New debt management plan to help struggling borrowers pay off debt in US.

Ten largest U.S. based credit card issuers have introduced a new debt management plan (DMP) for assisting consumers facing extreme financial hardship to pay off debt. The credit card companies have agreed to the Call to Action issued by the National Foundation for Credit Counseling (NFCC) because of rising defaults and charge offs. The Call to Action DMP offers lower rate of interest to debtors as compared to a regular DMP. It also encourages consumers to set aside funds to tackle emergencies so that they do not fall back into debt again.

What is Call to Action?

The NFCC had issued a Call to Action in September, 2008, asking all credit card companies to agree to more reasonable repayment terms for consumers who seek help from them to pay off debt. The Call to Action initiative encourages individuals facing extreme financial hardship to enroll in a debt management program.

How can a consumer qualify for the new DMP?

Consumers can qualify for the new debt management plan after a certified counselor assess their financial situation and determines that they are facing extreme financial hardship. The creditors must also agree to the fact that the consumer is in financial crisis and will not be able to pay off debt without additional help. 

What are the benefits offered by the new DMP?

Consumers can benefit by Call to Action debt management plans in the following ways:

• Free budget counseling: A certified counselor administers a budget counseling session and determines the credit needs of the consumers. The counselor provides borrowers with free consultation to help them manage their debts.

• Reduce finance charges: Like a regular DMP, the Call to Action plans help consumers reduce the rate of interest on their bills and also eliminate late fees and over limit charges. The new DMP also makes favorable adjustments to finance charges.

• Opportunity to save: The modified debt management plans allow struggling borrowers to save each month $25 to $200 more than a regular DMP.

Under the new DMP, debtors who have recently lost their jobs or are facing challenging circumstances will owe a minimum 1.75% repayment rate. Other consumers will be allowed to make monthly payments as low as 2% of their outstanding balance. Call to Action DMP not only assists consumers in distress to pay off debt but also provide them with suggestions to help them manage their finances effectively.