January 02, 2009
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News: Even W/O Gov't Assistance, CC Ind. Giving Breaks.
With all these new debt-forgiving and payment plans, credit card lenders are a little reluctant to send that message to the public because they don't wish to spoil the attitude of loyal paying customers. Of, course they want to encourage those who are struggling to pay their credit card payments in full to continue to do so. By working individually with those who simply can't pay the full amount on time, the credit card lenders are cutting them some slack, in hopes to recapture what they can.
Because the credit card situation is not being handled by the government in the same way as the home mortgage market, the lenders, themselves, are left to handle their own woes case by case on an individual basis. As such, many borrowers are having their payback schedules lengthened from six months to a year and twice as many consumers are receiving these extensions as there were before. The approach is now, more proactive then ever before. The credit card lenders aren't waiting until hopeless default occurs. They are reaching out early to those they believe may be getting into trouble and establishing pre-emptive plans to avoid default in the first place. They reasoning is that, if anyone's going to be paid back, it might as well be them first.
With all indications predicting that 2009 will be a time of unprecedented defaults and charge-offs due to unprecedented layoffs and job loss (expected to reach an extreme 10% before subsiding) the credit card lenders are already bracing for it. That's why they're taking these early measures. These aren't the only measures they've taken, however. Back in early November, the industry made request to the Office of the Comptroller of the Currency for government assistance in this effort. At the time, senior deputy comptroller for bank supervision policy, Timothy Long responded with a flat ‘No.' His impression seemed to be that the industry was just looking for a ‘free ride'. But, since that time, the industry is proving that they are not seeking just a free ride because they're still going ahead with the plan without government assistance. They're forgiving between 40 to 70% of debt balances for people who just can't make it otherwise.