I wonder when the PEOPLE will get a bailout? :sarcasm: This is from last month.
Troubled mortgage loans seem to be getting all the press lately, but bad credit card debt is following close behind. The US Congress will vote today on a revised bailout plan that could allow the Treasury Secretary to take possession of securities backed by auto loans and credit card debt.
The consumer credit market is currently worth $2.6 trillion. But delinquent credit card debt has risen 20% in the past year alone. And with job cuts and bankruptcies affecting more and more Americans, defaults and delinquencies are only expected to get worse. As a result, the value of all that credit card debt will plummet.
More credit card payments are 90 days or more behind schedule than have been since 1991. Compared to a year ago, banks are writing off 40% more of this debt as uncollectible.
All of this bad credit card debt trickles down to individual card holders in the form of lower credit limits, tougher standards for obtaining credit, and more aggressive debt collection.
Will the bailout plan be enough to help the credit industry? Martin Weiss, founder of Weiss Research, said, “When you sum up all the debt sectors and all the potential for bad debt, you recognize that $700 billion is a drop in the bucket.”