Debt relief companies know the more subprime credit that’s given out, the more business they are probably going to get. It’s just the way it works.
Over the past five years or so lenders have been hesitant to extend credit to those borrowers most likely to default, the subprime consumers. And consumers have been hesitant to take on new credit.
According to a New York Times article out today that a reader brought to my attention, lenders are getting back to playing in the subprime sandbox in search of profits.
The article claims Capital One, GM Financial, HSBC and Chase are getting back into the subprime market and actively lending. Apparently damaged credit extensions are up 12.3 percent over the same time a year before.
The article states, “Some former banking regulators said they worried that this kind of lending, even in its early stages, signaled a potentially dangerous return to the same risky lending that helped fuel the credit crisis.” You think? Of course banks will get back into subprime lending. It’s where they make a lot of money. While the default rates are higher than with the best customers, so are the fees and interest earned.
If you’ve been in the debt relief business over a couple of decades you’ve seen all this stuff is cyclical. Boom times follow bust times. The problem is the bust periods feel too long and the boom periods too short.
I know of several people that have received Capital One credit cards immediately following bankruptcy and the story mentions more. Rather than bankruptcy being the creditor stigma people perceive it to be, creditors want to lend to the folks again and they are actively doing it.
Once we start to see banks more comfortable to start exploiting this market segment again then debt relief companies should start to see an increase in demand within nine to eighteen months following that increase. That is, unless the debt relief space starts attracting new players to capitalize on increased demand. A reader just yesterday sent me a link to a website that was talking about the millions that can be earned by opening your own debt relief company.
You can read the full New York Times article here.
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