Banks Willing to Assist Debtors

Wednesday, November 26th 2008, 7:48 pm
By: News 9

By Kelly Ogle, NEWS 9

OKLAHOMA CITY -- Banks have begun reaching out to those struggling to come out from underneath debt, offering to slash their interest rates in exchange for low monthly payments.

"They are worried about people who have large balances," said Linda Sherry of Consumer Action. "The risk management techniques that the banks use in order not to lose money are being ramped up."

Consumer advocated said banks and other card issuers are going after money sooner because delinquencies are on the rise and more are offering special workout programs. While the programs may help some crawl out of debt, advocates warn they're not for everyone.

"If you're somebody that's just missed a payment, you think you're going to be able to keep on your feet, there are clear downsides to getting into one of these workout programs," Sherry said.

If the card issuer makes you an offer, you need to ask how the deal will be reported on your credit report.

"If they have debt waived it may be reflected as a debt not paid," said Nessa Feddis, Sr. Counsel of the American Bankers Association. "This would mean that in the future, they may find that credit is more expensive or more difficult to get."

If one card is reported "closed by bank," other creditors may take action.

"You could also face increased interest rates on your other credit accounts," Sherry said.