August 5, 2006
Older consumers have been increasing their debt loads at a time of life when debt is especially burdensome and fraught with peril. While older consumers still tend to hold less credit card debt than younger consumers, the elders are catching up, a new report warns.
Not surprisingly, elders are also filing bankruptcy in record numbers. It is not just that older consumers have more debt than before, but that many are buried in unaffordable debt.
The danger, as documented in a new report released by the National Consumer Law Center (NCLC), is that older consumers who get into trouble will lose their security in order to service their debt.
"This report highlights the vulnerability of older consumers to credit card borrowing," said the report's principal author and NCLC staff attorney Deanne Loonin. "There is little margin for error with older populations. Those who lose income over time or who slip in and out of poverty have fewer working years, if any, to replace resources and save for retirement."
The increase in credit card borrowing is tied to a host of other social and economic policies.
In rapidly increasing numbers, elders are using credit to pay for necessities like groceries, prescription drugs, and urgent house repairs. Others fall into traps set by credit card companies and do not always know that they are borrowing at an unaffordable pace.
Even small setbacks, such as using a credit card for a supply of prescription drugs, can send these older consumers into a spiral of late fees and increased rates that is impossible to escape.
Credit cards provide a great convenience for many consumers, including elders who increasingly use credit cards to pay for a range of products and services. The danger comes from the borrowing features of credit cards, the exorbitant costs of borrowing, and the downward spiral that hits consumers once they get into trouble.
Some of the most abusive creditor practices identified in the report include:
• High-cost credit;
• Aggressive solicitation and lack of underwriting;
• Punitive fees;
• Penalty rates and universal default;
• Deceptive marketing;
• Changes to credit limits;
• Debt collection abuses;
• Mandatory arbitration clauses;
• Tiny monthly minimum payments; and
• Change-in-terms provisions.
The report calls for reinstating substantive limits on the terms of credit and the cost of credit, including the interest rate and all fees and charges.
The report, which includes results from interviews with older consumers and their advocates nationwide, documents the rising levels of credit card debt, causes of the increased debt levels, and reviews credit card company practices and credit card terms which cause particular problems for consumers generally and for older consumers specifically.
It also contains recommended policy fixes addressing the most abusive credit card practices.
