Friendlier Credit Regulations Heightens Opportunity to Consolidate Credit Card Debts
People who have financial problems should rejoice as their chances to consolidate credit card debts and even reduce their liabilities have been transformed into high possibilities. Thanks to the economic recession that the United States is facing, many credit card companies came up with “friendlier” repayment plans for those who are having problems with their credit card balances.
As stated by Don Siler, Chief Marketing Officer at MRS Associates - a huge debt collection company that is affiliated with many of the biggest credit card companies in the United States, “You can’t squeeze blood out of a turnip.” So, instead of forcing debtors to pay the full amount, banks and financial institutions are just trying to find ways to get the most of whatever they can from the customers who owe them a lot. Such is definitely a better deal than getting nothing.
1. An Ideal Response to Debtors in Financial Distress
In the past few years, the number of credit card holders who default on their payments continuously increases. What’s more is that this population has grown rapidly since last year. Fortunately, credit card companies have figured out that forcing people to repay them in full is no longer a practical solution. “Knowing that the sources of funding have dried up, having someone pay the balance in full isn’t a viable strategy,” says Tim Smith, Senior Executive of First Source, one of the leading debt collection companies.
Right now, banks and card companies are paving the way for debtors to consolidate credit card debts. They are preparing for a wave of repayment defaults on credit card balances this year and they are competing with each other - not just in attracting more cardholders, but in motivating their debtors to repay them.
2. Prime Motivation - Less Than the Full Payment
In an attempt to reduce the number of debtors who end up having delayed repayments and huge debts, many credit card companies cut consumers’ credit lines. Some also raise late repayment fees and others just pull back on lending and employ stringent application processes. However, none of these strategies seem to work especially at a time when the whole country is experiencing a major economic problem. So, banks are trying out a new technique.
As noted by the experts, credit card companies are providing some “space” for repayment opportunities. For example, Bank of America has reduced balances, waived late fees, and lowered the interest charges for more than 700,000 card holders. American Express and Chase Card Services are also trying to implement the same measures for their customers who fall behind their supposed repayments. According to Robert D. Manning, author of “Credit Card Nation” and a longtime critic of the credit card industry, “Consumers have never been in a better position to negotiate a partial payment.” Definitely, this is the best time to consolidate credit card debts.
3. No “Sweetheart Deals”
Contrary to popular misconceptions however, not every debtor is entitled to the debtor-friendly repayment strategies. Credit card companies will provide loan modifications to debtors who will meet their criteria. Debtors who are planning to consolidate credit card debts and get loan repayment changes must be delinquent for ninety days or longer. The credit card companies also consider the debtor’s monthly income, credit records, and repayment practices.
Strict implementation of the criteria is observed since credit card companies do not want to encourage all of their debtors to stop paying what they can really afford to pay. Despite their efforts to attend to the needs of delinquent customers, lenders are still unwilling to admit that they will agree to repayment deals of less than the full loan repayment.
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