CFPB encourages consumers to work with card companies to resolve debt issues

cfpb-logoThe CFPB released a guide encouraging consumers who struggle to keep up with credit card bills to work with their credit card company to resolve issues. Credit unions can share these tips with members and consumers to help them get a handle on credit card debt.

The agency explained in a blog the following methods to address credit card debt with a credit card company:

Contact your credit card company. When consumers think they might miss a credit card payment, or already have, it is important to contact their credit card company as soon as possible. Many will work with the consumer to find a repayment plan that suits their current situation. Once a payment is late or a consumer misses a payment, it is then considered delinquent. If the consumer does not pay, the credit card company may block the ability to use the credit card and report the delinquency to the credit reporting companies. Generally, that delinquency can stay on the consumers’ credit report for up to seven years. Consumers could also face debt collection and be sued.

Find out what repayment options your credit card company offers. Credit card companies can, and often do, provide alternative repayment options. They depend on, income, how much a consumer can afford to pay and the amount they owe. Credit card companies offer mitigation programs, sometimes called forbearance or hardship programs. These programs often allow consumers to postpone a set number of monthly payments or pay a lower monthly payment at a reduced interest rate, until the balance is repaid in full. If the credit card company determines that the consumer cannot afford a full repayment plan within a certain timeframe, they might be able to negotiate to settle the debt for an amount lower than what they would owe. This would depend upon the company’s policies and account-specific circumstances. It is important to remember to get written confirmation of any alternative repayment option to which the consumer agrees to.

Comparing costs: Debt settlement company vs. credit card company. Another, less visible cost of working with a debt settlement company that has a consumer stop payment on debt is the potential negative impact to their creditworthiness. When contracted with a debt settlement company, the balance often is not negotiated down and settled right away. This also means that the balance could continue to grow with additional interest and late fees if the consumer stops payments to the credit card company on the instructions of the debt settlement company.

The blog explained that consumers may want to work with a credit counselor depending on the circumstances of their situation. Credit counselors can help manage money, pay off debt and work with the consumer to achieve their financial goals. Credit counselors also may help make payments on debt over a longer period, generally at a lower interest rate.

The blog also introduced a debt boot camp that helps create a budget and strategies for paying down on debt. Get a handle on debt boot camp is also a useful tool for consumers who want to find new ways to meet financial goals.

To view the complete blog, visit the CFPB’s website.

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