As tough economic times continue, more and more consumers are seeking to negotiate reductions to their credit card debts, as the NY Times points out their new article titled Credit Bailout: Issuers Slashing Card Balances.
As they confront unprecedented numbers of troubled customers, credit card companies are increasingly doing something they have historically scorned: settling delinquent accounts for substantially less than the amount owed.
The practice started last fall as the economy worsened. But in recent months, with unemployment topping 9 percent and more people having trouble paying their bills, experts say this approach has risen drastically.
They say many credit card issuers have revised internal guidelines to give front-line employees the power to cut deals with consumers. The workers do not even have to wait for customers to call and ask for a break.
“Now it’s the card company calling you and saying, ‘Let’s talk turkey,’ ” said David Robertson, publisher of the credit industry journal The Nilson Report.
Although it may be getting easier to negotiate with credit card companies, the IRS still considers this canceled debt taxable income. Which is creating some confusion since they changed the tax code to not tax canceled mortgage debt, which occurs when a bank allows some one out their mortgage for less than the original value.