Credit forgiveness plan nixed
Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.
The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don’t qualify for existing repayment plans.
An unusual alliance of financial industry interests and consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, made the request to the Treasury Department agency on Oct. 29. It demonstrated the urgency of the situation in a deepening economic crisis: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions from the losses.
An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.
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The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will "continue to look for ways to help consumers in these extraordinary times," said the group’s senior vice president, Scott Talbott.
Travis Plunkett, legislative director of Consumer Federation, said that with the number of deeply indebted consumers growing dramatically, "we still hope to work with bank regulators or Congress to create an alternative" to bankruptcy for them.
