Regulators nix credit card debt forgiveness plan WASHINGTON â Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt. The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don't qualify for existing repayment plans. An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers â even those with strong credit records â defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses. An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program. The agency "does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us," Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday. "The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with ... confidence" in the banking system, Long wrote. The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group's senior vice president, Scott Talbott. Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "we still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them. Under the proposal, borrowers would be able to defer payment of income taxes they owe on the forgiven part of the credit card debt until after the remainder was paid off. The lenders could wait until then to book their losses on the forgiven debt. The two groups hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit card debt would be involved. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent. Consumers would be allowed to pay back the remainder over several years. The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted. The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings. Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service. Americans are weighed down by about $900 billion in credit card debt, according to the latest available Federal Reserve figures. ********************************************** Finally some sanity.
This is an outrage! I demand an explanation. Or is this a case of mainstreet is too little to bail while wallstreet and the big three are too big to fail? Or in the case GM, too bloated with overpaid union management. If your a large sized company with high priced lobyists you can tell your ceo to go home with his millions in pay comp and then apply for free money. Why can't people who failed at paying credit card debt pay themselves first and then apply for a bailout? I see no difference other than lobysists, unions, and lawyers. And you think this is sanity???
Those who lived responsibly should pay for those who bought every stupid trinket on their credit card. Such a bailout will be unhelpful in the long run, because it's a hand out and not a hand up.
Perhaps the banks should stop sending out millions of credit cards to Americans every month. If they want one, they must apply for it themselves. Don't temp the child to enter the candystore. They have no money, just appetite.
Doubtfull. I am thinking more along the lines of credit card companies being the largest political contributors.
Right, so it's ok for the banks to get bailed out by the TAXPAYERS, but when those same taxpayers ask for the same treatment, it's denied. That is considered sanity? Get the fuck outta here. I'm in agreement with the proposal being nixed, as long as they nix all other bailouts as well.
So we should live in a double standard society? Those with money and power deserve free money when they can't afford their mistakes and those with little money and no power deserve to be wiped out when they can't afford their mistakes?
Well said. Agree 100%. The Government black stroke just proves what schelping Whores they are to Bankers. Uncle Sam takes care of Bankers with Trillions in Public money, but not rebate that same public money back to the public - from whom its owed - to "pay down" their own debt. Its a raping for Corporate America And if u wanna talk socialism, they should have nullified CDS, bought the mortgages, let the weak Banks fail, THEN forgave credit card debt. The economy is largely hobbled by an over-indebted American consumer. Printing trillions to pay down consumer CC debt would be a far better stimulus than handing it to upside down Banks who hoard it and pocket-it so they don't have to pay down their own derivative losses. Bullshit