Congress Credit Card Reform ~~Financial Matters of Life ~~
Bankruptcy Backfire! Is Bankruptcy "Reform" biting the hand that Fed?
As anyone who follows the world knows of the bankruptcy, from 17 October 2005, substantial and, from the point of view of consumers, painful changes were made to the Federal Bankruptcy Act. For instances, mainly from suppliers credit cards and banks, which had been pushing for years, new legislation was drafted and adopted the stage for stricter requirements governing (Mainly but not exclusively) of personal bankruptcy. This legislation came at great cost to its promoters, and is expected to lead to fewer failures and more payment plans all of which would benefit the banks and credit card issuers.
While it is too early to say with certainty what the effect global securities will default, it seems that, statistically, Chapter 7 applications are rising again, and the relative increase in expected repayment schedules Chapter 13 can not in fact materialize. Less debtors would be expected to have been disabled for Chapter 7 for "evidence."
In addition, while the new bankruptcy law took effect, the credit card issuers and banks were finding creative ways to avoid problems of usury by direct themselves to use creditor states, like South Dakota, and default rates of consumers now more than 30% in some cases. Default, to consumers (most of them, dare I say) who have not read the fine print in their disclosure of credit card data, can be caused not only by default, but a high debt-income ratio observed in periodic reviews by the card issuers, and by default under other credit card agreements. The consolidation of issuers, of course, means that there is only sending out there now. Along with these changes have been "minimum payment" rules, so that when a credit cardholder balance might have been able to carry a $ 250 minimum payment month, the combination of more than 30% per annum and higher minimum payment standards may be increased to $ 600 or more. Multiply that by five or six cards that a consumer could use, and, well, it's easy to see where this goes. But that same cardholder now faces major obstacles for Chapter 7 presentations simply because, statistically, in the "middle class" and above their state's median income.
What will be the result? It is difficult say, but a more likely scenario is failing with no option of bankruptcy. For cardholders who are homeowners, with equity, Chapter 13 can not be a viable option because of the huge amount of debt they are carrying in relation to their income, so the risk of losing their homes can be substantially improved. If this happens on a large scale basis, there will surely be an outcry for "reform" the "reform." The credit card issuers and banks, having paid a high price for this legislation, may have exaggerated his hand.
Moreover, cardholders can have a large number, they pay their balances, are to be outraged as much punch with 30% in April. This has hurt the bottom line of the credit card issuer and its subsidiaries of banks, they do nothing for cardholders who do not carry a balance. The pot of gold for them is to push cardholders in the balances and paying high rates, and even better, consumers who pay late fees when they are in their heads, or fees that exceed the limit where, as in many cases, increases interest rates Suddenly unexpectedly to take them over their limits. late fees and overlimit fees are often now in the range of $ 40 – $ 50.
The result? Less income to creditors and consumers have wised up. MBNA and Capital One, two major credit card providers, are seeing their earnings sink. Other credit card providers are reporting similar results. Highly dependent on your desire to contract debts, these companies are seeing its profit margins plummet. In short, consumer debt equals big profits high, low levels of consumer debt is equal to low profitability.
During the last five to ten years from the halcyon days of late 1990 when, apparently, everyone was a millionaire on the Internet or high-tech on paper, the Congress was amenable to bankruptcy reform to address real or perceived abuses. Banks have the will and the money to fund law and, after years of almost arrived, finally reached the "Promised Land" in 2005. On the contrary, consumers, many of them sophisticated, had received credit cards like candy, with low "teaser" rates could not resist the temptation of easy credit, TV large screen. As expected, acted irresponsibly. But while lobbyists worked his magic to MBNA and Chase, the consumer has no lobby with which oppose the bankruptcy reform. I'm sure that for the most part, had no idea what was in store for them. Consumers in the economic strata not yet have lower lobby, but still be eligible for Chapter 7. The challenge for banks is the pain is moving up the scale to the homeowner middle class. The howl is bound to be heard, and soon.
Warren R. Graham
Copyright 2006
About the Author
Credit Card Companies are adding MISERY to this economy!
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