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January 18, 2011

Banks begin to extend consumer credit, target those with balances

  Loveletter1
Today all across the country thousands of consumers are receiving a flattering letter, a billet-doux of sorts, that makes them feel accepted and loved by their charming credit card company. The letter, which reeks of enthralling affectation characteristic of a no-good ex hoping to reconnect, informs them that their credit line has been increased, that because of their improved credit or on time payments they can now spend more money they don’t have. The exciting moment causes giddy consumers to forget how bad the relationship was just a few years ago. They begin to daydream about how they will spend this new money—perhaps a trip to Disney, a dinner for two, or simply bills. So begins the sad story of mass recidivism, the return to American overconsumption enabled by those god-awful credit cards.

My hunch just a few weeks ago served me right and was verified by The Wall Street Journal this week: For the first time since the Great Recession started in 2008, banks are beginning to make many more loans to consumers.  In general, this isn’t a bad thing, but the extension of credit to consumers who haven’t quite learned the lesson of good credit management will pick up old habits and overextend their obligations.  This is likely the case with those who carry balances.  These revolvers are the target of credit card companies looking to increase profits quickly. Thus, as revolvers spend more and creditors increase loans, we could see a return to the unhealthy credit card debt levels of early 2009.

Here are a few important statistics from The Wall Street Journal article:

- Bankcard loan originations increased 17% in the third quarter of 2010 as compared to the third quarter of 2009. 

- Bank of America CEO Brian Moynihan told analysts last month that industrywide, credit-card holders who carry balances "have actually started to borrow just a little bit more: not a lot, but 3% or 5%."

- At Discover, customers who revolve their credit-card balances increased their spending in September, October and November.

Read the entire article at The Wall Street Journal

Comments

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This is a welcome development. Rather than banks being hostile with customers who have balances, why not offer flexible lite long term payments as a re-settlement.

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About Me

Greetings! I’m Kevin D. Johnson, a business owner who has recently assumed the role of consumer advocate and internet activist. Atlanta, Georgia is my home.

My Story

Upon returning from my wonderful honeymoon in Jamaica in October 2008, I received what I thought was an ordinary American Express bill, but to my surprise it was a disappointing letter informing me that my credit line was reduced by about 65% for a highly suspicious and discriminatory reason. Considering my excellent credit score and pristine payment history, it just didn’t make sense. However, what does make sense are the unfair and insidious policies that I have uncovered when asking why. It is time to change them.

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I created this web site to document and share my challenging journey to change what is wrong, unfair, and unjust in the credit card industry. The ultimate goal of this web site is to inform consumers of ways to stand up for themselves against treacherous business practices and to educate consumers about how to improve their credit. Finally, I hope to encourage a more open dialogue with credit card companies about their policies–good and bad.

Success

I am proud to say that this blog's unyielding demand for change led to an important amendment in the final Credit CARD Act signed by President Obama on May 22, 2009. Despite this major accomplishment, there is still more work to be done.

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In an effort to educate as many people as possible about financial management, especially about how to manage the current credit crisis, I have begun to speak around the country at colleges, universities, corporations, chamber of commerce meetings, congressional hearings, trade organization meetings, etc. Having acquired a wealth of information that will help to empower people and to improve their financial future, I feel that sharing this information is the least I can do to make a positive impact. For information on my availability for speaking opportunities, please send an e-mail to Jennifer Silverman at jennifer@silvermanworldwide.com.


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