A worried parent on Democratic Underground tells how his daughter made partial payments on credit card debt for a few months only to find the credit card company is demanding full payment of the entire bill or it goes to collection and probably garnishment.
The new guidelines required that 4% of the principal was to be paid every month. Since my daughter had missed that more than once, they were calling up the entire debt. I cannot believe this. They are going after the people who are trying to pay, but fall short.
Credit card companies are tightening requirements and canceling cards both in the US and UK. No doubt they are getting squeezed by rising nonpayment rates and thus they are squeezing whoever they can.
Are the credit card companies in such dire straits, that they have resorted to this? Are they hoping to cash in on the folks that can’t cough up the balance in the 4 days notice that she was given?
We haven’t even begun to see the nightmare that is coming.
Credit card companies have always gone after the ones who pay a little– they’re more likely to pay than those who pay nothing. And for those who pay little or nothing, the creditor’s goal is to force you into bankruptcy so they can write off the debt and get the tax credit. There’s little worse for them than an old receivable on their books– they want it collected or written off as quickly as possible.
As to the increased minimum payments, that’s actually a good thing: It used to be that card companies could set their minimums so low, no principle was paid down. One of my clients once had a Sears card, and we calculated that if she paid only her minimum payment, her balance would take 600 years to pay off! Talk about indentured servitude.
For those in trouble, get familiar with the Fair Debt Collection Practices Act (search for it online). It says what collectors can and can’t do under Federal Law– and in my experience, collectors thrive on the knowledge that few people know the rules.