2002 Bankruptcy Losses on Credit Card Debt Reach $18.19 billion – Nilson Report

2002 Bankruptcy Losses on Credit Card Debt Reach $18.19 billion – Nilson Report

http://www.collectionindustry.com/index.cfm?id=8&news_type=1&news_id=8540

February 7, 2003 — Credit card issuers lost $18.19 billion on personal bankruptcies last year according to an article in the January issue of the Nilson Report. This total represents a 15.1% increase over the losses from 2001. These losses include loans originally classified by card issuers as credit losses rather than bankruptcy losses, since many debtors file for bankruptcy protection after their line of credit has been cut off. Not all issuers subsequently reclassify losses from credit to bankruptcies.

Even though bankruptcy losses reached an all-time high last year, they were less than they would have been if consumers hadn’t had such widespread access to debt consolidation through home-equity loans. When consumers consolidate debt by paying off various card balances with a secured line of credit, card issuers are off the hook because the equity lender assumes all the liability. Often, consolidation proves an insufficient solution and the consumer ends up filing for bankruptcy anyway.

The report goes on to say that the percentage of total credit card charge-offs due to bankruptcies will continue to rise. In 2000, card issuers charged off $47.49 billion in credit card debt, of which $12.55 billion, or 26.2%, was due to bankruptcies. The Nilson Report expects some $76.46 billion to be charged off in 2005, with $21.37 billion, or 27.9%, due to bankruptcies.

A free copy of this issue of the Nilson Report (#779) is available on request at www.nilsonreport.com. A follow up article will focus on best ways for credit card issuers to recover the maximum amount from bankruptcy charge offs. Anyone interested in being listed free in this report as a buyer or collector of bankruptcy debt should contact The Nilson Report PH (805) 983-0448, FAX (805) 983-0792, e-mail info@nilsonreport.com.


Source: The Nilson Report

Very appropos to this topic I submit these exerpts from Ralph Nadar's letter (3/16/02) to Senators Trent Lott and Tom Daschle regarding last year's proposed BK reform:

There is no emergency, no bankruptcy crisis. Profits of credit card issuers have increased by nearly 50 percent in the past two years and are at a five-year peak. Consumer bankruptcies, contrary to industry propaganda, have declined since the end of 1998. There is the time for Congress to take an objective look at bankruptcy and the credit practices which push consumers into unmanageable debt.

The proponents of the draconian provisions of the so-called bankruptcy reform have dodged totally the issue of excessive, deceptive and unconscionable practices of credit card companies which have lured consumers into mounting debt. Aggressive marketing and lending practices are on the increase while these companies lobby the Senate for punitive amendments to the bankruptcy law.

Recent class action and regulatory agency complaints against credit card companies have revealed a growing list of practices by credit card issuers designed to rip off consumers including:

* charging late fees even when payments are received on time;

* advertising deceptive "teaser" interest rates that quickly

* skyrocket into unaffordable double digit figures;

* worthless add-ons on high-cost credit life insurance;

* false promises to eliminate annual fees; charges for processing applications;

* frequent increase in credit limits without regard to the ability of the card holder to repay.

At the same time that the banks and other credit card issuers are sending lobbyists to Capitol Hill to gut consumer bankruptcy protections, the issuers are sharply increasing their direct marketing of cards and expanding credit lines to already overextended consumers. These lenders have not come to the Congress with clean hands asking that the consumers (they have lured into excessive debt) be blocked from access to bankruptcy protections.

Congress has long been aware of the sleazy lending practices and excessive fees by credit merchants (including banks and other credit card issuers) who daily take unfair advantage of consumers. There have been plenty of headlines about the practices of vicious high-cost predatory lenders, pay-day lenders as well as respectable appearing bankers (insured by federal deposit insurance) who think nothing of imposing arbitrary and hidden fees of $20 billion or more annually) on their unsuspecting customers.

There are numerous cases in the news about lenders who deceive customers – many of them senior citizens and low and moderate income and minority families – to promote costly refinancing of homes, often resulting in the loss of homes, through foreclosures.

So, now the financial industry – having milked so many consumers dry through high interest rates, fees and sleazy underhanded tactics – wants the Congress to squeeze their victims further through punitive amendments to the Bankruptcy Code. Congress should be ashamed to even take up such a bill, much less enact it into law.

I urge you to ... defeat the assault on consumer bankruptcy protections, and, instead to ... end pernicious credit practices that are taking billions of dollars annually from working citizens.

Well said Ralphie!!

Thanks Elmo,
I couldn't have said it better than Ralph did.
m5k

I'm sure surprised to see ANYTHING from Nader. About a year ago I looked for him all over the net, hours and hours, sent e-mail after e-mail, the only responses I got were "sorry, he's no longer affiliated with this site." I even called Washington about the "FCAs" he wrote about a few years ago, and the associated grants. Everybody I talked to was like in some kind of zone, definitely weird.

Then I found a site that I thought was his current one, but there was not ONE word about credit or finance, just the usual environmental and whatever other causes.

I was sure he sold out during his 2000 campaign.

I did a search for the above letter and found this very interesting Nader testimony for Congress dated February 11, 1999:

http://www.nader.org/releases/hr10.html


"What is needed is the formation of Financial Consumer Associations (FCAs) across the nation. These associations would be modeled on the Citizen Utility Board (CUB) concept which has been utilized in states like Illinois to give consumers the means to fight rate increases and promote awareness of energy conservation.

The Illinois CUB alone helped consumers save over three billion dollars in eight years and participated in a major settlement of six cases against Commonwealth Edison, resulting in a annual savings of $272 for the average single-family residential consumer and $1,750 for the typical small business.

Financial Consumer Associations would be state-chartered, nonprofit, nonpartisan organizations. FCAs would be supported by membership dues and would receive no tax money. The members would elect a board of directors which could hire researchers, organizers, accountants and lawyers.

These associations, among other things, could represent consumers before regulatory and legislative bodies, the courts and in negotiations with financial service providers. They could, as well, develop data that would provide consumers with the facts needed to deal with financial institutions and provide a means of shopping for best bargains in the financial marketplace. They could also monitor the availability of financial services to less affluent and minority borrowers and advocate policies to ensure access to credit by all consumers.

In past Congresses this Committee has considered legislation that would allow these associations to include notices in statements, billings and other mailings of financial institutions. These mailings would include notices about the existence of the associations and an invitation to join. The mailings would not cost the financial institutions anything and would be a modest reciprocity for the all the benefits of insurance, guarantees and the federal safety net that are bestowed on the financial industry.

The mailings are critical to the formation of FCAs. This process has been a huge success in attracting members to the Consumer Utility Boards. Legislation to authorize the FCA inserts was introduced in 1989 by Representative Charles Schumer, now the newly elected U. S. Senator from New York. The effort was supported by the then House Banking Committee Chairman, Henry Gonzalez. With the wide-ranging changes in the financial landscape contemplated by HR 10, now is a propitious moment to renew this effort.

..."

Apparently, it didn't pass. But that's exactly what's needed, information on every credit report and collection letter about consumer rights.

An organization with an 800 # and a web site that'll assist consumers with disputes and KEEPS TRACK of violations and takes LEGAL action. Similar to Shylock's idea (http://creditforum.org/showthread.php?s=&threadid=1413)

So what happened with Nader?

Why are the Nader letters and his opinions and press releases ALL there is?

What happened to activism?

It looks just like an ongoing presidential campaign - where is the ACTION?

Christine - I got Nader's letter from a site that no longer has it posted. It was copied & pasted into a Word file that I pulled from to post. Also noticed I had the wrong date on the post. The correct date of the letter - if this will help your search - is March 6, 2001.

I found the letter at nader.org - but letters and opinions is all that's there.