Banks to write off 40% of a consumer's debt?! on clarkhoward.com

The number of calls we're receiving from people who are in trouble with credit cards has skyrocketed. Traditionally, Clark advises people about negotiating one-on-one with a creditor; seeking help from NFCC.org; or dealing with a collection agency.

But we're on the cusp of a new way that consumers may soon be dealing with credit card debt. The banks have petitioned federal regulators for permission to offer an immediate 40% write-off to those facing default. The remaining 60% would then be paid off through a 5-year payment plan.

So why do the banks have to seek federal permission to do this? If they just go ahead and reduce your balance, you are taxed on that as imputed income via a 1099 and you have to pay on that. So they asked for a waiver of that rule. In addition, the minute they charge something off of their books, they have their capital standing reduced.

The banks are likely to get permission to do the 40/60 split experiment with a small segment of 50,000 customers. If it is successful, the banks may roll it out nationwide. It's enlightened self-interest on the part of the banks; after all, getting 60% of a debt is better than getting nada.

Please note: The banks haven't gotten permission for this quite yet, so Clark doesn't have details about applying for this program at this point. But he'll let you know as soon as it happens so you can be first in line.

UPDATE: The banks' request has been denied by the government. That means if you are facing impossible debt, your options remain the same: default or bankruptcy. Many people are doing both as delinquency rates rise and bankruptcy looks set to hit an all-time high in 2009.

What others are saying

Predatory Lenders
Your right I'm sick and tired of irresponsible behavior by the banks and lending institutions. They go after the vunerable then when they can't pay they go out to destroy them. IMHO it's 50% responsiblity of the lender and 50% responsibility of the consumer for lending practices. I'm sick of these predators and very saddened the Justice Department hasn't done more to stop it. To all you goody two shoes who do such a great job of handling your finances "good for you" but not everyone in this world is as accounting savey nor are these bad people who asked to be caught up in this lending scam.
By Lintee @ 08/29/09 02:48:57 PMreport abuse
40/60 split
Please let me know if and when this is available. Until then, I am going under for the second time! Help--throw us a life perserver!
By Claudia @ 08/12/09 05:49:50 PMreport abuse
To Irresponsible behavior
Ms Irresponsible behavior,
You just don't get it. I applaud you on your frugal lifestyle, but you refuse to see the other side of the coin. These banks are DRUG PUSHERS. They attack the vunerable in society (college students, the low to middle class) and give them free Heroin (credit cards), with slick marketing campaigns to encourage the new addiction. The trip to Vegas....priceless...when its unknowingly indentured servitude. When they become addicted (get their balances up) they then start charging for the heroin (increased fees, interest rates, minimum payments). GOOD people, people who did not fully understand the mice type on the contracts, are now slaves to these pushers. I have no sympathy for these DRUG PUSHERS (the banks). I am a financial planner and see daily the carnage these banks have foisted on the unaware. IN my mind it is criminal behavior. Let's face it, we are all not as financially savvy as you are.
I don't follow these boards so I most likely will not respond to you.
Regards,
T Tail
By T Tail @ 06/25/09 07:13:23 PMreport abuse
Credit Card Debt / Negotiate Amount Owed
Has anyone negotiated down the amonut they owed without getting a 1099? Isn't that up to the credit card companies ant not the government? Any advice or help would appreciated.
By Michael @ 05/03/09 09:39:30 PMreport abuse
Debt Choice
I have 47,000 worth of credit card debt. It was all in my name only. I lost my job unexpectedly after 22 years. I didn't think it was fair that my husbands credit be damaged for my irresponsibility. I was afraid to file bankruptcy....so I went to a debt settlement law firm. His charge will be 1/3 of the decreased settlement that he gets from my 2 credit card companies. I was never late but saw the inability to pay approaching this month. I struggled with this, does anyone know if I did the right thing. They will not pay my cards, my credit will be damaged for 4 years or longer, the money I pay to them will go into a trust and when the credit cards are ready to settle, they will pay the settlement at that time. I have been contracted for 4 years 2 $564 a month.

Credit card companies were raising the amount being owed minimally each month and was taking my credit card from 2.99 percent to 11.99 and it was my largest amount...25,000. I was drowning in my payments and if the interest went up, I would really be drowning. So this seem to be my only way out. I could never get to anyone to speak with me from the credit card company.
By Vicki Harper @ 04/20/09 09:45:37 AMreport abuse
40/60 split for credit cards
Please let me knowd when this passes.
Thank you
By Marianne Miller @ 03/17/09 06:16:28 PMreport abuse
To All you Financial Experts out there
I'm glad to hear that many of you have been able to "live within your means", are responsible because you "pay off your balances in full every month and are tired of "bailing out" the rest of the "irresponsible people out there" That's great. A year or so ago, I would of probably agreed with most of you. I'm no "bleeding heart", but, this financial meltdown is/will take out a lot of people who thought they were "financially responsible". There is no way peope could of predicted a 40% losses in the 401k, or the loss of a good paying job with a company they had been with for years, or the 20-40% devaluation of their homes. Which in the past, could of been sold giving you an opportunity to pay your debts and start over. This financial mess was caused pure and simply by the Federal Goverment and the Federal Reserves monetary policy on behalf of the finacial industry. They first allowed deregulation of all the "safeguards" that were in place since the first Great Depression. Thus allowing practices that were yes once, "illegal" and criminal to become legal. Once Wall Street made their billions, they left the rest of us holding the bag. Now that banks can't make the profits that they once did, they simply jack up the interest rate on CC balances to 35%, creating a situation where most people will never get out from under. But, I understand that all you "self Rightous" financial experts out there feel like it's our own fault for carrying credit card balances. I agree carrying a CC balance is a poor financial choice, but allowing the banks to compound it into a situation that consumers can never get out from under is shameful and immoral. Do yourself a favor all of you financial experts out there and Google monetary policy, the Federal Reserve and banking. Hopefully you will learn how little control we actually have in regards to are own money and finances.
By John S @ 12/17/08 02:10:43 PMreport abuse
40/60 split with credit cards
Please let me know when the banks get this permission
By Pam @ 12/14/08 10:42:04 AMreport abuse
Correction
"Now, you're not employed. Think about what is the first to pay bills as they increase close to a third. Fun? No."

Should read:
Now, you're not employed. Think about what is the first device used to pay bills. In one month, if they missed payment, they increase rates close to a third. Fun? No.
By Blazenbu @ 11/16/08 01:52:19 AMreport abuse
Banks are to blame NOT comsumers
When you actually read the 'agreements' between comsumer and banks, it's a joke. Moving payment dates monthly, Universal Default, and a contract that actually state they can raise your rates for any reason. Those are but a few of the new ways, for those who are perfect and haven't seen "Maxed Out", an excellent documentary offering a rare peak into the industry.

As I read some of the posts, some of you are heartless. Yes, there are others who could take another job, cut back, and survive. Great for you. Different time I would bet and not in an ungovernable state like California. Particularly, when you live in a state like California, one must take other factors into consideration. The tax rate in LA county will be at 10.5% soon, rent out of sight, and all utilities asking for a 30% rate hike. The state ranks highest in all taxes.

Now, you're not employed. Think about what is the first to pay bills as they increase close to a third. Fun? No.

Just when the consumer has only their head above water, the banks start their intelligent wisdom and raise the interest to, in Bank of America, 45%. This can be validated by the documentary "Maxed Out" for those whose head just exploded. Suddenly that money pit you started digging became a sinkhole. Yes, those holier than thou, it can happen to anyone. Even those with perfect history. Please keep this in mind as you blog.

It has been PROVEN again and again that the banks have only one thing they care about--themselves.

Now, can we work faster bailing them out?
By Blazernbu @ 11/16/08 01:49:36 AMreport abuse
40/60 split
Please add me to yuou list and let me know!
By Deborah M @ 11/13/08 01:52:36 PMreport abuse
LOL - Can it get any crazier?
Am I the only one who sees this for what it is? We are looking at total, 100% financial meltdown here so it really doesn't matter what the banks, borrowers, the Fed, or hank Paulson do at this point. The whole damn SYSTEM is about to collapse before our very eyes.

Need $100 billion? Sure, what the heck, make it $200B! It's all going to be Monopoly money is a few months so enjoy this period of madness while you can. Next Winter is going to be cold and hungry for a lot of people who will all learn some valuable lessons about humility and the real meaning of need.
By Tom H @ 11/12/08 01:36:13 PMreport abuse
The Blame Game
Seems its been the American way for a long time to blame someone else for ones lack of financial responsibility. The reality is that you are where you are because of the actions YOU have made. Time to wake up and see that your in the hole you dug for yourself.
By patdesign @ 11/11/08 06:25:39 AMreport abuse
irresponsible spending
I have to pay my bills and I feel it only fair that others pay theirs. Business's aren't here for our health, they are here to make money. So if they write off a debt, the rest of us are going to be paying for YOUR MISTAKES.

Don't write off the debt, make the dead beats pay for what they charged. You knew what you were getting into when you made those purchases.
By Tonya @ 11/11/08 05:25:57 AMreport abuse
Credit help
A year ago I'd agree with most of the posts here. I myself lost a job and was unemployed for 6 months. I am no employed but making 35% less than I was before. I had little credit card debt at that point, only about $4000.00 but now find it very hard to keep up with all the fees and interest they want once you fall a little behind. A 60/40 split with a 5 year plan is exactly what I need right now. I'm making my mortgage payments as well as student loans and all the other payments that come along with life but once you take a 35% hit in income after collecting unemployment for 6 months it becomes hard to get back on track.
By Mike @ 11/10/08 11:26:12 PMreport abuse
Irresponsible Behavior.
Maybe you should look into bus driving jobs and especially those for private sectors. We had to take up summer routes which consumed 5 hrs of our day only getting paid for about 3hrs. My husband and I enjoyed driving school busses and we hoped during those years of driving it was going to get better. IF we can just make it one more year it will go back to the school district and drivers would make a decent wage again. Please don’t assume you know everything about anything. My point was only that there is always two sides to a story. I could go into great detail some of it being personal but I didn’t feel there would be a need. Possibly if you weren't so narrow minded you could see that not every person fits in one description. We have more equity in our home than majority. The problem we are facing is with credit card companies which we have always been responsible in paying. we made a choice for me to quit my job and coincidental shortly after that we got encumbered in Interest shock! We do not want take out a second mortgage when owes little compared to its worth. What the credit card companies have done to consumers wither you agree or not what we spent on them is not fair! Especially to those of us in which there was no reason to do so.
By Heidi @ 11/10/08 11:16:35 PMreport abuse
irresponsible
your both bus drivers and you knew you would be out of work every summer, so instead of getting summer jobs you lived on credit cards? that is the definition of dumb....sorry for the negative opinion, but get real, how many years did this go on before you guys got a clue?....duh
By Dave @ 11/10/08 10:21:40 PMreport abuse
define credit
credit: the latin root to belive.
So, the banks belive we will pay them back.
I feel this is a huge education for everyone. I know my limits I hope those who did not do now! TO BELIVE?
By Frank @ 11/10/08 10:03:05 PMreport abuse
Irresponsible Behavior.
I was not trying to get sympathy nor do we have our hands held out. We will pay our debts no matter what. I was simply saying there are always two sides of a story and not everyone falls into a certain speculation. We are far from irresponsible, but having a hard time due to the banks raising interest from 8.9 to 29.99. We turned one into the BBB and Clark Howard’s team gave us another website to address our concerns. But mind you this has taken a year and a half to just get somewhat under control. In another words they had a year in a half to add on those interest rates. Got another one to come back down to 11.99 so were focusing on paying the last one with a 29% interest rate, my comment was its not just the consumers fault. We decided for me to quit to further my education then credit card companies decide they are going to boost up their profit by increasing interest rate, with no reason. Less money coming in meant it was harder for us to get these paid down, we continue to struggle.
By Heidi @ 11/10/08 09:01:02 PMreport abuse
Frustrated
I'm frustrated because I have scrimped so much to make it on one salary with two kids. My socks have holes in the heels, my shoes have the sole worn out etc. I could have qualified for a bigger house but I bought a tiny one that I felt I could truly afford. We don't eat out at all and I cut coupons and only buy stuff on sale. Our towels are raggedy etc etc etc. It bothers me that many (not all I realize) bought and bought and essentially I will have to continue to scrimp to cover these choices.
By Rosanne @ 11/10/08 07:44:24 PMreport abuse
B D McGan Comment
Your right B D. Why can't the responsible people take advantage of this great deal too!! I'm charging like crazy this week so I can get a free pass also.
By patdesign @ 11/10/08 05:08:01 PMreport abuse
Timing
Will you please wait on enacting this legislation so that I can borrow up to my capacity and go into default so that I feel the benefits of shifting to irresponsibility
By B D McGan @ 11/10/08 03:49:04 PMreport abuse
Live within your means
I am tired of people complaining about their situation? Why should I have to pay for someone to get bailed out because they could not live within their means. I don't have credit card debt because I have fiscal responsibility. Maybe the government should learn a little themselves. I am tired of the whining and complaining of those who choose not to study in college or work and go to school to better themselves. Maybe if you don't make a lot of money, you shouldn't be living like you do. When will it all end.
By Whatever @ 11/10/08 03:20:42 PMreport abuse
Consumer Debt
I'm mad as hell and am sick and tired of rewarding irresponsible behavior! People like myself who live within their means, pay their mortgage, credit cards, etc are getting a slap in the face, and I predict we will take revenge in some form.
By Jorge @ 11/10/08 03:02:35 PMreport abuse
wrong way
Again the government is going to give the banks all the power. Why not use a tax credit that has to be paid back at 10% a year directly to the consumer. Putting all the money in at the top isn't helping those of us that are running as fast as we can and still falling behind. This mortgage crisis cost my husband his job. No we find out that only those who have been irresponsible will be helped. I want to throw up. By the way, our income has been slashed in half!
By Jill @ 11/10/08 02:33:53 PMreport abuse
No Way - Double Standard
NO WAY should the banks be allowed to do this. Unfortunately they control this country's money & he who has the gold makes the rules (in their favor).

I made the mistake of living at the edge of my means. Then when that good salary went away because of job loss & medical problems I made the choice to tend to the secure debt, like my house. The non-secure hole just sat and got deeper & finally after a year I got backed into the corner of settling. I then ended up that imputed income 1099 of about $20K, thus paying more extortion money. I took my lumps and now they are looking to do this on a mass scale and waive the imputed income-extortion payment?

NO

THe darn bail out should have happened either. Everyone should pay the price for their irrisponsibility/greed/sin, whatever you want to call it.

Bottom line is that is there are no consequences for your actions/mistakes they are to be repeated.

That's my opinion and you can take that to the bank.
By Ricky @ 11/10/08 12:59:59 PMreport abuse
Would you live on the Streets?
I see both sides of the arguement but no one should think that all who owe on credit cards or defaulted loans are careless with money. Have you ever thought that a person works on a commission based income and never had a (in the 20 years they worked this job) paychecks that could not even pay a reasonable mortgage payment, car note or even food for the family? What about those who lost a job because the economy tanked and can't find a job to replace it? Most of us have not seen economic times like this. So if you lost your job or your main source of income is reduced by 65% would you tell your family "gee guys I'm sorry but we are not going to put housing,transportation or food expenses on a credit card cause we will look like irresponsible people so let's go live in the woods?" Come on people. Wake up. You can't reduce your overhead expenses if you can't even sell your house because no one is buying or you owe pretty much what it's worth because the value keeps dropping. I think that this is a good program for them to consider for some maybe not all. You have to look at both sides.
By JW @ 11/10/08 08:26:39 AMreport abuse
Irresponsible Behavior.
Let me start off by saying both my husband and I was school bus drivers. I was one for 7 years; my husband is still employed there. For the first 4 years we did not receive any raises whatsoever. We got laid off every summer and several times for several weeks during the year. We would have to live off credit cards every summer, and then we would pay them off when we returned to work. We never seemed to get ahead mind you. We were both school bus drivers but my daughter and I qualified for medical. This should give you some idea for two “hard working" people trying to make ends meet. Not only was money tight, it is a very stressful job and the company treats you like crap. To give you an idea of the way they treat their drivers. They removed all furniture in the lounge intended for 80+ employees and left a table and 2 chairs. After the big boss heard about this they ordered new furniture. Anyways we decided two years ago for me to quit and further my education, knowing it would be really hard to live on such little money. We also know that once I am finished we will be better off. We are currently 15k in debt due to credit cards we could not pay off like we normally did. They hiked interest rates even though we have paid month after month and never late. These interest rates have increased from 8.9 to 29.99. The point to my story is some of us are not the irresponsible living beyond our means as you might like to think.
By Heidi @ 11/10/08 05:47:44 AMreport abuse
cash advance write offs
I would be willing to bet that 60% of the so called write off is consumer debt paid toward autos, school and mortgage note payments.

Cash advances were easy to get and due to financial circumstances consumers
had to find a way to pay back loans.

This is another way the banks are stealing money from the bail out program. What is terrible---is the fact that the banks will get their money 2 fold----the credit card debt is just
being delayed 5 years.What a deal for the banks!! No, No, and H__L No.
By Tim @ 11/10/08 12:05:25 AMreport abuse
The goverment does not care what you think.
If you people haven't learned by now after the $700 billion bailout loaded with pork that the goverment does not give a rats ass what us commoners think you never will.
By MC @ 11/08/08 08:48:07 PMreport abuse
Fight Back
If your credit card provider is involved, simply cancel your card & go with one that does not reward irresponsible behavior
By H. Short @ 11/08/08 08:27:09 PMreport abuse
I hate this too!
I agree - No bail out for those who chose to be reckless with their spending and bought things they can't afford! NO! Sadly, I'm afraid the newly elected government will think differently.
By Gina @ 11/08/08 05:06:28 PMreport abuse
I hate this
Another example of the government rewarding bad behavior while those who do the right thing - live below their means, pay off credit cards as they should, etc. - are punished with higher taxes to pay in the long run. People are more and more looking to the government for a solution to every problem they have. This is NOT good.
By Karen @ 11/08/08 06:41:11 AMreport abuse
How about a simple tax break instead?
Here's a novel idea for the powers that be: instead of bailing banks out, how about a tax break for consumers? Send a simple tax rebate check, which we can endorce and only use to pay debt. This beats rewarding predatory lending practices that have kept banks in business for the last 20 years!
By JD Adams @ 11/07/08 09:24:04 PMreport abuse
No Way
If the banks did that, want to know what will happen, they will just spend more and drive their balance back up to the max again, want to bet? I might as well start defaulting. The 1099 will be much cheaper coz only have to pay the tax on the amount deducted, as income.
By Guy @ 11/07/08 09:15:53 PMreport abuse
this article. what else?
This does sound bad, but it's better than a government bailout. It's actually good for the banks, instead of not receiving 100% of the loaned money, they'll get 60%. Yes, it's not fair to those who've been responsible, but at least the bank stays afloat without taxpayer money.
By Joe @ 11/07/08 08:26:22 PMreport abuse
Bail Us Out TOO!
I hope that I will be one of the $50,000 consumer to trial this program. I am so sick and tired of the government bailing out the financial institutes, it's about time they give the consumers that have fallen on hard times beyond their control assistance.
By Quie @ 11/07/08 08:18:51 PMreport abuse
"Pay Day"
Clark,
Would you recommend that we should all start defaulting? I don't want to miss
out this fabulous opportunity.
By Tom @ 11/07/08 06:29:30 PMreport abuse
I wish they would write off 40% of my mortgage not because I can't pay it but because of lost property value they cost me when they loaned out the money to all these people who could not afford a mortgage to begin with.
By me @ 11/07/08 04:34:14 PMreport abuse
Forgiveness of consumer debt
I couldn't agree with Larry more! I only charge what I know I can pay at the end of the month. I think I have only paid credit card interest once or twice in my life and then for only a month or two. This write off is just another form of income re-distrubution. I guess this is just the beggining. See you in Austrilia!
By Tom Carvel @ 11/07/08 03:30:33 PMreport abuse
Forgiveness of consumer debt
This really p****s me off. Why should those who lived fat get forgiveness on their debt while those of us who behaved ourselves and payed off our credit cards in full every month pay for it through our taxes and/or higher bank fees.
By Larry @ 11/07/08 02:35:44 PMreport abuse

Predatory Lenders

Your right I'm sick and tired of irresponsible behavior by the banks and lending institutions. They go after the vunerable then when they can't pay they go out to destroy them. IMHO it's 50% responsiblity of the lender and 50% responsibility of the consumer for lending practices. I'm sick of these predators and very saddened the Justice Department hasn't done more to stop it. To all you goody two shoes who do such a great job of handling your finances "good for you" but not everyone in this world is as accounting savey nor are these bad people who asked to be caught up in this lending scam.

By Lintee @ 08/29/09 02:48:57 PMreport abuse

40/60 split

Please let me know if and when this is available. Until then, I am going under for the second time! Help--throw us a life perserver!

By Claudia @ 08/12/09 05:49:50 PMreport abuse

To Irresponsible behavior

Ms Irresponsible behavior,
You just don't get it. I applaud you on your frugal lifestyle, but you refuse to see the other side of the coin. These banks are DRUG PUSHERS. They attack the vunerable in society (college students, the low to middle class) and give them free Heroin (credit cards), with slick marketing campaigns to encourage the new addiction. The trip to Vegas....priceless...when its unknowingly indentured servitude. When they become addicted (get their balances up) they then start charging for the heroin (increased fees, interest rates, minimum payments). GOOD people, people who did not fully understand the mice type on the contracts, are now slaves to these pushers. I have no sympathy for these DRUG PUSHERS (the banks). I am a financial planner and see daily the carnage these banks have foisted on the unaware. IN my mind it is criminal behavior. Let's face it, we are all not as financially savvy as you are.
I don't follow these boards so I most likely will not respond to you.
Regards,
T Tail

By T Tail @ 06/25/09 07:13:23 PMreport abuse

Credit Card Debt / Negotiate Amount Owed

Has anyone negotiated down the amonut they owed without getting a 1099? Isn't that up to the credit card companies ant not the government? Any advice or help would appreciated.

By Michael @ 05/03/09 09:39:30 PMreport abuse

Debt Choice

I have 47,000 worth of credit card debt. It was all in my name only. I lost my job unexpectedly after 22 years. I didn't think it was fair that my husbands credit be damaged for my irresponsibility. I was afraid to file bankruptcy....so I went to a debt settlement law firm. His charge will be 1/3 of the decreased settlement that he gets from my 2 credit card companies. I was never late but saw the inability to pay approaching this month. I struggled with this, does anyone know if I did the right thing. They will not pay my cards, my credit will be damaged for 4 years or longer, the money I pay to them will go into a trust and when the credit cards are ready to settle, they will pay the settlement at that time. I have been contracted for 4 years 2 $564 a month.

Credit card companies were raising the amount being owed minimally each month and was taking my credit card from 2.99 percent to 11.99 and it was my largest amount...25,000. I was drowning in my payments and if the interest went up, I would really be drowning. So this seem to be my only way out. I could never get to anyone to speak with me from the credit card company.

By Vicki Harper @ 04/20/09 09:45:37 AMreport abuse

40/60 split for credit cards

Please let me knowd when this passes.
Thank you

By Marianne Miller @ 03/17/09 06:16:28 PMreport abuse

To All you Financial Experts out there

I'm glad to hear that many of you have been able to "live within your means", are responsible because you "pay off your balances in full every month and are tired of "bailing out" the rest of the "irresponsible people out there" That's great. A year or so ago, I would of probably agreed with most of you. I'm no "bleeding heart", but, this financial meltdown is/will take out a lot of people who thought they were "financially responsible". There is no way peope could of predicted a 40% losses in the 401k, or the loss of a good paying job with a company they had been with for years, or the 20-40% devaluation of their homes. Which in the past, could of been sold giving you an opportunity to pay your debts and start over. This financial mess was caused pure and simply by the Federal Goverment and the Federal Reserves monetary policy on behalf of the finacial industry. They first allowed deregulation of all the "safeguards" that were in place since the first Great Depression. Thus allowing practices that were yes once, "illegal" and criminal to become legal. Once Wall Street made their billions, they left the rest of us holding the bag. Now that banks can't make the profits that they once did, they simply jack up the interest rate on CC balances to 35%, creating a situation where most people will never get out from under. But, I understand that all you "self Rightous" financial experts out there feel like it's our own fault for carrying credit card balances. I agree carrying a CC balance is a poor financial choice, but allowing the banks to compound it into a situation that consumers can never get out from under is shameful and immoral. Do yourself a favor all of you financial experts out there and Google monetary policy, the Federal Reserve and banking. Hopefully you will learn how little control we actually have in regards to are own money and finances.

By John S @ 12/17/08 02:10:43 PMreport abuse

40/60 split with credit cards

Please let me know when the banks get this permission

By Pam @ 12/14/08 10:42:04 AMreport abuse

Correction

"Now, you're not employed. Think about what is the first to pay bills as they increase close to a third. Fun? No."

Should read:
Now, you're not employed. Think about what is the first device used to pay bills. In one month, if they missed payment, they increase rates close to a third. Fun? No.

By Blazenbu @ 11/16/08 01:52:19 AMreport abuse

Banks are to blame NOT comsumers

When you actually read the 'agreements' between comsumer and banks, it's a joke. Moving payment dates monthly, Universal Default, and a contract that actually state they can raise your rates for any reason. Those are but a few of the new ways, for those who are perfect and haven't seen "Maxed Out", an excellent documentary offering a rare peak into the industry.

As I read some of the posts, some of you are heartless. Yes, there are others who could take another job, cut back, and survive. Great for you. Different time I would bet and not in an ungovernable state like California. Particularly, when you live in a state like California, one must take other factors into consideration. The tax rate in LA county will be at 10.5% soon, rent out of sight, and all utilities asking for a 30% rate hike. The state ranks highest in all taxes.

Now, you're not employed. Think about what is the first to pay bills as they increase close to a third. Fun? No.

Just when the consumer has only their head above water, the banks start their intelligent wisdom and raise the interest to, in Bank of America, 45%. This can be validated by the documentary "Maxed Out" for those whose head just exploded. Suddenly that money pit you started digging became a sinkhole. Yes, those holier than thou, it can happen to anyone. Even those with perfect history. Please keep this in mind as you blog.

It has been PROVEN again and again that the banks have only one thing they care about--themselves.

Now, can we work faster bailing them out?

By Blazernbu @ 11/16/08 01:49:36 AMreport abuse

Please add me to yuou list and let me know!

By Deborah M @ 11/13/08 01:52:36 PMreport abuse

LOL - Can it get any crazier?

Am I the only one who sees this for what it is? We are looking at total, 100% financial meltdown here so it really doesn't matter what the banks, borrowers, the Fed, or hank Paulson do at this point. The whole damn SYSTEM is about to collapse before our very eyes.

Need $100 billion? Sure, what the heck, make it $200B! It's all going to be Monopoly money is a few months so enjoy this period of madness while you can. Next Winter is going to be cold and hungry for a lot of people who will all learn some valuable lessons about humility and the real meaning of need.

By Tom H @ 11/12/08 01:36:13 PMreport abuse

The Blame Game

Seems its been the American way for a long time to blame someone else for ones lack of financial responsibility. The reality is that you are where you are because of the actions YOU have made. Time to wake up and see that your in the hole you dug for yourself.

By patdesign @ 11/11/08 06:25:39 AMreport abuse

irresponsible spending

I have to pay my bills and I feel it only fair that others pay theirs. Business's aren't here for our health, they are here to make money. So if they write off a debt, the rest of us are going to be paying for YOUR MISTAKES.

Don't write off the debt, make the dead beats pay for what they charged. You knew what you were getting into when you made those purchases.

By Tonya @ 11/11/08 05:25:57 AMreport abuse

Credit help

A year ago I'd agree with most of the posts here. I myself lost a job and was unemployed for 6 months. I am no employed but making 35% less than I was before. I had little credit card debt at that point, only about $4000.00 but now find it very hard to keep up with all the fees and interest they want once you fall a little behind. A 60/40 split with a 5 year plan is exactly what I need right now. I'm making my mortgage payments as well as student loans and all the other payments that come along with life but once you take a 35% hit in income after collecting unemployment for 6 months it becomes hard to get back on track.

By Mike @ 11/10/08 11:26:12 PMreport abuse

Irresponsible Behavior.

Maybe you should look into bus driving jobs and especially those for private sectors. We had to take up summer routes which consumed 5 hrs of our day only getting paid for about 3hrs. My husband and I enjoyed driving school busses and we hoped during those years of driving it was going to get better. IF we can just make it one more year it will go back to the school district and drivers would make a decent wage again. Please don’t assume you know everything about anything. My point was only that there is always two sides to a story. I could go into great detail some of it being personal but I didn’t feel there would be a need. Possibly if you weren't so narrow minded you could see that not every person fits in one description. We have more equity in our home than majority. The problem we are facing is with credit card companies which we have always been responsible in paying. we made a choice for me to quit my job and coincidental shortly after that we got encumbered in Interest shock! We do not want take out a second mortgage when owes little compared to its worth. What the credit card companies have done to consumers wither you agree or not what we spent on them is not fair! Especially to those of us in which there was no reason to do so.

By Heidi @ 11/10/08 11:16:35 PMreport abuse

irresponsible

your both bus drivers and you knew you would be out of work every summer, so instead of getting summer jobs you lived on credit cards? that is the definition of dumb....sorry for the negative opinion, but get real, how many years did this go on before you guys got a clue?....duh

By Dave @ 11/10/08 10:21:40 PMreport abuse

define credit

credit: the latin root to belive.
So, the banks belive we will pay them back.
I feel this is a huge education for everyone. I know my limits I hope those who did not do now! TO BELIVE?

By Frank @ 11/10/08 10:03:05 PMreport abuse

I was not trying to get sympathy nor do we have our hands held out. We will pay our debts no matter what. I was simply saying there are always two sides of a story and not everyone falls into a certain speculation. We are far from irresponsible, but having a hard time due to the banks raising interest from 8.9 to 29.99. We turned one into the BBB and Clark Howard’s team gave us another website to address our concerns. But mind you this has taken a year and a half to just get somewhat under control. In another words they had a year in a half to add on those interest rates. Got another one to come back down to 11.99 so were focusing on paying the last one with a 29% interest rate, my comment was its not just the consumers fault. We decided for me to quit to further my education then credit card companies decide they are going to boost up their profit by increasing interest rate, with no reason. Less money coming in meant it was harder for us to get these paid down, we continue to struggle.

By Heidi @ 11/10/08 09:01:02 PMreport abuse

Frustrated

I'm frustrated because I have scrimped so much to make it on one salary with two kids. My socks have holes in the heels, my shoes have the sole worn out etc. I could have qualified for a bigger house but I bought a tiny one that I felt I could truly afford. We don't eat out at all and I cut coupons and only buy stuff on sale. Our towels are raggedy etc etc etc. It bothers me that many (not all I realize) bought and bought and essentially I will have to continue to scrimp to cover these choices.

By Rosanne @ 11/10/08 07:44:24 PMreport abuse

B D McGan Comment

Your right B D. Why can't the responsible people take advantage of this great deal too!! I'm charging like crazy this week so I can get a free pass also.

By patdesign @ 11/10/08 05:08:01 PMreport abuse

Timing

Will you please wait on enacting this legislation so that I can borrow up to my capacity and go into default so that I feel the benefits of shifting to irresponsibility

By B D McGan @ 11/10/08 03:49:04 PMreport abuse

Live within your means

I am tired of people complaining about their situation? Why should I have to pay for someone to get bailed out because they could not live within their means. I don't have credit card debt because I have fiscal responsibility. Maybe the government should learn a little themselves. I am tired of the whining and complaining of those who choose not to study in college or work and go to school to better themselves. Maybe if you don't make a lot of money, you shouldn't be living like you do. When will it all end.

By Whatever @ 11/10/08 03:20:42 PMreport abuse

Consumer Debt

I'm mad as hell and am sick and tired of rewarding irresponsible behavior! People like myself who live within their means, pay their mortgage, credit cards, etc are getting a slap in the face, and I predict we will take revenge in some form.

By Jorge @ 11/10/08 03:02:35 PMreport abuse

wrong way

Again the government is going to give the banks all the power. Why not use a tax credit that has to be paid back at 10% a year directly to the consumer. Putting all the money in at the top isn't helping those of us that are running as fast as we can and still falling behind. This mortgage crisis cost my husband his job. No we find out that only those who have been irresponsible will be helped. I want to throw up. By the way, our income has been slashed in half!

By Jill @ 11/10/08 02:33:53 PMreport abuse

No Way - Double Standard

NO WAY should the banks be allowed to do this. Unfortunately they control this country's money & he who has the gold makes the rules (in their favor).

I made the mistake of living at the edge of my means. Then when that good salary went away because of job loss & medical problems I made the choice to tend to the secure debt, like my house. The non-secure hole just sat and got deeper & finally after a year I got backed into the corner of settling. I then ended up that imputed income 1099 of about $20K, thus paying more extortion money. I took my lumps and now they are looking to do this on a mass scale and waive the imputed income-extortion payment?

NO

THe darn bail out should have happened either. Everyone should pay the price for their irrisponsibility/greed/sin, whatever you want to call it.

Bottom line is that is there are no consequences for your actions/mistakes they are to be repeated.

That's my opinion and you can take that to the bank.

By Ricky @ 11/10/08 12:59:59 PMreport abuse

Would you live on the Streets?

I see both sides of the arguement but no one should think that all who owe on credit cards or defaulted loans are careless with money. Have you ever thought that a person works on a commission based income and never had a (in the 20 years they worked this job) paychecks that could not even pay a reasonable mortgage payment, car note or even food for the family? What about those who lost a job because the economy tanked and can't find a job to replace it? Most of us have not seen economic times like this. So if you lost your job or your main source of income is reduced by 65% would you tell your family "gee guys I'm sorry but we are not going to put housing,transportation or food expenses on a credit card cause we will look like irresponsible people so let's go live in the woods?" Come on people. Wake up. You can't reduce your overhead expenses if you can't even sell your house because no one is buying or you owe pretty much what it's worth because the value keeps dropping. I think that this is a good program for them to consider for some maybe not all. You have to look at both sides.

By JW @ 11/10/08 08:26:39 AMreport abuse

Let me start off by saying both my husband and I was school bus drivers. I was one for 7 years; my husband is still employed there. For the first 4 years we did not receive any raises whatsoever. We got laid off every summer and several times for several weeks during the year. We would have to live off credit cards every summer, and then we would pay them off when we returned to work. We never seemed to get ahead mind you. We were both school bus drivers but my daughter and I qualified for medical. This should give you some idea for two “hard working" people trying to make ends meet. Not only was money tight, it is a very stressful job and the company treats you like crap. To give you an idea of the way they treat their drivers. They removed all furniture in the lounge intended for 80+ employees and left a table and 2 chairs. After the big boss heard about this they ordered new furniture. Anyways we decided two years ago for me to quit and further my education, knowing it would be really hard to live on such little money. We also know that once I am finished we will be better off. We are currently 15k in debt due to credit cards we could not pay off like we normally did. They hiked interest rates even though we have paid month after month and never late. These interest rates have increased from 8.9 to 29.99. The point to my story is some of us are not the irresponsible living beyond our means as you might like to think.

By Heidi @ 11/10/08 05:47:44 AMreport abuse

cash advance write offs

I would be willing to bet that 60% of the so called write off is consumer debt paid toward autos, school and mortgage note payments.

Cash advances were easy to get and due to financial circumstances consumers
had to find a way to pay back loans.

This is another way the banks are stealing money from the bail out program. What is terrible---is the fact that the banks will get their money 2 fold----the credit card debt is just
being delayed 5 years.What a deal for the banks!! No, No, and H__L No.

By Tim @ 11/10/08 12:05:25 AMreport abuse

The goverment does not care what you think.

If you people haven't learned by now after the $700 billion bailout loaded with pork that the goverment does not give a rats ass what us commoners think you never will.

By MC @ 11/08/08 08:48:07 PMreport abuse

Fight Back

If your credit card provider is involved, simply cancel your card & go with one that does not reward irresponsible behavior

By H. Short @ 11/08/08 08:27:09 PMreport abuse

I hate this too!

I agree - No bail out for those who chose to be reckless with their spending and bought things they can't afford! NO! Sadly, I'm afraid the newly elected government will think differently.

By Gina @ 11/08/08 05:06:28 PMreport abuse

I hate this

Another example of the government rewarding bad behavior while those who do the right thing - live below their means, pay off credit cards as they should, etc. - are punished with higher taxes to pay in the long run. People are more and more looking to the government for a solution to every problem they have. This is NOT good.

By Karen @ 11/08/08 06:41:11 AMreport abuse

How about a simple tax break instead?

Here's a novel idea for the powers that be: instead of bailing banks out, how about a tax break for consumers? Send a simple tax rebate check, which we can endorce and only use to pay debt. This beats rewarding predatory lending practices that have kept banks in business for the last 20 years!

By JD Adams @ 11/07/08 09:24:04 PMreport abuse

No Way

If the banks did that, want to know what will happen, they will just spend more and drive their balance back up to the max again, want to bet? I might as well start defaulting. The 1099 will be much cheaper coz only have to pay the tax on the amount deducted, as income.

By Guy @ 11/07/08 09:15:53 PMreport abuse

this article. what else?

This does sound bad, but it's better than a government bailout. It's actually good for the banks, instead of not receiving 100% of the loaned money, they'll get 60%. Yes, it's not fair to those who've been responsible, but at least the bank stays afloat without taxpayer money.

By Joe @ 11/07/08 08:26:22 PMreport abuse

Bail Us Out TOO!

I hope that I will be one of the $50,000 consumer to trial this program. I am so sick and tired of the government bailing out the financial institutes, it's about time they give the consumers that have fallen on hard times beyond their control assistance.

By Quie @ 11/07/08 08:18:51 PMreport abuse

"Pay Day"

Clark,
Would you recommend that we should all start defaulting? I don't want to miss
out this fabulous opportunity.

By Tom @ 11/07/08 06:29:30 PMreport abuse

I wish they would write off 40% of my mortgage not because I can't pay it but because of lost property value they cost me when they loaned out the money to all these people who could not afford a mortgage to begin with.

By me @ 11/07/08 04:34:14 PMreport abuse

Forgiveness of consumer debt

I couldn't agree with Larry more! I only charge what I know I can pay at the end of the month. I think I have only paid credit card interest once or twice in my life and then for only a month or two. This write off is just another form of income re-distrubution. I guess this is just the beggining. See you in Austrilia!

By Tom Carvel @ 11/07/08 03:30:33 PMreport abuse

This really p****s me off. Why should those who lived fat get forgiveness on their debt while those of us who behaved ourselves and payed off our credit cards in full every month pay for it through our taxes and/or higher bank fees.

By Larry @ 11/07/08 02:35:44 PMreport abuse

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Nov 07, 2008 -- Banks to write off 40% of a consumer's debt?!

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