Despite a decrease in debt, the number of credit card delinquencies grew in the fourth quarter.

A recent release by credit bureau TransUnion showed that states hit hardest by the housing crisis, like Florida and Nevada, also had the largest percentage of consumers falling behind on their credit card payments. The overall number of borrowers 90 days or more delinquent on one or more of their credit cards grew to 1.21 percent, a 10 percent percent increase compared to the third quarter.

The average credit card debt fell by 3.18 percent to $5,434, from the previous quarter’s $5,612. Alaska, Tennessee and Alabama reported the highest levels of average credit card debt, while Iowa, North Dakota and West Virginia ranked lowest. None showed an increase in average debt compared to the third quarter.

TransUnion director of consulting and strategy Ezra Becker said the uncertain financial conditions inspired consumers to pay off their debt. This creates a credit cushion that can be used in case of an emergency.

“However, we do expect to see the increased balances due to holiday spending show up on credit files in the month of January,” Becker said.

Delinquencies are expected to fluctuate throughout the year, ending just 0.01 percentage points below their current rate, according to Becker. Nevada will maintain its lead, while Alaska is expected to continue having the lowest delinquency rate, at 0.64 percent.

This report follows last week’s announcements by Capital One Financial Corp. and Discover Financial Services Inc. that credit card delinquencies increased among their customers during January. Loans at least 30 days overdue grew from 5.78 to 5.8 percent at Capital One, while Discover reported a 5.55 percent delinquency rate, up from 5.49 in December. Delinquencies decreased at Bank of American Corp.

Courtesy of Credit.com

By Gerri Detweiler

Recently, someone asked me about how to stop a debt collector who had contacted him about a debt that had been wiped out 21 years ago in bankruptcy. Fortunately, most debts don’t last forever, and there are perfectly legal ways to stop debt collectors. Here are four:

1. Settle the debt

It may sound obvious, but paying a debt can be a good way to stop debt collectors. Most likely, though, if you haven’t paid a debt, it’s because you can’t afford to. Don’t let that stop you. Many collectors are willing to settle debts, sometimes for pennies on the dollar. After all, they would rather get something than nothing. Just be sure to get the terms of the deal in writing before you pay. Otherwise they may treat your settlement as just a partial payment. The agreement should state that your payment will be accepted as payment in full and the balance will be zero.

2. Send the debt collector a “cease contact” letter

Under the federal Fair Debt Collection Practices Act you can stop debt collectors from continuing to contacting you by sending them a letter asking them to do just that. Once they receive your letter (send it by certified mail so you have proof of receipt), they can’t contact you again except to notify you that they are taking legal action against you.

However, be careful. This strategy is fine if you are confident you don’t owe the debt, or that it is too old for you to be sued over it. If not, sending a cease contact letter may leave the collection agency with no option but to sue you.

3. Sue the debt collector

Debt collection lawsuits are on the rise, and I am not just talking about collection agencies suing debtors. Consumers who believe that debt collectors have crossed the lines are turning the tables on collection agencies and suing them for violations of the federal Fair Debt Collection Practices Act, or for breaking state debt collection laws.

I am not advocating frivolous lawsuits, but if a debt collector is harassing you, making illegal threats, or damaging your credit rating over a debt you don’t owe, talk with a consumer law attorney. He or she may be willing to take your case on a contingent fee basis. If you win, the defendant can be ordered to pay the attorney’s fees. (Many of these cases settle out of court.)

4. File for bankruptcy

You may have heard that bankruptcy is the option of last resort. But if you are being hounded by debt collectors, don’t wait until you are sued to consult an attorney. If you file for bankruptcy protection, collection calls will stop immediately. But even if you don’t, a bankruptcy attorney can explain what property and assets the collector can (and cannot) go after to collect from you, as well as help you evaluate your options.

courtesy of kcautv.com

Upcoming federal credit card reforms are intended to make debt management easier for people, but one consumer group is warning that lenders are already using a variety of tricks to continue maximizing their profits.

According to the Center for Responsible Lending (CRL), consumers are finding it very difficult to gauge the true cost of their credit card debt due to a variety of tricks aimed at replacing the more straightforward penalty interest rates and late fees that have become increasingly common in recent years.

For example, the center says that some emerging tactics by credit card companies include inactivity fees, minimum finance charges, extra fees for international transactions and higher fees on balance transfersand cash advances.

“The Credit CARD Act that Congress passed earlier this year was a big improvement for American families. But our research shows that industry keeps finding clever ways to get around meaningful reform, and we need a regulator focused on making financial products fair,” said Josh Frank of the CRL.

Another tactic apparently used in recent years by credit card companies has contributed to millions of consumers already paying significantly more for making a late payment. According to the center, credit card companies once maintained a penalty fee setup where a balance of $1,000 would be subject to a $35 late fee. Now, most cardholders are said to face the same size late fee if their balance is $250, which means that 90 percent of them are subject to the largest possible late fees.

The group also reports that the average credit card late fee now stands at $39. Late fees have also drawn criticism from consumer advocates when it comes to debit cards, with some previous media reports citing customers who paid high late fees for over drafting their accounts by less than a dollar.

courtesy of credit.com

Airtime:
Fri. Aug. 21 2009 | 9:01 PM ET

Credit guru John Ulzheimer walk you through the new rules of credit cards, with CNBC’s Carmen Wong Ulrich.

courtesy of cnbc.com

The Federal Reserve Board recently approved a rule that relates to recently-approved legislation that aims to guard consumers against certain lending practices.

The change in regulation is related to the Credit Card Accountability, Responsibility and Disclosure Act, much of which takes effect on February 22. The requirements released by the Fed relate to the new guidelines that take effect on that date.

“The rule bans several harmful practices and requires greater transparency in the disclosure of the terms and conditions of credit card account,” Elizabeth Duke, the Fed’s governor, said.

In most cases, companies that issue credit cards will no longer be able to increase interest rates during the first year that an account is open. They generally will not be allowed to increase rates that affect existing credit card debt.

Younger people will also be affected by the new Fed rule. Anyone who is under 21 will not be able to get a credit card debt account unless they can either prove they have the means to afford payments or get a cosigner for the card.

Through the regulations, those that issue credit will also have to get the consent of their customers prior to charging fees associated with transactions that go over a credit limit. Companies will also not be allowed to structure transactions in such a way that maximizes charges on interest.

Though the rules are intended to help consumers, many card companies have tried to change account terms in anticipation of them. For example, some companies are switching consumers to variable rate cards while also setting a minimum interest rate. Others have closed accounts while also limiting which consumers they approve for new credit cards.

courtesy of credit.com