Debt relief for consumers on the way?

Just read this story today. I can't find any details. Anyone know anything about this or how it might work? Of course, it may not even be approved and god forbid they push anything through quickly to help the consumer and not big biz, but it sounds encouraging. But, with the credit card companies in charge if approved, I wonder what it really would mean...

Groups seek credit card debt forgiveness
Nearly all the biggest credit card banks have agreed to a temporary pilot program.

By Marcy Gordon
ASSOCIATED PRESS
Thursday, October 30, 2008

WASHINGTON â?? An alliance of financial industry interests and consumer advocates Wednesday asked federal regulators to allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a special program.

As the economic crisis has deepened and consumers increasingly are defaulting on their credit card debts, write-offs on the loans have mounted for banks and other lenders.

The unusual joint request from the Financial Services Roundtable and the Consumer Federation of America highlighted the urgency of the situation: Consumers â?? even those with strong credit records â?? are defaulting at high levels on their credit cards as banks battered by the credit crisis bleed billions of dollars in red ink from the losses.

The request came in a letter to U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks. The groups asked him to approve a pilot project allowing major credit card companies to sharply reduce the amounts owed by heavily indebted consumers who don't qualify for available repayment plans.

"This proposal would make it financially feasible for credit card lenders to provide immediate financial assistance to American consumers who are carrying record levels of debt," the two groups said in a release.

Nearly all the biggest credit card banks have agreed to a temporary pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time, they said. But government rules don't allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years.

Robert Garsson, a spokesman for Dugan, said the agency's staff hadn't yet seen the letter and declined to comment on it.

"The most important thing right now is to strike a balance between the lender and the consumer," Steve Bartlett, president and CEO of the Roundtable â?? which represents more than 100 large banks, brokerage firms and insurance companies â?? said in a statement. "We are asking the (comptroller's office) to provide guidance to lenders that will in turn offer relief and stability to consumers."

Five big financial companies â?? Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Capital One Financial Corp. \â?? issue about 80 percent of all U.S. credit cards.

Americans now are weighed down by around $900 billion in credit card debt, according to Federal Reserve figures.

 

"Americans now are weighed down by around $900 billion in credit card debt, according to Federal Reserve figures."

You said: Now lets see the bank bail out starts at 700 billon to one trillon.If the 900 billon is consumers debt then why not pay the consumer debt off so they could recoup their losses cut the people that our unstable credit wise and start over.some say why a bailout plan at all.let everyone go bk and get it over with.can we get some comments on this.]

Agreed! The instability is largely caused by consumer/lending debt. Will the bailout more than likely make the rich richer? The derivates market stands to gain millions/trillions on nothing more than speculation while consumers are still left holding the bag. (And the bailout money keeps the big corporations in business and makes the rich speculators billionaires many times over). Can we really say that the "credit unstable" consumers saddled with debt were just irresponsible or should we all share the blame, and the relief? Now that credit markets are virtually closed to many consumers and especially small businesses, how do we dig ourselves out? My business has ground to a halt because of the lack of working capital. And now my debt is no longer being paid, but piling up. So, all for one and one for all? Either we all sink or we all swim, right?

Don't mean to get on a soap box. I found the article, and the entire subject, very interesting.

Would love to hear others thoughts and if anyone knows anymore about this proposal.