Do high credit card rates have you wondering what happened to usury laws?
Click here to read my column on the 79.9% credit card from First Premier Bank.
Credit Crunch
If you want an idea how the consumer credit market is doing, look no further than the resurgence of layaway plans at major retailers.
Toys ‘R Us, Sears and Kmart all allow consumers to put larger items on hold until they can make a series of payments to take them home.
Click here for more details from The Associated Press.
I remember layaway plans as a kid, in the 1960s and 1970s, before the insane expansion of consumer credit we enjoyed until the beginning of the recession. Looks like we’re headed back to that era, which is not a good sign for consumer spending, or our growth-at-any-cost economy.
Layaway plans can give consumers a sense of accomplishment when they finally make that last payment and get the item they’ve desired for so long. But they don’t do anything to satiate Americans’ ceaseless quest for instant gratification.
Make payments for weeks or months and then get the product? Where’s the fun in that?
Student lender SLM Corp. , a.k.a. Sallie Mae, expects its charge-offs for uncollectable loans to peak this year.
Dow Jones Newswires reported Sallie Mae CEO Albert Lord’s observations on Wednesday that charge-offs will still be “very high” going into next year.
“Even with charge-off levels where they are, we’re able to see the edge of the forest and we expect that by mid-2010, those [charge-off] numbers will start to come down,” Lord said.
Sallie Mae reported $203 million in loan losses, and charge-offs of $139 million, in the first quarter of this year. Lord’s prognistications thaty they will soon peak may be wishful thinking on his part.
The graduating class of 2009 has entered the worst entry-level job market since the dot.com bust, according to John A. Challenger, CEO of Chicago-based outplacement firm Challenger, Gray & Christmas.
The nation’s unemployment rate is at 8.9% and many forecasters foresee it in the double digits by year end.
“Spring graduates will be vying for jobs not only with their fellow classmates, but also with young workers who already have two or three years of experience, returning retirees shocked by a stock market devaluation of savings, and even stay-at-home moms returning to the workplace for economic reasons,” he said.
Challenger says discouraged graduates may choose continue their education, which means taking out even more student loans. Or they may just go back home to live with mom and dad until the job market rebounds.
And one of the hardest things about not getting a job after college is paying back all those student loans.
That 2005 law that is supposed to make it harder for people to file bankruptcy isn’t working, according to an analysis by the Associated Press.
In the past 12 months, 1.2 million debtors have filed, representing a huge, recessionary surge. The 130,831 people who sought bankruptcy protection last month, for example, represented an increase of 46 percent over March 2008 and 81 percent over March 2007, the AP reported.
Congress voted in 2005 to tighten the bankruptcy laws, imposing higher filing fees and requiring debtors to participate in credit counseling sessions.
Now it appears Congress just didn’t go far enough.
Many of the banks that lobbied for this bankruptcy reform have been deemed too big to fail. But their customers are not too big to fail.
Maybe it’s time some our bankers are required to take credit counseling sessions, too.
Some debt collectors don’t know when to quit.
If a debtor dies, they’ll try to collect from relatives.
“These companies call surviving relatives, often shortly after the death of a loved one, to coax or cajole them into making payments on the deceased relative’s credit card,” wrote Sen. Charles Schumer, D-N.Y., a member of the Senate Banking Committee, in a letter to Federal Trade Commission Chairman Jon Leibowitz on Wednesday.
“To say the least, this practice is distasteful and unethical. Moreover, this practice may very well violate the Fair Debt Collection Practices Act.”
(PHOTO: Charles Schumer, from his website.)
American Express is giving some of its customers $300 to pay off their accounts and go away.
Not-so-select cardholders who pay off their balances and close their accounts by April 30 will get a pre-paid card loaded with $300.
The company is apparently in a big hurry to get rid of some of its riskier customers as consumer defaults skyrocket amid mass layoffs and an ongoing recession.
“The prepaid card can be used to help you with your day-to-day expenses including purchases at your pharmacy, grocery store, or virtually anywhere American Express® Cards are excepted,” the company wrote on its website.
Amex subsequently fixed this sentence to read “accepted,” not “excepted.” But it was just as well.
