By Martin H. Bosworth
ConsumerAffairs.com
September 28, 2005
The skyrocketing gas prices resulting from Hurricanes Katrina and Rita
have already begun taking a toll on consumer finances. The American
Bankers Association (ABA) reported today that delinquency rates on
monthly credit card payments have reached record highs for the second
quarter of the year.
According to the ABA's poll, credit card payment delinquencies rose to 4.81 percent of total accounts, up from 4.76 percent in the previous quarter. That was also an increase, from the original figure of 4.03 percent.
James Chessen, the ABA's chief economist, blamed higher gas prices for the increases in delinquency.
"Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," he said.
In addition to tracking credit card loans, the ABA surveyed seven other types of loan categories, including home, auto, and personal. All categories showed increases in delinquency, with the exception of mobile home loan delinquencies, which fell from 4.46 percent to 3.74 percent.
Home equity lines of credit (HELOCs), normally posting the lowest rates of delinquency, also rose from 0.40 percent to 0.43 percent.
Gas prices have stayed high even though the damage from Hurricane Rita was less than predicted, leading many consumer groups, state attorney generals, and the FTC to warn against price gouging.
Consumers have even more pain to look forward to this fall, as the mandatory minimum payments on credit card balances are doubling. Though the long-term effect of the higher payments means consumers will get out of debt faster, it also means that consumers will have even less money to set aside for other expenses or savings.
The new bankruptcy law, scheduled to take effect October 17th, will make it much more difficult for debtors to get a fresh start by filing Chapter 7 or 13.Many victims of Hurricane Katrina and Rita have already run up huge debts on their credit cards as they try to reestablish their lives, and Congress has so far not seen fit to waive or suspend provisions of the new law to offer them relief.
