Banks Want To Forgive Debt
I have to admit, this kinda pisses me off. From Associated Press:
Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.
The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. 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.
[...]
Under the groups’ proposal to U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks, a pilot project would allow big credit card companies to sharply reduce the amounts owed by consumers in over their heads who don’t qualify for the repayment plans now available.
Nearly all the biggest credit card banks have agreed to such a pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time.
The test program could reach as many as 50,000 borrowers, said Scott Talbott, senior vice president at the Roundtable. Borrowers would have to be in a counseling program for their credit card debt. The amount of debt to be forgiven would be determined case by case, depending on the borrower’s financial condition; those receiving close to the maximum forgiveness level would be nearing a personal bankruptcy filing.
And there would be a tax benefit. Borrowers would be able to defer payment of income taxes they owe on the forgiven part of the debt until after the remainder was paid off. The lenders could wait until then to book their loss on the forgiven debt.
OK, you know what? Our family could have bought a huge flat screen TV, we could have cars that don’t have 100,000 and 200,000 miles on them, and we haven’t been on a vacation that didn’t involve family in … well, ever. My husband and I have gone on a couple of weekend trips in the last SIX YEARS but that’s it.
While I think I’ve been pretty consistent in saying that I empathize with people who dealt with sleazy mortgage brokers, believe credit card companies have been way too lenient with the offering of credit in the first place, and know sometimes people get caught up in illnesses or accidents that just tank them financially, but dammit - this looks like a blanket pardon to me, and that means there are people who have been completely irresponsible and are getting a nice little “get out of bankruptcy free” card.
I hope this “plan” isn’t administered as willy nilly as this article makes it sound, that’s all I’m saying.
