November 14, 2008
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News: Credit Card Alliance' Proposal to Regulators.
A large alliance group from the consumer credit card industry has recently submitted a request to federal regulators concerning bad debt write-offs. Dated Oct. 29, their proposal was submitted to the Treasury Department agency responsible for credit card industry regulation. In their letter to the agency, the alliance' proposal was a request to allow credit card debtors that could not qualify for existing repayment plans to delay paying taxes on the amounts of debt they were forgiven until some later time when those people could repay the remainder of debt they were not forgiven. This could involve several years and some of the debts forgiven could be as high as 40 percent of debt owed. The number of consumers struggling with credit card debt that could be effected by this may be as many as 50,000.
The US Treasury agency responsible for this type of credit card regulation is called the Office of the Comptroller of the Currency. Their response to this proposal was issued on Monday, Nov 10 and made public on that Wednesday. It came back negative. Timothy Long is the senior deputy comptroller for bank supervision policy. He took exception to a side effect of the credit card regulation proposal.
Mr. Long noted that this tax deferment requested would carry the side-effect of the credit card lending institutions also delaying timely reporting of their loss. He cased that this would not be prudent and so his agency would not respond favorable to it. He, further, went on to state that public confidence must be maintained and requires "The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels."
The alliance making this request is comprised from two large sub-groups. One is called the Financial Services Roundtable. It represents more than 100 diverse entities such as insurance companies, large banks and brokerage firms. This group's senior vice president is Scott Talbott. After the rejection, Mr. Talbott stated that his group is committed to continuing "to look for ways to help consumers in these extraordinary times." The other group is called the Consumer Federation. Their legislative director is Travis Plunkett. Mr. Plunkett's response to the government's rejection was "we still hope to work with bank regulators or Congress to create an alternative" that is better than the one nobody wants. The alternative no one wants is to bankrupt these deeply hard-pressed credit card debtors.