A Catch-22 Faces Credit Card Debtors

The vast majority of credit card companies will not cut a deal with a cardholder--Consumer Affairs column, “Try to Cut Honest Deal With Creditors” (Jan. 31).

The firms generally refuse to respond to cardholders’ written requests to negotiate lower payments. In many cases, cardholders may have experienced a short-term unemployment crisis and seek extended time to pay their debts in good faith.

The credit card companies deserve much of their bad-debt woes. A common policy is to demand the full amount when payments become delinquent, which forces many debtors into bankruptcy.

If the customer is having difficulty making the monthly payments, how can he or she possibly pay the full amount in a single payment? What many need is a short-term moratorium or reduction in the monthly payments.

The theory that working out a reduced payment plan is better than bankruptcy is also a fallacy.

When debtors enter into an arrangement, they are reported to the credit bureau as delinquent. Several months of a slow payment history are as bad or worse than bankruptcy.

A previously bankrupt debtor with a good excuse for the bankruptcy has a better chance of re-establishing credit than a long-term slow payer, who faithfully adhered to a reduced payment plan.

Unfortunately, the policies of the credit card companies and the credit reporting industry are breeding a society of dishonest credit consumers. If you are going to be hung for a lamb, why not a sheep?

MICHAEL WILLIAMS

The writer is a CPA and financial planner in Westlake Village.