Obama To Address Credit Card Abuses

WASHINGTON — The White House says that it will back congressional efforts to clamp down on credit card abuses in an effort to address the recession's effect on Main Street.

The House and Senate are considering a credit card bill of rights to limit the ability of credit card companies to raise interest rates on existing balances and to require greater disclosure. White House economic adviser Larry Summers said people need to save more, but that the government also needs to curb credit card pitches that addict people to plastic.

President Barack Obama is "going to be very focused, in a very near term, on a whole set of issues having to do with credit card abuses, having to do with the way people have been deceived into paying extraordinarily high rates that they wouldn't have paid if they knew what they were getting themselves into," Summers said.

Summers said the administration wants to see a better-regulated financial system, encourage savings and eventually get back to a situation where government spending is not a drain on the economy.

"Individuals are going to have to save more, that's why savings incentives are so important," he said. "That's why we need to do things to stop the marketing of credit in ways that addicts people to it _ so that our households are again saving, and families are again preparing to send kids to college, for their retirement, and so forth."

Summers made the comments in an interview broadcast Sunday on NBC's "Meet the Press." He was attending a summit of Western Hemispheric leaders in Trinidad and Tobago.

Comments

[CharlesMac]

Let's think about this from the Banks' perspective.

You have had a ton of losses. You have an unknown, but expectedly huge, set of losses hidden off of your balance sheet. Very high probability, if you took all of your tangible and marketable assets to market today, you would be declared bankrupt. There is one and only one solution ( the gov't helps you hide your situation, which will get very difficult for them someday), you have to generate massive net income from your operations.

My point is that everybody is missing the other point while they complain about funding these businesses. These banks are double deadly to your economy. First, it costs to just maintain a failed business zombie. But that zombie has a veracious appetite, attempting to bring itself back to life. They have to prey extra heavily on their customers.

A well-run, solvent business doesn't have to do that. In fact, it would keep its rates/charges/price (while everybody raises them) so that it will get as much market share as it can. Not so, when you have a handful of companies issuing 75% of the credit cards, companies who need extra-huge profits to just stay standing.

Prime rate 3.25%,

Avg cc rate 15%

..........­. And that doesn't even count future "defaults" by missing one payment. Which raises it anywhere from 23.99%+pri­me to 29.99% plus prime (Citi's rates).

Their new name is "Banksters".

It costs twice, to support a failed company.

[Lemmy]

Two fundamental rules of credit cards are known by everyone:

1.) Banks charge a high interest rate for unpaid balance
2.) Banks can raise their rates

If you dance with the devil . . . . . .

[GroundhogBoy]

Just curious, why exactly do you think that 75% of the credit card debt is owned by the same few big banks? Could it be a result of the fact that they've got the easiest lending standards?

Try getting a $10,000 line of credit from your local bank, then try to get the same from BoA or Citi It's just not the same thing because the big banks were thought to have been able to absorb larger losses. As a result, better customers are suffering to make up for the losses (just look at BoA or Capital One's most recent quarter). Obviously everyone has different circumstances, but

[WalkaboutMike]

Credit Card abuses.

This is nothing new but I'll tell you this, it's about time we address this problem that has been lurking for a while.

Learn more at www.TheCreditCardAct.com

[annieR]

Of course, some people abuse credit cards needlessly, but many people use credit cards out of desperation (e.g., a medical procedure for which payment must be guaranteed, a mortgage payment to prevent eviction). These vulnerable people are the ones who can least afford to have their rates increased exhorbitantly. Many are victims of the current economic situation. No one needs to charge 30% interest. How about a temporary 5% interest rate with a cap of 10% for everyone?

[GroundhogBoy]

Yet Bank of America has $1.8 billion in losses in the credit card branch in the quarter that was announced this morning.

So, yes, it seems that they do need to charge 30% interest, maybe more. This is what happens when credit card default rates get as high as they are (8.6%, up from 5.2% last year, with projections to go higher). Some people just didn't deserve as much credit as they were given, but now we're all on a tirade because banks are cutting back credit limits and making credit more costly?

[duchessofdork]

Raising the rates the way they are is going to cause a massive snowballing default rate!

And the indiscriminate manner in which they are doing it is going to cause many otherwise responsible cardholders to be swept up in that.

A few months down the line you will see folks who had been plugging along the best they could, stumbling and then falling. Into bankruptcy.

And that means the flow of consumer money via payments into the banks will drop to a trickle.

Just like the folks on Wall Street, the Banksters only seem to see the short-term rather than the long-term picture.

[iameliot]

Mr. President, Mr. Summers, Mr. Bernanke et. al........­will one of you please take a look at the consumer affairs complaint sites for Bank of America and Chase. and Citi......­don't listen to the BS the bank CEOs are spewing...­...read the real horror stories that tens of millions of those holding credit cards and unsecured CREDIT LINES from these banks.....­..

The solution needs to be immediate and needs to be Retroactiv­e.......No one in this country should be paying more than 9-10% interest at a time when the fed funds rate is zero.

[chayefsky]

Figures don't lie but liars figure. SAVE money, America...­.No wait!.....­.SPEND to save the economy...­..No wait!.....­PAY OFF your credit cards and close unused accounts to ease the credit crunch....­.No wait!.....­If you do that your credit score will drop like a stone.....­..Here's a thought: Do what is right and good for you. Don't listen to the money grubbers; they ALL have an agenda. Credit scores are b.s and are easily manipulated.

[SangZe]

It's high time Obama and company took notice of the usury practiced by credit card companies. Now if only he and his crew will actually do something about it, not just talk.

[Lemmy]

Control your own destiny or someone else will. The more folks bury themselves in these credit card debts, the more control these banks have over them. Stupid . . . and we'll all pay for it.

[econ1]

It should be much, much harder to get a credit card. With higher certainly they would get paid, companies could then lower rates.

We have to get back to being a producer / saver nation or our children will be paying the people of China, Japan and India for their entire lives.

[Sundialsvc4]

This is "usury," ladies and gentlemen. A very ancient crime.

[Cogitoe]

This reform is crucial to our nation. We have to stop the legalized loan sharking that is enslaving millions and get back to saving. Here are four reforms any legislation should have:
(1) No introductory rates to entice unsuspecting consumers
(2) No unilateral changes in interest rate. Rates should either be fixed for a specified period or floating but with a fixed spread over a specified common base rate (e.g. one-year Treasuries)
(3) Only one-time late payment charges, not ongoing penalties
(4) Maximum rate not to be exceeded regardless of credit score (e.g. 12%). If the issuer needs a higher rate than the max to justify extending the credit, the credit should not be extended.

[Ohsherrie]

The marketing of credit cards was all part of the "let's build an economy based on credit" facit of repug economic planning.

[Lemmy]

And the use of credit cards was all part of the "let's buy it even though we can't pay for it". Marketing and use of credit cards was hardly started under Bush. Your hate is blinding you.

[JustJoy7]

Forget the tea bagging joke. That was just organized theatrics. Want a REAL revolt? Organize a taking to the streets event on credit card abuse by banks and other credit card issuers and give it a REAL name and I'd bet we couldn't find room on the streets to hold the turnout. Nope...no room.

Add to that the crazy CREDIT REPORT/SCORE scam, and no one would go to work. We'd crowd all the streets in the nation. Dispense with FORMULAS already!!! Give us something in our financial life that can be understood. Formulas is another way of saying "Scam...No­t to be understood­." It's amazing the many ways ordinary citizens in America have to live by "legal" deception and trickery. What a shame. EVERYTHING is designed to rip the people off. Start listing the ways, folks, and HuffPost would run out of space to contain it all.

[Shashi0224]

Thank you President Obama! Another good deed that will help the middle class!

[LemonFreshScent]

i have one card with a $300 limit that I just use for gas. It keeps my score high since i pay it off every month, and keeps me out of spending trouble.

Problems solved.

(I have gotten out of over 40,000 in debt throughout my life... debt is so stupid)

[MurrayAbraham]

Frankly, as much as I would be in favor of a simple anti-usury law to curve credit card interest rates, I can't believe the behavior we Americans have with consumer credit.
It's not rocket science! If you don't have the cash to pay for it, don't buy it. Credit cards should be used only as commodity to avoid having to carry around cash.

[Rockwell]

Thank you Mr. Obvious. But the fact is, while corporations squeezed wages they were happy to let workers rely on credit cards to suplement the income the corporations refused to pay.

It's just a modern variation on the wage slave model at the turn of the 18th century where workers were trapped because they "owed their soul to the company store".

So yeah, blame the stupid old American consumer. Who's consumption has been fueling world growth for the past 20 years. Now that the credit well has dried up, the rest of the world that got rich off our spending is suddenly complaining about how it's all our fault.

Consumers deserve a share of the blame. But tightwade Corporations and blood sucking banks deserve much more of the blame. Their manipulation was calculated, targeted and implemented by professionals to get us backed into the corner we are now.