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American Express Cancelled My Card With Them Because My Mom Defaulted on Hers After 32 Years. – Carl

Carl

“Dear Steve,

I earn 85K clear of tax per year, I have a total of 95K in unsecured credit card debt, I am single and cover the expenses of my mother with a disabilty and she lives with me.

My mother had an American Express charge card for 32 years, she made a few late payments recently so Amex cancelled her membership, a month later they cancelled my membership and when I asked why they said its because someone at your address had their membership cancelled so all members of the same address have been cancelled even though our accounts are seperate and not a sub account.

I owe Amex 16K credit card, 3k line of credit and 11K charge card balance, total 30K. My salary is not fixed, I am a travel agent and earn commisions only, travel sales are well down and my salary has fallen 30%. I went to see a financial counsellor who requested to Amex if I can pay them $600 per month until my salary goes back up and they said no, I then asked if I could pay 5K on the charge card as full and final payment and again no.

My normal minimum monthly payment on the credit card was $350 and the line of credit $65, now that these accounts are closed they want $900 on the credit card per month and $130 on the line of credit. They made a payment plan on the charge card of $4000 end of July, $3500 end of August and $3500 end of September and this is non negotiable, I told them I am currently bringing in $5k per month, my monthly expenses are, rent 2K, credit cards (not including Amex) 2K, food/electricty/telephone and transport $600. Amex has said its not their problem and if I do not come up with the money then I am going to be sued.

At this stage if my salary does not go down any further I can make all the monthly payments and in the next few months when sales get better I will be able to pay Amex more money quicker. To date I paid them $1600 in July and intend to pay $1200 in August and so on but they are still not satisfied and I am hounded with their letters, phone calls and demands to get money from friends/family, borrow or any other means.

I have zero assets and I have supplied Amex with a statement of position but nothing helps.

I am so worried that they will take me to court, increase my current amount owed with solicitor fees and possibly garnish my wages.

Do you have any advice on what I can do, if Amex gives me the time I can pay out the charge card in 8months and the credit card in 24months. I must stress that Amex refuses anything less then the payment plan they have made for me which for the Credit Card and Line of Credit is 300% more then the minimum I paid before the accounts closed.

Thank you

Carl”

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The Answer

 

Dear Carl,

That is the first time I’ve heard of that happening. I’m not all that surprised though. American Express plays hardball when it comes to collecting. Some would say they are being heartless bastards, while others would say they are just doing the best for their shareholders by trying to maximize profits with aggressive collections.

Your only legal leverage is bankruptcy. Under bankruptcy, the court would either discharge your debt or create an affordable repayment plan based on your income. The Chapter 13 repayment plan would be binding on American Express at 0% interest.

Even if you have said to yourself that you would never consider bankruptcy, I implore you to call a local bankruptcy attorney and schedule a free bankruptcy consultation to go in and talk about bankruptcy. Do this to educate yourself about your options. After the appointment you’ll be in a better position to determine if that is a reasonable solution for you.

The danger here is that AMEX will take some initial big payments from you. That will leave you in a position of not being able to get by, you will default, and they will then come after you with a vengeance for defaulting.

When it comes to making repayment promises, it is ALWAYS much better to under promise and over-deliver.

Entering a debt management plan might be an option for you but only if American Express will actually lower your payment for you to something you can afford. You can click here to check with a debt management company. They may not make any allowance since they have already closed the card on you. It’s worth investigating.

You also need to consider if bankruptcy is a better option for you since you have a duty and responsibility for taking care of your disabled mother. How is she served if you meet the demands of American Express? She’s not and it leaves her in a potentially medically and life disadvantaged position.

This is unfortunately another classic example of the fact that people want to repay their debt, if creditors would only let them in a reasonable and sustainable way.

The other thing this situation demonstrates is that cardholders are only as good as their last payment. A long past history with a card does not mean a thing.

And let’s not forget, that while canceling your card was harsh, it is their ball and they can decide at any time to take it and go home and that’s exactly what they did.

Big Hug!

American Express Cancelled My Card With Them Because My Mom Defaulted on Hers After 32 Years.   Carl
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.myspace.com/thomasjfox Thomas Fox

    Unfortunately, I am not surprised. It seems that more and more creditors are using voodoo matrix to avoid messy balance sheets.

  • http://twitter.com/syllana Syllana

    Carl, it never ceases to amaze me how creditors depend upon the “fear factor” and their assumption that they are in charge. They are in fact not in charge, especially if you have no assets. You just need to know this. AMEX ought to realize that your options are either to pay, or not pay. It seems pretty clear to me which would be better for them.

  • http://www.thedebthawk.com Mark @ TheDebtHawk.com

    I am very sorry that this is happening to you Carl. It is a shame that they accelerated your payments like this.

    Steve, do you think that the accounting rules applicable to credit card companies are causing these types of account closings?

    I know that credit card companies are working hard to clean up their balance sheets, but I am hearing more and more people talk about their cards being cancelled.
    .-= Mark @ TheDebtHawk.com´s last blog ..This Week In Personal Finance – July 26 =-.

    • http://GetOutOfDebt.org Steve Rhode

      Mark,

      I think it is a two part problem. The first part is that American Express wants to bring in as much money as quickly as possible now. Second part, is that AMEX has a formula that triggered the closure. The calculation probably says that if one person at an address defaults, it is more likely that something is happening in that household that could snowball. I think they are just being hypersensitive to avoid more losses.

      Unfortunately, in situations like this it becomes a self-fulfilling prophecy. If American Express simply sent a notice of closure but did not accelerate payments, then the cardholder might actually have a chance to repay.

      One last thing. American Express might just want to accelerate repayment if the person has a Chase card, for example. Creditors are greedy and each one wants all their money first, before anyone. The end result, is that if someone has multiple creditors, an action like this by American Express, can result in other creditors doing the same thing and leaving the consumer totally buried.

      Steve

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