If you have a credit card, you’ve almost certainly just received, or are about to receive, a notice that your rates, fees and minimum payments are going up. For this you can thank Congress.
Banks across the country are changing credit card terms in anticipation of new legislative restrictions which take effect next February, and some members of Congress can’t resist crying about how unfair it is and how they’re going to have to do something about those evil greedy bankers.
The evil greedy bankers, on the other hand, say it’s the only thing they can do, and that they warned beforehand that if the law passed, they would have to raise rates across the board just to try to survive. The banks apparently won’t be allowed to give higher rates to higher risk customers, so everyone’s rate must go up to compensate.
I don’t see why these members of Congress are crying; after all, don’t they want everyone treated “equally”?
The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May. The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.
Yesterday, Sen. Charles E. Schumer (D-N.Y.) once again requested that the Federal Reserve invoke its emergency powers to place a limit on interest rate hikes.
“This is what many of us feared about a law that didn’t take effect right away,” Schumer said. “It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law, and it is just plain wrong.”
Rep. Carolyn B. Maloney (D-N.Y.) said the recent rate and fee hikes were “unfair and deceptive and must be stopped.”
“Capricious actions like these are why Congress overwhelmingly passed, and President Obama signed, my credit card reform bill: to level the playing field on behalf of consumers,” she said. — Washington Post
Maloney’s statement is particularly absurd, since she certainly knew that this would be the result of her legislation. If she didn’t, she should fire her staff. It’s also particularly absurd to tell banks, “You must extend credit to consumers,” and then make it as difficult as possible for them to actually do so — unless, of course, the intent here is to put every bank in a position where it needs to be bailed out.
The reason rates are going up, aside from this new law, are twofold: First, consumer credit scores are declining, and second, the overall cost of issuing credit is rising. According to Fitch Ratings, credit card losses hit a record high 10.44 percent in June, the Washington Post noted.
Industry observers also warned that when this new law takes effect next year, credit availability would decline further and costs increase even more. A Citi executive said that the rate hikes were intended to “preserve the broad availability of credit,” one thing the government is requiring of banks which took the bailout money. Citi, for its part, is 36% government owned now.
“Congress wanted to cut costs for consumers, but ended up costing them instead,” writes Cato Institute senior fellow Doug Bandow. “One hates to think of what additional ‘help’ Congress plans on providing for us in the future.”
If it’s anything like this, count me out. I don’t want any “help” from the government. And the sound financial advice still holds: Pay off all your debts as fast as you can and avoid incurring new ones. Sure, you may have to, in order to buy a car or a house, but for your own sake, don’t charge the new 52 inch HDTV. Save up the money instead, like your grandparents used to do. By the time you have enough money saved, you’ll be able to buy a bigger one for less money anyway.
If you’re impacted by these changes, feel free to tell us about it below.
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September 30, 2009 10:26 pm
11 Comments
There goes more people’s credit ratings down the crapper. Those bastards!!!
We do need to do something about the credit card industry. I was in a bad accident where the other party was not insured. In the three years of being put back together, including six months where I literally could not even feed or “output” myself. I got behind on my cards. I found out that the rules and laws we have over collection procedures were totally ignored. I don’t know where they got the information that they used for doing the collections. Then their actions were totally over the top:
Regularly they would try and talk me into writing a check when I told them I had no money in the bank. (”Oh the bank gets so many checks they will never notice and then you can have this off our books”)
They send me “orders” from “the circuit court inc.” to report to prison if I didn’t pay.
They made calls threatening me with violence.
The really good one they threatened my mom and then called me and threatened my mom. “if you don’t pay we will have to collect from your mom. She doesn’t owe it and the courts won’t let you do that. We don’t have to have the courts approval, and do understand that we hire the biggest “n word” for these types of collections and do those collections at night. You know how “n word” are around white women in bed clothing. Do you want to put your mother through that.”
They also called my preteen niece on her cell phone and tried to get money from her on the threat that if she didn’t pay that they would have me arrested at the nursing home, put in jail and then that I would die in jail because I could not get medical care there.
Nobody seems at all interested in stopping this until this latest round of laws. So it is about time. Frankly the credit card execs who let this type of thing be done (and you know they had to in general know what was going on) should be joining Barney Madioff in prison.
That sounds like a collection agency, not a credit card company.
I just got one of these notices, after which I canceled my card. I actually am on the fence with this one in terms of gov’t intervention – I believe the terms and conditions on these cards are so labyrinthine that no reasonable person can figure out exactly what they are agreeing to under the terms of the card. this needs to be fixed, but could be done much more effectively and efficiently by state regulation, not federal mandates.
The collection/credit rating industry is another matter. I have one company that insists I owe a credit card debt, and keeps putting it back on my credit report and lowering my credit score. Complaining to the FTC has been a waste of time, and the credit rating company (after I send them a detailed written document, individually addressed to each of the three credit bureaus) removes the information, but will put it right back again when the collection company says i owe it. A contract should be enforced, but filing false credit reporting info or threatening to do so should be a state felony.
Remember that most of those credit card terms and conditions are government mandated.
As for the rogue collection agency, I doubt anything short of a lawsuit is going to stop them…
a business must always assume a ten percent loss. the higher interest rates in itself, offsets loss. go bankrupt if things get out of hand. yea, contracts are bindable, but then again, life is way to short to let a credit card company harrass you. they know a certain amount of people are going to default. boo hoo credit card companies, as much as everbody would like to retain perfect credit, we would also, like the economy to rebound, opportunities to open up, and for our government to stop selling its citizens down the river.
Michael:
Some of that was in the name of the credit card company, by their “delinquent accounts department”. The rest was by several different collection agencies. Of course the one that threatened to send the n word after my mom and that they would then rape her had its official corporate mailing address as the exact same address down to the same suite but a different “mail stop” as the credit card delinquent accounts department.
We got the letter from Chase and it due to go from 10% to 15% October 1st. My feelings are that we need to pay up the cards, and close the accounts. If enough people do this then the big banks are going to feel the pinch. Quite frankly what needs to happen is to take back the TARP funds and if they make it fine, if not, then that’s OK in my book. Heck if the banks quite loaning any money then the auto industry as we know it is done…the real estate industry is done…heck the USA as we know it is done. But of course the greed that prevails in the banking industry is by far more important than the health of our country. I say to HELL with all of you in the banking industry and once my few credit cards are paid off…you’ll never get me back.
Bank of America raised my minimum payment to three times the minimum payment was before.
By the way that was over two years ago(not 2009) and my credit rating was A+.
I’m disabled so I went the route of credit consolidation and all my cards were shredded.
I made arrangements for reduced payments with BOA before I went to consolidation and the next month they changed their own policy and still wanted more than the agreed amount for payment.
I’ll never do business with BOA again and I’d advise people to do the same.
“I believe that banking institutions are more dangerous to our liberties than standing armies…” – Thomas Jefferson
Article I, Section 8, Clause 5, of the United States Constitution provides that Congress shall have the power to coin money and regulate the value thereof and of any foreign coins. But that is not the case. The United States government has no power to issue money, control the flow of money, or to even distribute it – that belongs to a private corporation registered in the State of Delaware – the Federal Reserve Bank.
The Federal Reserve is controlled by private banking interest and by Presidential appointment – but it is still a private organization and not a government entity. In 1913, President Wilson’s creation of the Federal Reserve System established a three-tier monetary system in the United States – the holders of money (public, government, business and institutions; the commercial banks that borrow from the public and issue loans; and the central bank or Federal Reserve that has a monopoly on the issuing of money. The Federal Reserve is technically owned by the commercial banks.
The monetary policy of the United States is the domain of the Federal Resene Bank and not the government. This process is in direct contradiction of the U.S. Constitution that reposes the responsibility of the monetary system with the Congress of the United States. The Federal Reserve can create money out of nothing, simply printing it, lending it and printing more.
Representative Charles A. Lindberg, Sr., the father of the famous aviator, was a member of thc Banking and Currency Committee. He opposed the Federal Reserve Act and gave a speech on January 20, 1915. “The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people’s money, and in the interest of the stockholders and those allied with them.” Representative Louis T. McFadden, chairman of the Housing Banking and Currency Committee, stated on June 10,1932, “Some people think the Federal Reserve Banks are United States Government institutions. They are not Government institutions. They are privatc credit monopolies that prey upon the people of the United States for the benefit of themselves and their foreign and domestic swindlers; and rich and predatory money lenders.”
If the Federal Reserve Bank were demolished and the Congress of the United States took control of the currency, as required in the Constitution, the National Debt would virtually end overnight, and the need for more taxes and even the income tax, itself.
I agree that the Fed should be abolished… but I am not sure how that would eliminate the need for the income tax or it’s equivalent….
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