Consumer Law

Credit Card Industry Tactics?Suddenly, Bankruptcy Becomes Less Painful Than Default On A Credit Card

By Karen Oakes, Southern Oregon Consumer Attorney

For the last several weeks, I have been posting reviews of chapters of Kevin Trudeau’s book, Debt Cures “They”  Don’t Want You To Know.  The reviews have been posted on the Bankruptcy Law Network, Credit Law Network, Debt Law Network and Mortgage Law Network.   In Part 3, following the review, I posted my personal results with attempting to negotiate with a credit card company–having had no late payments, no defaults, being way under the credit limit — and still facing a sudden 20% increase in interest to a 29% interest rate.  I closed my account when the company refused to lower the rate.

Today, I had consultations all day with clients who walked in the door befuddled at the sudden increase in minimum payments, rapid change in interest rates and suddenly, they are faced with bankruptcy as each card goes into default.

One man who I will call “Bob”  had not read the Trudeau book but since he had been in business for years, figured he would call his credit card companies one-by-one and tell them his situation.   His situation?   Sudden termination of his employment at age 65.   Suddenly, he had to live on social security income and a very small pension.   He had figured to work until 70.   He has looked for a job for months and cannot get employment at his age, in this economy.  (My county’s unemployment rate is officially over 13%–and experts believe the true rate is over 22%).

First up on the list?  Bank of America.   As he explained that he wanted to pay the account but was having difficulty making the minimum payment at the interest rate, the representative at customer service became more and more terse with him.   His explanation of age and unemployment wasn’t believable.   By the end of the phone call, his credit limit had been slashed to $2000.   (His current debt on the card was over $7000….so that was an interesting move).

Second, he was informed that the minimum payment amount on that account had just doubled.   And if he was late making that payment (which was now 3/4 of his income each month), the default interest rate of 29% could kick in….now, this man had never been late with a payment.

His reward for trying to work a reasonable payment plan?    An unreasonable payment expectation suddenly caused him to come to discuss bankruptcy–anything rather than discuss payment options again with Bank of America.   After all, the first time he tried to negotiate cost him a credit limit decrease and a minimum payment increase.   And Bank of America profits from this how?

• Part 1 of my review examines the first three chapters of Kevin Trudeau?s book, ?Debt Cures ?They? Don?t Want You to Know. (gets an ?okay? rating)
• Part 2 of my review dissects Chapter 4 of the book (gets a warning of ?Get legal advice from a lawyer in your own state?).
• Part 3 of my review deals with Chapter 5 of the book (gets a warning of ?Get legal advice before following Trudeau?s advice?)
• Part 4 of my review examines Chapter 6 over at our sister site, Credit Law Network, as Trudeau discusses how to ?cut? your credit card rate.  (gets a ?doesn?t hurt to try it; don?t expect it?).
• Part 5 of my review examines Chapter 7:  Fighting Back. (gets an okay rating).
• Part 6 of my review examines Chapters 8-11:  Credit Score (gets “good information”)
• Part 7 of my review discusses Chapter 12:  Credit Reporting Errors (gets mixed review as he repeats bad information (discussed earlier in Part 3) but generally good information).
• Part 8 of my review examines Chapter 13:  Student Loans (gets generally good review)
• Part 9 of my review discusses Chapter 14:  Home is Where The Start Is (gets nearly failing grade)
• Part 10 of my review examines Chapter 15:   No Bankruptcy (gets failing grade/adds shame)
• Part 11 of my review examines Chapter 16:  Big Business (credit card industry)(gets A grade for giving information)
• Part 12 of my review discusses the information presented in Chapter 17:  Stealing Candy from Babies (gets okay rating for giving information)
• Part 13 of my review examines Chapter 18:  Three Ring Circus (gets failing grade for repeating information already provided)
• Part 14 of my review examines Chapater 19:  Slaying the Dragon (gets A grade for giving the math on how long it takes to pay off a 20% credit card with a balance of $8000 with just minimum payments….FIFTEEN YEARS!!!

Full post as published by Credit Law Network on April 30, 2009 (boomark / email).