The Credit CARD which will be fully implemented next year contains provisions that provide consumers access to financial literacy education. Now more than ever, with bankruptcy cases and foreclosure levels rising, people need to be informed and educated on the consequences of bad credit habits.
The recent CARD bill has caused a major uproar in the industry, with credit card issuers scrambling to make use of the time they have left to jack up credit card rates without being penalized. With the passing of all the provisions of the law next year, credit card companies would have to abide by stricter guidelines regarding interest rate hikes.
According to a recent survey conducted by National Foundation for Credit Counselling, 58 million Americans admit to not paying their bills on time. Another interesting feature of how Americans prioritize their payments in this time of economic crisis is that an overwhelming majority of consumers make regular payments on unsecured debts such as credit card bills, but allow major bills that require collateral such as mortgage to lapse and eventually go into default.
Another study conducted revealed that there are roughly 13 million American households today whose monthly debt hovers in the $10,000 range, and that many who fall in this segment are on the brink of bankruptcy or have recently filed for bankruptcy.
The disturbing data and trend makes the urgent establishment of financial literacy programs necessary in order for Americans to be educated on how to manage their finances and avoid unreasonably high debts.
The Credit CARD Act requires credit card issuers to include in billing statements toll-free numbers of legitimate groups and agencies that offer credit literacy programs. Banks also need to provide additional information to consumers about non profit groups that offer credit counselling for free.
There have been an overwhelming number of case studies that testifies to the effectiveness of such programs.
NeighborWorks America, a government agency that provides counselling to homeowners who are facing serious risks of losing their homes, report that people who finished a credit literacy course are 60% less vulnerable to foreclosures compared to individuals who are less informed.
Another study initiated by Georgetown University looked into the lives of people who took credit counselling workshops and seminars. The results were revealing in that people who attended financial literacy workshops were less likely to consider bankruptcy or face bankruptcy than people who did not. People who were assessed for credit counselling but did refuse to seek help, faced greater risks of financial ruin due to high debt levels.