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Stagnant wages linked to surge in credit card delinquencies

Consumers in Ohio and around the country are finding it increasingly difficult to keep up with their monthly bills according to a report from the Federal Reserve Bank of New York. The New York Fed says that credit card delinquency rates in the United States rose in both the first and second quarters of 2017 and now sit at 2.47 percent, and financial sector giants including Discover, Chase and Capital One have all reported a sharp increase in the number of revolving debt accounts falling into arrears.

Experts say that rising consumer debt delinquencies are partly a reflection of more flexible bank lending policies. Underwriting standards were tightened considerably following the financial and credit crisis of 2008, but banks have been willing to take more risks in recent years as the economy emerged from recession and began posting impressive growth and job creation figures. Riskier lending will generally lead to higher rates of default, but analysts say that stagnant wages are also an important factor.

Consumers often turn to borrowing when their wages are no longer sufficient cover their monthly expenditures, and credit cards provide them with a simple and convenient way to pay for major purchases over time. Banks are now more willing to lend to individuals with troubled credit histories and limited incomes, and experts are worried that an unexpected economic downturn or upheaval could lead to a new financial crisis.

Creditors and debt collectors can be extremely aggressive when unsecured accounts fall into arrears, and harassment and abuse are not uncommon. Attorneys with experience in this area could explain to those with unmanageable financial situations that the nation's bankruptcy laws are designed to provide second chances, and they could also point out that filing a bankruptcy petition generates an automatic stay that requires creditors to at least temporarily cease all collection efforts.

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