Credit Card Debts Adding To Foreclosure Problems

Posted on November 6, 2008
Filed Under Foreclosure Homes | Leave a Comment

Now there is an additional problem to the foreclosure crisis. With the entire economy going through a bad phase, banks are already suffering a lot from the high number of repo homes listings. Now credit card debts are adding to foreclosure problems – banks are losing out on huge sums of money due to people not paying up their credit card dues. Credit cards are these omnipotent plastic rectangular things, which are a very integral part of all Americans’ lives and the entire nation’s economy. Now, they are the latest addition to the financial crisis which begun with the sub prime mortgage crisis – and now it is full of new additions.
But the banks are reacting in an unusual manner. They have formed a strange partnership with consumer advocates to plead the government to forgive the consumers’ debts. This is quite different from the past years, when the banking industry would continuously pressurize their customers making it difficult for them to get rid of their credit card debts.
This new program, which the banks have come up with, might help many people, about 50,000, who are struggling hard to pay up their credit card bills. The banks hope that this plan might become permanent. A portion of the debt would be forgiven on an individual basis. The amount of debt to be forgiven would depend on the seriousness of the customer’s financial condition. The amount of money to be forgiven could even be up to 40%!
There is a reason behind this proposal given by the banks. Now that the nation is going through a tough economic phase, mortgage lenders and the banks are putting forward proposals for suffering homeowners, so that the mortgage amount on their home will be decreased- at least the home won’t go into foreclosure. Now, the credit card bills have reached a stage where the banks cannot afford to lose the entire amount by the customer just walking away- they lose less by forgiving part of the bill amount.
Discover Financial Services and Capital One Financial Corp., are among the many credit card companies.
Susan Keating, president and chief executive to the National Foundation for credit counseling (which has roughly 108 member organizations throughout the entire country) said, “There’s obviously a financial benefit to the financial institutions to step up to the plate right now. We absolutely support the proposal.”

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