Maxed out credit cards

[Louis Proyect <lnp3@xxxxxxxxx>]

(This appeared in my home town newspaper in upstate NY.)

Middletown Times Herald-Record, February 10, 2008
More and more maxed out and defaulting
Counties report slew of credit-card judgments
By Steve Israel

How can the parents of a 2-year-old pay their minimum credit-card 
bill of $70 when they must choose between buying milk or diapers? How 
can a mother of five let her kids sleep in the cold, even though she 
knows that the credit cards that bought 50 gallons of fuel oil are maxed out?

And how can parents already in debt for cars and college pay their 
suddenly soaring adjustable mortgage without turning to a credit card?

Now that gallons of milk, gas and heating oil each have soared nearly 
a dollar over the past year, thousands of cash-strapped local 
residents are forced to choose between the food that feeds us, the 
gas that moves us, the fuel that heats us and the homes that shelter us.

Many pay for the necessities with credit cards. So when it's time to 
pay those bills ? with interest rates and fees that can balloon the 
debt in just a few months ? they don't have the money. And neither do 
thousands of middle-class folks who have paid for their comfortable 
lives with credit.

Judgment rates 'alarming'

This is why judgments on credit cards ? companies canceling credit 
and ordering borrowers to pay up or lose their money or property ? 
are soaring at "an alarming rate," an official with the National 
Foundation for Credit Counseling said. That rate has been rising so 
fast in the past few months, exact numbers have not yet been tallied.

But the people who first see these judgments, workers in the county 
clerks' offices, handle so many ? 150 per week in Orange County alone 
? they can't file them fast enough.

"Amazing and horrible," said Darla Kroposki, a recording clerk in 
Orange. "We can't get to anything else." Judgments on the popular 
Capital One credit cards in Orange more than doubled from 2006 to 
2007 ? from 374 to 789.

"Frightening," said Sullivan County Clerk Dan Briggs. Last year, his 
office was swamped with real estate transactions. Now, as housing 
sales hit bottom, the clerks are overwhelmed with credit-card judgments.

In Sullivan, the first half of last month saw 65 judgments on Capital 
One. Judgments on Capital One in Sullivan also soared from 2006 to 
2007, from 341 to 584.

While Ulster doesn't separate its judgments on various forms of 
credit, the 2007 total was up about 500 from 2006.

But while the record number of foreclosures on homes makes headlines, 
the inability to pay credit-card bills of a few hundred or a few 
thousand dollars receives little publicity, in part because people 
are embarrassed to admit that debt. But those judgments signify a 
more widespread problem: More people can't afford life's necessities, 
say credit experts, whether it's food or fuel, a car or a home.

"How can I worry about my credit card when I have to feed my baby?" 
asked Robert Toscano of the western Sullivan County hamlet of 
Obernburg. He and his baby's mother, Jennifer Franklin, have seen 
their debt on two credit cards, each with a $500 maximum, balloon to 
more than $2,000 in just a few months. She works several jobs. He 
works a seasonal job, reinforcing telephone poles. He was just laid 
off, one of the thousands of American construction workers who lost 
their jobs recently. Since they don't have health insurance, they 
still owe the hospital for the birth of their baby.

'Everyone is going through it'

But even workers with so-called solid jobs are feeling the credit crunch.

"It seems like everyone you know is going through it," said Orange 
County's Caysie DeLaCruz, a nurse and mother of two who's seen her 
credit-card bills of $2,000 more than double in just three months ? 
even though she has tried to keep up with payments as she struggles 
to pay her mortgage, heating and fuel bills.

"It's out of control," said Smith Barney financial adviser Charles 
Carnes of Pine Bush, who saw credit-card defaults soar in the fall 
and summer as adjustable-mortgage-interest rates rose.

Situations like that come as no surprise to those who track what one 
describes as the "overwhelming" situation.

"As they feel the squeeze at the pump, the home and grocery store, as 
they try to keep their heads above water and their salaries don't 
keep up, they're forced to charge more and more items," said Gail 
Cunningham of the National Foundation for Credit Counseling, which 
sees more than 2 million clients per year. "And then they hit their 
limit and they can't pay."

Fuel, food on credit

It's a situation that's bound to get worse before it gets better.

Local shop owners are seeing more customers pay with credit ? or 
rolls of coins ? for smaller purchases, like envelopes or sandwiches.

"I can't tell you how many customers come in with a roll of quarters 
or put $2 on a credit card," said Bob Baron of the Kristt Co. office 
supply store in Monticello. "Things are really tough out there."

A few blocks away, Albella Pizzeria and restaurant has lowered its 
credit-card minimum from $20 to $10 because so many customers must 
charge their meals.

And now, oil companies advertise that they accept credit.

But as anyone with a credit card knows, those charges add up.

Take the woman who paid $22 for a large pizza, chicken parmigiana 
hero and large Coke at Villa Gaudio in Bullville and put it on two 
credit cards. By the time she left the restaurant, the cards had been declined.

For folks like this, who owe thousands on their credit cards and must 
struggle to afford life's necessities, help, in the form of the 
proposed federal government rebate in June, might be too little too late.

Take those young parents of the 2-year-old. By the time they pay 
their baby's medical bills, they won't have enough money to pay their 
$2,000 credit-card debt, which surely will have ballooned by then.

The only comfort for them is a small, cruel one:

"At least I know I'm not alone," said Jennifer Franklin.