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The National Foundation for Credit Counseling is stepping up efforts to persuade the nation's top credit card issuers to make deeper concessions for distressed borrowers seeking help repaying their debts. Susan C. Keating, the foundation's president and CEO, in September called on credit card lenders to expand concessions for debt-strapped borrowers. Now she personally is asking the nation's top 10 credit card issuers to adopt its recommendations by March 31, according to a foundation spokesperson. As the economy worsens, more consumers are falling short of issuers' debt-repayment plans, which is forcing more borrowers into bankruptcy, according to the Silver Spring, Md.-based national nonprofit organization, which offers credit-counseling services to consumers in 850 offices nationally. The foundation is urging issuers to waive late and over-limit penalties for consumers receiving its credit counseling and to set their monthly payments at 2% of their existing balances or at 1.75% in cases of extreme hardship. To ensure consumers can liquidate their debts within five years, as required by federal regulations, the foundation also urges lenders to trim the interest rates of debt-strapped borrowers appropriately. The foundation's plan also would require borrowers enrolled in its debt-counseling program to pay off existing debts and not to apply for more credit. They also would have to set aside $25 per month in savings. Although analysts say most issuers are likely to raise interest rates and fees next year in response to the tougher economy, some observers say deeper concessions for troubled borrowers could help offset further losses. "There's a 50-50 chance that issuers might consider going along with better concessions for borrowers that are already in debt counseling because logic says it would be better to get 2% on a loan than writing it off and getting nothing at all," Adil Moussa, an analyst with Aite Group, tells CardLine. Brian Riley, a research director with TowerGroup, says recent data suggest there will be a sharp surge this year in consumer bankruptcy filings. "Now is a practical time for card issuers to offer (debt-strapped) consumers some creative alternatives to write-offs—at least as much as financial institutions are getting (from government-funded capital programs)," he says.
