May 11, 2009
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A Call to Action, Pt.2
Top 10 Climb Aboard.The “Call to Action” formed an alliance between the National Foundation for Credit Counseling (NFCC), their Member Agencies, and the Association of Independent Consumer Credit Counseling Agencies (AICCCA) to negotiate debt reduction options with major credit card companies. The “Call to Action” set an implementation target date for the end of March 2009. After many hours and days of hard work, they have been successful in reaching their goal. As of March 31, the “Call to Action” challenge has received the support of ten of the nation’s major credit card issuers, including American Express, Bank of America, Capital One, Chase Card Services, CitiBank, Discover Financial Services, GE Money, HSBC Card Services, U.S. Bank, and Wells Fargo Card Services. It is estimated that these top 10 organizations hold approximately 90% of the nation’s credit card debt. The NFCC applauds these organizations and hopes all lenders will understand the benefits of working with the agencies to help consumers and follow the examples of these top 10.
The NFCC made the announcement in a press release which stated the action will provide debt ridden consumers with greater options in alleviating credit card debt and help them to begin rebuilding their lives. The agreement will provide relief beyond the traditional DMP and includes a new “hardship” DMP for individuals who do not meet the criteria of a standard DMP. The new extended DMP would assist consumers in setting up realistic monthly budget, establish emergency funds, and establish an “affordable fixed monthly” credit card payment. The end goal is to help the consumer to be debt free within 60 months.”
The two tiered program consists of a 2% of the debt balance monthly payment for the standard DMP; and, for individuals with extreme hardship who are not able to realize a $200 monthly emergency fund contribution, the “hardship” DMP plan would reduce the monthly payment to 1.75% of the debt balance. The plans would allow consumers to pay back an average of $24,000 within a five year period. The estimated pay back to creditors would be $677 million of unsecured credit card debt. This amounts to an approximate $135 million of principal that would be repaid to creditors each year. Considering a large portion of this debt would be written off through bankruptcies or defaults, it’s a win-win situation for creditors and consumers.