Cutting Credit and Its Snowball Effect on Consumers and our Economy

While many consumers feel betrayed and upset believing that banks continue to sit high and mighty on their perch on the shoulders of the average American citizen, credit cardholders and homeowners alike struggle to come to terms with the fact that the big banks simply do not care about helping them out.

Today's economy has a stranglehold on lots of consumers who face a daily struggle to pay their debts and survive despite the fact that the banks have arbitrarily cut off their credit.

Not only does this make it more difficult for homeowners to stay in their home, but it also makes it more difficult for them to refinance, or obtain new credit now or in the future.

Unfair, and often fraudulent practices and irresponsible behavior on the part of banks and mortgage servicing companies have left thousands of consumers without a means to pay their bills, obtain new credit, or find employment. As banks slash home equity lines and decrease credit card limits without cause or justification, families continue to be placed at risk of losing their homes due to failure to refinance, modify loans or meet monthly mortgage payments. They are at risk of incurring late fees and penalties and end up growing their debt rather than reducing it, essentially making it impossible to keep their head off the chopping block when the foreclosure man comes a-knocking.

Surviving difficult economic times, whether caused by the loss of a job, a health crises or simply keeping up with the rising cost of living, credit often helps sustain a family -just as unemployment can. Whether it comes in the form of plastic credit cards or a mortgage agreement with your name on the dotted line, the ability to have credit is fairly certain to be the best way to survive when cash isn't in the picture. Regardless that neither the interest paid on credit cards or unemployment funds are allowable deductions anymore -as once were, and again should be, each form of assistance is a Godsend to a struggling family trying to weather this recession.  

Unfortunately, consumers cannot access credit without the help of the financial industry -and what outrages most consumers is their seeming lack of interest in returning the help taxpayers extended to them when needed. Not only have consumers been unable to get assistance -but these actions or in-actions by lenders and mortgage servicers are equated to kicking someone when they are down -and then laughing about it. While having credit suspended might not look like a problem at first glance, it has been to countless consumers who have been the unwitting victims of unfair lending and mortgage servicing actions, especially when dealing with interest rate hikes, forbearance agreements or the slashing of home equity loans and credit limits. 

Decreasing credit limits not only takes buying power out of the hands of consumers, but it also creates a situation in which their credit scores begin to take a nosedive as the ratio of available credit to accessed credit tightens up. Lower credit scores equals fewer real opportunities to obtain new employment, auto loans, or credit of any kind whatsoever.

No one truly knows what the final outcome will be from the unfair mortgage servicing and credit card issuers actions that continue to flourish --despite the protests of consumers. The financial industry continues to lobby against any real financial reform. But consumers have had enough and though these growing complaints have caused a few politicians to take notice, consumers are now changing their own banking policies and moving their accounts to  community banks and credit unions. Nonetheless, we have to wonder what it is going to take for someone, anyone, to give consumers a break!