Released: October 31, 2008

Banks seek help to forgive some credit card debt

Source: Kathy Chu, USA Today

To head off surging credit card defaults, banks and consumer groups are lobbying regulators to make it easier to forgive a portion of struggling consumers’ credit card debt.

The proposal — and the unusual partnership by two groups typically at odds with each other — underscores the severity of the economic downturn, and the fear that credit cards could provide the next shock to the financial system.

This year, delinquent credit card accounts hit a six-year high of 4.9%. Meanwhile, charge-offs — when banks give up on collecting debt — have been rising for about two years, hitting 5.47% in the second quarter, the latest data available, according to the Federal Reserve. Credit card and mortgage losses have dragged down banks’ earnings.

Read Full Article: Banks seek help to forgive some credit card debt