I would love t be a blind cheerleader for the legitimate players in the debt relief world that are helping consumers and doing it the right way. The news remains worrisome though. And when I have good news to report on the forecast for debt relief services you better believe I will share it with you.
In the past few months I’ve been publishing my forecasts of tough times ahead for debt relief providers due to a shrinking customer pool and decreased issuance of credit that would lead to an increased demand for debt relief services.
Moody’s has just release some new data which reinforces those points and adds some new information that continues my thumbs down demand for debt relief services.
Credit card defaults will reach a 20-year low by next year, Moody’s Investors Service said Monday, as card issuers remain choosier in their lending practices.
After writing off billions in uncollectible credit card debt over the past few years, banks have started to hand out new cards again. But they are doing so slowly and only lending to those with higher credit scores. Overall, such a large number of borrowers were eliminated from the credit pool that it will take years to replace those accounts, analyst Luisa De Gaetano said in an interview.
In 2009 and 2010, defaults totaled a combined $74.5 billion at just the top six banks that issue credit cards — Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and Discover Financial Services, according to Moody’s. That doesn’t take into account smaller banks or retail cards. The default, or charge-off, rate peaked in the second quarter of 2010 at 10.9 percent.
While consumer research firms and an important Federal Reserve banker survey have found that banks are easing lending standards a bit, it remains tough for those with the lowest credit scores to get cards. The riskiest card customers, those individuals who had cards shut down because they couldn’t pay their bills, are unlikely to be able to get new cards in the near future. – Source
The reason this is not optimistic news of growth for debt relief providers is that the underlying extension of sub-prime credit is going to remain limited or grow very slowly.
My opinion is that debt relief providers should focus on tools and efforts to provide services leveraging automated tools, remain focused on limiting operational expenses, cut overhead and prepare to coast through the next 18-24 months on lower income until lenders begin to gain confidence in the economy and lend with more vigor.
For anyone wondering how to obtain the best chance of success in a down debt relief market, you may be interested in the upcoming class, “How to Survive, Thrive & Arrive in the New Debt Relief World” which will offer expertise and instruction on dealing with this difficult marketplace.
Moody's Releases News on Debt Relief Customer Pool by Steve Rhode
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