Credit Research News - August, 2005

College carry too much credit-card deb

Throughout a three-month period, WFI asked about 700 undergraduate, graduate and professional school students - both male and female - about their credit card habits. Participants were selected randomly and surveyed electronically. In that survey, funded by OppenheimerFunds, WFI found that 23 percent of respondents use credit cards to pay for tuition and fees, and 52 percent use credit for textbooks and school supplies.

U.S. debt could cost Americans

A new Associated Press/Ipsos poll finds that barely a third of Americans would cut spending to reduce the federal deficit and even fewer would raise taxes. If those figures seem out of whack to you, if they seem to cut against the way you learned to handle money, if they seem like a recipe for a national economic nightmare - well, then, at least you're not alone. A chorus of economists, government officials and elected leaders both conservative and liberal is warning that America's non-stop borrowing has put the nation on the road to a major fiscal disaster - one that could unleash plummeting home values, rocketing interest rates, lost jobs, stagnating wages and threats to government services ranging from health care to law enforcement.

College students and credit card debt

Dominguez is like many college students (65 percent) who carry credit card debt, according to a recent survey by New York-based OppenheimerFunds Inc. and Smith College. The survey found that more than half of college students surveyed charge their cards to the limit some or most of the time. The practice can lead to debt problems well beyond graduation, making it difficult to buy a home or finance a car at a low interest rate.

Experts warn debt may threaten economy

You owe $145,000. And the bill is rising every day. That's how much it would cost every American man, woman and child to pay the tab for the long-term promises the U.S. government has made to creditors, retirees, veterans and the poor. And it's not even taking into account credit card bills, mortgages - all the debt we've racked up personally. Savings? The average American puts away barely $1 of every $100 earned.

Hang on for a tidal wave of bankruptcies

There's an Oct. 17 deadline looming: Changes in bankruptcy law will make erasing debts more difficult. But many who rush to file may find their troubles are worse later on. And the rush is on. Bankruptcy filings are rising in advance of a new federal law that will make erasing debts more difficult and complicated for some filers starting Oct. 17. Consumer filings were up 8% in the first three months of the year, according to the Administrative Office of the U.S. Courts, while bankruptcy experts predict even sharper increases for the second and third quarters.

Increase in Bankruptcy Filings

A government report shows bankruptcy filings in federal courts increased by 16 percent during the April-to-June quarter, according to an article by Reuters. The Administrative Office of the U.S. Court says most were Chapter 7 filings, which allows an individual to keep certain property, such as a primary residence. Filings have increased due to the new federal bankruptcy law, which goes into effect on October 17. The law makes it more difficult for filers to qualify for Chapter 7 bankruptcy, leaving repayment plans under Chapter 13 as their only option.

Questions for nation's biggest credit-counseling agency

Desperate debtors were supposed to be the key to riches for the North Seattle Community College Foundation, created to independently raise money for North Seattle Community College, a public school. As the foundation began to morph into a credit-counseling agency in the ensuing years, organization officials predicted great things. Credit counseling would bring in as much as $1 million a year for scholarships, they said. The foundation has taken in $233.6 million and contributed only 1.2 percent of that in scholarships and grants, according to tax returns. That would put overhead costs at 98.8 percent.

Bankruptcy filings boom as deadline approaches

Minnesota bankruptcy filings increased 32 percent from April through June over the same period in 2004. Other Upper Midwest states also saw increases in the number of people seeking protection -- 22 percent in Wisconsin, 16 percent in North Dakota, 18 percent in South Dakota and 21 percent in Iowa, according to a survey of bankruptcy courts in those states. The surge in personal bankruptcy filings followed strong signals in March that the federal law allowing people to discharge many debts was about to be overhauled. The U.S. Senate that month approved a new federal bankruptcy law, and President Bush signed it in April. The law takes effect in October.

Bankruptcies increasing

UK BANKRUPTCY may be losing its stigma but it's no soft option for consumers overwhelmed by debt. Figures released by the Department of Trade and Industry show a massive increase in bankruptcies, while consumers are keener to 'shop' fraudulent bankrupts. In the year to June 30 2005, 40,840 people were made bankrupt, an increase of 28 per cent on the previous year.

Growing Consumer Debt Requires Reliable Credit Counseling

The opposite is true, and that's the problem. Consumer debt is at an all-time high, notes Susan C. Keating, the new chief executive of the Maryland-based National Foundation for Credit Counseling (NFCC), the nation's largest organization of nonprofit credit-counseling agencies.

Consumer debt business

Consumer debt now tops $10 trillion. It's no secret that too many Americans are drowning in debt (from credit cards and many other sources), so it should be no surprise that debt collection is now a big business. If you're interested in investing in a rapidly growing industry, it's definitely one to consider. According to a Washington Post article, the number of debt collection firms has increased from roughly 12 in 1996 to more than 500 today.

Credit card hawkers get wings clipped on campus

Credit card companies will only be allowed on campus to sign up students if the college has an official marketing policy. The policy must limit credit card companies to specific dates and locations, prohibit signup gifts and require the credit card companies to sponsor student education programs about credit management. The law was designed to protect college students from the aggressive marketing of credit card companies - and minimize their risks of graduating with thousands of dollars in credit card debt.

$3.5 million of W.Va. consumers’ credit debt gone

The agreement with Midland Credit Management will result in the cancellation of more than $3.5 million in credit card debt allegedly owed by approximately 3,500 West Virginia consumers. Midland had purchased the charged-off accounts for collection from Wilmington, Del.-based Cross Country Bank, a bank that markets high interest credit cards to consumers with bad credit.

Bankruptcy filings still rising but at slower pace

The number of Arizonans filing for Chapter 7 bankruptcy has remained ahead of last year through July, though not at the pace expected in reaction to federal legislation that will make it harder to erase consumer debt later this year.

Increasing minimum payments will help in long run

For many American consumers, credit cards provide the entry to a trap. Marketed as the ticket to a free-spending lifestyle, the credit cards can saddle consumers with high fees, unexpected interest rates and minimal payment terms that encourage indebtedness from which it can be hard to escape. Too many people take the easy route, paying as little as they can toward their debt. Until now, federal officials have done little to safeguard credit-card users from shady industry practices.

Credit card companies getting tough

Issuers are checking reports on consumers and raising rates more often. Consumer advocates say some consumers are seeing their credit card rates jumping precipitously even when they had no late payments with the issuer of the card. And with rising interest rates, the penalty rates can top 30 percent.

Few Bad Apples Among Debt Collectors

ut that debt collectors made an estimated 4 billion phone calls last year, but only 58,687 complaints were lodged with the Federal Trade Commission. According to the Federal Reserve, consumer debt totaled $10.3 trillion at the end of 2004. Professional debt collectors provide a cost-effective way to recoup funds for enterprises extending this credit, including businesses, hospitals, colleges and even government. The collection industry employs 445,000 people, and Bureau of Labor Statistics projections show faster-than-average job growth in the industry through 2012.

The Federal Bankruptcy Reform bill goes into effect in October 2005

The Federal Bankruptcy Reform bill will go into effect in October 2005. At that time, anyone wishing to file for personal bankruptcy protection will first be required to seek counseling from an Executive Office for United States Trustees (EOUST) approved credit counseling agency before becoming eligible to file.

A nationwide debt negotiation scam is leaving consumers worse off

Coral, a Maui resident, was current on her bills but stressed over mounting debt when she decided to contact a debt-settlement company that advertised it could solve her problems by reducing the amount she owed creditors. Eight months after enrolling in the company's debt-settlement program, Coral's credit was in arrears, her debt load had substantially increased and she was forced to file bankruptcy. To add insult to injury, she also was out the thousands of dollars she had paid the company.

New rules could raise the minimum payment on your credit card bill

Changing federal regulations soon could force you to write a bigger check each month to cover your credit card bills. Credit card companies are changing the requirements for minimum payments in response to concerns from the federal Office of the Comptroller of the Currency that many consumers aren't making much of a dent in their balances.

Late on One Credit Card? Rates Can Rise on All of Them

Creditors are checking customers' credit reports as often as once a month. One ding can make interest fees soar on all your accounts. The reason, experts say, is that bank card issuers regularly review their cardholders' credit reports to see whether they have become riskier bets. Some issuers are doing this as often as once a month, compared with annually or semi-annually, as they did in years past. And if they find a change in credit history, the consumer's rate could skyrocket — on all credit cards, not just the one that's been paid late, for example, or for which the credit limit has been exceeded.

Consumers boost borrowing

Consumers boosted borrowing in June by the largest amount in eight months, the Federal Reserve reported Friday. They added to their debt loads by $14.5 billion in June from the previous month, a jump of 8.2 percent on an annualized basis. That pushed total consumer credit outstanding to $2.1 trillion. The June increase - the biggest since October - came after consumers cut back on their borrowing in May at a rate of 0.7 percent, or by $1.2 billion. A sharp rise in demand for revolving credit, primarily credit cards, led the way in June's borrowing, shooting up at a 1.5 percent pace, or by $7.6 billion, which was also the biggest increase since October.