"When Debtors Decide to Default " - NYT

[ovidsen]

There's apparently a growing, and (depending on your perspective) highly destructive or completely understandable decision being made by credit card holders to simply ignore making payments on outstanding balances and walk away, credit ratings be damned. They claim when they try to negotiate with credit card issuers at a point where they're still willing to acknowledge their debts, the banks instead make moves such as doubling the interest rate on outstanding balances and stacking on late fees.

Some of the debtors admit they were irresponsible with plastic in the past, but are telling the banks to "shove it", noting that many big bank card issuers received TARP money, and are apparently unwilling to give the consumer a similar break. That may explain why in June (according to the article linked below), Bank of America reported a delinquency rate among cardholders of 13.8%, compared to 12.5% just a month before.

Why do I NOT find this grass roots revolt surprising?

Click below for the 7/25 column by David Streitfeld:

http://www.nytimes.com/2009/07/26/weekinreview/26streitfeld.html?scp=4&sq=credit%20cards&st=cse

[imdjh]

1. I hate to say it, but my first reaction is to cheer her on.

"She did not take the deal, but considered it progress."

Bold.

[4dsc]

2. Banks are losing billion because of this

Didn't BAC lose like $5 billion and Wells Fargo lose a couple of billion on dredit card losses?? Look for this to balloon in the coming years.. I know if I lose my job, credit cards would be the last thing I pay if at all..

[DemReadingDU]

3. Delinquency

Delinquency destroys credit scores, can prompt a lawsuit and guarantees a very large number of hostile calls from collection agencies.
http://www.nytimes.com/2009/07/26/weekinreview/26streitfeld.html?scp=4&sq=credit%20cards&st=cse


Edit: from Mike Shedlock's blog...
Last week I received an email update from Jon Maddux, CEO, of You Walk Away

Hello Mish,

I hope all is well. I thought you might want an update. About 90% people who sign up for our service nowdays, are "A" paper good credit borrowers who can afford their mortgages, but they just don't think it makes sense to keep paying. The rest either already got a loan modification and didn't get a principal reduction or just really can't afford to own any longer. I wish you the best!

Kind regards,

Jon Maddux
CEO
http://globaleconomicanalysis.blogspot.com/2009/07/preemptive-defaults.html

[ovidsen]

7. I'm lucky. Comparatively speaking.

I sliced up my credit cards years ago, paid off the balances, and now use cash or a debit card (with not much to steal in the card's account). But I'd be the first to admit that my timing was just plain luck. I never expected things to get as bad as they are now. I just got tired of spending beyond my means, and paying a fortune for the "privilege".

However, if I had lots of plastic debt today, and I lost my income, the first things I'd probably do would be throw away the bills and unplug my phone. TARP gave Big Banks a break. Their greed precluded them with being so charitable to cardholders.

Screw 'em.

(edit for egregious typo)

[FatDave]

4. If you have been carrying hig balances for years that you cannot get paid off...

...and you consider how many times over you've paid for the merchandise originally purchased on credit, it's hard to have much sympathy for the banks.

Kind of like when you look at your Truth in Lending statement when buying a house, and see that with interest, you're paying close to a million dollars for your $200,000 loan? Makes it hard to take mortgage banks seriously when they talk about how much they're losing.

[Mopar151]

5. I'm there right now

And it ain't good - but since they quadrupled my interest rate, and I lost my job, I have little choice.

[ovidsen]

8. You have my sympathy and support

Big Banks who got TARP bailout funds (a true act of mercy by the Obama administration, and (yes) to a degree, Bush 43, all at the expense of us, the taxpayers) have refused to extend similar benevolence to cash-strapped card holders, who (yes, I'm repeating myself) just happen to be the taxpayers who bailed out the Banks in the first place.

They obviously aren't giving you the breaks they got, and so get no sympathy from me.

Parasites.

Good luck.

[wolfgangmo]

14. This is kind of a strange idea, but...

I know that Canada has better bankruptcy laws. Why don't you emigrate and then declare Bankruptcy under Canada's laws?

[bemildred]

6. "Freedom's just another word for nothing left to lose"

Debt slavery is still slavery. The whole debt-based Reaganomics Ponzi-scheme is coming crashing down, and that is not a bad thing for America, although it might be a bad things for some banks.

[Selatius]

9. I've gone almost all to cash nowadays. I have a balance of about 115 bucks on my card.

I plan on paying it off and using it only in emergency situations. Cash and money orders are the rule of the day. They jacked my interest rate up for no reason from about 9.5% to 16.99%.

Credit card companies operate like a mafia racket only they have politicians in their pockets.

[ShamelessHussy]

10. Main St's Bail Out - To Small to Notice

Wonder what the plan to deal with that is?

[Wednesdays]

11. K&R

:kick:

[Joanne98]

12. It's the bank's fault. They're assholes!

[BR_Parkway]

13. When all is said and done, I don't think credit ratings are going to

be an issue the way they had been. Too many are defaulting - banks will eventually have to start making loans again to make money.

[wolfgangmo]

15. I talked to the VP of my local small bank and she told me...

... the very same thing. That credit ratings are becoming less relevant compared to our track record.

I can still get loans, just not through the big banks who are shite anyway.