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EU finance ministers are pressing their indebted and riot-prone Balkan member to embrace a massive austerity plan and plug its debilitating deficit.

But with markets sceptical and the appetite for more bailouts at a low, there are deepening concerns that a Greek meltdown could deal a severe blow to the very European idea of a common currency, and set off a domino effect through Italy, Spain and Portugal.

Yesterday, some European Union leaders said they were confident that Greece would pull itself out its debt crisis under a plan submitted by Prime Minister George Papandreou, who promises to cut expenditure and tighten the country’s notoriously leaky tax system.

Spanish Finance Minister Elena Salgado – whose country holds the rotating EU presidency – said she was not worried that Greece will default.

She refused to discuss the possibility of a bailout in case Greece fails to make debt repayments – fears that have sharply raised its borrowing costs.

“I think Greece is going to do all that is necessary to avoid that,” she said before chairing an EU finance ministers meeting.

A bailout would be a first for the decade-old eurozone, which now looks vulnerable and faces painful, unpopular measures such as budget cutbacks and higher taxes.

Other European governments were less sure – and reluctant to pay for Greece’s failure to manage its debt.

Finland’s finance minister Jyrki Katainen bluntly said the Greeks couldn’t expect “any outside help”. Dutch Finance Minister Wouter Bos said the Greek plan to cut debt needs to be more substantial because it is based on vague one-offs such as a promised fight against corruption.

Markets are also sceptical that Greece can make the cuts that are needed. BNP Paribas currency strategist Ian Stannard said investors believe they “lack detail and in some respects appear unachievable”.

Stannard cited the risk of investors losing their appetite for Greek bonds, 70 per cent of which are held by foreigners.

Bigger, better off countries such as Germany would be faced with leading a bailout, but it’s not certain that their leaders – or voters – would agree. Meanwhile, other countries with heavy debt loads – Spain, Italy, Portugal, Ireland – would have to pay more to borrow if investors flee government bonds because of Greece. Read More

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New Zealand firms are hurting each other and setting themselves up to be locked out of the credit market as a result of the way they are prioritising payments, according to research released yesterday.

Dun and Bradstreet (D&B), a leading credit reporting, sales and market data and debt collection company, said the research showed that eight in ten firms were prepared to miss supplier payments if they were unable to pay all their accounts.

Half of firms were settling their bills late as a result of cash flow issues or because their own customers were paying delinquently. D&B general manager John Scott said firms were hurting each other and themselves.

The research showed that many firms were unaware of the implications of paying late on their ability to access credit. Six in ten firms indicated that if they knew late payments would detrimentally impact their credit standing they would be more likely to pay on time.

The finding comes at a time when financial institutions and trade credit providers continue their stringent focus on trade reference checks as part of the credit assessment process. “Cash is absolutely critical to business survival and prosperity in an economic recovery,” said Scott.

“However, the payment habits of New Zealand firms are making cash flow management increasingly difficult.”Around half of firms admit to paying their bills late – this is causing cash flow to come under increased pressure despite improving economic conditions.”

Scott said firms were indicating they would be willing to miss payments to their suppliers – the very payments that were recorded on their credit file and assessed by lenders and trade credit providers when they applied for funds.

“This means firms could find themselves unable to access credit as lenders continue their vigilant focus on risk management.”

Scott said the likelihood that a credit provider was unaware of a firm’s poor payment behaviour was very low.

The Business Payment Priorities Study follows D&B’s latest economic and risk forecasts which show that despite renewed business optimism, it could be some time before executives’ confidence is translated into business actions that support the real economy. While cash flow issues remained prevalent, business investment and hiring intentions would continue to come under pressure. D&B was forecasting real GDP growth of 1.1 per cent in 2010.

NZPA

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NZ Herald reports

A big chunk of the surviving finance company sector is unlikely to outlive the retail deposit guarantee, the Reserve Bank indicated yesterday.

In its twice yearly report on the stability of New Zealand’s financial system, the RBNZ noted that the local banks and their Australian parents had “withstood the crisis better than most” overseas, although they remained overly dependent on offshore money markets and asset quality had deteriorated as reflected in recent results.

However, Deputy Governor and head of financial stability Grant Spencer said the non-bank finance sector, “remains under pressure”.

“Strains are particularly evident in the deposit taking finance company sector where a substantial number of companies are in moratorium or receivership.”

The RBNZ said the same underlying economic issues that were driving surviving finance companies to the wall were also negatively affecting those companies that have secured moratoriums from investors, already driving one into receivership.

The comments come just a day after Hanover Finance said ongoing property market weakness meant it would be unable to make full repayment to debenture investors, as forecast when it sought their approval for a moratorium last year.

READ MORE

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For those consumers who can no longer to afford minimum credit card payments, Ethan Ewing, president of Bills.com offers tips to help consumers understand their odebt relief ptions for help, including: “Now that credit card reform legislation has passed, it’s a great time for consumers to take control of their debt,” said Ewing . “To do so, consumers need to understand the available debt relief options.”

 

Debt settlement. A debt settlement company works on consumers’ behalf to lower principal balances due, often obtaining savings of 50 percent of the total debt. The firm does not make monthly payments to creditors, but rather negotiates with the consumer’s creditors while the consumer accumulates funds for the settlement. Debt settlement firms charge consumers a fee for their services, typically a percentage of the debt enrolled or a percentage of the debt reduced.

 

Consumers who persist with a debt settlement plan can resolve their debts in two to three years at significantly lower cost than that of a debt management plan. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing and does not leave a permanent bankruptcy judgment on one’s record.

 

Debt settlement may have a negative impact on credit ratings and profiles and is best suited for consumers in serious financial hardship who cannot afford to make minimum payments on bills and who cannot afford the higher monthly obligation typical debt management programs require.

 

Debt management. Debt management companies, also known as credit counseling agencies, maintain pre-arranged agreements with credit card companies to lower interest rates on a consumer’s existing debt to a creditor-issued “concession rate.” Debt management companies collect a monthly fee from consumers, as well as revenue from the credit card companies called “Fair Share” payments.

 

In debt management plans, monthly payments decrease, but principal amounts owed do not. Consumers who are able to continue with the payment plans typically can pay off debt in approximately five years. Debt management plans also require higher monthly payments than debt settlement programs, and are best suited for individuals who are facing a less-severe financial hardship than a typical debt settlement customer.

 

Bankruptcy. Bankruptcy Attorneys concur that BK’s can leave a severe negative impact on a filer’s credit rating for many years. Credit repair is not as easy as some debt counselors may lead you to believe.  Under bankruptcy reform enacted in 2005, it is harder and more expensive to obtain than it used to be. Under the new law, fewer people can eliminate most consumer debt by filing Chapter 7 bankruptcy, taking more people to Chapter 13 filings. Chapter 13 requires consumers to pay back debt on a repayment plan (which can take up to five years), while still suffering the negative repercussions of a bankruptcy on their credit reports and public records. Generally considered a last resort, consumers considering a bankruptcy filing should speak to a bankruptcy attorney licensed in their state.

 Read the complete press release online at http://www.emediawire.com/releases/debt/credit/prweb2493574.htm

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Americans continue to hold back on credit card spending as banks slash lines of credit and charge off card accounts at a record pace. The Federal Reserve reported another large dip in consumer credit for September.

The Fed said late Friday that overall consumer credit in the U.S. contracted at an annual rate of 7.2 percent in September, or by a total of $14.8 billion. Analysts had a contraction closer to $10 billion.

September marked the eighth straight month of consumer credit declines.

Credit card debt, called revolving debt in the Fed’s report, led the way once again. Revolving debt fell at a 13.3 percent annual rate or by $9.9 billion to $889 billion. The Fed slightly revised upward the reading from August to reflect an identical 13.3 percent annual contraction rate.

Since September 2008, Americans have shed $86.2 billion in credit card debt. Although many credit consumers restrained card spending, much of the mathematical credit for the plunge can be given to soaring charge off rates at banks.

The Fed said that the annual rate of decline for revolving credit was 10.0 percent in the third quarter of 2009. In the first and second quarters of the year, the annualized rate of decline was 9.6 percent and 9.7 percent, respectively.

Nonrevolving consumer credit – like that found in auto, student or personal loans — dropped at an annual rate of 3.7 percent in September, or nearly $15 billion.

Total consumer credit outstanding in the U.S. stood at $2.455 trillion at the end of September, down from its all-time high of $2.581 trillion in July 2008. The Fed’s report does not include debt backed by real estate

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MADISON, Wis.— Concerned about proposed federal rules that would effectively eliminate its industry, The Association of Settlement Companies (TASC) recently provided the Federal Trade Commission data that supports the value of debt settlement to consumers in response to the agency’s proposed changes to the Telemarketing Sales Rule (TSR).

The FTC is seeking to create amendments—including a ban of advance fees—that would effectively eliminate a viable option for consumers who are struggling with unsecured debt. TASC outlined in a brief historical performance data that clearly illustrates the economic value its member companies deliver to consumers enrolled in debt settlement programs.

For example, based on a recent data analysis of its members, TASC estimates its members settled more than 94,000 accounts representing more than $553 million in debt in the first 6 months of 2009. This is an annual rate of more $1.1 billion in debt settled by TASC members for just 2009.

“We firmly believe that debt settlement should remain an option for those tens of thousands of consumers each year who choose debt settlement as their preferred—and often only available—program to handle their financial situation,” Chris Kesterson, President of TASC, said. “In our response to the FTC, we clearly demonstrate the value consumers receive from our companies who work diligently on their behalf each day to negotiate settlements with creditors.”

TASC is the leading trade group of the debt settlement industry. The cornerstone of TASC’s mission as an organization has always been to promote fair legislation at the state and federal level designed to protect the consumer and to promote best practices of operations by its members.

Without advance fees, debt settlement companies would have to work for free for the duration of the settlement process, which typically takes three years. No company in any industry could accept this, Kesterson pointed out.

“We look forward to working with the FTC in exploring appropriate and comprehensive ways to regulate the entire debt settlement industry, rather than only one segment,” Kesterson said

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Members of the Commercial Collection Agency Association of the Commercial Law League of America reported that for the twelve months ending in September 2009 compared to the same period in 2008, account placement rose by about twenty-eight (28) percent, reaching $17,286,448,679 in the dollars placed for collection. 

Emil Hartleb, Executive Director of CCAA stated, “This is a record account placement but there are signs on the horizon that indicate that the delinquency situation with trade receivables might be stabilizing.  The gain in account placement for the third quarter of 2009,  compared to the third quarter in 2008, was about 12%.  This is still a strong showing but significantly less than the gains registered in the fourth quarter of 2008 and the first and second quarters of 2009 compared to the same quarters in the previous year.”  Those quarterly gains were:  Fourth Quarter 2008 – 25.4%, First Quarter 2009 – 38.4% and Second Quarter 2009 – 39.5%. 

Hartleb further stated, “The third quarter of 2009 when compared to second quarter of 2009 showed a decline in placement of about eleven (11) percent.  This reflects to a certain degree the seasonality of the data but it also reflects, we believe, stabilization in the past-due accounts that many companies were carrying in their accounts receivable portfolios.  Much of these delinquencies have been placed for collection or payment plans have been negotiated with them.  This coupled with a lackluster sales environment for many companies makes a continuation of future very strong account placement questionable.”

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