Chalk one up for the little guy, I suppose. Last week I posted a video of a Bank of America customer who was refusing to pay her credit card bill because of a rate hike she considered unwarranted. You can see the video HERE.
Once the video went viral, she was contacted by Jeff Crawford, Senior VP of existing credit card accounts for Bank of America. He offered to lower her rate to 16.99% and she told him to get bent. BofA backpedaled further, and they settled on a rate of 12.99%.
Here is her latest video explaining what happened:
Is this a sign of things to come? Is the credit card business so precarious at this point that the banks will do anything to avoid defaults?
Credit scores are quantitative and qualitative. It is the most prevalent example of grading on the curve in human existence.
Meaning, if everyone defaulted on their credit cards in concert, there would be no net negative effect on individual credit scores. Everyone's credit score would drop a similar amount and establish a new baseline for what is considered "good" credit. I know the banks are keenly aware of this.
A massive debtors' revolt would be catastrophic to the banks because they'd have to write off all the debt and fees and they couldn't afford not to issue new debt to the defaulters.
The WSO Guide to Understanding TARP
You are theoretically correct. However, the odds of a massive voluntary debtors' (coordinated) default are infinitesimal. Trying to convince millions of people to stop paying back their debts, a good chunk of these people being risk-averse, is just not possible.
Also, if this were to happen, there would be a huge collapse in the credit market. Banks would not be able to afford to issue new debt. (Like you said)
Where does this leave us (the people)? Fucked. Sure, we would have a new baseline credit score but it would be meaningless. No bank will be able to offer credit, no need for a credit score.
Americans finance their lives on credit, I don't agree with it, but I sure as hell do not want to go through ANOTHER (and more disastrous) credit crisis because of AGAIN the lack of common sense spending and financial sense of the American people.
Not only is the next credit crisis a foregone conclusion, it's going to make this downturn look like a day at the beach.
The WSO Guide to Understanding TARP
But there won't be anything "for the people". There will be the illusion of "for the people", but it will just be another naked corporate money grab.
The WSO Guide to Understanding TARP
Election 2012: the ascension of his Majesty, the Devil:
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