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Debt forgiveness plan rejected by Federal bank regulators

2008-11-13 20:45:30 (GMT) (Caymanmama.com - Banks & Banking News)

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Office of the Comptroller of the Currency

Federal bank regulators deny a debt forgiveness plan requested by financial industry interest groups

Syracuse, New York (CaymanMama.com) — In light of the recent bailout plans for the mortgage and auto industries, it seems one aspect of the economic crisis will not be sent aid.

In a recent report by the Associated Press, federal bank regulators have refused a request by banks and consumer advocates for a bailout plan to allow lenders to forgive hefty portions of credit card debt.

According to the report,”The Office of the Comptroller of the Currency rejected the request for a special program that would allow as much as 40 percent of credit card debt to be forgiven for consumers who don’t qualify for existing repayment plans.”

An atypical amount of financial industry interest groups teams up with consumer advocates, represented by the Financial Services Roundtable and the Consumer Federation of America, and submitted a formal request for a debt forgiveness plan to the Treasury Department agency on October 29th.

The driving force behind the unusual alliance was to express the urgency of the worsening economic crisis. Americans who have a strong credit history are still defaulting at high levels on their credit cards. Still, banks who have been tattered by the current financial crisis manage to bring in billions from those losses.

An official at the agency said “the government objects to allowing banks to defer losses for several years on the forgiven debt, as would occur in accounting by lenders under the special program.”

The agency “does not consider any plan that defers the timely recognition of loss as prudent, and any such proposal cannot be viewed favorably by us,” Timothy Long, senior deputy comptroller for bank supervision policy, said in a letter to the two groups.



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