The Department of Consumer Affairs wants to know the relationship between consumer credit card debt collection and mortgage default as a result. Although many studies have been performed to correlate the rate of bankruptcy to consumer debt, no information has been provided to study exactly what caused consumers to file bankruptcy or default on their mortgage.
As of 2012, the U.S. banking industry has distributed over 487.6 million credit cards and 40 percent of consumers generated $858.4 billion of debt which produced $145.8 billion in accrued interest plus $17.8 billion in penalty fees according to the Board of Governors of the Federal Reserve, "Report to the Congress on the Profitability of Credit Card Operations of Depository Institutions."
Bankruptcies have almost tripled over the past thirty years many of those filings are preceded by credit card payment and interest rate hikes after credit card teaser rates disappear. Mortgage default remains at an all-time-high.
The PEW Charitable Trust reported in 2010 that consumers complained about usurious interest rates in their, "Safe Credit Card Standards" report.
Since 2005, bank shenanigans have prompted several class action lawsuits against lenders for :
- robo-calls,
- delaying allocation of consumer payments towards debts,
- falsifying monthly credit card statements,
- shredding consumer debt payment checks,
- fee generation through bank accounting tactics,
- failing to approve mortgage loan modifications,
- floating due dates,
- and unlawful foreclosure
In every instance where banks caused a consumer to be unable to pay his monthly credit card debt on time, his FICO rating dropped and subjected the consumer to potential Universal Default.
Now the Consumer Affairs department wants to know if consumers that experienced rate or payment hikes, or aggressive consumer debt collection and related garnishments, have been unable to pay their mortgages or other critical bills as a result.
In some cases consumers who experienced payment or interest rate hikes, the new monthly payment became four to ten times the original payment amount. In those cases where the consumer was not capable of paying such high payments many were sued and garnished over the payment amount.
According to Jessica Silver-Greenberg's Aug. 12, 2012, news investigation "New York Times article, Problems Riddle Moves to Collect Credit Card Debt", Lawsuits against credit card borrowers are flooding the courts. Judges, regulators and lawyers indicated that 90 percent of credit card lawsuits are flawed.
In some instances lenders are trying to collect debts that are already paid by adding erroneous fees and interest costs. In some instances falsified credit card statements are produced years after borrowers supposedly fell behind on their bills.
The Federal Trade Commission found that credit card issuers were basing some lawsuits on incomplete or false paperwork. In most consumer debt lawsuits the debtor doesn't show up to contest the lawsuit and the plaintiffs evidence of the debt is not reviewed. As a result the lender is able to garnish the wages of the debtor.
In addition they would like information on whether high-interest credit card debt collection caused mortgage defaults or prompted bankruptcies.
If you would like to participate in providing information to the Consumer Affairs Departments, send your letter with subject line: "Correlation Between My High-Interest Credit Card Debt and Potential Default of my Mortgage Payment", to:
Federal Trade Commission, Complaints Division, 600 Pennsylvania Ave. NW, Washington, D.C. 20580, fax 866-418-0232. Also, fax a copy to The PEW Charitable Trust at 202-552-2299.
Include the following in your response:
1. Name of lender, interest rate and repayment amount that affected your ability to pay. Amount of the original debt per month and total owed? Last four digits of the account number. What was the payment that you offered to pay per month?
2. At the time of the interest rate or payment hike did you own real estate? Who was your mortgage lender?
3. Did this consumer credit card debt repayment plan affect your ability to pay your mortgage(s)?
4. Did the lender offer affordable terms of repayment?
5. Did the credit card debt affect your ability to pay other debts? Which debts?
6. Did the cost of the debt collection sway you to consider filing bankruptcy?
7. Did the cost of the debt collection reduce your income and cause you to be unable to pay for other debts which resulted in additional lawsuits from other unrelated entities or loss of tangible assets?
8. Was your ability to pay for your auto insurance, home insurance, HOAs, child care, medical costs, vehicle payments, food, medical insurance, or any costs associated with your ability to sustain employment impaired by the cost of repayment of the high-interest rate credit card debt collection?
9. Were you garnished by this debtor? What is the dollar amount that you paid through garnishment each month?
10. How many conversations verbally or in writing did you have with the debtor to attempt to settle the monthly repayment amount? What was the final agreement?
11. If you considered bankruptcy was it related to the cost of repayment of this particular debt?
12. Did you delay in filing bankruptcy because you owned a home and did not want to lose your home in the process?
13. Were you fearful that the credit card debt would ultimately cause you to lose your home?
14. What was the final offer to settle the credit card debt?
Lastly, in your own opinion what is a reasonable ceiling credit card interest rate, and what could improve consumer debt collection processes?
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