At a time when lenders are complaining that too many consumers are using bankruptcy to escape paying their debts, several of the nation's largest credit card issuers are making it harder for troubled debtors to repay, and thus increasing the likelihood that they will declare bankruptcy, a consumer study has found.

These and some smaller credit card companies are boosting the interest rates they charge card holders who enter debt-management programs under the auspices of the various debt counseling services around the country, the study by the Consumer Federation of America found.

Other issuers, which charge high rates generally, are holding to those levels for troubled borrowers, the CFA found.

Historically, many creditors have reduced or eliminated interest charges to debtors who are in formal "workout" programs. The assumption is that halting the charges gives the borrower a better chance of actually repaying at least the existing debt, and that in turn gives the lender a better chance of recovering some or all of what is owed.

Since credit card debt is generally unsecured, a debtor who goes into bankruptcy is often able to expunge it, leaving lenders with nothing.

A debt-management program "is a better situation for them than if the consumer has to declare bankruptcy," said Travis Plunkett, CFA legislative director.

CFA officials said they aren't sure why card issuers are hardening their stance toward troubled consumers. Stephen Brobeck, the group's executive director, said he could only assume that "it is part of their continuing drive to increase profitability" through increased interest charges and higher fees.

At the same time, as reported last month by my colleague Kathleen Day, many lenders are cutting back on the payments they make to debt counseling agencies. Lenders have typically given debt counselors around 15 percent of the amount repaid by the agencies' clients, but in recent months many lenders have cut that back to 10 percent or even 6 percent.

"They are starting to pull the rug out on the last debt stop before bankruptcy," Plunkett said.

Some issuers disputed the CFA findings, calling them misleading.

A spokesman for MBNA said the big Delaware-based card issuer treats troubled borrowers on a case-by-case basis and will set rates anywhere from the 15.9 percent cited by the CFA to zero, depending on the borrower's ability to pay.

"One of the tools you have to work with . . . is to lower their interest rates," he said. "Lower interest means more of their payment goes toward their [principal] balance."

Credit card issuers and other lenders have been pressing Congress to redraw the nation's bankruptcy laws, arguing that it is now too easy for debtors to file for bankruptcy protection and wipe out thousands, sometimes tens of thousands, of dollars in unsecured debt.

The industry and consumer groups have been trading rhetorical salvos over who is to blame.

Consumer groups contend that banks and others all but shove credit down consumers' throats with the billions of solicitations they send out every year. Also, lender advertising encourages card holders to spend beyond their means, critics say.

The industry charges that many borrowers simply cannot control their spending and that it is unjust to let so many off scot free when, according to lenders, they could pay at least part of what they owe.

Oddly, debt-management plans resemble the kind of bankruptcy workout lenders say they would like to see more of--where a debtor curbs spending and pays back part or all of the debt over time.

But some of the interest rates the CFA says are now being charged such debtors make it tough if not impossible for them to repay. At $350 a month, which debt counselors say is a typical rate of repayment for many debt-management plans, a borrower with $25,000 in debts could pay for a lifetime and never clear the debt on some cards, according to the CFA.

On the other hand, some issuers are cutting rates for troubled debtors. CFA officials noted that debtors who fear they are getting into trouble should consider switching their balances, or as much as they can, to these issuers.

Brobeck acknowledged that this is hardly a just reward for issuers who try to be helpful, but Plunkett noted that many debtors recover to become excellent customers, and surveys show that those who have been helped by creditors at a time of need become very loyal to those creditors.

Many credit card borrowers run into trouble when their income suddenly drops, often as a result of illness, unemployment or divorce. In such cases, there may be no alternative to bankruptcy.

But financial planners and other experts say many other consumers slowly slide into trouble, which is made easy by the low minimum monthly payments and easy access to new credit offered by banks.

In these cases, consumers who see their credit card balances climbing should take a hard look at their spending and work to bring it down. Credit card debt is very expensive; rates are usually high, and generally the interest is not tax-deductible.

People with steady incomes should make it a priority not just to keep up with their credit card payments but to pay their balances off and keep them off. Credit cards are great for convenience use and for emergencies, but as a source of credit, they should be just about your last choice.

Paying Off That Debt

This chart shows the rates charged to troubled card holders in debt-management programs by the 10 largest credit card issuers nationwide, ranked by size of credit card portfolio, and how long it takes to pay off debt of $10,000 and $25,000 with monthly payments of $350.

Issuer* Interest rate Months to pay off Months to pay off

$10,000 at $25,000

$350 per month at $350 per month

Citibank 9.9% 33 months 108 months

First USA/Bank One 6.0 31 89

MBNA 15.9 36 222

Chase Manhattan 6.0 31 89

Bank of America 0 29 71

Capital One 19.8 39 Lifetime

Household Credit

Services 9.0 32 103

Fleet 9.5 33 106

Providian 12.0 34 126

Wells Fargo 10.0 33 109

SOURCE: Consumer Federation of America

Some Rate Changes

Of the 10 largest credit card issuers, four recently have raised interest rates they charge consumers who enter a debt-management program. One lowered the rate and five have made no change.

Issuer* Current interest rate Change from previous rate

Citibank 9.9% +1.9 percentage points

First USA/

Bank One 6.0 +6.0

MBNA 15.9* +5.9

Chase

Manhattan 6.0 -- 2.0

Bank of

America 0 None

Capital One 19.8 None

Household Credit

Services 9.0 +3.0

Fleet 9.5 None

Providian 12.0** None

Wells Fargo 10.0 None

NOTE: For example, Citibank used to charge 8 percent, but now charges 9.9 percent, an increase of 1.9 percentage points

*Will consider lower interest rates based on account demographics.

**Interest rate will not be reduced below 9 percent.

SOURCE: Consumer Federation of America