Reform in the Age of Plastic
"Consumers, by definition, include us all," said President Kennedy in an address to Congress in 1962. Delivered only four years after the first widely-accepted charge card was issued, he could hardly have imagined the credit card boom to come -- or how much Americans would come to rely on them.
Americans know they have a responsibility to live within their means and to pay what they owe. But they also have a right not to be deceived, misled, or ripped off by unfair and arbitrary credit card industry practices that have become commonplace. That's especially important when one considers how credit card use has expanded in the US.
Today, three-quarters of American households have at least one credit card. And where only about 16 percent of U.S. households used credit cards four decades ago, with fewer than a million merchants accepting them, purchases made with credit and debit cards now outnumber those made with cash and check.
Unfortunately, as the use of credit cards has soared, so too has the list of predatory practices, hidden fees and sudden interest rate hikes to which the industry has increasingly resorted -"any time any reason" interest rate increases, "double cycle billing" that charges interest on balances that the consumer has already paid, deceptive marketing to young people, and skyrocketing penalty interest rates, some as high as 32 percent.
The industry has profited handsomely; between 2007 and 2008, credit card companies raised interest rates on nearly one out of every four accounts -- 70 million cardholders in all who were charged $10 billion in extra interest.
Put simply, this is an industry that has thrived in part on misleading its customers. Consumers should not have to live in fear that a clause buried in the fine print of their credit card contract might someday be their financial undoing.
Even the federal financial regulators finally recognized the threat posed to consumers and our economy alike, finalizing rules that would curb some of these unfair and deceptive practices.
But with our economy in deep recession and layoffs mounting, the time has come for broad reform -- to insist on consumer protections that are strong and reliable, rules that are transparent and fair, and statements that are clear and informative.
Those principles are the very essence of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, legislation the Senate will vote on today.
Protecting millions of Americans not covered by the Federal Reserve's rules, the legislation prevents unfair increases in interest rates and changes in the terms of credit card contracts -- prohibiting the kind of unjustifiable rate increases on existing balances that the Pew Charitable Trusts found were allowed by 93 percent of cards surveyed, while preventing the kind of "gotcha" tactics that say if you pay late once, you're penalized forever.
The bill puts an end to exorbitant and unnecessary fees that drive families further into debt--requiring that any penalties be proportional to the violation and prohibiting issuers from charging fees when customers make a payment by phone or unknowingly exceed their credit limit.
The Credit CARD Act protects the rights of financially responsible credit card users -- so that if the credit card company delayed crediting your payment or charged you for debt paid on time, you aren't charged for their mistake.
This legislation also requires far better disclosure of card terms and conditions. Cardholders should not need a microscope to read what a statement says and a law degree to understand what it means.
Importantly, the bill includes robust protections for young people who credit card companies have shamelessly and aggressively targeted for years. According to Sallie Mae, college students graduate with an average credit card debt of more than $4,100, and nearly a fifth of students have balances over $7,000.
The Credit CARD Act limits the kind of prescreened offers that get so many young people into trouble and requires companies to take into account a young person's ability to repay before allowing them to take on what is all too often a lifetime of debt.
And finally, with fines as high as $5,000 per violation, credit card companies will understand that if they violate the terms of an agreement with their cardholders there will be serious consequences.
When given fair terms, credit cards can be a valuable financial tool for millions of Americans. But that's far from the case today. And with our economy in trouble, Americans do not deserve -- and cannot afford -- to be pushed down the economic ladder by credit card companies any longer.
Over and over we've heard that consumers should act responsibly when it comes to credit cards. I agree -- but it's time we held credit card companies to the same standard.
Follow Sen. Chris Dodd on Twitter: www.twitter.com/SenChrisDodd
Charles Warner: The Verizon-Citi Visa Scam
How is Citi going to pay the government back? One way is to find new, underhanded ways to get Visa cards into people's wallets.
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"Over and over we've heard that consumers should act responsibly when it comes to credit cards. I agree -- but it's time we held credit card companies to the same standard"
Hold the credit cards companies to what standards? The standards of the wealthy and powerful bankers who bought us to our knees? Wall Street Standards who sold toxic assets to the world and poisoned the Well?
To CountryWide Bank standards who gave Dodd his two dream mortgages loan rates that no one else could get?
How can someone like Dodd talk about standards? He has no ethics.All that Dodd has done is to give the Banks money. He gave the victims-that is you and me nothing? These banks operate with impunity-they answer to no one. This financial mess will never be over until the Congress is purged of the bank buddies. Millions of Americans have been financially castrated by the Banks and Dodd is talking about standards- give me a break.
I cannot conceive that congress would allow credit cards to penalize good clients that pay on time and in full. After all the merchants they are buying from are getting charged fees, so they are not losing out...and they are also not getting stiffed by the customer either as they replenish the banks coffers on time...this should not be allowed! Please do something about this!
I would give up my credit card in a jiffy if they did this to me! Switch to a card with some integrity and respect for the consumer!
I think the difference is... if you are a good responsible consumer, AND you don't face an unexpected life change (like sudden job loss, or the loss of a spouse), and you're a pretty fiscally responsible person. You have options. If your credit card company starts jerking you around via sudden rate hikes, excessive annual fees, etc. you can just pay it off and cut it up.
Sure a credit card is more "convenient" for a lot of things, but I live just fine without even one. It can be done.
But if you're not financially stable (and what percentage of people under about 25 really are?), or if you do face a sudden life change like job loss, sudden divorce, loss of a spouse, etc, then you have no options if your card company decides to a bunch of jerks.
But a credit card is a privelege of good financial standing, not the automatic right of every American consumer. And quite frankly, 9 out of 10 Americans shouldn't have one at all. They do not have theincome nor financial stability to justify being given one at all.
Sorry, but no one is forced to use a credit card. Where are the complaints when banks slap on huge fees for checking account overdrafts?
Quite frankly, the majority of card users just buy stuff! Most aren't relying on them for survival.
You don't NEED 5 shirts, 5 pair of pants & 5 pair of shoes in one purchase - (often just cause they're "on sale"). I see it ALL the time - at Target, Kohls, malls, etc. Or what about "Save 15% when you spend $100"! Why spend the $100 to begin with - for stuff no less?
Everyone cries about debt? I pay cards off monthly - if you can't, don't buy!
BTW, I'm not including business owners in my above comment. I know some extremely hard working, responsible business owners who do require credit cards for survival!
I agree, but imagine when you travel and you have only cash or credit card to use,,, credit cards sure are more convenient. I tend to use mine mostly for travel. Also buying online, how else could you do this? Nobody takes checks anymore.
Yeah, I use mine for all of the above, but esp for convenience (& for just about everything). I spend accordingly so as to pay it off monthly. Got hit with cash advance fees years ago, didn't know how it "worked". When I found out the advance only comes off if paid in full, I did & have done so ever since!
If you want to know what is in for me? This is the best article I found so far. There is no need trust Chris Dodd once again.
Here's a true-and-false primer. Decide for your self!
http://redtape.msnbc.com/2009/05/dispelling-confusion-over-credit-card-legislation-.html
DISPELLING MYTHS ON CREDIT CARD LEGISLATION
Posted: Wednesday, May 20 2009 at 05:40 pm CT by Bob Sullivan
The legislation caps interest rates and fees. FALSE.
It will lower your credit card bills. FALSE.
It will raise your rates. TRUE.
It will make 'good' users pay for bad users. FALSE.
It bans retroactive interest rate hikes. SORT OF.
It speeds up the rules issued by the Federal Reserve earlier this year. FALSE.
It substantially improves upon the credit card regulations already approved by the Federal Reserve. TRUE.
It bans over-the-limit fees. WE'LL SEE.
It bans two cycle billing and universal default. TRUE.
Even when interest rates are jacked up, consumers have new rights. TRUE.
It will strike a steak through the heart of those fee-harvester cards. FALSE, BUT…
The bill also allows carrying of loaded guns in national parks. TRUE.
Consumers should celebrate. A LITTLE.
For details:
http://redtape.msnbc.com/2009/05/dispelling-confusion-over-credit-card-legislation-.html
The fake credit card bill that passed today was worthless.
There are loopholes big enough to drive an oil supertanker thru.....
It's all fake and doubletalk to appease the masses and make it appear that congress is doing something when in fact they are doing nothing.
The credit card companies got everything they wanted.......the American people were betrayed......again.
READ the fine print in this fake bill......it will make you sick.
Both political parties are corrupt............bought off by Wall Street - Big business.campaign contributions
OK, so when are we going to get our so-called 'privacy' back from the credit card companies???? I find it appalling that a credit card user must 'opt out' of their policies on sharing a person's information. Shouldn't it be the other way around? Shouldn't THEY have to ask US if they CAN share ANY of our information?
Oh I really agree with you there, I am tired of receiving these long complicated options telling me that they can share just about everything with other merchants, and even if you can opt out its very limited...so .who is protecting the consumer now a days? nobody?
Well consumers have to get together and demand a change in this...!!!
If we're going to get serious about limiting the ways lenders can squeeze blood out of turnips why not start with controlling payday loans to something lower than 700% interest? As a first step, why not simply limit all forms of credit to a 50% interest maximum? It would be a start.
Dick Durbin said yesterday (on the news) that they were not finished and that payday loans was included in the 'stuff' they are addressing next!
More Lipstick Senator, you need more lipstick for this humongous pig...!
Do you nay say everything any Democrat says?
You never add anything else to the discussion.
I don't know how young you are or if you are Democrat or Republican but these people are right. I have seen nothing out of this new administration that makes me feel any different from the Bush era.
When the credit card companies made sure that everything you spent, everywhere you went you had to have a credit card people should have begun paying off their bills then. I have come to believe that what this government needs is a complete overhaul because they are more interested in keeping their jobs (at any cost) and making more money. This credit card bill is a prime example. WAIT FOR THE HEALTH CARE BILL!!!
We will be saying 'Chris who?' after the election in his state. Hurray.
I certainly hope so!!!
Do we need to be reminded again that the Congress is a wholly owned subsidiary of the Banking industy. Giving them a year or 9 months to reform their practices is like asking the fox to nice to the chickens before we put a lease on his neck. This is stupid beyond belief. If Obama signs this then he is part of the problem and needs to recant all his crap about a new way to do politics.
So much for help from the Democrats. There was no cap on interest rate charges. All else is minor. The card companies gave in a little and kept the large. Real progressive change! Isn't it great to read Chris Dodd pat himself on the back.
Where were these guys when all of this was happening? We are getting a ton of lip service. The devil is in the details and I am positive there are loop holes large enough to back the Brinks trucks into them.
Your right. The only way to tame Congress is to separate them from the money. This could prove impossible since the Fox is already in the Hen House.
Paco
Why did the bill get 95% of the vote? Because only slaps the wrist of the credit card companies. Today on Morning Joe, Chris Dodd admitted that the credit card companies will find loopholes. He also admitted that details will continue to be hidden in a 30-page loan agreements. He was pitiful, pretending to be David against Goliath. If Congress represented the people rather that the credit card companies, they would require, among other reforms, a simplified contract with all important information on the first page. But of course campaign contrubitions would suffer. Money will continue to rule until we get campaign finance reform.
exactly. . it got overwhelming support because the Senate knew full well the bill is itself a fraud. This is nothing but theater.
Credit and credit card industry is part of the
REPUBLICAN GREEDY PROFITEERING NANNY STATE FOR THE RICH
that specializes in:
unfair and arbitrary credit card industry practices that have
CRASHED AMERICA'S ECONOMY.
You act as if only the conservative half of CONgress is taking money from industry lobbyists and 'fixing' legislation for them. Nothing could be further from the TRUTH.
Please remind me, who has predominately been running Congress for the last 16 years. Has the Democratic party been watching out for you??
Paco
Stop living beyond your means, it's so simple... Take all pieces of plastic that is are not your drivers license, grocery discount cards, check card, or pre-paided debit card out of your wallet and destroy it. Pay off all credit card debits or file for bankruptcy. Some people have theories that in just a few years money won't matter anyways, however that's rather an escapeist attitude and a bit off this topic...
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