Subscribe to this BlogCredit Card Reform: What Might Have Been
You’d think in a year when major banks received billions in taxpayer aid and face billions more in defaults on credit card debt, tackling anti-consumer practices by credit card issuers would be a slam dunk in Congress. There’s certainly been lots of buzz about changes coming to the credit card industry, served up by feisty Democrats eager to show American consumers that they're looking out for the little guy. The House approved Rep. Carolyn Maloney’s Credit Card Holder’s Bill of Rights in late April and this week, the Senate is wrangling over Sen. Christopher Dodd’s Credit Card Accountability, Responsibility, and Disclosure Act. It’s strong sounding legislation but the powerful banking lobby is hard at work on Capitol Hill trying to water down the toughest provisions. Unfortunately for consumers, the bank lobbyists are having some success.
Here are just a few provisions that have been dropped or not made it out of committee:
- Speedy reform. Maloney’s original bill included a provision that would require card issuers to implement changes within 90 days of the bill becoming law. Maloney’s bill is very similar to new regulations that the Federal Reserve approved in December , including banning card issuers from raising rates on existing balances unless your payment is late and giving consumers more time to make payment before fees kick in. All that's good but the Fed’s new rules don’t kick in till July 2010. And ever since the Fed regulations were made public in December, credit card users have been slammed with rate hikes and higher fees, which consumer advocates say is a purposeful move by banks to soak consumers before the new rules kick in. Now the only part of Maloney’s bill that will go into effect within 90 days of signing is a provision that would give consumers 45 days notice that their rate is being increased.
- An end to universal default and multiple overdraft fees. According a report in the Huffington Post, an earlier version of Dodd’s bill explicitly prohibited universal default (that's when a card company raises a user’s rate when they are late paying another creditor) and limited the number of overdraft fees that hit a cardholder when a cardholder goes over their limit. The latest version contains neither of those provisions.
- A cap on rates. Sen. Bernie Sanders, a Vermont Independent, proposed a provision that would cap credit card interest rates at 15%. Noting that one-third of credit card holder’s pay interest rates higher than 20% and up to 41%, Sanders said this would end “loan sharking” by banks and consumer advocates said the provision would put real teeth in the bill. That effort was defeated last week.
President Obama asked Congress to deliver a credit card reform bill that he can sign by Memorial Day, one that would provide “strong and reliable protections for consumers.” Sure some reform is better than no reform. But let’s hope the legislation that lands on President Obama's desk is still worth signing. Tell us: What do you think would be the most effective change to credit card practices?
- Donna Rosato
American’s with credit cards that pay their bills on time and do the right thing.
DON'T USE YOUR CREDIT CARDS ANYMORE
I have a business visa card from one of those popular banks who send clients on junkets. I pay it early and I usually either pay more or round it off to the closest hundred higher than what is owed.
I received my bill last Friday. It actually wasn’t asking for any payment because I had paid so much that it was caught up past what it should have been. Of course I am going to pay it anyway. This card has a 9.99% interest rate on it, which I do not consider a bad rate. I have been using it above others because the rate was so good.
I just happened to look at the amount of interest it accrued for the month; it seemed awful high in relation to what was owed on the card. To my utter horror, they had raised my interest rate to 17.99%. I called to find out why, because as I said I have never been late.
The young lady who answered my call told me that they had sent a letter telling me that if my account was not closed by the end of April, my rate was going to be increased to 17.99%. First of all, I never saw the letter, but that could be my own fault because they are always sending me “checks” and I just grind them up. It really doesn’t matter though, because I don’t have the 13,000.00 plus to pay it off anyway.
I waited until Monday to call and talk to a supervisor. He told me that because I didn’t answer his letter in time, I was going to be stuck with that interest rate. America has to be told of this. He did give me the address of the business card and consumer correspondence, so I can complain to them, but he couldn’t give me a name of someone or a phone number where I can call.
I told him that I intended to call my congress rep and anyone else I could to set this right, he basically told me in a nice way that I could do that, but it won’t help. So apparently they already have had their lawyers on this and know that we can’t do anything about this. They have to be stopped, and I don’t know what can be done to stop them. This is not fair, and congress in their haste to look like they were actually doing something good, forgot to think about what would happen to the rest of us who pay their bills. They passed this law without any thought for the rest of us, or they may have thought about us and just didn’t care, I don’t know.
Had bank of america raise my Michigan AAA credit card rate to 29% with a surcharge of $10.00 per charge or have the option to leave the card at a favorable rate to pay off the debt or balance and have BOA cancel my credit card.
Advanta just canceled my business credit card. No questions asked. It had a zero balance.
????Money will be under the mattress and will finance immigrants like my uncle did for 60 years. It's called money lending where u lend money to poor people to start a business and then arrange for timely payments when u show up in person.
Forget the banks for the struggling class and soon the middle class. The wealthy do not need the banks for personal finances. We are going back to the turn of the last century standards for financing personal and small entrepreneur enterprise.
If banks are not friendly to the working poor and middle class they do not have a future in the USA. The news formally forcasted the USA would have 8-12 major banks in the next 20 years. So be it! Canada has less than 12 major banks so why not the USA?
Hidden cash is next! Unless the government grandfathers what the banks are doing to to credit card holders and lending practices.
Donald Trump files bankruptcy many times and still gets financing. Millions were wrote off. Poor John Doe can't pay $5000 cc bill. Which is worse? I work as a cc rep and the wealthy pay off bal in full every month. It's the poorer people who keep the cc comp afloat.
We need a bill that defines “usury” and prohibits CC companies from ever increasing interest rates a certain percentage over prime, aiming for what now would be about 15% as the top rate. Banks need to get out of the trickery bisness. Lenders who are in the usary/ trickery bisness are called Loansharks. Out banks right now have gone into loansharking.
Credit cards are for when peole need them, during short term illness, to cover small bisness costs and to help with the kids braces. Let's go back to having a banker who co-partners with us to assist in all having a better life. Today we have banks taking more than their share of money from honest, hard working Americans.
Problem with the legislation is that those of us that pay off our credit cards will pay for the irresponsible…as always under Obama. The banks are now allowed to charge interest as soon as you swipe your card so good-by to not paying interest. Also, the banks will raise the interest rate from an average 15% to 20%. So, the responsible people will now pay interest for every charge….no more hurry to pay-off.
Thank you, BR. Well said.
This Credit Card Bill would not be needed if consumers paid off their balances and read the terms and conditions.
Does a 30% interest rate matter if you don't carry a balance?
There are exceptions… Huge medical bills, lengthy unemployment, but an emergency fund should cover most extenuating circumstances.
The most effective change to credit card practices? President Obama must sign into law a comprehensive bill which includes the following: 1) prohibits the universal default gimmick, 2) defines "usury" and prohibits CC companies from ever increasing interest rates higher than 15% (15% is a fantastic investment return and remember, CC co's don't just receive interest pymts from you and me, CC co's also have streaming in fixed percentages from each purchase charged), 3) prohibits the current pymt-allocation trickery of disallowing you and me to designate how much of your monthly pymt pays down separate balances at differing interest rates. The average cc customer wants to act responsibly in managing their revolving debt and that means aiming to pay off the highest interest rate balance first. 4) Prohibits the use of legally dense language in the application for credit and any subsequent 'offers' to change the terms of the previously agreed-to-contract. E.g., my CC co sends me a notice they are increasing the APR% "effective with your JULY 2009 statement" and clarifies the higher interest rate takes effect "the first day of your billing cycle that includes July 1, 2009." WTF?!? Can't CC Co. just state the actual date they plan to jack-up my interest rate? There is never any need for this type of obfuscation about an important change that will impact how my family handles this increase in revolving debt. 5) Prohibits the arbitrary and unilateral lowering of your credit-line limit and/or BARS THE CREDIT REPORTING AGENCIES from factoring in recent (Sept '08 to foreseeable future) reductions showing up on CC bills. This financially devastating step taken by many CC co's without bothering to gather facts about the actual economic status of their customers results in ruining their credit scores.
The CC Co's are suffering from the same illness that afflicted Wall Street and required us to bail them out: GREED. CC Co's can turn a nice profit without gouging their customers, and with We The People getting regulatory mechanisms in place to prevent the unregulated, unbridled greed of free-market capitalism, we just might climb out of this current world economic depression before … oh, say … 2012?
How long have people "known" that credit cards are "evil" and their fees / rates "criminal"? Quite awhile…but you still signed up for one, right? Are credit card companies agressive in their tactics? Are their measures punitive if you give them room to act? Yes, very.
That said, this is pretty plainly stated in the fine print! Everything from default rates to the priority of how payments are applied. Everything. A lot of you are saying, "no one reads that though". Ok fine, but don't complain when you are on the hook for more than you can handle due on a loan that you willingly signed up for (for those that are on the hook for medical bills etc., I'm truly sorry) but neglected to make the effort to understand. Funny, this sounds disturbingly similar the a lot of the mortgages that were taken out.
Bottom line, you are the only one in your corner looking out for your best interests. Everyone else, corporations included, are looking out for theirs. So spend an extra 10 minutes reading a document in order to understand how and why it could come back and hurt you. If you did that, you will understand your rights, your recourse and how to avoid this from the outset.
Unfortunately, with the way these docs are structured, you can bury yourself in a hurry. But at the end of the day, most people got themselves in that position by yielding to instant gratification and buying stuff they can't afford instead of excercising fiscal responsibility and saving. Not all, but most.
Let's be honest…most Americans' defnition of NEED is laughable. We're just lazy, materially driven and creatures of convenience. I largely put myself through private college (thanks to my folks in part, student loans and grants)…but I have high 5 figures of debt that I have rolled over every year on credit cards at 0%. I financed my education for an annual transfer fee of $75.
Credit cards are a valuable tool…you just need to use that muscle in your head, exercise some personal restraint and start expecting other people to look out for you.
It is my understanding that the new rules will not allow credit card companies to raise rates on over limit unless the card holder has agreed to allow going over his/her limit, and that interest rates on balances cannot go up unless the payment is more than 60 days late. This is a sufficient compromise from my standpoint, and nothing less is ethical or acceptable.
That said, anyone who believes that interest rates above 15% are OK for any reason,(let alone 20% to 32%) needs to have their head examined. Rates should be a max of 5% over prime and 10% over for high risk individuals. Current rates are criminal and have been sanctioned till now by our federal government and a few states. Does anyone really believe that our economy is going to be hurt by low income people not having availability to credit with rates that run them into bankruptcy? Consumers are in debt for life. Our excessive debt is exacerbated by ridiculous interest rates that do not allow debt to be paid down. Even the mafia will reduce these rates by half. Banks do not need to retain high pay executives and bonuses who figure out numerous ways to shaft the public. The entire capitalistic system for all business requires conservative, sound banking practices. A bank's job is to borrow money and loan it out for profit on the spread. We have seen that when banks get greedy and gamble, the entire world economy can go into a depression.
If you want to see what real unsecured interest rates should be, open up the credit card business to all local and regional banks and watch credit card rates tumble as competitions improve productivity and efficiency. I am sorry, but the entire financial industry is about to be restructured as we rebuild an econony that is based upon viable goods and sevices that consumers want, and not a false economy of flipping paper money and exotic derivitives to make money.
Limbaugh started a rumor today that he was aware that certain (unnamed)Banks and such are going to start charging interest from the day that the charge is made. Additionally – all the 'perks' associated with the cards are 'going away' such as: airmiles, gasoline, rebates, etc. Any truth to this nonsense – or is it just that – nonsense. Almost seems believeable – all part the 'hope plan' of "you ALL will have to share in the 'pain'"
The most important change that Congress could make would be to CAP the rate that could be charged. How many millions of Americans are being charged rates in excess of 20% TODAY on credit card debt. These may be credit card rates that started at 0% and then slid up rapidly due to all the other devious practices. Roll the rates back to reasonable levels and folks can get caught up. If you don't allow rates over 15%, card issuers will make more prudent decisions regarding the amounts extended. The risk/reward decision will be more balanced.
Comment #1
I booked 2 rooms at Best Western Heritage Inn for my son and his teacher, regarding a Key Club meeting from school rooms booked through travelocity.com on my Bank of America credit card charging $204.30. My son and teacher reported at the hotel and were refused to get the rooms, because the credit card was on my name, and my son was under the age of 18. Then the teacher had to pay the rooms under her credit card for that event, which I paid to her. I recieved a bill even though the hotel staff promised that I will not be charged. I called and explained to the bank about the charges, and the bank advised me to call travelocity. I explained the situation to travelocity to get the credit, and they gave me $159.04 out of $204.30, using the excuse that they used the rest of the amount to pay the hotel. Therefore, I lost $45.26 just for nothing.
Comment #2
I called one of the bank of americas loan officer to refinance my home loan with a less interest rate. While discussing, he gave me high hopes and asked for my credit card number to charge any fee. I have not turned in any papers yet, but I have received a bill of $ 450.00 on my credit card. When I called to inquire about it, I was told that this bill is for locking the interest rate and also someone came to appraise the house, but that fee is refundable if the deal will go through which doesnt look like. Because, they will refinance 80% of the appraised price of the house. Therefore I have to put in around $24,000 plus this and that and finance charges around 8,000 dollers. Which does not look like that I can meet that requirement. Therefore it seems to me that I will be loosing some money being charged on my credit card. This is for your information please. Thank you
Eh… what did we expect? This is government we are talking about after all. I bet most of the politicians hand out with the executive officers of these issuers. They would not have money to campaign with without them… special interest that is. Since when did "special interest" become the common interest? The founding fore-fathers would have heads rolling for stuff like this… yet we keep taking it. Its really crazy.
What people need to do is stop squabbling over the scraps and peices that these people leave us and make a stand.
Imagine the bargaining power of 20% of all Americans closing their accounts with a single bank/issuer? We need to "boycott" people. It has been the only weapon of measure with real teeth against "the man" for over one thousand years.
How about we start with BOA?
Any bank or institution that issues credit cards has, literally, a license to steal. They're no different than the mafia. Its just that simple.
Your only chance to deal with their arbitrary power is to have the means
to eliminate that debt at any time. Otherwise, you are their hostage and they will rape you, financially, whenever they choose.
Its important to recognize that banks are not your friends. That should be evident from all that you see, hear, and read.
1)End the ability of credit card companies to solicit individuals particularily through unwanted mail.
2) regulate credit card companies on interest rates and hidden charges that are market based.Since there is no transparency on what credit card companys are doing they are essentially
price fixing. Why is a mortgage 6% fixed but credit cars are 20% plus
3)Restrict credit card companies from sharing information with each other
I don't mean to seem harsh but there is a good reason that credit card companies are charging you more interest on your cards even if you have paid your monthly minimum payments. You have a loan out at a very high interest rate. This in turn makes them extremly suspect on your ability to handle your finances and a at risk customer. Lets just say they have put you in the "stupid" file. That is why they are are raising your rates and lowering your credit limit and making a mint off of you. There are many other places availble to get loans (provided you have good credit) at interest rates 1/3 of what the credit card companies charge you.
I get treated royally by my credit card company. I have had several occasions where I have sent the check in and they posted it late and they charged me interest. I quickly called and they offer to take it off the bill before I even get it out of my mouth. They don't want to lose me as a customer.
With credit card defaults at an all time high they cannot afford the risk of certain customers so when they raise your rate to 30% and lower your limit they are saying we don't really care to loan you any more money becasue you are a bad risk. You are into us for too much and we need to cut that risk. Frankly as a taxpayer that has bailed out millions of idiots who did not understand the mortgage they were signing I don't want to repeat that with a bunch of credit card users that are using the last entity standing where they can get a loan to continue to try and justify a unsustainable lifestyle.
Granted there are circumstances that are beyond peoples control and I feel for you. But again, that is why you have money in "safety" fund that will allow you to pay for those unexpected (reasonable) expenses like a car repair of other surprise that might come along. If you don't have one equal to 6 months living expenses then start one. Does it involve sacrifice, hell yes. But it will give you peace of mind and not put at the mercy of a 30% interest credit card. If we are too harsh in regulating these guys and cap the rates they can charge then nobody will get credit. They will just quit offering it.
To me, this bill is "business as usual". How sad. I guess what we the people need to do is stop using credit cards, or paying them in full every month.
We need to vote with our wallets. My credit card company shot my rate up from 7% to 27% for no cause. Chapter 13 took care of them.
I agree with the many of the commenters that some of the practices employed by credit card companies (e.g., universal default) may seem unfair. I agree that they are not just, but unfair? I'm not so sure.
If you really read the disclosure statements printed by credit card companies ("the fine print") it basically says that the credit card companies reserve the right to do any thing, at any time, for any reason. In other words, your promise of 7.9 percent "fixed" is worthless, because the card company can drum up an excuse to hike your rates.
So my advice is to go into this with your eyes open. If you can afford to not carry a balance on a credit card, by all means do so, as if you do carry a balance, you may end up getting raked over the coals. If you can't afford not to carry a balance, just realize what can happen.
Credit card companies apparently have succeeded in allowing themselves to change the loan terms unilaterally at any time. No other types of loans (mortgages, car loans, student loans) allow the lender to do this. In a way, credit card companies are worse than loan sharks; at least (I believe) loan sharks do not change the terms.
But for all of those complaining that you need the relief from the unfair practices of credit card companies, ask yourself the following: Did you actually read the disclaimer before accepting the card? Did you think about the worst thing that could happen if you carried a balance? Or were you just so anxious to get the credit that you ignored these things?
Are credit card companies actions misleading? Perhaps. Unjust? I think yes. But unfair? If you were given terms of a loan that you accepted, whose fault is that?
To all of those of you who say that its "your own fault" or that people are "too stupid" for going into debt (looking at you Mark from Dallas), here's what I have to say… Are you kidding me?
Mark, how would you feel if lost your job and needed to borrow money from a friend and then a few months later they said "I'm now going to charge you 30% interest on that money you borrowed from me". Do you think that's fair? I guess that'd make YOU pretty "stupid" then for losing your job and needing to borrow money, wouldn't it?
It should NEVER have been legal to allow Credit Card companies to adjust the rate on previous balances. The clauses "we can change your rate any anytime" would be like signing a contact that says "this contract can be changed at anytime". That defeats the purpose of having a contract! Its extortion.
The Government's job is to try and protect its citizens. There's a reason why things are illegal: it may be "your fault" if you get addicted to cocaine, but that's why Government makes it illegal to have it.
Allowing Credit Card companies to charge 30%+ interest rates plus $40 if you're a minute late or a dollar over is criminal. There's NO ONE on this planet that can afford to pay 30% interest on a loan.
Its the job of government to set limits of what's reasonable. No credit card should be allowed to have an interest rate above 15% nor have annual fees above $50 per year. Period.
If that means that a large number of Americans can't get credit, then that's okay because they'll be better off without it.
Nooooooooooooooooo……… credit card reform at the expense of allowing guns into National Parks. Say it ain't so.
A shameful, shameful move by the party of no, but a great way to protect big business. This will come back to haunt Coburn.
Although Tom from St. Louis may be right in some instances, that doesn't always apply. What about the customers who are good customers and still get screwed? One of my cards I've had for almost a year and a half now. My last statement showed my interest rate had gone from 10.5% to 27.5%, with never having a late payment, never going over the balance and never receiving notice that it would change. I know I'm not the only one out there this stuff happens to, so Tom explain to me how my rate nearly tripling in my own fault.
Re Mark from Dallas. I agree people need to be aware of the provisions of the credit cards and act responsibly. The banks, however, do take advantage. I have alway only had one credit card at a time. I have always paid my bills on time and made minimum or more than minimum payments, but twice I have been hit with increased interest rates. No explanation was made. Each time I paid off the card and closed the account, but if I not been able to do that the payments would have increased significantly.
Neither the banks nor the consumer can be blamed for all the ills but both have to take responsibility and be fair in their transactions.
When are people going to realize, the only way to win is to NOT play. This was a lesson from the movie Wargames back in the 80's. Get yourself a debit card and use it like a credit card. Your available credit is what you have in your checking account.
It's all bull. Credit card companies reinforce the "capitalist dream" of getting all your desires *now*. The result is financial rape until the money is repaid twenty years later.
Mark in Dallas, Tangent man… Pay attention. The conversation here today is about how financial institutions have been taking advantage of consumers and reforms needed to protect them. Noone, regardless of how irresponsible they are, should be paying a 40% rate. Why don't you get off your Republican pulpit and join the rest of the world in trying to fix the last 8 years of BS the Bush administration left us.
Although this legislation has long been over due, the credit card companies are using it to increase rates now. Too bad the law won't make the interest rate raises void for the previous 90 days. My Capital One card was at 14%, but I just got a notice it is going to be 22%. There is no outstanding balance or nay reason to raise the rate, so it will go unused until I decide to cancel it.
To make up for lost revenue resulting from the new regulations, credit card companies may start charging interest on those "non profitable" accounts that are paid in full every month.
Why is there so much complaining. Grow up and take responsibility. You weren't complaining when these companies allowed you to buy new clothes, gas, and whatever else. Now you owe them, so pay them back.
Credit card companies shouldn't be able to raise rates on balances for no reason. What other business could get away with extending specific terms to a customer and then raising the amount due without reason?
That's what Advanta Corp did last fall when they tripled the rates of their customers' small business accounts. They told their customers the large APR hike was due to "multiple factors" related to their credit.
We know now that was a lie. They raised the rates as a desperate last attempt to avoid going out of business. That didn't work and now they're closing everyone's account.
Is it a coincidence they rejected TARP funding earlier this year? Given their suspect business practices, I say it's possible they have something illegal to hide.
I for one would like to see an investigation into Advanta Corp.
The banks have won again at our expense; this bill gives us nothing but will protect the banks from new, more consumer friendly legislation any time soon.
This is no different than the people that hike fuel prices when we have a fuel crisis due to a natural disaster.
What kind of people do we have running
our financial institutions??!!!!
Answer- No ethics and pure lack of moral responsibility. Again they
have proved why we have catastophic
problems in the financial sector.
Congress does not have the peoples best interest at heart. They only want to appear to have it. Their alignment is with the lobbyists who donate to them, pay for all of their expenses, and basically fund their campaign purses. The banks have the Democratic congress in their pockets and constantly flexing their muscle.
Basically screw the normal citizen
Check out the article on Motley Fool, "how to destroy the credit card industry"…
Finally, some press about the risks to overall credit impacts of the current bill.
I agree with Mark from Texas: 1. The disclaimers are written in bold in 20pt font thanks to Shumer…read them before taking out a new loan, and 2. What makes a person think that living beyond his/her means is a sustainable way of life?
Living within your means takes sacrifice, discipline and yes, some luck. It is especially daunting when you see peers with expensive new cars, clothes, houses, etc. while you use hand-me-downs and bargain sale items. However, financing purchases has a cost, and we are seeing this now. Don't forget that when some were some of you were spending on those "gotta have it now" items, others of us were postponing dreams, working two jobs and stashing away cash for "rainy days".
If you take out a loan (by not paying the entire amount when you get the CC bill, you are taking out a loan) and don't know the rules and stipulations of that loan (like what happens in default, ie. missing a payment), it is not the credit card company's fault. It is yours.
If you are too stupid or irresponsible to not apply for every credit card you get an application for, that is not the credit card company's fault. It is yours.
It is called personal responsibility.
I loan money and property (tools, etc) to friends and family all the time. I consider it a gift to them and rarely see things repaid or returned. The irresponsible way they choose to live their lives has very little to do with how I choose to live mine.
Take responsibility for your actions and/or poor life choices and stop complaining about others. Didn't your parents or roll models teach you this? Are you teaching your children responsibility or how to whine and complain that "things are unfair and I need relief"?
Basic financial education would keep most people from obtaining credit of which they could not afford to payoff. Credit cards are a privilege granted to the user and one must always remember these lines of credit are unsecured. Thus by becoming more of a credit risk to these businesses your rates have to rise accordingly.
It is unfortunate that the provision to cap credit card interest rates did not make it into the bill.
Apparently, "other backers" of the bill felt its introduction would doom the bill, which explains why those "wise" senators voted against it.
By the time this bill reaches the White House, its going to get so watered down, that even George Busch and his wife Dick Cheney would have signed it into law
ITS A TOTALLY MEANINGLESS BILL
President Obama, put some teeth in this legislation. Don't sign a watered down, meaningless bill.
In my opinion, the credit card companies have "stolen" enough from me. I have never been late on a payment and yet my interest rates continue to rise. It is a disgrace, but the truth of the matter is that the lobyists are able to put more money in the pockets of our politicians then we can and therefore we (the working class) will never win. When this bill is finaly voted on, it should be a roll call vote and the way that every congressman voted should be made public. That way, we can see who realy has our best interests at heart.
Universal default has to go.
It is not ethical.
Changing contracted interest because of FICO scores is garbage. What about on time payment history?
Hey Tom: What planet are you living on? Guess you must work on Wall Street! Remember $4.00 a gallon for gas, food prices etc. YET OUR SALARIES did not go up? As you can see from the previous posts, we as consumers did pay on time and more than required, I know of NO ONE who went out and blew money away on articles that were not needed….WE ALL SAW THIS COMING..remember the last 8 years? WEll, Congress and the Senate, better act quick…better yet.. close your bank accounts out and place the money under the flooring and see how fast these companies reduce the rates! Our parents did that during the depression, and it took many of them years to trust the banks!
Banks should not be allowed to sell their charged off loans to debt collection agencies. The agencies are organized criminals in action. Never ending harassment on the phone. They file lawsuits that they don't intend to fight, so they can get default judgements. And worse.
Congress really should have stopped banks from selling bad loans to these criminals.
So the top rate would be 15%… a year? I wish to see it & is it 15% per year or per time?
Wells Fargo's "Direct Deposit Advance" charges you 10% per use or 260% per year if you use it bi-weekly… what about the cash in services… ?
Sounds like a useless bill. I hope Obama makes good on his promise and not sign it. I have been fortunate (or smart enough) to never carry a balance on these cards. I wish people would do the same. Live within your means if possible.
It seems all too common to blame consumers as being irresponsible for racking up credit card debt. While perhaps true for many, there are millions of others that have debts due to hospital bills, medical bills their insurers refused to pay despite having coverage and other unforeseen circumstances. Increasing interest rates to the max allowable by some state law is evil. The problem is that it is legal — and that is clearly the fault of elected officials that need to be driven out of office. The financial lobby groups are far too possible and have gutted consumer protection laws, including bankruptcy protections to the benefits of creditors — the same crooks that are getting bailed out today. There are banks that run reports to identify customers that are no longer in a position to pay the balance in full and target them with outrageous rates. They know that those with sufficient cash will simply cancel the accounts and perhaps change banks out of disgust.
Do you really think consumers will be "protected" by this type of legislation? As soon as banks aren't allowed to price based on risk, they won't lend the money. Period. Face it – this is one more way to disenfranchise the little guy. What do you expect? A person with a 550 FICO will get a 5% interest rate? No. Folks with previous bad credit, bankruptcy, and other issues will no longer have access to credit. And now, when everyone needs credit, there will not be any additional access!
The credit lines that people depend on for emergencies will vanish and so will the offers of new credit. And, don’t forget about all the millions of people who have defaulted on their home loans…those high priced credit cards that people call loan sharking are actually the first offers that people who have gone bankrupt get for credit. It helps them establish a good repayment history and if treated properly, gets them a chance for additional loans. How else are people going to get a chance to rebuild their credit?? Is that supposed to happen by magic?
Oh, maybe the legislators are setting themselves up to have the government lend/give money to these folks who’ve had credit woes….subsidized by those of us who are prudent savers. Wouldn’t that be a gem! More taxes, redistribution of wealth, etc.
I'm getting tired on "business as usual" tactics being played by some Congressmen, lobbyists and the sharks (credit cards firms). This is white collar crime but with exceptions.
i agree with skip. my interest rate on two of my credit cards have gone UP within the last six months. yet i have never been late on any of my cards and also almost always pay more than the minimum. and in the height of hypocrisy, i called the card with the highest interest rate to renegotiate and lower it. they told me no. yet, unsolicited, they then proceeded to increase my limit even though they just told me i couldn't get my interest rate lowered.
Your policy requiring names is unfair to those who have unique names and wish to remain anonymous, because someone with a unique name can easily be identified. It also intimidates many whose names are from non-Western backgrounds. Look at the names of the replies you published and consider if these are actually representative of the population.
American consumer debt is in part an issue of personal responsibility. But there is a much greater issue underlying our consumer debt. That is the issue of undervaluation of labor. In other words, wages are too low to survive compared with actual costs of living. Debt is used by many to cover the difference, but without sufficient earnings, it becomes a trap.
What we have is a labor pool without bargaining leverage, competing with each other for the lowest wage. It is a dream for corporate interests. Only the very few with advanced degrees and highly desired skills are able to negotiate higher wages for their talent. What we need is a living wage for all, or at the very least, increased collective bargaining for a much greater portion of the employed. What good is a government sponsored minimum wage, if it is below the poverty line????
How about forcing people that are 90+ days late into some sort of class that teaches them better Economics 101 and how to not get themselves into debt.
I think a lot of people aren't in the situation voluntarily. Give them help getting out and that is a good chunk of the problem.
And I believe we need to cap interest rates across that country at a fixed limit to eliminate loan sharking banks for keeping people enslaved in debt.
The credit card companies only give me 30-45 days notice of changes. This bill should become law within 30 days of President Obama's signature, especially since the "cat has been out of the bag" for several months now, and credit card companies began sticking it more to customers long ago, due to upcoming law changes.
It would really help to make changes retroactive to January, 2008.
You could get better rates with organized crime. I guess at least the banks won't send someone to break your legs if you pay late.
People should be grateful that Congress did not pass laws that appear to favour customers on surface, but have the unintended consequence of depriving those exact same customers of access to credit.
Think about it – which are the customers that pay 41% APR? Not people with a credit score of 700+. It is people whose scores are 500 or below. These are extremely risky customers and credit card lending is unsecured lending. At a time when even secured lending e.g. mortgage is seeing high rates of delinquency, what do you think is the expectation for unsecured lending to people with low credit score? As must be obvious, one of the key drivers to the current crisis was mis-pricing of credit risk.
So what would happen when you cap the rates at 15%? Yes. These people simply will not get approved for credit. This story has been played out in Japan already.
We have already seen the impact of de-leveraging on retail businesses dependent on consumer spending. This bill would simply make things far worse.
People who write articles such as this need to recognize that access to credit is a privilege not an entitlement.
Sure let's help the banks, but "F" Joe consumer. I'm madder than hell and I'm not going to take it anymore!! What a joke!!
Take the CEO's of the top 5 credit card issuing banks and hang them for the theives they are. Real reform would come quickly after that.
How about simple contract law? If I agree to do something for you, and you agree to pay, our terms are set and we enter into the deal. Then, I can change the deal midway through, just because I do not like the deal anymore. Right? No, that would be a breach of contract.
But, that is not the case for major CC issuers. They are free to make unilateral changes to the agreement as they deem necessary. Talk about bargaining power: They have it, we don't, so they make all the favorable changes.
Ever try to tell your CC company that you will only be paying 5.9% interest for the forseeable future? You would end up "oweing" late fees, over-the-line-of-credit fees and possibly litigation expenses, including attorney fees. When the CC companies do it to consumers, we're stuck.
Sure does sound fair to me. That would explain why our elected officials allow it to happen to us.
I say make them stick to their original deal with us. It has nothing to do with either the bank or consumer being "fiscally responsible." It has everything to do with keeping the original bargain struck between the parties. To keep the bargain, there would be no:
1. Changing of the interest rate after CC use;
2. Universal default rates;
3. Exorbitant interest rates (because no one in their right mind would ever agree to 21% interest when they first get the card).
When a consumer defaults on his/her bargain, normal practices and law should apply to the breach of contract. What is interesting is that CC companies do not want that because it would mean filing a breach of contract action and reducing the debt to judgment, which is then subject to 8% per annum interest (pursuant to Indiana Law), a rate that is often much lower than its "default rate."
Elimination of universal default should DEFINITELY be included in the bill!! My Macy payment was 30 days late — two years ago. Every year one credit card company has looked at the SAME late payment and used it as justification to lower my credit limit – even though this specific account and others (3 credit cards, mortgage) were never late. I've responded to this unfair policy by not using that card and am paying off the balance as quickly as I can. Customers who feel victimized by this policy should try to reduce their charges or better yet – if possible – don't use the card at all – just pay off the balance. As my total debt decreases – universal default may be a blessing in disguise.
I hope that Americans are finally realizing that the banks don't exist to do us any favors, nor will they ever. Do yourselves and this country a favor- DON'T PLAY! Pay off your cards and don't ever use them again. Period. It's really that simple.
If consumers want the abuse to stop, they need to pay off these credit cards every month. That's what we do and we don't know or care about interest rates or fees. We are only interested in the points we earn. The card industry is too powerful and I don't believe there will ever be a change. If they come up with new rules, the banks will always find a way around it. Card user who don't pay their bills off every month will always be paying high fees of one kind or another. These banks are sharks!!!
So let me get this straight, we loan the banks billions of dollars and in return we get slammed by them when they double our interest rates, therefore causing our payments to go higher and then we default. 'I don't get it"
"I'm mad as hell and im not going to take it any more"
I would assume that everyone that is complaining here about credit card fees carry a monthly balance on their cards? There is actually something you can do. Number 1: Pay off your bill every month. Number 2: See Number one.
Lastly if you are stupid enough to pay any more than 6% interest on any loan then you are either 1) borrowing from the wrong entity or 2) are obviously unaware of any other means of financing or 3) you have such a bad credit risk that even 30% interest is not enough interest for the banks to charge you.
They could charge 100% interest for all I care. I pay my bill every month and they PAY ME cash rewards of $500.00 a year to be a customer. Whats there to complain about.
The congressional timidity on this legislation, as well as on health care reform and other legislation important to we of the citizen-majority, demonstrates the REAL problem.
President Obama and the legislators who really WANT REAL REFORM, are doomed to failure until and unless the CAMPAIGN FINANCE LAWS ARE DRASTICALLY "reformed", to eliminate the BRIBERY OF OUR PUBLIC OFFICIALS!
Its a 2 way street.
Consumers need to be more responsible for their spending and not rack up tens of thousands of dollars in debt and think they can brush it off by filing for bankruptcy. Bankruptcy should be heavily restricted.
Credit card companies need to stop targeting teens who just turned 18 and stop approving consumers they have analyzed and know who has a high probability of only being able to make minimum payments since thats where credit card companies make most of their profits.
While some might object to the term “loan sharking”, what has happened in the free wheeling credit card market is nothing short of usury. What is the justification for any type of interest rate in excess of 20%? By applying those types of rates and typically higher not many average Americans would ever get out of debt and be owned by whomever lent them the money. And even if you are responsible all it would take is one legit major expense (say a major car repair) and that’s it.
The large credit card companies mailed and in some case still do solicitations to any walking being even pets (yes I got them for my dog). They are guilty of teasing and sucking you in with a low rate then raise it as soon as possible. Not much different then the insurer who is happy to sell you a policy and collect premiums until you file a claim and then drop you like there is no tomorrow, but that is a subject for another day.
Significant reform is needed and the industry cannot be counted on to do it by itself. As to the issue of making credit harder to find, so be it may be that would lead to better lending practices and smaller lines of credit that are balanced with one ability to pay. Call it the back to basics approach of banking and lending. The sooner tighter regulation is brought to the financial industry again the better for every day Americans.
Yes, bad, bad person for "racking up" debt they couldn't pay…sounds real familiar, doesn't it??? Like bail out money should be alloted to the little guy who has debt not anywhere near what the big guy (banks, car companies, etc.)has.
Then explain to me, how my rate was doubled when I have never missed a payment nor even been late. I have no problem paying, but jacking up the interest rate when the BANK itself is in financial straits (not me) is the height of hypocrisy.
I guess some people aren't as smart as Tom, In St.Louis. Obviously he has never extended money to anyone but himself. Congrats Tom.
Fiscally resposible? What a joke.
I do not know about the rest of the world, but most of my debt is from medical bills.
I had a "guaranteed" rate that both Chase and Bank of America said would be good until the balance was paid off. That didn't happen.
Even though I did not charge anything else, my rate popped up.
Of course, they called it a monthly service fee.
On the cards I do not have a balance on, my rate went to 30%. I wont be using them anytime soon.
I was out of work for 2 years. I went into CC debt to avoid welfare and homelessness. I am still paying off that money a year later. As of now I am facing a huge increase in my interest rates, and their is nothing I can do about it, except close the accounts. For some of us, debt wasn't an option. Don't get me wrong, I am thankful to the CC companies that I didn't have to live on the street, but there still should be more regulations on this, like how is FICO scored exactly, and giving the consumer 3 month notice before changing rates, or lowering your limits.
A logical argument for this being an unfair practice:
When we get a CD from a bank, we are loaning them money towards whatever in exchange for a guaranteed return. We can't re-negotiate the terms, and if we try to get that money back, we get penalized, why don't they???
It's not exactly the same, but it is similar enough to warrant the question: How come they are always in control?
I've got your answer: they have the money…
I BELIEVE ALL THE CREDIT CARD COMPANYS SHOULD CLEAR OUT OR GIVE THE CUSTOMERS A BREAK ON THEIR ACCOUNT, IN MOST COUNTS THE MONEY THE BANKS RECIEVED ON THE TARP SHOULD BE DEDUCTED FROM THE CUSTOMERS ACCOUNT SINCE THE CUSTOMERS WILL BE PAYING TWICE, BY PAING THEIR TAXES AND THERE STATEMENT FROM THE CC COMPANYS. THIS MAKES NO SINCE TO ME.
WHY SHOULD THE CARD COMPANYS (BANKS) HAVE THE BEST OF BOTH WORLDS.
I SEE NOTHING HAS CHANGED IN WASHINGTON AGAIN…………..
Placing a cap on the interest rate charged by a credit care issuer would be the most important element of reform; charging customers who have had never missed a payment 30% would be criminal if "the mob" was doing it. Problem is, "The Mob" doesn't have good enough lobbyist to MAKE it legal!
The banks which are the credit card companies had to get billions in taxpayer bailout money to stay in business. These banks are more irresposible than the people with the credit cards.The taxpayers are the ones getting screwed. The banks are allowed to conduct business as usual.
I agree with Tom from St. Louis. Individuals need to learn personal responsibility and stop looking to "Big Brother" to save him/her from their own failures/mistakes.
Regardless of whose fault it is the economy will pay the price. We are all adults and should bear the responsibility for what we do. Consumers who over indulge deserve poor credit or no credit, but lenders who over lend deserve loan losses. What I find distasteful is the bias exhibited by our Congress and the present administration. The banks are being restored while the consumer is left to pay for his transgressions.
The limits prescribed would make some banks rethink their lending practices, since the capacity to absorb losses would be reduced. That being said, I believe we should all (including the banks) be left to the marketplace, that being the only unbiased judge. The regulatory agencies do not enforce rules and regulations concerning consumer credit abuses. In effect we have been letting the banks operate as they choose. Now it is time to let the chips fall where they may.
I believe, that the so called "foreign transaction fee" of 3% is one of the outrages that goes unnoticed. It does not cost a bank any more when a transaction is done out of US. They still get their fee from the seller. It is another rip-off.
Loan sharking indeed. Pay another creditor late and they take that opportunity to increase your interest rate 20 percentage points. The consumer becomes powerless and ensnared in a trap of unpayable debt which was initially manageable. These banks are crooks. This is not an issue of irresponsible consumers. It's the practice of baiting and switching performed by the banks that is criminal. This wasn't happening 15 years ago. They've become emboldened because they've become too big to stop. This article shows how they can control congress to defy the will of the people who elected them.
The Universal Default Provisison of any credit card agreement is an absolute joke and needs to be outlawed. Now, I have zero credit card debt and an 820 score, but as soon as I learned that the 2 cards that I had both had this provision, I closed one and ripped up the other, opting to open a new account where I knew this provision was not included. The only reason that I did not close the other is because it has been open for 16 years and represents my oldest open trade line.
It is practices like this that really screw consumers. And while I applaud Tom's comments below, if I am someone that rarely uses credit cards and then make one large purchase and put it on my card because it is at a lower rate than I could get a personal unsecured loan for, if a company would then turn around and jack that rate to 27.99 because I made a late payment on another account, I would be PISSED and rightfully so.
Some of the things credit card companies get away with are nearly criminal and you might get better terms borrowing from my Uncle Vito, though you would not want to default on that one.
Yes, "loan sharking". 30-41% interest rate is loan sharking. Why do you think all the credit card companies are headquartered in Delaware or South Dakota? Because only those states allow such high interest rates, and allows the credit card companies to "export" those rates to other states. New York, for example, has enacted usury laws many years ago, by capping the maximum interest rate. They must have had a reason to do that, wouldn't you say so?
I was given my balance as a surprise from my ex-wife. Banks are bilking us. First change the bankruptcy law back then brace yourselves banks. Never been late and Chase raised my rate from 5.9 fixed to 11.9 variable. Shame on them!
The banks are showing that THEY are in charge. Congress is a bunch of wimps who are only concerned with getting money from the banks for reelection. CONGRESS DOES NOT CARE ABOUT THE LITTLE GUY WHO IS NOT CONTRIBUTING TO THEIR REELECTION.
End to "loan sharking"? It's not the credit card company's fault that the consumer couldn't pay. Maybe that consumer shouldn't have spent more than they earned.
None of this would be a problem if the average American was fiscally responsible and didn't rack up thousands in CC debt.
It is this domino effect with the credit card companies that is going to hurt the country the most in the long run. All across America, Companies are lowering credit limits of good paying, good credit, long history length consumers for no reason. Most of the time the limit is being reduced to just above the available credit, in turn other companies then see this and think you are maxed out on your limits and then they want to lower your limit as well and so on and so forth. People get denied purchases, can't buy homes, cars, pay bills, etc. It will never end until this country wakes up and realizes that the government is screwing us left and right and we are going to be in this recession for a lot longer than predicted. All these bail outs are coming straight out of our pockets and we are the ones getting screwed because of it. I am only 28 years old and I am ashamed of the country we live in and what the government has done to us over the years. The poor get poorer, the rich get richer and the middle class have to try to play this balancing act to pay for everything. The worst thing credit card companies can do in a time like this is lower limits. Americans will eventually get smart hopefully and stop using them all together and just pay cash for everything.. The credit card companies would be in a very bad situation then wouldn't they?? I live in a very nice neighborhood in GA and I see businesses and homes falling down all around me. It is very devastating. Mr. President, please help our country and be the first president to get the government's hands out of working America's pants pockets. We need you to do the job you promised us you would do. Other Countries are laughing at us right now. We have hardly any allies left and we are a joke to the rest of the nation. A country such as America should never import more than they export- general rule folks..America needs a wake up call and we need help right now.