April 21,2009
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Antiquity of Credit Card Debt, Pt.1
The trouble I've seen.With unemployment rising, house values declining, and lack of credit resources available, consumers are feeling a heavy burden. Credit card companies are raising interest rates and slashing credit limits. When consumers are late with monthly payment, credit card lenders charge large penalties and then raise interest rates. In some cases, rates are doubled if consumers are even one day late. It is becoming more and more difficult for consumers to reduce their debt. Adding to the difficulty, are the alluring temptations of credit card companies with aggressive marketing strategies. With the unemployment rate the highest in 25 years and the cost of living escalating to unmanageable levels, consumers are going under for the third time. In the wake of all this, lenders have embarked on a surge of intimidating and threatening collection calls. Credit card lenders justify their actions by saying they need to collect whatever amount they can before consumers begin defaulting on their financial obligations. The communication gap widens and the once cohesive consumer/lender relationship has broken down. Each side blames the other and little hope exists for recovery.
While consumers and credit card companies continue to blame each other for sinking the ship, there is agreement on one thing, consumers lack education on managing their financial business. Resources have not been readily available for financial education until consumers find themselves in bankruptcy court. The 2005 Bankruptcy Abuse Prevention and Consumer Protection ACT has provisions that require bankruptcy candidates to participate in two educational interventions. To assure that all borrowers are fully aware of their options and obligations, they must participate in an approved credit counseling session prior to bankruptcy filing. To assist borrowers in obtaining the minimum skills required to manage their credit card and loan debt, after initiating the bankruptcy process and prior to final disposition, they must complete an approved financial education course. Historically, neither the government nor the financial institutions have contributed to consumer financial education.
In the wake of the current recession, urgency has been given to provide consumers with financial education. Pulling consumers out of that deep black hole of credit card debt, has become a monumental challenge; one that will not go away soon enough.