Credit Card Fees

Faced with rising delinquencies and charge offs, banks are raising fees on credit card accounts. The increased fees are charged for late payments, over limit borrowing and annual membership. USA Today reports that 2009 income for these fees will be a record $20.5 billion. Banks are raising rates now since Federal regulations take effect next year which will limit banks ability to raise rates on existing accounts.

All of this is no help to individuals struggling to make payments on existing debt and stands in contrast to the the actions of the Federal Reserve which has cut rates to stimulate the economy.

Mortgage Modification Bill

The Mortgage Modification Bill that was passed last week by the House of Representatives has now stalled in the Senate. One key provision of the bill is to allow bankruptcy judges to modify mortgages. Judges could reduce the principal of the mortgage as well as reduce the interest rate and extend the terms. Advocates of the bill claim these modifications, referred to as "cramdowns", would greatly reduce the number of foreclosures. Financial institutions, particularly credit unions that did not offer subprime mortgages, oppose the legislation.

Individuals who are delinquent or upside down on their mortgages need to closely monitor this legislation. There is no updated timeline on its consideration by the Senate, but for now the vote is off.

Means Test Median Income

New median income levels have increased and will be applicable for bankruptcy cases filed after March 15, 2009. Median income levels for the means test are determined by family size.

Family size----------Median Income

1--------------------$42,468
2--------------------$53,939
3--------------------$60,162
4--------------------$71,124

For each additional family member, add $6,900

Well, at least I won't worry about my credit card bills when I am dead.

Not so fast. You will not worry about your bills, but your survivors may have a problem. The New York Times reports about an agency that specializes in collecting bills from the dead. In Florida, credit card companies have frequently filed claims against estates which then are settled under the probate process. But what happens when the decedent has no estate or assets. These agencies will then contact the relatives of the decedent. Even though there is no legal obligation for the relatives to pay the bill, they often will pay out of some sense of moral obligation or as way to honor the wishes of their loved ones. In fact, agencies that specialize in collecting from the dead report that they are quite successful.

If you find yourself dealing with the death of a loved one and unpaid bills, please seek independent legal advice.

Same as cash, at least for now

Retailers now have to rethink how they finance big ticket items such as appliances, furniture and jewelry or at least what they disclose to the consumer. Claims of "no interest" or "no payments for 12 months" may soon have additional disclosures or even be stopped entirely. Anyone who has taken out one of these loans knows that there is an interest rate but the interest is waived when the loan is paid early, and if not the interest is charged back to the original date of sale. Retailers often pay a percentage of the sales price to the finance companies to offer these loans. The Federal Reserve has proposed a rule change about how these loans will be promoted. Although the rule change will not take effect until July, 2010, retailers will change their promotions ahead of that date. In April, the Federal Reserve will clarify the effect of the rule.

Trend is up for consumer bankruptcy

USA Today reports that in February, 2009, 98,344 consumers filed for bankruptcy. This represents the most cases filed in February since the new bankruptcy laws went into effect. and is a 29% increase over the cases filed in February, 2008.