In the past, you probably felt as if your credit card statement was virtually indecipherable. Specifically, you may have taken once glance at the extremely small print, complicated legal language and multitude of figures, and simply cast it aside in frustration.
However, you've probably noticed some changes to your credit card statement over the last year, including more detailed information on how much you would have to pay per month to eliminate your debt in three years and how long it would take to eliminate your debt if you made only the minimum monthly payments. These disclosures were mandated by Congress as part of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, a measure designed to introduce debt relief for consumers by giving them a concise summary of their debt.
Interestingly, researchers from the respective business schools of NYU, Harvard and Oxford have been conducting an ongoing study designed to determine how effective these new mandated disclosures -- particularly as they relate to minimum monthly payments and the three-year payment schedule -- have been in changing consumer habits.
To accomplish this, they studied the payment habits of 30,000 credit card customers of a mid-sized credit union in Minnesota.
Interestingly, they determined that the disclosure requirement concerning minimum monthly payments actually resulted in more consumers changing their habits (i.e., paying more than the required monthly minimum toward their credit card balance). In addition, they found that some consumers elected to make payments in accordance with the disclosure outlining the three-year payment schedule.
However, the researchers determined that those consumers making payments under the three-year payment schedule weren't necessarily getting out of debt. Specifically, the disclosure concerning how much it would take to pay off their credit card debt in three years changed with every statement once a payment was made.
Consequently, the three-year payment schedule is something a moving target and the unwitting consumer may actually take far more than three years to pay it off.
Accordingly, the researchers have determined through their preliminary findings that the language of the disclosure concerning the three year payment schedule needs to be amended.
"Generally, more disclosure is a good thing," said Professor Claudine Gartenberg of NYU. "It just has to be done in a way that doesn't lead people astray."
Stay tuned for more from our Phoenix bankruptcy blog ...
Whatever the cause, whatever the reasons behind your financial difficulties, take the time to speak with an experienced legal or financial professional if you would like to learn more about Chapter 7 bankruptcy, Chapter 13 bankruptcy or additional debt relief options.
The following post is for informational purposes only and is not to be construed as legal advice.
The New York Times, "Disclosures are found to change financial behavior" Feb. 22, 2012
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