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This Business Week article (which made the rounds a week and a half ago) says that credit card debt will prove the next big financial crisis. Apparently, in the same way that mortgagers were bundling mortgages and selling them to hedge funds, credit card issuers have been bundling credit card debt, almost all of which is unsecured. And those bundles are getting harder to sell, which suggests that the collapse of the credit card market may come sooner than later. I would be surprised if anyone were surprised by that claim.

I do note, however, this paragraph about proposed new rules regarding lending practices:

Under rules proposed by the Federal Reserve, a borrower would have a 21-day grace period before being hit with a late fee, instead of the few days offered by some firms now. A similar plan working its way through Congress would allow banks to increase rates only on consumers’ future purchases—not existing balances. And under both proposals, credit-card companies would have to allocate account holders’ payments equally to balances with different interest rates.

At various times during graduate school and those eighteen months I was only spottily employed we lived off credit. We made our payments, but we watched our total balance creep up slowly, especially when we had some major dental work to pay for. We juggled our payments and our bank account carefully; every once in a while, we would drop one ball or the other, only to get hit by late fees and exorbitant interest-rate hikes because of the short nonexistent grace period. That was a hard time, and it seemed quite unfair—impersonal, anonymous—because we were trying to manage but getting little help managing. We would call to ask for mercy, but we rarely got it. So I say, if it takes law to get the credit card companies to show some grace, then let there be law. Maybe then there will be less of this happening in the depths of the call centers:

Cate Colombo, a former call center staffer at MBNA, the big issuer bought by Bank of America in 2005, says her job was to develop a rapport with credit-card customers and advise them to use more of their available credit. Colleagues would often gather around her chair when she was on the phone with a consumer and chant: “Sell, sell.” “It was like Boiler Room,” says Colombo, referring to the 2000 movie about unscrupulous stock brokers. “I knew that they would probably be in debt for the rest of their lives.”



As someone who has also been unemployed had to live off credit, I hear you, loud and clear.