Credit Card Debt Forgiveness Program Proposed
Oct 29th, 2008 | By Rob | Category: Uncategorized
The debate over proposed credit card reforms by the Federal Reserve and the United States Congress may have paused in September to handle the financial crisis, but it has received a big push into the spotlight at the end of October. Undoubtedly, the numerous articles in mainstream media warning of the coming credit card debt crisis exacerbated by the credit crunch has garnered the attention of both the financial industry and consumer advocates. And, unlike the reforms proposed by the Federal Reserve and the Credit Cardholders’ Bill of Rights proposed by the House of Representatives which received harsh criticism from credit card companies, consumer advocates and bank leaders may have finally come together to propose a plan to begin to deal with the nation’s mounting credit card debt.
The Financial Services Roundtable and the Consumer Federation of America, in a joint letter to the U.S. Comptroller of the Currency John Dugan, asked him “to approve a pilot project allowing major credit card companies to sharply reduce the amounts owed by heavily indebted consumers who don’t qualify for the repayment plans that are currently available”, according to an Associated Press article in Business Week.
According to the article, credit card companies already allow for forgiveness of credit card debt through repayment plans but require that the remainder of the debt be repaid within months. The pilot program would allow for the establishment of longer term payment plans - over years rather than months.
On one hand, I am pleased to see movement by the financial industry to help address the credit card debt problem. I am hopeful that this will advance the interests of a certain segment of consumers and serve as a springboard to advance the nation’s debate in this financial crisis from the bailout program to the main street rescue effort. I am also hopeful that this program might prove more effective than similar efforts to modify subprime mortgages.
I’ll reserve complete judgment on the proposal until I hear more details about the plan - but I hope that this proposal will not serve as a replacement to required changes in American bankruptcy law, usury laws, and consumer protection. After all, before the bailout of the banks, a consensus appeared to be forming that the practices of credit card companies were misleading. It would be a shame if that momentum was lost without putting in place a permanent solution to the credit card problem.
Look for more information on the credit card debt forgiveness program here as it unfolds!
