All I’ve got to say is, Good!
The plan would have done more damage than good and while some people might have hoped that the government would accept the creditor based plan, it was shallow and not enough to make a real difference to help people avoid bankruptcy and get out of debt.
Recently I wrote an article, New Concerns About 40% Credit Card Debt Reduction Proposal and Banks Agree to Wipe Out Up to 40 Percent of Credit Card Debt But Watch Out where I laid out my concerns over this plan.
Well as of today, the proposed 40% debt elimination plan is dead. Federal bank regulators have rejected a request by banks and consumer advocates for a program to let lenders forgive huge portions of credit card debt.
The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don’t qualify for existing repayment plans.
An agency official said the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.
The agency “does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us,” Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups dated Monday and made public Wednesday.
“The timely identification, reporting and management of credit losses, along with adequate loan-loss reserves and capital levels, provide the public with … confidence” in the banking system, Long wrote.
The Financial Services Roundtable, which represents more than 100 large banks, brokerage firms and insurance companies, will “continue to look for ways to help consumers in these extraordinary times,” said the group’s senior vice president, Scott Talbott.
Forgive me for being cynical but this plan was never designed to “help consumers”. The plan helped creditors by making the plan non-binding on all creditors, letting banks not report huge losses in a timely manner, and punish the consumer with huge tax bills for the debt forgiven.
It was a stinker from the word go and I’m glad it’s dead. Maybe now we can get to work on putting together some real solutions that truly are designed to help consumers.