In the space of 24 hours this week, I saw two clients with substantial credit card debt who had been servicing that debt faithfully and at a substantial sacrifice , hanging on to the slippery financial slope, when a single irregularity in payments to one creditor sent their interest rates from 4-9% to 30%. For each client, that was the triggering event: they made an appointment with a bankruptcy lawyer.

An objective look at the impact of using universal default as a “reason” to increase the interest rate on a card that is being paid according to terms suggests this is horrible policy. In the cases of my clients, the card issuers turned a performing account being paid by someone who could probably never have paid off the balance in full, and thus would be paying interest forever into a bankruptcy write off. Good going guys.

As the heat in Congress increases on credit card issuers, some claim to have abandoned the practice of universal default. Consumer Action’s latest study of credit cards says it isn’t so.

In a macabre way, I guess in my line of work, I should applaud universal default: it instantly brought home to my client base that credit cards are rigged against the consumer and that pretending that you can pay them off is self deception. Anyway, I have two new bankruptcy clients.

Cathy Moran

Bankruptcy in Brief