you is important, especially if you want to take the path that causes you the least financial damage. Both the debt settlement program and bankruptcy have benefits and drawbacks, and here we’ll go over some basic information comparing debt settlement to bankruptcy that will help you decide if it comes to that. The legal counsel for both options is similar. Many bankruptcy lawyers also offer debt settlement services. In the past, people would just get an equity loan after a bankruptcy discharge but the laws and guidelines have changed in recent years.

Debt settlement is essentially a negotiation with a creditor in order to reduce the amount that is owed on a debt in exchange for a lump sum paid to the creditor. Negotiating debt can often reduce it to anywhere between twenty-five and seventy-five percent of the debt, which can be a substantial amount. However, this amount must be paid as a lump sum, or in some cases, over the course of a short period of time (a month or two). Debt settlement can only be performed on unsecured debts, such as credit cards and medical bills.

Bankruptcy, on the other hand, takes a number of different forms. The most common type of bankruptcy for individuals is Chapter 7 bankruptcy, in which all non-exempt property owned by the person in debt is sold, and the proceeds are given to the creditors. This process is also known as liquidation. Chapter 7 bankruptcy has the advantage of allowing the person in debt to start fresh relatively quickly, and is often used by individuals with very large amounts of debt and few assets. Because bankruptcy is certainly more damaging in terms of loss of assets and credit, most people will attempt a debt settlement before declaring bankruptcy.

If you are in financial trouble and want to avoid bad credit in the future, a debt consolidation loan is often a sound option. Debt settlement should certainly at least be considered before jumping to bankruptcy, as Chapter 7 bankruptcy can have far-reaching repercussions that stay with you for a long time. However, failing to pay a debt settlement can be even more damaging. Consider all of your options and try some comparison shopping for debt settlements before making your final decision, as doing the right thing for you and your family should be a top priority.

January 13, 2011

Do Debt Settlement Services Lower Credit Scores

Author: admin - Categories: Debt Relief Tips, Published Debt Relief Articles

Debt Settlement Nationwide posted a good article recently seeking to set the record straight on the impact debt settlement has on a person’s credit.  Does debt settlement hinder credit scores?  Did you know that qualifying for a debt consolidation loan is often more difficult than getting approved for a mortgage bad credit? Of course it will but so will late payments and typically consumers are seriously delinquent on their bills when they enter a debt negotiation program.  Read the original article, How Debt Settlement Impact Credit.

New Laws Impacting Debt Settlement Industry

Author: admin - Categories: Consumer Debt News, Debt Settlement News

According to the Mortgage News Post, many mortgage brokers were shifted to selling debt relief when the sub-prime mortgage sector went south.  It’s been more than two months after the start of new federal rules designed to curb abusive practices of shady debt settlement companies.  New debt relief law advocates continue to complain that consumers are still being duped into signing up for these erroneous debt settlement programs.  The industry best known for late-night television commercials promising to help consumers negotiate credit card debt for pennies on the dollar has changed since the new rules took effect.  Consumer advocates are saying that the new laws haven’t necessarily led to positive changes for consumers seeking true debt relief.

Critics and industry observers say the new federal rules have led debt settlers to either: “Today, we are seeing the debt settlement industry morph into other areas,” says William P. Binzel, senior adviser and counsel for the National Foundation for Credit Counseling. He represents nonprofit credit counseling agencies that help consumers create plans to manage their finances and pay off what they owe over time in debt management plans rather than make deals to reduce the principal amount of debt.  Their nemesis over the past several years has been the debt settlement industry — which has collected upfront fees and payments from consumers with the promise of negotiating settlements with creditors to reduce the principal by as much as 50 to 70%.  Unfortunately, as many consumers found, debt settlers often did not fulfill their promises and kept the fees and money paid to them by their clients, who still owed the original debts.

As of Oct. 31, 2010, for-profit companies that use telemarketing to attract clients cannot charge fees until after they have negotiated settlements with credit card companies and other creditors, according to the new Telemarketing Sales Rules drafted by the Federal Trade Commission. The rules also restrict the amount of fees that can be charged and ban ads that tout impressive settlement success rates unless they have evidence to prove those claims.  “All those guys that were getting customers and collecting fees and not providing any services … in the new world, they just by definition cannot exist,” says Andrew Housser, a member of the board of The Association of Settlement Companies (TASC), an industry trade group.

Comparing Consolidation Loans to Debt Settlement

Author: admin - Categories: Debt Consolidation, Debt Settlement News, Published Debt Relief Articles

Consumers have seen significant debt relief solutions over the last few years.  In the past homeowners had a serious edge in consolidating credit card debt, because they could take out a fixed rate home equity mortgage to eliminate high interest variable rate credit cards.  Traditionally home equity rates have been affordable and lenders were pretty aggressive with second mortgage programs if borrowers were getting the loan for the purposes of consolidating debt.

Debt Settlement

  1. Don’t need to own a home
  2. No Equity Required
  3. Could Harm Credit
  4. Settle for 30 50%
  5. Settlement 12- 36 months
Secured Debt Consolidation

  1. Must own a home
  2. Must Have Equity in Home
  3. Beneficial to Credit
  4. Pay back 100% of debt + interest.
  5. Consolidation 10 to 30 years

A few years ago, debt settlement programs become available to homeowners and non-homeowners alike.  Now people who had been burdened with credit card debt had another solution besides bankruptcy or a bad credit debt consolidation loan.  Nationwide Lender posted a good article recently Comparing Credit Card Debt Settlement to Debt Consolidation Mortgage.  Importantly, the company reminded us that managing your debt is a critical financial decision.  Today, there are more debt relief solutions forever for disposing credit card debt and securing a fresh start.

July 12, 2010

Comparing Debt Settlement to Debt Management

Author: admin - Categories: Debt Relief Tips, Featured Debt Articles, Featured Debt Relief Companies, Published Debt Relief Articles

Debt Settlement Nationwide published an article today comparing debt management to debt settlement services.   The debt relief company notes that debt management is great for consumers who are still concerned about their credit scores.  They recommend debt settlement solutions to consumers who are looking for a service that renegotiates their balances owed so they actuallly pay less than owed to their creditors.  Read the original article > Debt Management Versus Debt Settlement

6 Ways to Reduce Debt

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Relief Tips, Featured Debt Articles, Featured Debt Relief Companies, credit counseling

The debt relief industry has both credible and shady debt management companies.  Yes, there are debt settlement companies that engage in fraudulent, deceptive and abusive practices that pose a risk to consumers, according to a federal investigation of the industry. In its investigation, the U.S. Government Accountability Office found that some debt settlement companies provided fraudulent, deceptive, or questionable information to its consumers, such as claiming unusually high success rates for their programs – as high as 100 %. However, the Federal Trade Commission and state investigations have typically found that less than 10% of consumers successfully complete these debt settlement programs.

According to the Federal Trade Commission, if a company promises to erase your debt for pennies on the dollar, be skeptical. Debt negotiation can be risky, and it can have serious, long-term consequences for your credit report and your ability to get credit in the future. And if another company include credit repair, alarm bells should go off.

Here are six tips from the Consumer Federation of America on how to get real debt relief:

1. Try to resolve your debt issues with your creditors one on one. You may be in a position to able to get your credit card interest rate reduced, late charges forgiven, and your monthly payments reduced.

2. Contact a nonprofit credit counseling service for advice. It may be possible to work out a plan through the credit counseling service to pay off the debts over time. To find the nearest nonprofit credit counseling services, consumers can contact the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

3. Know your rights. Ask your Attorney General’s Office if state law limits the amount or timing of debt settlement fees in your state. Find your state AG at www.naag.org.

4. Read the fine print. Walk away if the contract doesn’t contain the promises that were made to you, or if the contract contradicts what you were told.

5. Look for services that charge a fee only after the service actually negotiates debts.

6. Take immediate action if you can’t make your home loan or auto payments. (In some cases, debt settlement services can’t address home mortgage or secured auto loans.) Contact your lender to discuss loan modification options. immediately to try to work out new payment arrangements.

Read the original debt article online >

May 10, 2010

Democrats Pushing Debt Settlement Bill

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Relief Tips, Debt Settlement News - Tags:

Last week, Democrat Senators Chuck Schumer, D-N.Y. and Claire McCaskill, D-Mo., introduced the “Debt Settlement Consumer Protection Act.” This debt relief bill would limit the fees that a debt settlement company would be able to charge a consumer for debt settlement services. If passed, the new law would mandate written disclosures before debt reduction services were performed and include a provision for the right to cancel for a full refund. These new laws are intended to impact debt service like subprime loans have been impacted by the Dodd-Frank Bill.

According to a press release from the Council of Better Business Bureaus, BBBs across the nation have received more than 3,500 complaints about debt settlement companies since the beginning of the recession in 2007.  Many consumers complained that the debt settlement programs did not work.  Some people even accused the debt settlement companies of increasing their debt.  Credit card debt settlement can leave consumers liable for a lawsuit from a credit card company, in addition to having wages garnished.

A number of consumers who quit the program say they were not refunded for payments they had made.  The debt settlement bill comes after a hearing last week during which the U.S. Government Accountability Office testified about the results of a covert investigation into the debt settlement industry’s practices. It found that most companies it mystery shopped charged an upfront fee before any services were performed, and nearly all of them told the undercover callers to stop paying their creditors. In some cases, a consumer’s payments into the program would go entirely toward fees for up to four months.  Certainly debt settlement can be a successful financial tool for consumers to get out of debt, but it should be a last resort. The FTC explains the pros and cons of various debt relief options in this fact sheet, “Knee Deep in Debt.”

The Better Business Bureau warns of the following red flags for unscrupulous debt settlement companies:  High upfront fees.

  • Guarantees of debt reduction by specific amounts.
  • Claims that the process will be swift or easy.

The original article was written by Leslie McFadden for Bankrate.com

Tighter Rules Coming for Debt Settlement Companies

Author: admin - Categories: Credit Card Debt Articles, Debt Settlement News, credit counseling, debt relief - Tags: ,

Last week TASC reported that the debt settlement industry was under attack as credit card companies may be misleading the government once again.  Debt settlement companies that charge high fees and mislead consumers would be more tightly regulated under new legislation introduced Wednesday.  TASC agrees that debt settlement companies need to be held accountable for their actions but much of this debt relief reform appears to be biased and many incidents are taken out of context.  The proposed law, put forward by Sens. Charles E. Schumer, D-N.Y., and Claire McCaskill, D-Mo., comes as complaints about the debt settlement industry have soared amid the economic downturn.

Under the legislation, debt settlement companies wouldn’t be able to collect fees until a settlement was reached. Consumers also would get clearer upfront disclosures, including a detailed list of all costs and promised services.  Typically, the settlement firms promise to negotiate with credit card companies to reduce the amount that consumers owe. Costs vary, but a company might charge up to 20% of the total debt. Fees are usually demanded upfront, even though a settlement may never be secured

Hiring a debt settlement company doesn’t stop the collection calls either. Interest and financing charges continue racking up too, and lenders may even decide to sue in the meantime.  Consumer groups note that individuals can negotiate directly with lenders, and that credit card companies often refuse to negotiate with debt settlement companies. Even if a debt negotiation is reached — either independently or through a third party it could hinder the consumer’s credit score. (so do bankruptcy, consumer credit counseling and debt management)  Under the Schumer-McCaskill bill, consumers would have the right to cancel a debt settlement agreement and get a full refund. The legislation would provide for enforcement through state attorneys general and the Federal Trade Commission. The federal agency also would be given authority to regulate the industry’s advertising and marketing practices.

Is Debt Settlement the Best Option For You?

Author: admin - Categories: Credit Card Debt Articles, Debt Relief Tips, Debt Settlement News, Featured Debt Articles, debt relief

Like take a loan out to consolidate debt, debt settlement is not something you want to just jump into.  Consider your debt relief solutions and tax implications before signing an agreement with a debt settlement company.

1. First, determine how much debt you have(specifically unsecured debt no including student loans) Request a copy of your credit report from one of the main credit reporting agencies. You could view your credit report with a credit repository company like Trans Union, Experian or Equifax.

2. Have you spoken to a debt settlement company about qualifying?  In most cases, debt settlement companies only work with people who owe more than $7,500. There may be other requirements as well. Read through the information provided by the debt settlement company. Make sure you meet all the requirements.

3. Determine if you have the money for debt settlement. Subtract from your monthly income your normal living expenses, including housing, transportation, utilities, food, and insurance. If you have money left over, then debt settlement may be right for you. If you don’t, you should not try credit card debt settlement.

4. Search for a debt settlement company. Don’t sign with the first company you find. Instead, read through what services they provide and what they expect from you. Look for debt relief companies that have been in business for a while. Make sure the debt settlement companies you are working with have been approved by the Better Business Bureau.

5. Decide if debt settlement is the best option for you. With debt settlement, you can reduce the total amount you owe and improve the relationship between you and your creditors. Also, you can pay your debt quicker as long as you remain faithful to the credit card settlement offer.

Debt settlement can also incur potential tax problems, and may hurt your credit rating. It may encourage your creditors to initiate law suits against you. Also, it could increase the frequency of calls to you by your creditors.  Read more at http://www.ehow.com/how_2002294_compare-consolidation-settlement.html

April 5, 2010

Debt Settlement Nationwide Rolls Out New Debt Relief Program

Author: admin - Categories: Credit Card Debt Articles, Credit Market Updates, Debt Relief Tips, Debt Settlement News, Featured Debt Articles, Featured Debt Relief Companies, debt relief

The California debt relief company, Debt Settlement Nationwide announced a new debt relief initiative to help consumers find the path to debt freedom.  With so many consumers getting behind on credit card bills,  a better solution for debt relief is in demand.  Debt Settlement Nationwide  announced that their debt reduction option to help people get back on their feet their financially.  With bankruptcy laws and lending tightening considerably, consumers look to debt settlement to take the pressure off of the high rate burdens that go hand in hand with unsecured debt.  See the original blog post online > New Debt Relief Programs

Debt Relief Leads in Demand

Author: admin - Categories: Debt Leads, Debt Relief Tips, Debt Settlement News, Featured Debt Articles, debt relief

Bankruptcy and debt settlement have become two popular debt relief choices for consumers seeking help, so many finance companies are searching for debt leads online.    Now that home values have been devastated, homeowners no longer have the ability to take out a no equity debt consolidation loan.

Debt settlement has become the preferred solution for consumers that want to eliminate their credit card debt.  Debt settlement leads are in high demand because millions of people are looking for debt relief  online.   The Mortgage Lead Vault has many popular lead buying programs to for companies seeking mortgage, foreclosure prevention and debt relief leads.   Read the original article online > Debt Leads Rise in Popularity.

February 1, 2010

Debt Relief Great 1st Step in Credit Repair

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Credit Repair Tips, Debt Consolidation, Debt Settlement News, debt relief

One of the most effective steps in credit restoration is debt consolidation.  Debt consolidation loans were very popular with homeowners until the credit crunch of 2008.  Millions of consumers who were burdened by credit card debt we now seeking alternative solutions to eliminate their credit card debt. Almost every day sees a new posting somewhere about debt consolidation, its benefits.

As many people have experienced personally, credit repair can be time-consuming and paying a credit repair company for their services can be costly. So if you’re already behind, trusted credit repair companies will most likely suggest you look into debt relief if debt consolidation loans are not a viable option. Due to the challenging landscape of credit repair, it is critical for your finances to be stable and monthly bills to be paid on time to prevent further damage.

Does Debt Settlement Harm Your Credit?

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Relief Tips, Debt Settlement News, Published Debt Relief Articles, credit counseling, debt relief

Does debt settlement affect your credit negatively?
Yes, quite often debt settlement will make your credit scores drop, at least during the months you are building your account for the debt negotiations.  However, consumer credit counseling, bankruptcy and most debt management programs will also damage your credit, but in most cases, consumers can get their credit to rebound quickly after debt settlement.  It is amazing what credit repair can do to rebuild your credit profile.

As soon as you have the ability, I recommend starting a savings plan. Saving even a little bit each pay-period enables you to stop using your credit cards for the unexpected expenses that can arise frequently. Saving is essential to grow your wealth and prevent consumer debt. Check with your bank to set up an automatic transfer to savings via payroll deduction or direct deposit.

Read the complete article > Debt Settlement Solution or Scam? The debt relief article was written by Jeff Morris from the US Debt Relief Firm.

January 29, 2010

Debt Relief Services for Affiliate Marketing

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Settlement News, credit counseling, debt relief

The debt relief industry continues to expand with debt settlement, debt management, consumer credit counseling and bankruptcy filings rapidly soaring.  The Debt Relief Business and specifically, the attorney based debt resolution model is considered the new and preferred way of helping consumers settle their credit card debt.  Early on, we’re talking maybe a year and a half ago most sales offices believed that their dreams had been answered after the subprime mortgage meltdown, as promoting loan modification was the easiest money they’d ever seen.  Alongside modifying, loan officers, credit repair affiliates, mortgage brokerages and accountants alike became debt settlement affiliates with multiple net branches, but limited to green states.

The Federal Reserve announced more low rates for mortgage refinancing for all 50 states! $6,500 Tax Credit for First Time Home Buyers seeking FHA Home Loans.

Today, and with even greater confidence, the loan modification professionals see the debt relief business as the way to go and are quickly moving to promoting debt settlement, synonymous with debt resolution except debt resolution is performed by attorneys.  Attorney Based Debt Resolution also has several advantages to the debt settlement processing model, including the ability to service consumers in 48 states.

December 31, 2009

Debt Settlement Pros and Cons

Author: admin - Categories: Credit Card Debt Articles, Debt Settlement News

Debt consolidation used to be easy for homeowners.  They could run up credit card debt and then just take out a second mortgages to consolidate their credit card debt and even get a tax deduction in the process. Millions of homeowners lost their home equity so debt consolidation options have vanished.  Debt settlement has become a more popular method of debt relief, mostly because everyone qualifies for debt settlement.  Consider carefully your options to eliminate credit card debt quickly and effectively.

Debt relief offers many benefits many consumers strapped with credit card debt.  Debt negotiation may not be for everyone, some people are better suited for bankruptcy and others do not have the correct mindset to go through this process.  The goal of a debt settlement is to obtain a debt settlement for you on the current debt amount you owe your creditor. So for example you may owe one particular creditor $10,000 so the goal of the negotiator would be to have you end up paying back say $6,000. The two main benefits of debt settlement are to save money on what you currently owe your creditors and to save time. By just paying the minimum payment with even a modest interest rate you will be looking at 30 or more years to become debt free, with a sound debt negotiation program you will be out of debt within 2-3 years or sooner depending on your current financial situation.

Even though there are great benefits but there are a few drawbacks with debt settlement because your credit can suffer. For starters your creditors will not be willing to negotiate a debt settlement at all if you are current with your monthly minimum payments. They would prefer you to stay on their credit treadmill for the next thirty years and pay them back over four times the balance in interest alone. So you must be late on your payments to put the creditors into a position where they will be willing to settle. Once you stop paying them the ball game changes completely and they will then be willing to talk in terms of negotiating a settlement.

September 21, 2009

Consumers Warming up to Debt Settlement for Credit Card Debt Relief

Author: admin - Categories: Bankruptcy News, Consumer Debt News, Credit Card Debt Articles, Debt Settlement News

Debt settlement and the debt negotiation industry has grown significantly in this weak economy.  The available credit has all but dried up for American consumers seeking unsecured credit lines yet the interest on their credit card debt continues to rise.

With incomes decreasing nationally and the unemployment teetering at 10%, many consumers no longer have the ability to pay back their unsecured creditors that hold their credit card accounts.  Most of these people are delinquent on their credit card bills and very few qualify for a traditional debt consolidation loan, because if they own a home, they likely lost their equity during the housing crisis.

Consumers are considering bankruptcy, credit counseling and debt settlement that negotiate reduced credit card balances if funds are offered to pay off the credit card debt.  More and more people are comfortable with the debt settlement, because it allows them to become debt free in 12- 18 months.  Credit can be reestablished quicker after debt settlement than a bankruptcy, because the chapter 7 and 13 bankruptcies are reported by Trans Union, EquiFax and Experian for seven to ten years.

August 31, 2009

New Consumer Protection Laws to Reform Debt Settlement Loan Modification and Mortgage Industries

Author: admin - Categories: Consumer Debt News, Credit Card Debt Articles, Debt Settlement News, Foreclosure Prevention, Predatory Lending, Published Debt Relief Articles

In an effort to curb fraud and eliminate scams, State and Federal regulators are moving swiftly to reform the mortgage, debt relief and loan modification industries.  As the Mortgage Reform and Anti-Predatory Lending Act continue to make their way through Congress, it is clear this potential mortgage lending and settlement legislation could be just the beginning of an onslaught of future regulatory reform lawmakers will use to help protect consumers even more aggressively. The bill would fundamentally change the home lending market, placing tighter restrictions on nonprime mortgage lending. Perhaps more importantly, it would require mortgage lenders to establish what the bill calls a “duty of care” in proving borrowers could repay a loan and that mortgage refinancing gave them a net tangible benefit.

At the same time, banking and mortgage industry regulators are feeling much more empowered under the Obama administration than they were during the previous one. More stringent regulatory exams, a rising number of enforcement actions and the growing number of financial institution closings during the first quarter of this year are evidence of this fact.

These new rules are very different from those of previous years that required a simple update to a loan document or disclosure. Instead, these changes will demand mortgage lenders change the way they do business, revising and improving operational and compliance risk management processes entirely.  The myriad of federal and state anti-predatory lending laws are one subset of consumer-focused regulatory requirements lenders must comply with, but they present some of the most confusing and complex compliance changes facing mortgage relief companies and lenders.

August 17, 2009

American Consumers Charged the Credit Card Debt

Author: admin - Categories: Book Reviews, Consumer Debt News, Credit Card Debt Articles, Credit Market Updates, Featured Editorial, Published Debt Relief Articles, credit counseling - Tags: , , , , , , ,

Richard Geisst, a Manhattan College finance professor and former investment banker published a new book, “Collateral Damaged: The Marketing of Consumer Debt to America.” In the book, Geisst traces America’s credit history and finds it riddled with sleepy regulators, congressional nit-wits and sinister financial firms making euphemistic lures to consumers. “A credit card offers $10,000 of credit, not debt. It has a friendlier ring,” he writes.

Consumer debt is at an all-time high, exceeding $2.5 trillion, or $8,000 per person, making it as American as apple pie and apparently equally tasty. But The Great American Debt Machine, as Geisst calls it, is hardly new. Sears established its consumer credit operation nearly 100 years ago, and automobiles have been sold “on time” since 1916. The American debt machine really began roaring in the ’20s, when consumer debt doubled. But fewer than 20% of the population bought anything on credit then.

Credit cards hit the scene with Charg-It after World War II, followed by Diners Club and American Express. Diners Club and American Express required payment in full, however, so their credit card holders couldn’t get in over their heads. Plastic as we know it began about 50 years ago, with Bank of America’s BankAmericard (now Visa) letting card holders finance purchases over time, paying interest on unpaid balances.

Geisst says there are several significant factors beginning in the 1980s played a major role creating the current financial chaos:

o •Variable-rate credit cards and adjustable-rate mortgages shifted credit risks from lenders to borrowers.

o •Financial firms gleefully packaged and traded their debt, making credit easier to obtain than at any other time in history.

o •The Tax Reform Act of 1986 abolished the deductibility of interest, except for mortgages, leading to a stampede toward home-equity loans, on which interest remains deductible, to finance credit card purchases.

In the ’90s, Geisst says, Congress and community activists encouraged excessive lending to low-income groups, expanding the subprime mortgage market. And a 1998 tax law increasing tax-free capital gains on residences to $500,000 per couple “proved to be an irresistible lure for those who thought they could flip their homes for a profit after two years.”

Debt cravings turned to crisis this decade, Geisst writes, as lenders packaged debts and cleared them off their books; regulators relied on bond rating companies to do their work; mortgage originations hit a record $4 trillion (over 13% were subprime also called bad credit mortgages); and bank card customers used plastic to pay for $4.34 trillion worth of purchases. “In order to achieve the American Dream, average American families were going into more debt given the low growth in incomes, factoring in inflation,” the author writes. But Geisst puts excessive blame on consumers without evidence of bad behavior. He maintains that large numbers of homeowners used home-equity loans to run up credit card charges, but he concedes that no statistics confirm this. And the author says the “average American has over 13 credit cards.” In truth, consumers have only about five cards on average, 42% of card holders don’t carry balances and about a quarter of Americans have no credit cards.

How to stop the insanity? Geisst calls for mandatory debt counseling for borrowers who pay only minimums on credit cards; tighter restrictions on tax-free residential capital gains, consumer credit and mortgage approvals; and new laws reinstating state usury ceilings, punishing predatory lenders and creating a Consumer Financial Protection Agency like the one the Obama administration has proposed. Government regulation may help stem America’s debt problems, but the recession will probably do even more to make consumers and lenders more cautious. Book Review and Article was written by Richard Eisenberg.

Credit Card Debt Charge Offs Rise

Author: admin - Categories: Consumer Debt News, Credit Market Updates, Published Debt Relief Articles - Tags: , , , ,

A recent article released new info that charged off credit card debt in the U.S. continues to rise for credit card companies like Capital One.  Most analysts believe that the credit crunch will continue as home foreclosures, delinquencies, charge-offs and debt settlement cases keep rising. Finance giant, Capital One reported that they charged off $524.9 million in U.S. credit card debt in July, which is equal to an annualized net charge off rate of 9.83%, the highest charge-off rate of the year. It is also up from June’s rate of 9.73%. Read the complete credit card news post >Credit Crunch and Tightened Home Financing