Financial Expert Expresses Views On New Credit Card Rules: Higher Credit Card Minimum Payments: May Hurt Some Consumers.
May 23, 2005 (PRLEAP.COM) Business NewsDue to new regulatory changes, you may need to get ready to pay more on your credit cards. Three major credit card carriers, Bank of America, MBNA and Citibank say they will raise minimum payments from two percent to four percent. These payments now cover all fees and interest and pay down at least some of the outstanding debt. They began to phase in these rules in January of 2003 and gave creditors two years to make the transition.
According to Kenneth Priore, an attorney in California and a principal in a debt solutions company, New Leaf Financial, “The doubling of credit card minimums will be the tipping point for many consumers” Mr. Priore went on to ad, “These new rules make sense for new account holders, putting them in the mindset to pay off their debt faster…however for those who have already been victimized of the easy credit culture, this is going to be a huge shock! Combined with today’s high energy prices, rising interest rates, and record household debt levels, this is going to have a profound effect on consumers.”
The average American household has 8 major bank cards and twice this if you include store and gas cards. The average credit card debt for an American family is more than $10,000. This is more than the average debt for education. “There is something wrong with this picture.”, states Mr. Priore “Americans have to get out from under the thumbs of these creditors…doubling the minimum payment is great for those who can afford it, but people who can barely make their minimums now will be forced to seek a solution, because they are not going to be able to make these new minimum payments.”
The goal behind the new rules is not banking profits. It pushes people to pay off their debt at a quicker rate and lowering the long term cost of interest. Minimum monthly payments on many cards are going to double from about 2% to 4%. The deputy controller for credit risk for the OCC responded to concerns that people were making smaller and smaller payments, but not making any progress in paying off their debt.
With new bankruptcy laws that go into effect in 5 months, the number of people allowed to file for Chapter 7 will drop drastically. ”People are increasing going to take advantage of alternative debt solutions, from Credit counseling, to debt settlement and equity financing. “
Mr. Priore concluded by noting, “Whatever the solution chosen consumers are going to have to act fast. And if they decide to stick with making their minimum payments, the average American is going to have to do some serious re-budgeting to make those payments creditors will have required to have phased in the new credit rules by September this year.
Before founding New Leaf Financial, Mr. Priore was part of the litigation group for Charles Schwab, Inc., counsel and chief compliance office to MVC Capital, and worked in private practice. Mr. Priore received his BA from Tufts University in 1991 and his JD from Tulane University in 1995.
People who are concerned about the new Credit Card rules or the new bankruptcy law may read more about them at www.newleafdebt.com
New Leaf Financial