The new bankruptcy law requires debtors to come up with a payment plan to satisfy unsecured creditors like the card companies. So how do credit card issuers really look at the newly bankrupt? During a recent conference Capital One Vice President Mike Rowen checked off for his listeners the things that make the newly bankrupt so attractive to some lenders.
The newly bankrupt are… so grateful to get their mitts on plastic again, (they) will swallow the punishingly high interest rates that the credit-card companies will charge them because of their so-called “subprime” status.
“It’s diabolical,” said Travis Plunkett, legislative director of the Consumer Federation of America, a nonprofit watchdog group in Washington. “They’ll hit them with terms that will give the word ‘onerous’ a new meaning.”
Among their attractions: a tendency to engage in behaviors that generate hefty finance and penalty fees and bring fat profits to the issuers.
“The credit-card companies can’t afford to lose these people,” said Robert D. Manning, a professor at the Rochester Institute of Technology and author of the book “Credit Card Nation.” “They’ve really come to count on them.”
“Those were the ones who were getting late fees, over-limit fees, and probably bounced a check every once in awhile,” allowing the card issuers to hit them with one lucrative charge after another, said Ed Groshans, a specialty finance analyst at Fox-Pitt, Kelton in New York. “Those were like nuggets of gold on a company’s top line.”
Consumer advocates at Household - HSBC Watch speculate that complaints about abusive practices at HSBC Finance Corporation may be driven by the person’s FICO score, in that problems could be rectified quickly if their credit score is above 700, and never rectified satisfactorily if their credit score is 600 or below, said the watchdog organization. HSBC Finance Corporation is the new name for shady lender Household International.
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