AFSCME 3357-HOF'S BLOG

Credit Card Companies Are Thriving Despite Card Act

When Congress was considering tightening the leash on credit card companies with legislation that eventually became the Card Act, the credit card companies whined about how limitations on their practices and default fees would cause massive financial losses. Here we are a few months down the road past the effective date of most of the Act, and in fact the credit card companies are thriving. According to Collections and Credit Risk, charge-off's (losses from defaulting accounts) have gone down by double-digits at major lenders.

I think what the lenders are seeing that if you are fair with the customers, the customers will to their best to make sure that you get paid. If you are unfair, John Q. Public will get mad and give up or get even. We may be seeing some of that sentiment in the mortgage markets. People who got screwed by mortgage brokers and lenders are getting payback by squatting in the homes for months without paying. These same borrowers would likely pay a reasonable rental or mortgage payment for the home based on the home's current value, but since that's not offered, the borrowers don't pay at all.