TransUnion has announced newly updated TransUnion Account Management and TransUnion New Account scoring models claiming that "both models experienced improvements, over the previous versions, in their ability to identify bankrupt accounts -- in some cases by as much as 32 percent."   » Continue Reading

Frontier Airlines and First Data have announced "an agreement with respect to the continued processing of Frontier's Visa and MasterCard charges without any interruption. The agreement provides First Data with appropriate protection for continuing its processing work for customer credit card purchases on a "business as usual" basis."   » Continue Reading

In an article titled 'First Data: We were surprised, too', David Milstead reports for the Rocky Mountain News that First Data spokeswoman Staci Busby said today that "we [First Data] were taken by surprise when Frontier Airlines filed for bankruptcy. In our numerous conversations with them, they never informed us that filing for Chapter 11 was even a consideration."

Bob Lawless writes on the Credit Slips blog: "The March 2008 bankruptcy data showed that the U.S. average filing rate went over 4,000 per day for the first time since the 2005 bankruptcy law's effective date."

Felix Salmon writes for Conde Nast Porfolio about credit card holdbacks, merchant acquirers and Frontier Airlines.   » Continue Reading

Chris Walsh writes for Denver's Rocky Mountain News about the Frontier Airlines bankruptcy filing late last week and the need to move quickly to resolve a dispute with its credit card processor, First Data Corp. Walsh writes that "the carrier initially will look to resolve a dispute with its credit-card processor, First Data, over the amount of money the company can withhold on Frontier's ticket sales."

Aldo Svaldi writes for the Denver Post about Frontier Airlines chapter 11 bankruptcy filing which resulted from what Svaldi reports as a significant increase in the reserve requirements that First Data, as Frontier's merchant acquirer, was imposing. [Editor's note: We first reported the Frontier/First Data news last Friday morning here on Payments News.]

Frontier Airlines this morning announced it had voluntarily filed to reorganize under Chapter 11 of the U.S. Bankruptcy Code late last night. The airline is continuing normal flight operations today.   » Continue Reading

The New Yorker's regular financial columnist, James Surowiecki, writes this week about the US bankruptcy laws - suggesting that the changes to US consumer bankruptcy law made in 2005 'ended up making the economy less dynamic and less flexible.' Surowiecki mentions a recent paper by John Armour and Douglas Cumming that 'found a close correlation between the nature of a country’s bankruptcy laws and its rate of self-employment.'

Visa and Experian announced an alliance to create unique risk management products for financial institutions. According to the companies, "the alliance intends to deliver a series of jointly developed risk management products designed to help financial institutions reduce credit and fraud risk losses."   » Continue Reading

Katherine M. Porter, Associate Professor at the University of Iowa's College of Law, has written an article titled "Bankrupt Profits: The Credit Industry's Business Model for Postbankruptcy Lending" that "examines what the credit industry's behavior toward recently bankrupt families reveals about its internal profit models and the likely causes of consumer bankruptcy."

In an Op Ed piece in today's New York Times titled "Banks Gone Wild", Joe Lee and Thomas Parrish write about how credit card issuers are seeking “revolvers” - people "who are likely to pay little more than the monthly minimum — and who eventually find themselves in thrall to mushrooming interest payments, abundantly garnished with late fees." They go on to ask whether anyone can afford to pay debts charged a 30 percent interest rate?

Richard Piersol writes for the Lincoln (NE) Journal Star about the experiences of local credit counselors who conclude that "it’s not so much wild spendthriftiness and irresponsible abuse of credit card debt" that leads to personal bankruptcy - rather, "medical costs from health troubles almost always lead to misfortune in employment and loss of income. Then comes bankruptcy." A new report from the Nebraska Appleseed Center for Law in the Public Interest titled "Debt Trends in Nebraska" (PDF) examines some of the issues in more detail.

Bloomberg reports that the Federal Reserve issued a report (PDF) yesterday "downplaying assertions that the banking industry contributed to bankruptcies by offering credit cards to customers who may be unable to repay the debt."

Payment experts at Auriemma Consulting Group (ACG) suggest that by mid-year, bankruptcies should settle back to 2004 levels, thus significantly lower than the 2005 experience. So much for the good news. The firm is also convinced that overall bad debt levels are unlikely to decline simply because of stricter bankruptcy tests.   » Continue Reading

Helen Mirza of the Chicago Federal Reserve Bank has written an overview article about the new bankruptcy law (PDF) that took effect last fall.

Almost one-half of all U.S. adults (45%) say their household does not have enough money in liquid savings to cover at least three months of living expenses, according to a new survey conducted by Harris Interactive and commissioned by LexisNexis Martindale-Hubbell's lawyers.com.   » Continue Reading

Christine McManus reports for the Coloradoan (Ft Collins) about the rate of US bankruptcy filings following the effective date of new bankruptcy laws last October and the surge in filings that preceeded it.   » Continue Reading

Andrew Ellison reports for the The Times on a forty percent growth in the number of personal bankruptcies in the UK during the last quarter of 2005.   » Continue Reading

Timothy Egan reports for the New York Times on how credit card issuers are pursuing newly bankrupt consumers - because it's harder for them to escape new credit card debt.   » Continue Reading

Liz Pulliam Weston reports for MSN Money on how credit card issuers and other lenders may be finding the recently enacted changes to the bankruptcy law costing them more.   » Continue Reading

The Financial Services Roundtable has announced new consumer education efforts, including a new Web site to provide consumers with additional resources and accurate information on financial management and the new bankruptcy system and guidelines.   » Continue Reading

The Des Moines Business Record shares an editorial opinion about the level of US consumer debt and what it all means.   » Continue Reading

Timothy Egan reports for the New York Times about the upcoming changes in the US bankruptcy law that takes effect in October and the effects it is having on bankruptcy filings in advance of the changes.

Melissa Allison reports for the Seattle Times on a provision in new bankruptcy law that requires consultation with a credit counseling agency prior to filing for bankruptcy protection.

"The ultimate nightmare scenario is that families struggling with serious debt trouble will be forced under the new law into the hands of unscrupulous credit counselors," said Travis Plunkett, legislative director for the Consumer Federation of America.

Much of AFS's revenue goes to a for-profit company called Amerix that handles its advertising, negotiations with creditors and disbursement of clients' payments to creditors.

The North Seattle Community College Foundation, like some other college organizations, got into credit counseling after being approached by Maryland-based Amerix.

The idea was for the new agencies to work with financially strapped consumers and put some of them into debt-management programs, which Amerix would service for a fee.

Caroline Mayer reports in the Washington Post on how quickly following emerging from bankruptcy consumers begin receiving new credit card offers.

Michael Schroeder and Suein Hwang report in this morning's Wall St. Journal on the bankruptcy legislation nearing passage in Congress.

Credit-card companies, banks and their allies say the legislation, the biggest change to U.S. bankruptcy law since 1978, is an overdue correction to a system that is biased in favor of borrowers and too often protects deadbeats. Opponents condemn the bill as an overreaction that will inflict pain on consumers overwhelmed by debt that they can't pay because of health problems or layoffs.

Ronald Mann has posted a new paper (PDF) that examines the relationship between credit cards and consumer bankruptcy in various countries.

The paper analyzes data on consumer credit, credit card use, and consumer bankruptcy in the USA, UK, Australia, Canada, and Japan. Mann concludes that there is a statistically significant relationship between the increased use of credit cards, on the one hand, and consumer bankruptcy, on the other.

Mann is Visiting Professor of Law, Harvard Law School and Ben H. & Kitty King Powell Chair in Business and Commercial Law, Co-Director, Center for Law, Business & Economics, University of Texas School of Law,

Kathleen Day and Caroline Mayer report for Sunday's Washington Post about the proposed changes in US bankruptcy law that are close to being approved by Congress.

The stated goal of the new legislation, which was pushed by the credit card, auto and retail industries, is to end abuse of the bankruptcy system. But many bankruptcy experts worry it will only add cost and red tape to the process of filing for bankruptcy and not necessarily curb abuse.

As the Senate prepares to vote on changes in bankruptcy law this week, Kathleen Dan and Caroline Mayer report in a front page story in this morning's Washington Post on how credit card penalties and fees compound the problems of many financially strapped consumers.

According to R.K. Hammer Investment Bankers, a California credit card consulting firm, banks collected $14.8 billion in penalty fees last year, or 10.9 percent of revenue, up from $10.7 billion, or 9 percent of revenue, in 2002, the first year the firm began to track penalty fees.

William McLeod writes an op-ed piece in this morning's Boston Globe about bankruptcy reform legislation now under consideration in Congress.

What's missing in this new legislation? Any change to the current practice of lending money to just about anyone. These days, there is little difference between some credit card companies and a loan shark. Of course, credit card companies do not break legs, they just increase the percentage rate if a payment is late, add a late fee, add an overlimit fee, and some even charge an annual fee for the privilege of getting more fees. There are many people trying to get out of debt, but they are being thwarted by the perfectly legal fees and interest being levied against them.