Credit card customers are outraged at the credit companies.

I talk to business owners in stressed financial condition every day and here is what they are saying about credit card debt and the companies that control this business.

First, everyone wants to pay their debts and obligations, even their credit card debt.

However many business people I talk with having credit card problems fall into two general categories. The first group is typically not handling the science of doing business effectively and ran into the liquidity issue which prevent them from paying their debts and obligations timely. Their business is failing, revenues are inadequate, expenses too high, profit too thin, accounts receivable stretched out way past 90 days, no inventory, employees working at a very low productivity and on it goes so they do not, or cannot pay their credit card debt.

The second significant group  of business owners appears to be able to run their business effectively. However something presumably out of their control happened to cause them to slip into liquidity problems and thus become financially challenged. Such events as sickness, divorce, or other major issues can cause financial and business turmoil resulting in an inability to pay their debts. Some will say the bad economy is effecting them. It all results in a decision to not pay the credit card debt.

In the end the creditors reaches their limits and the debt becomes a collection issue.

Here is were things begin to go from bad to wrong. The credit card companies prey on their customers bad fortune and mistakes. When anything, and I do mean anything happens that may have some remote impact or even a direct impact on the borrowers financial condition, the card companies boost the credit card interest rate to 28%-32% and sometimes even higher then that, even if the customer is making current payments!

Such events as a customer going late on ANOTHER card and all the card companies the customer is using jump on the band wagon and boost the interest threefold further adding to the card holders misery and difficulties and as well reducing their liquidity even more. Additionally interest rates this high makes the debt almost impossible to ever pay off.

So here is the result. The card holders become frustrated and outraged. They believe this enormous increase in credit rate is grossly unfair, not what was originally agreed to and so expensive it is damaging to the creditors cash flow requirements and this damages them so significantly it results in their willingness and desire to not pay and “stick it to them” even if it damages their credit further.

Even people with great payment records and remaining current, but with credit issues stemming from some unavoidable event, are shocked when they realize their interest rate is increased threefold. “How can they do this,” I hear asked every day. “How can they  triple or quadruple their rates.  I may have been late or missed a payment or had another card go late but I am charged a late fee for this. Why would they do this to me and force me into default and collection. What purpose does this practice serve, other then fattening their pockets unreasonably? How can they get away with this”? They ask this in utter frustration, feeling not only abandoned but under attack, its a no win situation for the debtor.

I discovered that people who are normally unwilling to enter into a workout negotiation, and settle with a short payoff, because they feel it is morally inappropriate, are willing to do anything to beat the credit card companies as they feel they are being beaten by them. They say that after all, if they owe they should pay and they all want to, but under these changed circumstances, they feel so abused and taken advantage of, they are willing to sacrifice their standards and fight fire with fire. They feel justified.

Then they are required to default for ninety days before they are allowed to can enter into a workout discussion and pay 30-40% of the debt owed. What a disaster for both the card holder and the credit company.

I am hard pressed to answer their inquiry as to how this is allowed to happen other then to remind them that it is probably buried in the microscopic print that they could not possibly understand in their agreement and thus the card companies have a right even if unjustified… to plunder.

This is greed at its worst, and a symptom of what is wrong with our corporate and political leadership. Change will occur and lessons will be learned. These practices cannot go on. The system will correct itself.

While the credit card companies are not breaking the law, what they are doing is reprehensible and the principles of capitalism will force an adjustment in due time. In the meanwhile we are forced to defend ourselves against such predatory practices, by working out the debt with a short payoff.

My advice, use a debit card, spend the money you have. Stop borrowing from predators, especially if you are confronting financial trauma, its a problem in the making and we all know this. Call for help 413-549-2966/