More credit card issuers and banks are doing something they have scorned in the past. Proactively helping people with credit card bills and debt. More companies are settling unpaid debts and accounts for substantially less than the total amount owed on the debt. Most experts are now saying today say this approach has risen drastically.
There are many examples of credit card issuers and banks that have revised internal practices and policies to give front-line employees and customer service agents the ability to cut deals with consumers and settle debt. The employees sometimes do not even have to wait for customers to call the credit card company ask for assistance. For example, a Bank of America spokeswoman said that the bank expects to modify and provide assistance to 1.2 million credit card accounts this year, which is an increase from 1 million last year. Also, Chase has made it significantly easier for those in the earlier stages of delinquency on their accounts to get credit card modifications and last year restructured credit lines for over 600,000 customers. Find additional ways to get help with credit card bills.
While studies and many consumers are saying this assistance is occurring even on a grander scale, only a few creditors are willing to confirm the practice and the new flexibility. For example, both American Express and Bank of America say that they decide on a case-by-case basis whether to accept less than the full balance on their debts. Other credit card companies and banks refuse to discuss the subject of eliminating debt, but the American Bankers Association, which represents credit card companies, says that settlements are becoming more common by issuers.
After an outstanding balance on an account has been delinquent for six months, accounting and government regulations require the bank or card company to reduce the value of the unpaid bills and debt on its books to zero. After all, if a borrower has not paid their bills by this point, chances are that the borrower will never pay.
After all, it is common sense that the banks and creditors would rather have a piece of something now, and receive some type of payment, instead of receiving absolutely zero down the road. Some issuers are now calling these programs credit card modifications. More.
In addition to this proactive approach, both credit card companies and banks are discussing new debt assistance programs that would, for the first time, allow credit card counselors to invoke reductions of principal as a routine part of their counseling strategy and advice. In the not so distant past, debt counselors could persuade banks and credit card issuers to maybe lower or otherwise adjust interest rates, waive charges, and eliminate late fees, but the total unpaid balance was untouchable and they couldn’t help with it.
Here is an example of some of the assistance being provided and it shows how credit card companies are shifting their approach to dealing with consumers. The example is HSBC bank, a major card issuer. One gentleman paying sporadically on his credit card bills. He was delinquent. In April, HSBC offered him full debt settlement at 20 percent off. He declined. However, just a few weeks later the company came back with a better offer. It agreed to let him pay half of his unpaid bills.
Chase also offers an assistance program, called the Chase Proactive Solutions. More.
Before this poor economy, the banks and creditors could play tough with any credit card accounts that became delinquent because the consumer and cardholders had other assets they could use as leverage. For example, the creditors place a lien or sue to get cardholder’s house or assets.
While the help with bills is occurring, still many credit card companies do not want to promote or advertise the idea that debt settlements have become merely a matter of asking nicely and our easier to get. In addition, the creditors want people to know that a delinquency, like a home foreclosure, destroys a credit record and someone’s rating. Find ways to improve credit.
Note that it is those with least amount of cash, struggling the most, and the fewest assets who may be the most likely to receive a debt settlement offer from their credit card company. However, they also happen to be the least able to come up with the needed cash for that final negotiated payment. Some creditors, though, are helpfully letting families in need stretch their bills out over months.
In this poor economy and recession, in which third part collection agencies have little hope of collecting unpaid bills from the unemployed or otherwise struggling, the debt collection business model is suffering. Most studies and experts say that 5 cents on the dollar is now the most a card company can hope to get for its past-due unpaid debt.
Banks and issuers also have more competition. One other factor undermining the card companies and them trying to make money is the rise of debt settlement firms. The companies a are profit-making companies that charge fees, nearly always in advance, or charge a percent of savings, to bargain with creditors on a consumer’s behalf and to help a consumer with credit card bills.
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