The Bankwatch

Tracking the consumer evolution of financial services

Given a Shovel, Digging Deeper Into Debt | Nytimes

This has to be the most depressing piece on the true underbelly of the subprime situation in America.

Note how lenders have shifted to fee revenue to optimise the high personal debt situation.

Given a Shovel, Digging Deeper Into Debt –

Lenders have found new ways to squeeze more profit from borrowers. Though prevailing interest rates have fallen to the low single digits in recent years, for example, the rates that credit card issuers routinely charge even borrowers with good credit records have risen, to 19.1 percent last year from 17.7 percent in 2005 — a difference that adds billions of dollars in interest charges annually to credit card bills.

“Today the focus for lenders is not so much on consumer loans being repaid, but on the loan as a perpetual earning asset,” said Julie L. Williams, chief counsel of the Comptroller of the Currency, in a March 2005 speech that received little notice at the time.

For decades, America’s shift from thrift could be summed up in this familiar phrase: When the going gets tough, the tough go shopping. Whether for a car, home, vacation or college degree, the nation’s lenders stood ready to assist.

But as happens with many debt-laden Americans, an unexpected illness helped push Ms. McLeod over the edge. In January 2006, her doctor told her she needed a hysterectomy. She had health care coverage, but she could no longer work at a second job.

Written by Colin Henderson

July 20, 2008 at 03:16

Posted in subprime

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