In an address given in Albuquerque, New Mexico earlier this month, President Barack Obama outlined the dilemma faced by many American credit card holders.
“Americans know that they have a responsibility to live within their means and pay what they owe,” he said. “But they also have a right not to get ripped off.”
The president then outlined several unacceptable tactics he wants to see less of.
Credit card companies, as any credit card holder knows, have been raising interest rates throughout this economic slowdown.
Reading and understanding the fine print on one’s credit card bill can often seem as if one needs a magnifying glass and several business degrees. Penalties often seem unreasonable.
The recently passed legislation hopes to address many of these problems, but as much as the new legislation benefits debtors, much of it simply begins to undo legislation passed in 2005, when Congress passed a law that made it more difficult to declare bankruptcy.
In New Mexico, for instance, 12,400 citizens filed for bankruptcy in 2005. After the law passed, the number fell to 2,500. Since then, the annual number of filings has steadily risen, proof that difficult times have forced many Americans to pursue bankruptcy, regardless of the bank-supported legislation passed four years ago.
One unfortunate effect of the 2005 legislation was the rise of so-called “alternatives” to bankruptcy. Credit consolidation, debt management, and “settlement” companies stepped into the void and offered consumers promises they can rarely, if ever, keep.
Many feel that bankruptcy can still be a good deal for consumers, and the deal gets better with each new piece of legislation that provides an additional layer of debtor protection.
Even if bankruptcy isn’t the right option for a debtor, it might have a tactical use in some cases.
Clayton Hargrove, a collections agent in Santa Fe, often negotiates on behalf of friends with their creditors. Hargrove, who spends his days playing for the other team, has a simple perspective on the choice for many lenders. He says that consumers should never rule out a bankruptcy filing if only for the added power it gives them at the negotiating table.
“I’d tell ‘em flat out, ‘You can take 25 cents on the dollar or you can have a bankruptcy notice,’” Hargrove says. “Twenty-five cents on the dollar is better than zero. You’d be surprised. I’ve negotiated with Chase, Visa, MasterCard.”
Even though Hargrove collects on debts for his own living, his own feelings on the matter are telling, when it comes to the practices of some credit card companies.
“A lot of time what they do, it’s not necessarily, according to the law, criminal. But people make payments every single month, they’re not late, they always pay above the minimum, and all of a sudden you jack their interest rate up to 20 percent?”
When the debt collectors are worried about unfair credit practices, things may have gotten a little out of hand.
Are you exhausted by credit card debt? Chapter 7 bankruptcy was designed to discharge debt. Learn more by visiting www.TotalBankruptcy.com.
Source: Santa Fe Reporter