From the “Do as I Say, Not as I Do” department:
A rare, joint request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt is being rejected by the Federales.
The Office of the Comptroller of the Currency essentially said, "bite me."
Okay, so maybe he said, "bite the bullet," but the bottom line is the OCC nixed the request for foregiveness up to 40% of credit card debt for consumers who don't qualify for existing repayment plans.
You rarely see this, but an alliance of the Financial Services Roundtable and the Consumer Federation of America made the pitch to the Treasury Department last month, which underscores the urgency of the situation as our economy worsens: When consumers with strong credit records are defaulting at high levels on their credit cards, and the banks that encouraged the phenomenal growth of credit are now bloodied by tens of billions in losses, hmmm...maybe there's a problem here.
Not enough for the Bankanistas, which object to allowing banks to defer losses for several years on the forgiven debt, an accounting gimmick they'd have to use to keep everything straight.
Here’s what’s going to happen: People will just stop paying.
What’s the difference between a legal bankruptcy and an informal bankruptcy?
As far as the creditors are concerned, nothing.
They’re not going to get paid, regardless.
People are going to go into turtle-mode at some point, hoarding what little cash that remains, and paying for the essentials: food and gasoline. The guys making the rules and calling the shots are doing so in a vacuum of ignorance, and they’d be better served formalizing what’s happening anyway—and protecting their interests—than not, and risk losing control of the situation…as if they had any.
What’s the solution?
--don’t buy what you can’t afford.
--use credit as a tool, not an antidote for your cravings
--learn to defer
Practices we could all profit from--individually, and Federally.