Well, the credit card companies (major financial institutions) wanted to make it more difficult to bankrupt on credit card debt (even though they will issue a card to a five year old). So, they got what they wished for – tougher bankruptcy laws passed a couple of years ago. The result, payments on credit cards and a subprime mortgage mess.
According to Bloomberg News, Washington Mutual, Bank of America Corp., JPMorgan Chase & Co., and Citigroup spent $25 million lobbying for bankruptcy changes in 2004 and 2005 in order to protect their credit card industry. This has now led to a $40 billion writedown due to the increase in foreclosures. Basically, people are putting their credit cards ahead of their home mortgages according to Richard Fairbank, chief executive of Capital One Financial Corp. Seventy percent (70%) of people who are three (3) months behind on their mortgage are current on their credit card payments.
What does this mean? It means consumers cannot get the relief they used to get through bankruptcy, and it means the major financial institutions are losing a lot of money due to foreclosures. Consequently, instead of getting the large mortgage payment, the companies are getting the small credit card payment and having to figue out what to do with the glut of properties they will soon own.
Sometimes, consumers and consumer attorneys do know best.