Debt solutions expert supports CA Senator Diane Feinstein's proposed legislation for enhanced disclosure on credit card statements

Debt solutions expert, Kenneth Priore, of New Leaf Financial, (www.newleafdebt.com) advocates protecting consumers from dangerous credit practices and supports California Senator Diane Feinstein’s recent legislation aimed at helping consumers understand the dangers of overextending themselves.

Since 1990, the debt that Americans carry on credit cards has more than tripled, going from approximately $238 billion in 1990 to $755 billion in 2004. As a result, the average American household now has about $7,300 of credit card debt. The average household paying a 2% credit card minimum on a $7300 balance at an average interest rate, which stood at 16.75% this April, could spend 44 years and $23,373.90 to pay off that debt, assuming they do not spend another cent on their credit cards. Credit card minimums are structured to maximize interest costs and so the cost of the repaying through minimums is over $16,000 in interest on a principle of just $7,300.

“One problem that so many consumers have is being honest with themselves or other family members about the reality of their current financial situation,” said Ken Priore in regards to the new legislation, “Don’t let pride or fears of embarrassment urge you to keep your financial troubles to yourself. Seek help. Debt does not just go away, you have to take action to be rid of it. Waiting to address the problem only causes more problems and costs more money.”

Senator Feinstein’s legislation would require credit card companies to add two items to each consumer’s monthly credit card statement:
1. A notice warning credit card holders that making only the minimum payment each month will increase the amount of interest they pay and the amount of time it takes to repay their debt; and
2. Examples of the amount of time and money required to re-pay a credit card debt if only minimum payments are made, or, if an individual consumer makes only minimum payments for six consecutive months, credit card companies would be required to list the exact amount of time and money necessary to repay the individual’s specific credit card debt under the terms of their credit card agreement.
Mr. Priore often speaks with clients who are drowning in debt, yet they are in absolute denial and have convinced themselves that they can handle it. They tell themselves they will just live by the minimum balance and address the issue later. Mr. Priore urged individuals, “Whether you think you’re having a problem or not, it is valuable for consumers to take a few moments to reflect on their current financial state by reviewing the following ‘Financial danger signs’. If any of them feel close to home, you may want to consider contacting a reputable debt solutions company to explore relief options.” Some of the danger signs are:

-Your debt payments not including your rent or mortgage is more than 20% of your after-tax income;
-Making minimum payments is not the exception, but the rule;
-You can’t make an accurate ball park estimate of the total of all your debt;
-When you pay off a balance, you tend to replace the payment with a new purchase;
-Not only do you not save money, you don’t even have a savings account;
-You borrow for every day necessities such as food, gas or clothing;
-Your mail box is filled with ‘past-due’ notices;
-You repeatedly use new debt in order to pay off or consolidate old debt;
-You use balance transfers options to skip making a payment more than once a year;
-Your monthly interest charges are more than $35.00;
-Exhibiting anxious behavior such as losing sleep, hiding bills or fighting with your spouse over bills.

Making minimum payments might buy you some time, however simple mathematics shows us that it is an utter waste of money. “Time benefits the credit card company, not the consumer. There are many types of debt solutions a consumer can engage to reduce the overall cost of their debt, but oddly enough, the biggest hurdle for the consumer is not only deciding on a strategy, but determining they need one. And waiting usually costs the consumer more money and narrows what solutions they can choose from.” When facing a financial hardship because of being overextended, Priore says denial is the prevailing barrier to finding help. He suggests that a financial hardship is often only a hardship because you don’t know how long it will continue. No matter how long it continues, he advocates having a strategy, and picking a point at which you will act on it. “In the event of your financial hardship, you can bet your creditors have a plan they won’t hesitate to proceed with. Consumers also need to have a strategy and know when to use it.”

Before founding New Leaf Financial, a debt solutions company, Priore was a managing attorney for a third party litigation group for Charles Schwab, Inc. and counsel and chief compliance office to MVC Capital. Priore received his BA from Tufts University in 1991 and his JD from Tulane University in 1995.

People interested in learning more information about different types of debt solutions can visit www.newleafdebt.com.