Only a fraction of those in need file for bankruptcy
Instead, concern exists about a growing number of Americans who need bankruptcy protection but cannot get any benefit from it or simply cannot afford to file. As their financial problems worsen, that hurts everyone because it can hinder the economic turnaround.
“It’s shocking that we are back to the 2005 level,” says Katherine Porter, associate professor of law at the University of Iowa. “And the filing rate doesn’t even begin to count the depth of the financial pain.”
Bankruptcy laws changed in 2005 because filings skyrocketed and credit card companies and banks wanted to weed out deadbeat borrowers. The law made it harder — more expensive and more restrictive — for individuals to file Chapter 7 bankruptcy, which erases most debts.
Instead of seeking protection from bankruptcy, a number of debt-laden Americans have gone into a “shadow economy,” or informal bankruptcy, according to some experts.
Did anyone really expect reform?
Tuesday, December 29, 2009
New report highlights ways issuers have gotten around new law
While the Credit CARD Act of 2009 puts an end to abusive tactics card issuers have long used to boost their profits, consumers need only to look at their card statements to know there’s no reason to celebrate.
In the past year, card issuers have rolled out or expanded their use of other ways to collect millions more in fees each year, many of which are hidden to consumers, according to the Durham, N.C.-based Center for Responsible Lending’s Dec. 10 report, “Dodging Reform: As Some Credit Card Abuses Are Outlawed, New Ones Proliferate.”
“Credit card issuers are going to more than ever try to find ways to make extra profits,” says Joshua M. Frank, a senior researcher with the Center and author of the report. New charges and changes to the way fees are calculated are adding to the balances of a growing number of cardholders. While some of the practices were instituted after the Credit CARD Act was approved in May, others were quietly being put in place earlier as a result of the recession. The one thing they have in common, says Frank, is that “none of them are explicitly prohibited by the Credit CARD Act.”
I said in a previous post that it was wise to live up to the obligation to pay your debt . . . if the bank will cooperate and give you a reasonable payment plan. There is a new wrinkle to the story though. A recent report by Profundo consultancy has linked leading banks to $20 billion in cluster bomb production lending. And they knew it. The top five loan providers were Bank of America, Citigroup, JP Morgan, Barclays and Goldman Sachs. They provided financing to Textron, Alliant Techsystems, and defense contractor Lockheed Martin, all based in the U.S. Providing financing to arms makers sort of sounds like, uh, war profiteering? Upon questioning, all declined to comment.
Cluster bombs are one of the most hideous creations invented yet by weapons makers. I’m not going to post the disturbing results here, but anyone with intestinal fortitude can Google “clusterbomb victims” and see what happens. Cluster bombs open in mid-air and literally rain death, without much discernment about where the fallout lands. They have been linked to thousands of civilian casualties. The world recognized the level of horror and outlawed cluster bombs in May, 2008. Problem is, cluster bombs will only be made formally illegal when 30 countries have ratified the agreement. Twenty three countries have signed on. A couple of the holdouts? Wait for it, wait for it: The United States and Britain, where the top five loan providers make their home.
Can it be any more obvious with whom we are dealing? So, although I previously mentioned to try and make a deal with your bank to alleviate the debt you (rightfully?) owe; it is clear that this is a deal with the devil. Only you can decide for yourself whether you are OK with having your exorbitant interest rate ultimately being used to lend that money to arms dealers who kill civilians.
I know my choice.
The full article on which my comments are based came from Reuters and can be found HERE
Note: At the very least, please call your bank if it is one of the five listed above, and ask them to send you a signed denunciation of cluster bomb and weapons financing. Tell them you do not approve of this use of your money.
Building on what I posted yesterday, even the criminal Fed is denouncing the criminal credit card issuers. All irony aside, the Bloomberg article below is a great one to have on hand when you call your credit card company and ask them to adjust your rate down to a normal level that can actually enable you to pay off the debt. Now is the time to get aggressive with these people: first be polite and tell them that you would like to get your balance paid off; secondly, tell them that it is simply not possible with the current rate they are offering and that you fear you cannot continue to pay even the minimum payment. If they do not cooperate with reason, or a solid payment plan, then I suggest that you cite this article which refers to them as criminals. Tell them that you have tried to be reasonable and they are not cooperating. You might even suggest that a law suit is coming against their blatant worse-than-loansharking rates. If nothing works: don’t pay, just walk away.
Oct. 28 (Bloomberg) — None of the credit cards offered online by the 12 largest U.S. banks would meet requirements of new federal curbs on the industry’s rates and fees, a report from the Pew Charitable Trusts said.
All of the cards surveyed used practices considered “unfair or deceptive” by the Federal Reserve, according to the report released today by the Philadelphia-based nonprofit organization. The study examined almost 400 cards advertised by banks and credit unions and compared terms for cards offered in July 2009 and December 2008.
The Credit Card Accountability, Responsibility and Disclosure Act, which takes effect in stages, will require banks to apply payments to higher-rate balances first, limit rate increases and ban practices such as “universal default,” or raising rates based on a missed payment with another lender. Most of those rules are scheduled to begin Feb. 22; others such as limits on gift-card fees are set to start Aug. 22.
“Our research shows the most harmful practices the card act targets remain widespread,” said Nick Bourke, manager of Pew’s Safe Credit Cards Project, which began studying how the industry treats consumers in 2007.
Cardholders haven’t benefited from historically low interest rates, even though the Fed lowered the federal funds rate to near zero to ease lending for banks, the report said. Credit cards became more costly for American families in the first half of 2009, which makes them a potentially dangerous part of most Americans’ financial lives, according to the report.