How Congress Could Kill Shady Credit Card Schemes

In February we asked HuffPost readers to share their stories of credit card woe. The laments poured in, and we followed up with a story on readers who said they'd been gouged and another with an explanation from bailed-out banks: Our rate hikes are the economy's fault.

Over a month later, readers are still sending several stories a day.

Danielle Miele of Massachusetts wrote that after her husband was laid off last summer, they were late on some payments to Bank of America and wound up with a 29.99 percent interest rate.

"[W]hen it comes down to paying the groceries for my family or paying Bank of America, I know what I have to do," Miele wrote. "But why should I have to make that choice? Where is our bailout?"

Michael Sprague wrote that Bank of America randomly changed his address, causing him to miss bills, which in turn brought big penalties and a 30 percent interest rate. Sprague says he addressed a letter directly to CEO Ken Lewis. It turned out to have been a good idea:

"I never heard from Mr. Lewis directly, but a short while later I had a voicemail from a person at BofA in Arizona, who did all I requested, except they reduced the interest rate to about 8% and made it permanent," Sprague wrote.

Craig Gibson of Tyler, Texas wrote that rates went up on cards he holds with American Express, Chase, and Citi. He chose to "opt-out" rather than continue his Citi card at the higher rate, but he isn't too happy to have been forced to choose.

"The catch is that, if you accept the new rate, you are getting screwed for nothing!" Gibson wrote. "And, if you opt-out, like I did, then when you close the account, you get screwed on your credit report! For nothing!"

Reuters reports that credit card write-downs of uncollectable debt reached 8.82% in February -- the highest level in the 20-year lifetime of the Moody's Credit Card Index.

There may be relief on the way, as credit card reform is afoot in both chambers of Congress this week. On Tuesday, a Senate committee narrowly approved a bill by Sen. Chris Dodd (D-Conn.), supported by a broad range of consumer advocates (here's a PDF of their letter) that would ban unfair interest rate hikes, retroactive hikes, and some over-the-limit fees, among other things. Dodd calls credit card reform crucial to the nation's economic recovery.

In the House, Rep. Carolyn Maloney (D-N.Y.) introduced a similar bill, called the Credit Cardholders' Bill of Rights. The measure is up for a vote in the House Thursday.
Are you being forced to use your credit cards to make ends meet? Has a credit card company jacked up your interest rate after a single missed payment -- or raised your rate even though you haven't missed one? Have you been charged unexpected add-on fees? If so, we want to hear your story. Share it with us by emailing [e-mail].

Comments

[Sundialsvc4]

I think that there are three major issues to be dealt with here:

(1) U-S-U-R-Y. That's what they called this crime in the Book of Deuteronomy. Ancient societies dealt with it by chopping-off the right hand of the offender: it was the same penalty meted to a common thief. Old Jacob Marley spent eternity wailing about "a life's opportunities mis-used." Old Eb Scrooge saw that his debtors would rejoice with light hearts at the news of his passing, and pin their hopes of not finding "so merciless a creditor in his successor."

(2) Computerized fraud... or "salting the receivables." Transactions that you can't collect from one person are slipped into the accounts of another, hoping they don't actually open the envelope. Also, fiddling with the posting dates, or simply keeping a bag of mail a few extra days before dumping it into the system.

(3) Credit-ratings. Absolutely anyone can "ding" you, and they don't have to tell you, and if you ask, it's another "ding." I defy you to actually find ANYONE with "good credit" anymore. The system "justifies" usury.

Upshot? Uh huh: "merciless" abusive practices, now leading to (yet another) hemorrhage of noncollectable debt... which of course they sold-off as a security...

[IDIOTA]

Wow -- Deuteronomy! There are no new sins, just new sinners, armed with more technology.

[tomasedison]

We need to have National Usury Laws with a cap of credit card rates at 15 or 18% which seems to be more than enough for any legit credit card provider.

[Sundialsvc4]

... and a reinstatement of the consumer interest tax deduction.

Honestly, criminals are stupid more than anything. They can think of a hundred different ways to "screw" you, to stuff their own pockets with yet more money ... but they cannot figure out that a rising tide lifts all boats.

The notion of a cardholder as a customer, whose prosperity is your prosperity, is something that has burned out of their cold flint hearts. As a result, their businesses have failed utterly, and for all the world to see. But they just can't repent of their own folly. They must have laws imposed upon them to drag them, kicking and screaming and suing and appealing, to what any true Businessman would have quickly done on his own.

[pontesisto]

Sorry I put in the wrong bloc. The correct bloc is:

http://votingbloc.org/Credit_Card_Rights.php

The recent Senate committee vote was narrow and only passed by 1 vote. We really need to pressure Congress to get a full vote to pass. We are up against powerful banks and credit card companies who have a lot of money but they do not have any votes...so we really hold all the cards (no pun intended) if we can stand together on this issue!

[Sundialsvc4]

There are more than 305 million plaintiffs here.

Oh, okay. Something they can understand. Hundreds of millions of R-E-G-I-S-T-E-R-E-D V-O-T-E-R-S. (Uh huh, Bill Murray's line from "Ghostbusters" comes to mind.)

[NoBlinky]

I just had an interest rate hike on my Chase card -- it nearly doubled. I called to find out why, knowing I hadn't missed a payment or gone over my limit, and was told that given the balance I had, Chase had to pay more to the Fed to keep the account open than they were making on the interest I was paying.

Has anyone else heard that one? Does it make any sense at all? It sounds to me like they're penalizing people who keep reasonable balances and pay aggressively on them. Who wants a customer like that!?!?!?

[Egalitare]

You "failed" in delivering your portion of tribute to their balance sheets.

They were simply trying to restore your rightful place in "the natural order of things." : D

[Elle1019]

Same crap happened to me. I've NEVER missed a payment and have NEVER paid late. I carry a balance of about $400, and have been paying my card down consistently each month. Yet, my interest rate went from 7 to 12 percent.

[Sundialsvc4]

Well, you could obtain your own credit report. I'm sure you'll find all kinds of late payments and other trash there.

Bear in mind, of course, that when you ask for your own credit report, it'll be a big negative mark on your credit report (which will be added -after- your report has been printed).

So, see ... "we can charge you any interest rate we want." "We can attach anything to your credit report without your knowledge, consent, or appeal." "It's in our best business interest to extort money from you, because we said it was."

This is the utter and complete FOLLY that the American banking industry has stooped to. It's really pathetic to watch a man who calls himself a rich man, wallowing in the slop. Honestly, I think it's so disgusting to the pigs that it's affecting the flavor of the bacon.

[Georgia1992]

My story is the same as yours Ellen1019.

[AnnfromCA]

We're all up there now. It was just a rip-off. Credit card companies are in complete disarray.

The good news? Most of us are paying our cards off, and we'll not bite again in the future.

[TRYKER]

Hey, how about we charge those bailed-out banks 30% interest on their tax-payer provided funds?
How about we charge them a small percent, oh say 5% for late fees on BILLIONS of dollars...every month! Ooops. They would owe US so much money at the end of the year we could pay off the debt.
If they were treated like they treat their customers, perhaps they would wake up...nah, they know nothing but the gravy train.

[Kerra52]

We owed BofA money for credit cards. We were way behind and just starting our bankruptcy process. Before we could get it all discharged. BofA wiped out our bank account. Everything we had to live on. Not even a penny left. I know its legal but seems illegal.

[MaryanneAZ]

I would check with an attorney on whether that maneuver was legal. I do not know what State you live in, but in a lot of places they cannot go to your other accounts without your direct, informed consent. Many States do not have garnishment of paychecks either. You can also look up the statutes in your State online. Also, you can contact your State's banking authorities for information.

[Pleneras]

I posted this yesterday: I just got off the phone with Capital One to close both my accounts after being notified of the new interest hikes. I had the service rep laughing so hard... told her, "It says here that due to the economic crisis they must raise my interest rates. You tell because of the idiot who decided to raise the rates millions of people will close their accounts. Now why isn't this fool fired? Think I'm worried about my reputation as long as I'm paying it off? Closed account means bad reputation? Affects credit? Boo hoo! Capital One is the one with the BAD credit, not me. How's it feel to have a stupid boss, haha. Thanks to you guys the Loan Sharks back in business and their interest rates are better!