Debt Consolidation Credit Counseling In Phoenix

The current financial meltdown has taken everyone by surprise at its speed and ferocity of impact and has made the banking institutions and credit card lenders take a long, hard look at how they do business. The real killer in this current downturn has been how quickly the ordinary man in the street has been affected by the crisis and how vulnerable everyone is to its affects. The reason is simple " this recession has been the result of easy credit during the boom times; times that people were led to believe would continue indefinitely. The stark reality of the situation has now started to impact on a micro as well as a macro level.

Extreme situations often call for extreme measures, and the last few weeks have seen a number of significant changes to the regulatory framework that governs the credit card industry. Before the credit crunch kicked in the credit card lenders generated a fair amount of criticism concerning the way they dealt with customers who got into financial difficulties and had problems meeting regular monthly payments. The industry had been accused in the past of being heavy handed in its approach towards customers who default on payments, but with the advent of a serious financial crisis it has become obvious that more people will find it increasingly difficult to stay on top of credit card debt. The government has stepped in surprisingly quickly in this instance, and has insisted that customers in trouble have more protection and the time to take professional advice before being subject to stricter measures by the lenders.

Under the new regulations credit card customers who have difficulties will be given a 30-day breathing space to take an opportunity to discuss their situation with the Citizens Advice Bureau. Here they will be able to receive free, impartial advice and guidance as to how they can negotiate an agreement with their creditors and arrange suitable repayment terms that take into account their financial situation. If an agreement cannot be reached within this period, there is a further 30-day buffer period during which the credit card lender cannot make payment demands until the situation is solved. However, if no agreement has been reached by the end of this second timeframe then the picture can become much bleaker and the lender has the right to pursue payment fully.

The government has also brought in a second regulation stating that credit card lenders may not increase the interest rate charges within the first 12 months of an offer being taken up. This has come about as the result of complaints by customers about significant rises in interest rate charges only weeks after taking up an offer. Although legally the credit card lenders are perfectly entitled to raise the rates, the government perhaps considered it unethical to do so in the midst of an economic crisis and particularly as the Bank of Englands base rate is currently at its lowest level in history.

These measures are designed with the sole purpose of keeping the money markets buoyant " make no mistake in thinking that this is a purely altruistic move by the government. The credit card holder still carries full responsibility for any credit card debt and the onus is on them to manage their financial affairs in such a way as to ensure that the credit card lender is not exposed to further risk of bad debt. Although in hindsight the credit card companies have come under mounting criticism for their lending policy when times were good, it should be remembered that it is always the customers choice to take up a credit card offer. The changes in legislation take into account the extraordinary circumstances of the current economic crisis and will certainly go some way to alleviate the pressure that those struggling with credit card debt are under.

It remains to be seen how much impact the new legislation will have on credit card lending and if lenders will need to re-evaluate their position with regard to pursuing those in financial difficulty. But the breathing space the two 30 day periods give customers, combined with a guarantee that interest rates are fixed for at least 12 months should go some way to helping those who do get into difficulties.