Reform credit-card practices

You know the financial landscape has shifted dramatically when the big banks and consumer groups agree about credit card debt. The banks, with the consumer groups' support, are asking federal regulators for the ability to forgive up to 40 percent of the unpaid debt of their most troubled customers.

Self-interest is at play, of course. Banks are worried that the most indebted card-card holders will walk away from their obligation much as thousands of homeowners have with mortgages they can't afford. A program to forgive some of the debt will make it easier for banks to collect on the other 60 percent. And if a consumer's credit-card problem is partially relieved, chances are better that mortgage payments will be made.

But the quicksand the banks are trying to pull people from is a hazard they themselves created.

The banks have established a credit-card payment structure that maximizes profit for them but drives costs up for consumers with exorbitant interest rates and late fees.

The House this year has passed a reasonable reform bill that takes some of the most unfair edges off the interest rates and late charges.

The Senate has the reform package on its agenda, and should pass it — with the support of the banks. Without more reasonable payment terms, credit-card users will continue to fall into the kind of debt the banks fear.

source : http://www.democratandchronicle.com