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  • Lenders suing more often over delinquent credit card debt

    Lenders suing more often over delinquent credit card debt. A total of 428 consumers in one Pennsylvania county have been hit with lawsuits over their delinquent credit card debt in the past two months alone, according to a new report in the Lancaster Sunday News. Lenders like Citi, Capital One and Discover have been filing suits at or near record levels for the last two years, but more have joined them in becoming more aggressive recently, even as they’ve seen the total number of nationwide charge offs decline considerably. Experts told the paper that the number is only expected to rise in the future.

    In addition to civil suits from lenders, collection companies who purchase credit card debt from them are also boosting the number of court cases, the report said. This new trend seems to specifically target consumers with clean credit histories, though many agencies don’t have documentation for the cases.

    Nationwide, consumers have been more conscious of their credit card debt problems in recent months. As a result they have scaled back spending while increasing their savings and paying off more of their balances.

  • Moody’s: More bad debt expected to be written off next year

    Moody's says more bad debt expected to be written off next year. While the rate of bad credit card debt and other loans being written off by lenders has slowed in recent months, it should pick up again in the next 12 months.

    The financial analysis company Moody’s Investors Services says the rate at which bad debt is written off will likely skyrocket before the end of next year, the Associated Press recently reported. The firm estimated American lenders will write off a total of $744 billion worth of bad debt between 2008 and 2011, and so far they have only cleared $476 billion, about two-thirds of the predicted total in the first three years of that period. That leaves another $268 billion to be cleared by lenders between now and December 2011.

    Moody’s figures showed 68 percent of residential mortgage losses have been claimed, but less than half of those for commercial real estate yet to be taken, the AP noted.

    In addition, Moody’s predicts the return to the normal credit conditions seen before the recession will be “slow and uneven” during the next 18 months, the report said. If the global economy slides backwards in the remaining months of 2010, credit problems could reappear here in the U.S. as well. However, Moody’s says there is only a 30 percent chance at most that this will happen. Still, banks are being more cautious, keeping their outlooks negative as a result.

    While the number of seriously delinquent loans being written off as uncollectable has decreased each of the last three quarters, rates for almost all loan categories are still at, or near, historic highs, the AP said. However, this type of loan accounted for just 3 percent of all loans in the second quarter, the lowest level observed since early 2009. Similarly, loans that are delinquent but have yet to be written off accounted for roughly 4.7 percent of the all lending as of the end of June.

    Many credit card lenders have reduced their total number of charge-offs in recent months because consumers have cut into their credit card debt. Consumer credit has dropped in each of the last several months as Americans spend less on their cards and make a more concerted effort to pay into their total balances.

  • Fed changes numbers for rewards programs study

    Fed changes numbers for rewards programs study. In July, the Federal Reserve Bank of Boston released a paper [highlighting the social inequity of credit cards rewards programs. It found low income consumers were paying off credit card debt and, in doing so, lining the pockets of the rich who had enrolled in such programs.

    However, the figures the Boston Fed originally estimated were recently reduced after some criticism of its methods. It now estimates poor households – those who bring in less than $20,000 a year – pay $21 a year into programs that reward consumers for taking on credit card debt, while rich consumers – those whose household income is over $150,000 – earn $750 per year. Originally, the paper said those figures were $23 and $756, respectively.

    The changes came about after consumer advice website Nerdwallet.com questioned why the study included housing costs, auto payments and tuition for higher education in its data. The Boston Fed removed the housing information, but kept the other categories because consumers, who regularly take on credit card debt, pay for those things.

    Often, consumers with low incomes are unable to qualify for credit card rewards programs because their credit scores are too low.

  • Debt settlement safer for consumers after new laws

    Debt settlement safer for consumers after new laws. In the past, critics often derided the debt settlement industry as being very dangerous for consumers. But thanks to new federal laws governing the industry, it’s now considered much safer.

    Debt settlement companies will be required to actually reduce a consumer’s total debt amount before they charge for their services starting on October 27, the Wall Street Journal reports. Many of these companies promise they can get creditors to remove as much as 60 percent of their total debt, and they are often successful, but it’s also not a guarantee.

    However, many in the industry think that while these new laws could be trouble for businesses, they also understand the regulations will make it healthier in the long run, the Journal noted. However, these changes do not affect the way nonprofit debt relief organizations operate, because the Federal Trade Commission has no power over them.

    Consumers may find considerable relief from the services of a debt relief company, but they should also understand that using one offers no guarantee their debt can be reduced.

  • Some online shoppers prefer not to take on credit card debt

    Some online shoppers prefer not to take on credit card debt. When attempting to buy a product online, consumers have very few payment options that do not involve taking on credit card debt. But some say they’d prefer to have more.

    A new study from the online payment site eBillme.com found 27 percent of respondents said they would shop online more often if they had an option for payment besides taking on credit card debt, CNN Money relayed. The respondents said they prefer to control their finances by paying in cash. Of course, this isn’t possible over the internet, but there are a number of options considered “cash equivalent.”

    For example, services, such as eBay-owned PayPal and eBillme, allow users to link their bank accounts to online profiles so they can choose to take money directly out of their checking or savings. PayPal is by far the biggest of these services on the internet, and can be used at checkout not only for eBay auction winnings, but also at hundreds of other sites. In addition, eBillme is accepted by over 800 online retailers.

    “It’s a debt-free way of shopping online,” said Marwan Forzley, eBillme’s CEO. “No interest or fees, and since you can only spend with the money you have available, it’s a great option for sticking to a budget.”

    Forzley added the vast majority of consumers – 74 percent – use cash or cash equivalents, such as prepaid cards or gift cards, when making payments in the real world, the news provider reported. More stores began offering gift cards in recent years as consumers increased demand for them; these can often be used to make online purchases as well. However, gift cards may come with some initial fees when they are first set up, or maintenance charges if they go unused for a certain amount of time. But some consumers may prefer this type of fee over taking on credit card debt.

    The report also noted consumers can use the popular CoinStar machines to make giftcards for online retailers like Amazon.com and iTunes, as well as companies with both brick-and-mortar and online stores, such as Old Navy and CVS.

    Many consumers have been successful in paring back their credit card debt recently by keeping a closer eye on spending and paying more toward their balance every month.

  • Atlanta has most credit card debt

    Atlanta has the most credit card debt in the nation. While most consumers across the country are trying to reduce their credit card debt, those in Atlanta, Georgia, still have considerably more than the national average.

    According to a story in U.S. News and World Report, whichcited statistics from a study by Experian, consumers in Atlanta carry more credit card debt than those in any other city, with an average of $6,753 owed to lenders. However, that city is just the fifth-highest ranked in terms of overall debt. Denver, Colorado, has the most debt in the country, though it’s just fourth in credit card debt.

    Seattle, Washington residents carry an average credit card debt that narrowly trails Atlanta’s, at $6,577, with Baltimore, Maryland ($6,440), and Denver ($6,211) behind it. Dallas, Texas, had the third-most total debt but was well behind in credit card debt.

    The previous version of this study, which was released in May, also found Atlantans had the most credit card debt, but on a relatively small number of accounts when compared to other major metropolitan areas, such as New York City and Boston.

  • Debit card use on the rise as consumers shun credit cards

    Debit card use on the rise as consumers shun credit cards. It appears consumers are now so worried about compiling credit card debt that many have stopped using credit to make purchases, and are using their debit cards instead.

    The total number of nationwide debit card transactions passed those made with credit cards for the first time ever in 2009, and is expected to do so again this year, a new report from Javelin Strategy and Research said. Visa saw a 7.3 percent decrease in the number of credit card purchases made, while debit card payments rose 7.9 percent. Similarly, MasterCard debit transactions rose 5.8 percent, and Discover Financial Services saw a 2.8 percent increase.

    The study said 56 percent of consumers reported they had used their credit card in the previous month, compared to 87 percent who had done so in 2007. If this rate of decline continues, less than half of Americans – 45 percent – will take on credit card debt with regularity next year.

    “Consumers are turning from one form of plastic to another,” James Van Dyke, president and founder of Javelin, told Bloomberg. “Credit cards are falling out of favor as cardholders become more cautious and look for more conservative payment methods.”

    Two groups that are using debit cards rather than compiling credit card debt are young consumers and those with low income. The survey found consumers in their twenties are growing accustomed to using their debit cards more often, and thus, they will continue to do so into the future, eschewing the use of cash and checks.

    In contrast, lower-income consumers tend to use reloadable prepaid cards, if they use cards at all, Javelin noted. This type of card is expected to become more popular in the future, as financial regulations put an end to things like free checking, increase fees and change rewards programs. Use of these cards could rise to 9.3 percent of all online purchases by 2014.

    Not only have consumers curbed their spending, but they have also made a more concerted effort to pay off their credit card debt. Nationwide consumer credit has dropped for the last few months. This trend shows no signs of slowing down any time soon as the recession continues to make slow improvements.

  • Paying off credit card debt stabilizes lending industry

    Paying off credit card debt stabilizes lending industry. Many credit card companies have seen their businesses become more reliable even after the passage of the Credit Card Accountability, Responsibility and Disclosure Act thanks to more consumers paying off their credit card debt.

    Credit card companies, such as Capital One Financial and Discover Financial Services, have seen stabilized earnings and losses in recent months, according to a report from business research firm Stock Call. This is because the companies have tightened restrictions on what kinds of consumers they will allow to compile credit card debt. These new rules allow them to release money that was held in reserve to counterbalance losses from delinquent credit card debt.

    The report also said credit card companies have been able to step up lobbying efforts with 25 percent more funding because there is still some uncertainty in the industry regarding possible future changes to federal law.

    More consumers have contributed to the stabilization of the industry by reining in their own spending as the economy continues to make slow progress. Controlled spending allows individuals to pay off more credit card debt, and, as a result, lenders are charging off fewer delinquent accounts.

  • Employees could get stuck with business credit card debt

    Employees could get stuck with business credit card debt. Many employees across the country have credit cards in their name that were issued by their employers to cover business-related expenses such rental cars and hotel rooms. But they may not be aware that they could end up stuck with the debt on those accounts if their employer can no longer pay the bills.

    About 35 percent of all business-issued credit cards have agreements in which the card’s carrier can be held responsible for any debt on the account, ABC News recently reported. The companies that are most likely to issue a credit card with these agreements are the largest ones, including many Fortune 500 firms.

    The report said many employees are unaware that they have entered into such an agreement when taking a business-issued credit card. When a consumer’s company goes under, they are often shocked to learn that they owe thousands in delinquent credit card debt their former employer couldn’t pay.

    Because consumers are often unaware of these arrangements, that debt can go months without being paid, and in addition to owing all the money, they may also find their credit score has taken a severe hit. The report said some legal websites have seen many questions about corporate card liability since the recession hit.

    ABC News said warning signs can show up in the application process, where employees may be asked to give their personal financial information, most typically their name and Social Security number. If that information is requested, then it’s likely they are entering into such an arrangement. Other indicators include a corporate account which shows up on their personal credit report, and if they are required to pay the bill and then get reimbursed.

    Consumers should be wary of these agreements, since many have enough trouble with their finances even before being saddled with thousands in additional credit card debt. If an employer is going out of business, the report recommends that consumers should urge them to negotiate some sort of debt settlement. This way, an employee won’t be stuck with the account on their credit report.

    Consumers who already have a business-issued credit card and are worried that this may happen to them should ask their employer for a copy of the agreement and check whether there is individual or joint liability on the account.

  • Some forget about taxes for debt settlement

    Some forget about taxes for debt settlement. Although many consumers may opt for debt settlement when they face serious financial problems, there are some aspects of the process that can be forgotten.

    According to a report from the western Colorado news provider the Grand Junction Free Press, many consumers who choose to deal with their creditors by seeking the help of a debt settlement firm may not remember that they can receive a tax form, called Form 1099-C. This requires the recipient to pay taxes on the forgiven amount, which the government counts as being added to their income.

    The paper said if this happens, consumers should consult a tax preparer to see if they can obtain another sheet, called a Form 982, which may help them reduce the taxable amount of that forgiven debt. However, the newspaper warns that even in these cases debt settlement will stay on their credit report for years.

    The government recently made debt settlement safer for consumers by passing provisions of the financial overhaul bill. These only require Americans to pay if the work of a company that says it can reduce an amount owed delivers on its promises.