Credit Card Hardship Programs | CreditShout

Credit Card Hardship Programs

By Kevin / July 4, 2009
credit card hardship programs explained


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The top 10 credit card issuers have recently announced that they will begin so-called hardship programs to help assist cardholders struggling to repay their balances. The National Foundation for Credit Counseling, which is one of the nation’s largest consumer credit counseling groups, announced the agreement.

Late last year the same organization released what they called a “call to action” aimed at the nation’s top card issuers, asking them to make changes to their conditions to allow more consumers to participate in debt repayment programs.

These debt repayment programs, called DMPs for short, are designed to help families and consumers in specific financial hardships, giving them a low, affordable repayment rate.

So far, the credit card issuers that have responded to the NFCC’s call for action are Bank of America, American Express, Capital One, Chase, Discover, Citi, HSBC, GE Money, Wells Fargo and US Bank.

These DMPs available from these issuers grant a new tier of repayment for individuals and families that are suffering from distress or hardship, giving them a new term for a set period of time.

The NFCC’s release stated that consumers have benefited from repayment programs for over four decades, getting relief from waived fees and lowered interest rates. During the past few years, however, many consumers are finding themselves unable to qualify for traditional programs due to a low income and other factors,

Often, this leaves bankruptcy as the only alternative. But now there are new and improved solutions.

New Hardship Programs

If you’re wondering what exactly these new hardship programs require to qualify, here’s a summary.

Qualified hardship cardholders are now those that are dealing with any recent job loss or challenging circumstance, and will owe a minimum 1.75% repayment rate.

Other consumers will qualify for a repayment rate of 2% of their balance, a full percent below the current plans.

Savings plans will also be encouraged for consumers.

With delinquencies and charge-offs reaching an all-time high, DMPs were bound to get an overhaul.

According to Capital One, their charge-off rate for U.S. customers rose to 9.33% in March, up over a percentage from February. Making repayment plans more affordable is the first step to helping consumers get out of financial hardship and pay their bills.

For example, under these new DMP rules, a customer with $20,000 in debt will be looking at a minimum payment of $350. This is significantly less than the $600 minimum payment they would be facing under the old terms.

Obviously, this can be a huge benefit to individuals and families that are dealing with job loss, illness and other problems.

This isn’t the first time such a change has been proposed.

In October of 2008, the banking industry tried proposing an act that would allow creditors to forgive up to 40% of the principal amount on loans and stretch out repayment plans to reach five years. The Office of the Comptroller of the Currency rejected the plan that same year. Finally, however, something is being done for consumers in trouble.

The new DMP plans have benefits for both lenders and consumers, allowing debt to be paid. Now many thousands of consumers will be eligible to join DMP programs, decreasing the charge-off rate and allowing consumers to pay debt they owe.

It’s estimated that about $135 million will be returned to creditors per year.

If you’re interesting in joining a DMP to pay off the debt you owe, call 1-800-388-2227 to be connected with a local agency that can help you. This number is recommended by the NFCC and will assist you in finding a plan in your area.

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