Credit Card "Bill of Rights"

Credit Card "Bill of Rights"

PostBy: pvolcko On: Tue Oct 14, 2008 2:12 pm

Splinter thread from the "Is Barack Obama A Terrorist", starting point: Is Barack Obama A Terrorist?

Devil, I'll try to find the time to run through at least some of what you linked, but in the mean time, perhaps you can point out the one or two most problematic things in credit card land that you think need regulatory reform or a "bill of rights" enacted.

And as for the "fine print" of a credit card application. All of it, no, I've never read all of it. I have read significant portions. Rates, penalties, cash advance terms, arbitration terms, etc. I'm not sure what constitutes a "scam" or what aspects of the credit card agreement there are for which I need the protection of the government.

As an example of something like included in this so called "bill of rights": Credit cards are variable interest rate. This is not a hidden aspect of credit cards, it is fundamental to their nature. I've recently read that some want to actually make it illegal for credit card companies to change the rate of interest on any outstanding balance. This is insanity. Credit cards are not fixed interest rate loan instruments. They are relatively high risk for credit card companies, so they rightly charge high interest rates with high penalties and make frequent adjustments to rates. Of course these new rates should apply to current balances. If someone wants a fixed interest rate they should negotiate a fixed interest line of credit with their bank or get a personal loan.
pvolcko
 

Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 2:26 pm

Glad to see you started a thread for this topic Paul..... It is an important one. While I would strongly encourage you to take the time to watch at least some of the hearings I sent you a link for, I realize that time is a precious commodity. Here's a link to a short (1 page) article from Consumers Union.org (Consumer Reports) that give a quick overview in much clearer detail than I could provide you.
The lack of legitimate government oversight (in the last 8 years) goes far beyond just the banking, mortgage & investment communities & needs to be seriously re-instituted, imo.

Here's the article:

http://www.consumersunion.org/pub/core_financial_services/004292.html
This link is broken, either the page no longer exists or there is some other issue like a typo.
Devil505
 
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Re: Credit Card "Bill of Rights"

PostBy: pvolcko On: Tue Oct 14, 2008 4:35 pm

I've read the opening paragraphs of it, up until the "detailed" proposal.

I am most unimpressed with it so far.

They complain that 35% of cardholders are charged "special fees" of one type or another and that the average late fee charges have doubled in the last 10-12 years. Then goes on to say this is indicative of a problem in credit card lending and transparency to lendees. Why is this a problem? Fees are there to discourage people from paying late, under paying, from spending beyond their limit, etc. Higher fees mean more incentive to get ones credit card debt in line.

They later go on to say: “Credit card companies push debt on people without caring about whether folks can afford to pay it back,” said Alys Cohen, Staff Attorney with the National Consumer Law Center and a witness at today’s hearing. “The companies profit either way, but many Americans are being buried under a mountain of debt. Policymakers must stop destructive lending and make lending fair again. People have the right to expect that.”

In what world does this person live? Credit card companies don't care if their customers can pay them back? They profit either way? How so? If a customer can't pay back then the credit card company, who has paid for the goods long ago, can't recoup a profit much less the principle of the credit loan. They'll be lucky to get 10% on the dollar in bankruptcy proceedings.

What this person is really concerned about is people who can and do pay high interest payments on their cards because they dipped too far into their credit, but don't make enough to pay off the principle in a timely fashion. Off these people (and transaction fees paid by retailers, passed on in product pricing) credit card companies make their money. What would the consumer union have the card companies do? Offer low interest rates on their cards? Operate under much more restrictive rule on how much credit they can extend to a person, deserving or not? This is risky, unsecured credit, this means naturally that rates will be high and penalties significant for a consumer failing to keep up their end of the bargain. I've seen many credit card applications and offers and I've never once been confused about grace period, interest rates, late payment penalties, or the credit limit being extended to me. I have, as a safety precaution, asked for a lower credit limit. I've also called for a higher credit limit. This is not confusing or difficult stuff.

And this kind of credit is a bargain. Unsecured credit in small amounts, from a couple hundred up to probably around $10K in most cases, is a glorious business and personal financial instrument. Used properly and responsibly, it is the glue that holds many family's month to month finances together. Should all those people and credit companies have to suffer because some people don't know how to manage their money? Are we so infantile that we can't be responsible for knowing how much we've spent in a month, how much we owed from last month, what our monthly income is, and if we'll be able to carry the debt? What, is there just too much must-see-TV on to take 10 minutes a day and make sure we aren't overextending ourselves?

I'll read the rest of this later. I'll look for some points I support. I'd appreciate it if you pick one or two points you think are the most important to get done.
pvolcko
 


Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 4:46 pm

We'll talk after you have read the whole article & see if you still feel that the credit card companies are being fair & open with the public, & no legislation is needed to be changed. (it is only one page! :P )


As far as one quick change for fairness, I would suggest this:

Enhance ‘Schumer Box’ disclosures. Include a “Schumer box” disclosure table in all cardholder agreements containing personalized information about the terms of the card granted. The box should include the APR, the credit limit, and the amount of all fees, such as late charges, cash advance fees, over limit fees and any other applicable miscellaneous fees.

Right now, I can't even find what APR I'm paying when I look at a bill....Why??...Obviously they don't want to make it easy for me to find out what rate I'm paying them....That's hardly fair.(open any of your credit card bills Paul & see if you can find your APR)
Devil505
 
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Re: Credit Card "Bill of Rights"

PostBy: Richard S. On: Tue Oct 14, 2008 6:09 pm

Blame Jimmy Carter.. :lol: I'm joking but the high interest rates during his presidency was one of the factors. There was a limitations on CC's up until the 80's, proabaly still is in some states. There'sa Supreme Court Decision called the Marquette Decision that allowed banks to charge whatever interest rate that was allowed by law at the location they were at. So they all moved to North Dakota which had no limit or a very high limit, the rest is history.

http://www.fdic.gov/bank/analytical/bank/bt_9805.html

The rising level of credit card debt is often cited as one of the factors in the rising U.S. personal bankruptcy rate. Numerous theories have been advanced to explain the increases, including aggressive marketing by credit card issuers and a lack of discipline on the part of consumers. This paper argues that a 1978 Supreme Court decision ("Marquette") fundamentally altered the market for credit card loans in a way that significantly expanded the availability of credit and increased the average risk profile of borrowers. Marquette ushered in deregulation of usury ceilings on consumer interest rates by allowing lenders in a state with liberal usury ceilings to export those rates to consumers residing in states with more restrictive usury ceilings. The result was a substantial expansion in credit card availability, a reduction in average credit quality, and a secular increase in personal bankruptcies. The Canadian experience with bankruptcies supports this argument. This paper contends that a tightly regulated world, marked by restricted access to consumer credit and a low level of personal bankruptcies was exchanged for a deregulated world, marked by expanded access to consumer credit and a higher lever of personal bankruptcies. This argument implies that a return to the bankruptcy rates and charge-off levels that prevailed in the early 1980s or before may be unlikely.


According to the opening segment of this show the banks were losing a lot of money on them at the time because of the high interest rates they were paying. It's a really good show and well worth the time to watch. 99.9% of Frontline shows are.

http://www.pbs.org/wgbh/pages/frontline ... edit/view/
Richard S.
 
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Re: Credit Card "Bill of Rights"

PostBy: Freddy On: Tue Oct 14, 2008 6:24 pm

It's always bugged me how a credit card company charges over limit fees. They wait, lurk, hope, that a customer goes $.01 over and then slam them with a huge fee. It seems to me that it's just not right. If you hit your limit, you do not get to buy what's on the counter. It's that simple. EVERY purchase is checked before it's OK'd. They know darn well that you've hit your limit. It's a trap with an expensive ending.

I don't know how old you people are, but I'm not all that old at 54. I can remember when getting a credit card was difficult. If you were finally approved, the limit took into account not only your income, but your out-go. You had to show how much you paid for rent or mortgage, and they assigned a percentage of your income for all expences. They made darn sure you had the ability to easily make the payment. And over limit was simple. If you went over, you lost your card.

You ask "how can they profit both ways?". Look at it thiis way. THEY changed the rules and started giving cards to anyone that had a pulse. There's only ONE reason... They profit! They know full well that a certain percentage will go bad, they don't care! They make more money now than any time in history. Don't for a second feel bad for the poor little credit card companies. Every single move they make is perfectly planned to part people from their money. It's like they buddy buddy up to you and even though you can't hear the final words, they say: " Heyyyy, good friend! I'll tell ya what. For a few years I'll let you buy anything you want, anything, everything! Yippeee! Want a new TV? It's yours! Want a spiffy new computer? It's yous! Want a cheesuburger? no problem! All you have to do....is one little thing. After that first few years you will give me 25% of your income for the rest of your life".
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Re: Credit Card "Bill of Rights"

PostBy: Richard S. On: Tue Oct 14, 2008 6:33 pm

I'll tell you what the bastards did to me once, my payment got there late by like a day or two and they charged me $30 late fee... fine with me that's my own damn fault. They applied the payment to the late month and charged me $30 again the next damn month. :mad:
Richard S.
 
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Re: Credit Card "Bill of Rights"

PostBy: spc On: Tue Oct 14, 2008 7:13 pm

How about a Property Tax "Bill of Rights".
I've been paying property taxes for over 25 years & have NEVER been late. I started paying my bills through my bank's web site "online banking", I made the last quarterly payment to the town 5 days before it was do, the town said they got it 2 days late & charged a $485 late fee. When I called to ask if they would reconsider they said no, when I asked why the late fee was so high as it was the last payment of the year they said the interest was based on the tax bill for the entire year. The town lets us pay quarterly as a courtesy. Sound fair to you?
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Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 7:22 pm

Richard S. wrote:I'll tell you what the bastards did to me once, my payment got there late by like a day or two and they charged me $30 late fee... fine with me that's my own damn fault. They applied the payment to the late month and charged me $30 again the next damn month. :mad:



That's very similar to a scam the Senate is addressing. It works like this:

Someone who is close to their credit limit pays his bill ONE day late.
The CC company then hits him with a late charge...instantly. The late charge itself sends him over his credit limit & he gets hit with a big over-limit fee!!

Another scam is they keep changing due dates to try to catch you with a late fee.
Inexcusable!!
Devil505
 
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Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 7:34 pm

pvolcko wrote:Fees are there to discourage people from paying late, under paying, from spending beyond their limit, etc. Higher fees mean more incentive to get ones credit card debt in line.


Sorry Paul....That is wrong. High Fees are a built in profit center for many of these CC companies who now attempt to trick people into being an hour late or whatever so they can jack up your rates. Now, they even work together so if you are late with one of your cards, all the others (who you have always paid on time) can raise their rates too, as you are now a higher risk!....It's a scam & the laws are being looked at in Congress!! :mad:
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Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 7:44 pm

spc wrote:the town said they got it 2 days late & charged a $485 lat!?e fee.


No way Stephen.......$485.00!! ....late fee? (if that wasn't a typo I think any court in this country would agree that a late fee that high was ridiculous. I would have fought it!, moved & or gone to jail b4 I would have paid that!)
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Re: Credit Card "Bill of Rights"

PostBy: pvolcko On: Tue Oct 14, 2008 8:16 pm

All web pages are only one page. Hardly a fair metric for length. :)

I have two credit cards and a bunch of store specific credit cards. I haven't used the store ones in a while, so don't have any bills handy. I know the Visa has the rate listed on the second page, after all the current and new charges, but I don't have any second pages to confirm (I only keep the current/new charges segment of the bill, rest to the shredder). Amex... credit limit, available credit, previous, current, new balance, cash advance limit, and an available cash all in the first 1/3 of the 1st page. Current rates listed on page 3, again after all the charges. Even shows daily periodic rates and changes to rates from last month so you can determine how much interest as accrued since the bill was printed.

None of this was hidden or difficult to find. I can call cardholder services at any time and find out this information, too.

I'll start with what I think should be done:

1) I agree in part with the "no unilateral adverse changes for no reason" item. I'm against the part where they say the consumer must affirmatively consent to new terms, this will just unnecessarily increase processing time and costs, leading to marginally higher rates and annoying the hell out of most consumers. It's like the new user credentials feature in Microsoft's Vista OS. It sounds good on paper, greater security, more user information and knowledge, etc. But at the end of the first day using it you want to throw the computer out the window, ask your computer nerd friend how to turn it off, and if she's a good friend she tells you how, otherwise they let you suffer. This consent thing sounds good on paper, but in practice it will be an annoyance and get in the way for most people. But, I said I do agree with this item in part... I do believe there should be prior notice for all changes except those enacted through law or court case. A period of 1 month should be sufficient. If a person continues using the card or carries a balance after that point then they are agreeing to the term changes.

2) There is a "Ban retoractive rate increases" item, which is the idiotic idea I mentioned before of essentially turning a credit card into a monthly fixed interest loan for each month's purchases. This is bad for a lot of reasons which I'll go into if you want to delve into it, but suffice it to say I think there is a compromise that would be okay. Impose a prior notice clause on rate changes. If a change is desired by the company, they notify in the statement for the month that it will go into effect starting on the purchases made 1 month from that time. This allows time to either pay off the balance, get a loan to pay it off, or to transfer it to another card if desired. It will also prevent people from making a purchase in the time between the statement being printed and the statement being opened. This one month delay allows the card to retain it's adjustable rate nature while not surprising anyone with a new rate without time to adjust their spending behavior and/or make arrangements for the current balance.

3) Real minimum payment warning: I kind of like this one, but don't think it is a necessary regulation. Kind of thing that would be a good selling point for a card company to do of their own volition to engender some customer loyalty. Also probably of little use to someone who's making minimum payments except to make it clear just how badly they've screwed themselves. If they're doing minimum payments, they're in trouble and simply knowing the scale and duration of it doesn't help them make that payment any larger.

Next, your highlighted point: Enhance ‘Schumer Box’ disclosures. As a New York state resident I say anything named after Chuck Schumer can't be good. ;) Not that I know this is actually named after him. If it is applied only to post-application agreements and not to the applications themselves, I think this is reasonable. It is also probably entirely unnecessary. The issue here appears to be not that the agreement doesn't already include all this information, only that it isn't in a 5th grade comprehension format. I'm a strong advocate of not dumbing our world down so I have a natural inclination against legislating things to the lowest common denominator. I'd suggest that if a person needs the information to be so presented that they probably don't know what they're signing anyway and have bigger problems than not having Schumer's kind gentle hand to guide them.


Highlight gripes with this plan (not a full list):
1) No unsound loans: While I understand the impulse behind this, I think it is unnecessary and would unnecessarily limit the amount of credit available to most people and businesses. I do not want government defining what "sound underwriting principles" are. They could do themselves a favor by not bailing out lenders if they screw up. :)

2) Restrict lending to youth without conditions: What is "youth"? Last I knew no one under the age of 18 could enter into a contract without parental consent so I think they mean 18+, which are adults in my book and are thus ready to make their own damned mistakes. Will they make mistakes, certainly, but the great thing about youth is that you have a long time to learn from and fix your mistakes.

3) No abuse of consumers in bankruptcy: This item isn't very specific, but the language makes it sound like credit card companies are forcing people into bankruptcy. To this I say BS, the person forced themselves into it by using too much credit. Maybe they had to, maybe they didn't. It matters little because at the end of the day, if you don't have the cash to make even minimum payments then you are probably missing payments on other things too and need major intervention or a bankruptcy hearing anyway. It's cold, but it's the truth.

4) Ban universal default in all its forms: I suppose they want to stop car insurance companies from raising rates on people for speeding tickets too. When a person defaults on another line of credit or even misses a payment, it is a sign that things might be going off the rails and it makes all the sense in the world for other credit lenders to assess the person's risk of defaulting on their credit as being higher and charge higher rates as a result. This is the negative incentive built into the system to prevent people from letting a payment lapse and to protect the credit issuers from a consumer trying to maintain their spending level through increased use of other, non rate-adjusted cards.

5) Stop late fees for payments mailed on time: Dumb. It clearly says on the statements when payment is due. If it doesn't match up with your paycheck schedule or something then call them up and ask for the billing cycle to be shifted. If they don't do that, then tough, plan ahead. I've been nabbed by this once or twice. Learn the lesson and move on. I actually called them once to let them know it would be late, they waived the late fee. Nice.

6) End roll-over or repeat late and over-limit fees: Basically they want the card company to be strong armed into de facto extending the person's line of credit if they spend beyond it. Sure, they can charge the over limit fee in the first month, but never again, even if they leave the over limit balance on the card. I don't even know what a repeat late fee is. If a person is late with their payment each month, then they get a late fee each month. Pretty simple, no?

7) Ban unfair teasers: Again, I've never seen an application that didn't include the normal purchase/cash advance rates. Astrisk/small print, sure, but clearly indicated none the less. And their complaint that teaser rates can not be termed "fixed rates" is bull. Often the teaser rate is a fixed rate for any outstanding balance you want to bring onto the card. Or it is a fixed rate for a temporary time period (12 months) for new purchases and carry over balances. These are great rates and terms and of great use to a consumer, of course the company should be allowed to trumpet the rate and term length.

8) Ban pre-dispute binding mandatory arbitration: I hate that they usually precondition that any arbitration or court dispute has to be in a jurisdiction of their choosing (DE or CA). But, I'm against this item none the less. Such clauses are a cost saving measure that attempts to handle disputes without going to the expense of a trial. These clauses don't preclude trials from happening, even as a first step, they only discourage them from being a first step. They also don't preclude a cardholder from seeking legal counsel in the arbitration process. If someone is so aggrieved that they believe a trial is the only solution available or proper, they can do it. These clauses often say in such an event the cardholder becomes liable for court costs and legal fees of the company if the card holder loses the case. I'm not sure if such terms are enforceable or not, probably depends on the state and the judge. This item sounds like a gimme to trial attorneys, and given Schumer's name has already been invoked I must say I'm not surprised. :)
pvolcko
 

Re: Credit Card "Bill of Rights"

PostBy: Devil505 On: Tue Oct 14, 2008 8:28 pm

OK Paul....There are none so blind as those who will not see.

(I suggest you take the time to watch an hour of the hearings & watch Richard's Frontline" episode)
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Re: Credit Card "Bill of Rights"

PostBy: pvolcko On: Tue Oct 14, 2008 8:33 pm

Devil505 wrote:Sorry Paul....That is wrong. High Fees are a built in profit center for many of these CC companies who now attempt to trick people into being an hour late or whatever so they can jack up your rates. Now, they even work together so if you are late with one of your cards, all the others (who you have always paid on time) can raise their rates too, as you are now a higher risk!....It's a scam & the laws are being looked at in Congress!! :mad:


I'm not attributing to any of this a sense of honor, civic intent, or tough love benevolence on the part of credit card companies. I'm only saying that their greed serves the dual purpose of being the disincentive for being late, making only minimum payments, maintaining high balances, going over limits, etc. If people don't recognize these disincentives and go on merrily as if these companies lending them money are there as benevolent entities for their betterment through flat screen TVs, XBox games, and iPhone data plans, etc. then it's their own damned fault. And in so far as credit card companies increase rates when people demonstrate they are an increased risk through others and extend credit lines that are beyond the means of the customer to pay (if they abuse it), does not mean they are inherently evil or going harm to society. Many people take advantage of a high credit limit from time to time, they find the rates to be a fair trade for unsecured credit, and enjoy the flexibility of the service the credit card provides... all without themselves being greedy and getting into a hole. If we make many of the kinds of changes proposed at your link then the utility of the credit card, the size of the credit available to people, etc. will diminish significantly and I'm strongly against that as it hurts the many to coddle the few.
pvolcko
 

Re: Credit Card "Bill of Rights"

PostBy: pvolcko On: Tue Oct 14, 2008 8:41 pm

Devil505 wrote:Someone who is close to their credit limit pays his bill ONE day late.
The CC company then hits him with a late charge...instantly. The late charge itself sends him over his credit limit & he gets hit with a big over-limit fee!!


How is it a scam to charge a card holder for two mistakes (being late paying their bill and running so close to their credit limit)?

Another scam is they keep changing due dates to try to catch you with a late fee. Inexcusable!!


This happens? Maybe my experience with the 7 or so credit cards I've had or have is insufficient to have experienced this, but I can't say I've ever seen any of my credit card company try to "trick me" into being late by making the billing date and due date be a meandering target. I suppose it could happen with some types, particularly store credit cards where they often don't send out a bill unless there is a balance on it and each time a new balance is started it creates a new billing cycle. However, in this case the cycle is dependent on the consumer's usage pattern, not some random, ill-intended trickery.
pvolcko