|
Consumers battling debt
|
 |
September 13, 1996: 9:47 p.m. ET
Americans spending more than incomes are rising, causing debt to reach record
From Correspondent Irv Chapman
|
WASHINGTON (CNNfn) - All across the nation, banks and other financial institutions have been sending pre-approved credit cards to millions of Americans.
And the latest data shows many consumers have been using those cards. In fact, for every $1 incomes have risen over the past five years, consumers have spent $1.10. That's helped push consumer debt to record levels and has resulted in record debt, delinquencies and bankruptcies.
Despite a strong economy, 3-1/2 percent of credit card holders -- or 6 million people - are now missing payments. That statistic is at its highest level since the 1981 recession and is cause for alarm, according to Durant Abernethy, president and chief executive officer of the National Foundation for Consumer Credit.
"Only half of the households in this country have savings. We have record levels of uninsured medical expenses. We have divorces where you divide debt instead of assets. I think the consumer is stretched," he said.
The banking industry insists consumer debt is no threat to solvency although banks are becoming more cautious about new consumer borrowing.
If the nation's banks are confident they can handle the current level of consumer debt, the government's bank regulators are not about to panic over the situation. They agree that banks are in their best shape ever and say most households are doing better thanks to reduced mortgage rates, higher stock prices and rising employment.
Credit counselors say that barely half of those who can't pay their debts have lost a job or been hit with a financial emergency. Lawrence Chimerine of the Economic Strategy Institute said the other half simply don't know how to manage money --including many of the record 1 million people who declared bankruptcy last year. (205K WAV) or (205K AIFF)
Banks worry that bankruptcy is becoming trendy and say many lawyers have made it too easy to file. Overall, bankers insist more debt comes with more prosperity. They say debt is only a problem for individuals who can't handle it.
|
|
|
|
|
 |
|
