Originally published November 13, 2008 at 12:00 AM | Page modified November 13, 2008 at 9:16 AM
Comments (4)
E-mail article
Print view
Credit card relief plan is rejected
Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit-card debt.
The Associated Press
WASHINGTON — Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit-card debt.
The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit-card debt to be forgiven for consumers who don't qualify for existing repayment plans.
An unusual alliance of financial-industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.
An agency said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.
The agency "does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us," Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday.
"The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with ... confidence" in the banking system, Long wrote.
The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group's senior vice president, Scott Talbott.
Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "We still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them.
Under the proposal, borrowers would be able to defer payment of income taxes they owe on the forgiven part of the credit-card debt until after the remainder was paid off. The lenders could wait until then to book their losses on the forgiven debt.
The two groups hoped such a pilot program would become permanent and that as many as 50,000 people struggling with credit-card debt would be involved. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.
The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.
The biggest credit-card lenders include Discover, Bank of America, Citigroup and JPMorgan Chase.
Credit-card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.
Americans are weighed down by about $900 billion in credit-card debt, according to the latest available Federal Reserve figures.
Copyright © 2008 The Seattle Times Company
Tech execs double as scourges and sages at Allen & Co.'s media summit
Brier Dudley: Brier Dudley | Learning hard lessons from Boeing giveaways
UPDATE - 12:53 AM
Oil plunges below $65 on fears recovery may lag
Symantec, McAfee add firepower to market-share war

2009 fireworks time lapse
With strict parking rules enforced at this year's July 4th celebration on Wallingford Ave North, less cars and more spectators filled the streets.
Entertainment | Top Video | World | Offbeat Video | Sci-Tech
shopping

events for Monday, Jul. 6th
- IKEA Summer Sale
- Blackbird Spring Half-Yearly Sale
- Posh on Main Semiannual Sale
- Evo Independence Sale
editors' picks
More shopping guides- Landmark Smith Tower mostly vacant
- Property taxes: Appeals shoot up in King, Snohomish Counties
- Palin links resignation to 'higher calling' and blasts media in Facebook posting
- Former NFL MVP McNair killed
- Hard times for tourist towns means good deals for travelers
- Shooting unveils very different sides of McNair
- Tukwila residents rally against light-rail noise
- Quincy Jones remembers "the biggest entertainer on the planet": Michael Jackson
- Confessions of an Idol Addict | "American Idols" on tour: Live coverage from opening date
- Plasma and LCD beware; OLED screens ready to go mainstream
- Seattle Mariners at Boston Red Sox: 07/05 game thread
247 - Palin links resignation to 'higher calling' and blasts media in Facebook posting
172 - Hatred for the NBA runs deep, but don't take it out on the players
136 - Tukwila residents rally against light-rail noise
125 - Former NFL MVP McNair killed
112 - Property taxes: Appeals shoot up is King, Snohomish Counties
103 - Tent City on campus: UW stalls decision
100 - Anti-tax rally in Olympia attracts about 1,500
68 - Seeking your questions
53 - Mariners did their part, now they need help
44
- Property taxes: Appeals shoot up in King, Snohomish Counties
- Hard times for tourist towns means good deals for travelers
- Landmark Smith Tower mostly vacant
- Plasma and LCD beware; OLED screens ready to go mainstream
- Tent City on campus: UW stalls decision
- The People's Pharmacy | Estrogen mimicker found in sunscreen
- Toyota's Toyoda scolds execs for emulating U.S. car companies' mistakes
- Tukwila residents rally against light-rail noise
- Outdoor-theater season kicks off at Volunteer Park
- Seattle safety project: A snake shelter on Beacon Hill

