I agree. I am by no means suggesting that Average Joe is not responsible for his/her actions. We all are. I think most that come to the realization that they will never be able to repay the debt without some sort of settlement, however, are good people, with good intentions. Of course, the cc companies didn’t force them to take the money, but they did, and because of the rules they are now being forced to repay more than what they should. Isn’t 30% outright usury? How is that just? (aside from legal, of course). Not asking you, just rhetorically.

Over the past 20 years or so, most of this country (US), including our government, has lived way, way beyond our means. We are all now paying the price of excess (a deadly sin, depending on the form). I see settlement as the CC’s “contribution” to bringing us back to the middle.

Thank God debtor prisons were abolished long ago, or we would really have a mess on our hands!

Thanks for the response. I like your site. What is your Twitter name?

Best,

Richard

First, I agree that debts should be paid, and that those who render service that is accepted should also be paid. If I render service, I deserve to be paid; if one renders service to me, that person should be paid (assuming, of course, that the service rendered is what was bargained for and is acceptable).

The credit card companies, however, don’t play by fair rules, despite their assertions to the contrary. In most cases, the average Joe with several credit cards receives solicitation offers, checks, etc. at very, very low – or in some cases, zero – interest rates. Granted, that is for a limited period of time, and then perhaps the rate jumps to, say, 6.5%.

In need of money to make ends meet, Joe uses the balance checks to pay for groceries, mortgage, etc. As a result, Average Joe’s credit card balances get higher. Since Joe is only making minimum payments, the balances are not being reduced; they continue to escalate.

Now, I am not saying what Joe is doing is right or wrong. But, the bottom line is that Joe is making payments, even though Joe is not getting ahead, and if only minimum payments are made, it may take 20-30 years to pay everything off!

Here is where the banks go awry. Joe has trouble making a payment on time and is only 2 days late. What happens? First, Joe gets hit with a $39.00 late fee. Then, that nice interest rate of 6.5% suddenly jumps – without warning – to 18.9%. Joe still makes the minimum payment, but now more of that payment is going towards interest only, simply because Joe was 2 days late.

Now, it so happens, that all of Joe’s neighbors are in the same boat. In fact, a few of the people in Joe’s town lost their jobs and can no longer pay their credit card bills. So, the bank decides that JOE MUST PAY for those who don’t and raises Joe’s interest rate to 24.9%. That requires a mimum balance payment to increase, and now Joe can’t make that payment. So, Joe gets hit with another $39.00 late fee and the credit card company raises the interest rate again to a staggering 30.5%.

Because one of Joe’s creditors raised its rates for Joe, now all of the others do the same, for ostensibly, the same reasons.

The result: Joe cannot pay his creditors because they have all raised their interest rates for various reasons, inclusive that Joe must now subsidize the banks for those people who have completely defaulted.

IF the creditors would lower their rates and work with Joe, he just might be able to pay them off. At the very least, he would certainly try. But, at 30.5% on several accounts totaling more than $60,000, Joe is between a rock and hard place. And, Joe has a family of five to take care of.

Joe has choices, but debt settlement seemingly makes the most sense. Joe would love to pay the debts in full, as he agreed, but the interest rates and late charges have made it impossible.

The credit card companies are just as responsible for Joe, IMHO. As a result, negotation and settlement may be the best resolution for ALL parties when Average Joe finds he can no longer meet his obligations.

My two cents.

The hardest for me was when we were trying to negotiate settlements with the credit card companies, they just would not budge. Mainly because we paid on time and could keep on paying. We ended up taking a loan from my in laws and then went back to credit card companies asking them to waive the last bit of interest fees as we paid off everything in whole. Nope. Even though we were giving them thousands of dollars- they still would not waive the last 100 bucks or so of fees. Yet, if I was in bankruptcy, they would have no choice. It is a tough system for the desperate.
.-= Ted´s last blog ..On the road to a Doctorate…Library Access =-.