The Credit Card Accountability, Responsibility and Disclosure (CARD) Act

Posted: June 12, 2009 
Filed Under: Answers To FAQ

President Obama signs the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 

President Obama signed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act on May 22, 2009, which provides a sweeping overhaul of how consumer credit is handled by credit card companies. The bill provides strong and reliable protections for consumers against what some have considered unfair and deceptive practices by certain financial institutions.

The new law will go into effect in about 9 months. Below are the key elements of the bill:

President Obama summarized these new changes by saying, “We’re not going to give people a free pass; we expect consumers to live within their means and pay what they owe.  But we also expect financial institutions to act with the same sense of responsibility.”

For more in-depth information on this new bill, please visit:

http://www.whitehouse.gov/blog/A-New-Era-for-Credit-Cards/

http://www.creditcardreform.org/learn.html

http://www.creditcardreform.org/pdf/dodd-summary-509.pdf

Credit Card Charge-Off vs. Credit Card Write-Off

Posted: June 5, 2009 
Filed Under: Answers To FAQ

A charge-off and a write-off sound a lot alike, but they are two very different things.

Charge-Off

The term “charge-off” equates to when a credit card account reaches 180 days past due. At that point, the credit card company is required to reclassify the account for accounting purposes. Specifically, from a performing asset to a non-performing asset for the bank.

However, even though a credit card account has been reclassified as a charged off account, the credit card company still reserves the right to pursue collection of the outstanding balance.When a person hears the term “charge-off”, they often mistakenly think that they’re in the clear and that their debt will be forgiven. Not so. If only it were that easy. As mentioned above, a charge-off is simply a reclassification of the debt, and unfortunately you still owe the money even if the account has charged off.

Credit card companies handle charged off accounts in a variety of ways:

Write-Off

A “write-off” on the other hand is when a creditor forgives a portion of the balance that is legitimately owed. For example, if you owe $15,000 and a creditor agrees to settle the account for $0.50 on the dollar, they write off $7,500.

Debt Collectors And Charge-Off

When an account charges off, the credit card company will place a derogatory mark on your credit report as a way of penalizing you for not paying as agreed. This is standard procedure.

When attempting to collect an outstanding debt prior to the charge-off point (i.e. 180 days) debt collectors often make a big deal about the “ramifications” of having a charge-off appear on your credit report. They often try to create the impression that you’ll be ruined financially if a charge-off shows up on your credit report.

Naturally if you have the ability to pay, then you should honor your obligations. But if you’re having financial difficulties and you just don’t have the money to pay, then you can’t pay. It’s that simple. If your credit report gets dinged in the process, so be it. Life will go on. It’s not the end of the world.

In summary, you don’t need to be intimidated by a debt collector threatening you with the “dreaded” charge-off on your credit report, because now you know that charge-off is merely a *reclassification* of the debt that signifies that an account is at least 180 days past due.

Reference:

Office Of The Comptroller Of The Currency - Comptroller’s Handbook, Credit Card Lending
http://www.ffiec.gov/ffiecinfobase/resources/retail/occ-comptrollers_handbook_Credit%20Cards.pdf

Back To Basics

Posted: January 12, 2009 
Filed Under: Observations, Video

 

Last night was the season premiere of “24“. As usual, it was non-stop action while Jack Bauer eludes danger and saves the world from bad guys. But there was one particular minute last night that really struck a chord with me … one of the commercials.

It was a commercial from Allstate Insurance. The commercial reminded me of an article I wrote nearly a year ago. Here’s the link to the commercial >>  www.allstate.com/content/refresh-videos/AA_Back_To_Basics.wmv

Although the commercial is ultimately an advertisement for Allstate, they do a masterful job of communicating a much-needed reminder in these difficult economic times.

Nice job, Allstate.

Credit Card Bailout … Your Lucky Day?

Posted: October 9, 2008 
Filed Under: Observations, Answers To FAQ

During the past several weeks, one question that clients and prospective clients have been asking me every single day is, “What effect is the current financial crisis in the U.S. (as well as the rest of the world) going to have on my ability to obtain a settlement for less than full balance with my credit card company?”

My reply >> ”It’s probably not going to change much at all, at least for the foreseeable future.”

As I probe a little further and delve beneath the surface, what I believe many people are asking me in a roundabout way is …

1. Do you think that maybe my credit card company will go bankrupt like Lehman Brothers and I could get off not paying anything?

2. Do you think that maybe the banks are hurting so much for money right now that they would take just about anything they could get, and maybe I could lucky and settle my account in full for say $0.10 on the dollar?

3. Is there some provision in the recent $700 billion government bailout package that allows for credit card debt relief for consumers?

I wish I had better news for you, but unfortunately the answer to all three questions is no.

For the past decade I’ve witnessed peaks and valleys in the strength of our economy, although nothing like we’re presently going through, and the effect of a credit card company’s willingness to grant debt relief on outstanding balances has been negligible. Strange, but true. It’s stayed pretty consistent in good economic times and bad.

Certainly there have been periods where various credit card companies and collection agencies go through a temporary cash crunch, so they might temporarily loosen their settlement guidelines just to get some quick cash in the door. But the key word here is temporary. Remember, financial institutions are not in the business of permanently taking large losses.

What I continually tell people is that if you are having financial difficulties and you are seeking debt relief by attempting negotiated settlements with your credit card companies for less than full balance, you need to make that decision based upon how things are today regardless of what events may or may not happen in the future. If some massive bailout occurs in the future regarding credit card debt relief, that’ll be a bonus and you’ll certainly hear about it on the evening news.

If our global financial crisis worsens, things might change dramatically regarding credit card debt relief. But if things do dramatically get worse, I think we’re going to have more serious problems to deal with than outstanding credit card debt.

For now, though, it’s still business as usual with regard to credit card debt relief.

Review Of I.O.U.S.A.

Posted: August 22, 2008 
Filed Under: Observations

Last night I went to see I.O.U.S.A. at a theater near my house and to be very candid I was going primarily for “work-related purposes” since my job for the past 13 years has revolved around credit card debt. In other words, I was looking at this as kind of a continuing education class just keep up with the times and stay abreast of the latest information.

This was the first time I ever went to a movie with a pen and notepad in hand, and I was basically expecting to be sharing the theater with 10-12 other people that dealt with the financial industry in one way or another.

Boy, was I in for a surprise.

I walked into the theater 10 minutes before the show started and the placed was packed. I was STUNNED. Absolutely blown away. I actually had to sit in those seats way down in the front that no one ever sits in because that’s all that was available!

The fact that SO many people turned out for this event, especially when it was not publicized in the mainstream media, was a refreshing realization (for me) that the public at large is deeply concerned about the state of our economy and the massive debt that we are racking up … and the effects that it is going to have on our children and grandchildren, and our society in general, if we don’t do something about it.

I.O.U.S.A. is a sobering documentary based on actual financial data. The movie is very well done and they do a great job of explaining our current state of affairs, how we got into this financial mess and the potential ramifications if we don’t start taking corrective action now. As someone that has worked in the financial industry for many years, even I was a bit startled at the impact that our country’s massive debt load has on our everyday standard of living, not to mention our national security.

For more information:

www.iousathemovie.com

www.agorafinancial.com

 CNBC video with Warren Buffett and David Walker (8-22-08)

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