The average American household owes around $18,000 in consumer debt. That does not include any educational loans or mortgages that might also exist. Although there are more experts on the television and the radio telling consumers the importance of living debt free and there are enough books on the shelves to reach to the moon, consumers continue to bury themselves in debt.
The crisis has only been made worse over the last few years. Relaxed lending practices may have seemed like the way to help everyone reach the American dream but the dream has turned into a nightmare. People that should not have qualified for loans have been allowed to qualify under special exceptions. As the exceptions expire the inability to pay is revealed. Consumers face few choices.
A close in the bankruptcy rules has limited consumer choices. There was a time when an escape might be possible but for most people that escape valve was sealed. It was suppose to stop individuals from spending out of control and then claiming bankruptcy. It inadvertently also blocked those in legitimate trouble from finding the relief they needed.
Bad financial situations begat bad credit ratings that begat bad financial situations. The system seems to be spinning out of control for many consumers. Those in tight financial times can’t afford to dispute a credit history that is causing those tight financial times. There is just no money left over in the average budget to spend fighting the system that is squeezing that budget.
There is some hope on the horizon for consumers. Although the credit system is not perfect it is beginning to understand that consumers are an important asset to its survival. Some credit rating companies are choosing to evaluate credit scores on the last three years instead of waiting up to the seven years allowed in the current law.
The legal community is also recognizing the situation and stepping up to help. The American Bar Association has recognized the need for affordable assistance in dealing with the credit industry. Some attorneys are finding ways to use technology and other new tactics to make it possible for consumers to afford the help that is so desperately needed.
Credit in today’s society is a part of life that can’t be avoided. Many consumers are also finding that living with credit can also be an impossible situation. The key is to find a balance between living with credit and getting buried by debt. Consumers usually will have control over the two. Occasionally circumstance or simple bad judgment can cause an issue that spirals out of control. And in some cases it is just bad information that lands a consumer in hot water.
No matter how the credit crisis happens for individuals or for the country as a whole, it is important that there be ways to repair the damage. The government has already made it impossible for credit listings to remain on the credit history forever. But the government may need to put even more restrictions on the system.
The credit industry must continue to understand the importance of consumer participation. The ones that can afford to pay will opt out of the system. The ones that can’t afford to pay will continue to drag the system into debt of its own (proven by the recent housing crisis). There has to be a compromise created that will help lenders choose consumers based on more than a set of numbers.
There have already been some strides made towards a repair of the credit crisis, but there is still a long way to go. Consumers have to continue to take responsibility and credit companies need to set an example by doing the same.
Next: Power to the People