Some people can really attest that credit cards are bad for you. These are usually the people who have been or are currently neck deep in debt because of these plastic cards.
Credit card companies have been very lenient in the way they have distributed these debt inducing cards. While these are seemingly harmless products, they represent something that encourages reckless spending.
With the average American household almost $16,000 in debt because of credit card spending, the Obama Administration passed several laws that aimed to rectify the problem (See The CFPB). The goal was to protect the consumers from abusive credit card companies, banks, lending institutions, debt settlement companies and other similar establishments focusing on the financially distressed American. At the same time, it offered reprieve for the hard hit companies that were not able to get their ROI from their lending investments.
Debt Settlement Consumer Protection Act
The Debt Settlement Consumer Protection Act was meant to release government funds to aid companies who were hit hard by the failing economy.
Businesses are given support and tax reprieves so they can pool in their limited resources to keep their employees instead of firing them to cut back on costs.
This included creditors who are suffering from the bankruptcy filings of their borrowers. Because of the recession, people lost their jobs and this resulted in an increase in credit card spending. As they ran out of cash, they opted to put themselves in debt as the means to survive. As they go further into it without the hope of employment, their inability to pay off their dues began to take its toll on credit card companies who are suddenly left without profits from what they have lent.
The government supported these establishments through funding programs. As long as they accepted the terms of the Credit Card Debt Settlement Act, they were provided with government aid through tax credits. Also, whatever losses they suffered were replaced by the government through the “stimulus fund” that was released to support such transactions.
Credit Card Debt Settlement Act
As mentioned, another act called the Credit Card Debt Settlement Act was passed to encourage the best practices to debt settlement. It encouraged credit card companies to accept more debt settlements proposed by their card holders. Since people are unable to pay for the whole loan and wiping out the balances entirely can collapse the lending industry, the solution was to agree to a certain percentage of payment from the debt stricken borrower.
Before this passed last July 28, 2010, debt settlement was considered to be a risky way of getting out of financial obligations. However, it soon became the legitimate and easiest way for both parties (lender and borrower) to settle things without losing too much of their finances.
This law prohibited companies offering debt relief to collect fees upfront. A settlement deal must be in effect first before they receive any form of payment from the borrowers and small businesses who have enlisted their help.
With the passing of these two acts, debt settlement became one of the best options for credit card relief. The ideal settlement was up to 50% off but that was on a case to case basis that is dependent on the ability of the borrower to pay back the credit card company.
If you wish to learn more about these laws and how you can benefit from them, please get in touch with us. NationalDebtRelief.com exists to help financially troubled individuals and companies achieve a lasting recovery from their debts.