The Importance of Focusing on Credit Card Debt
A quick post of appreciation for Arianna Huffington helping to put the issue of out-of-control credit card debt in the spotlight. The nuts and bolts of why it is such a big threat to so many families and the already-battered economy are fully explained by Arianna (or in my November post).
The bottom line is that, more than ever, we cannot allow credit card companies to continue fleecing consumers, or making them feel like it's all one big guessing game. The convergence of over-stretched family budgets, increasing reliance on credit cards just to get by and wild credit card interest rate hikes threatens to put many families into bankruptcy and deepen the economic crisis.
I have reintroduced The Credit Card Reform Act -- the strongest credit card holder protection bill in existence -- to prohibit blatantly unfair actions, like unilateral interest rate hikes. The momentum exists to pass credit card reform legislation this year, and I'm optimistic we can get it done soon.
One other point to mention: much fanfare was given to new federal regulations curbing certain egregious credit card company practices, announced in December. Although these rules do not cover the full range of tricks and traps that must be ended, they marked a big step forward. The main drawback to the regulations was their late deadline for implementation: July of 2010. Between now and then, far too many Americans could go bankrupt.
I wrote the CEOs of the six biggest credit card issuers, urging them to implement these rules as soon as possible for the sake of families facing mountains of debt and for our economy. Five responded, and all but one claimed it was too much of a burden to do it any faster. Their feet should be held to the fire to reform their practices as soon as possible, and passing reform into law would be the most effective way to do it.
Follow Sen. Robert Menendez on Twitter: www.twitter.com/SenatorMenendez
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Senator:
(1) You are a United States Senator. You are a voting member of The United States Congress, which represents and defends the collective interests of more than 305 million people. Congress does not have to "strike a parley with" anyone at all. Congress does not have to stay its hand.
(2) In the book of Deuteronomy ... written so-many years ago ... it was called "usury." Until not too many years ago, usury was forbidden in all States as well as by the Federal government. In ancient days, you could get your hand chopped-off for usury, just like a common thief's ... because you WERE "a common thief."
(3) Your law should address not only usury, but also the "credit scoring" system ... which is now used to "justify" these predatory practices. Today there is no informed-consent, no recourse. It is in the best interest of a lender to drive one's credit-score as low as possible, and no one is watching the henhouse.
When human societies from the earliest days of recorded history spoke so savagely against usury ... sir, "they were on to something." They knew something that we conveniently forgot.
You are the Congress. You represent 305 million Plaintiffs. You parley to no one.
they flood the mail,
every month, with offers like
0% interest, or interest free...
and when you read the fine print,
you will see the late fees, or something else..
called a "universal default"
they want you to pay late just one time,
and they have the rights,
to raise the interest rates on all.....
yes, all your credit cards to 32% or more, there is no limit either..
consumer lending..
is definately highway robbery...
and the minimum payments you make each month, is probably late fees,
or penalties, when the principle of the entire bill is never ever going to go away.. you will take 20 to 30 years to pay off your credit card bill..
and thats just one of them too..
check out the term,
"universal default"
it will blow you away....
use cash, and pay off your credit cards entirely at the end of each month....get rid of them..
Why is this issue not huge? Why are we not in the streets?
With a FICO near 800, never a late payment, never any penalties, I have just been notified by capitolone that my APR is more than tripling jan 2010. Good bye capitolone.
Yes, we need reform NOW, not later.
If you don't want to pay the credit card company, don't use the cards. Yes. It is that simple.
Credit is a fundamental necessity. It is imperative that credit be fair... and that credit reporting, also, be fair.
Human nature being what it is (in our hearts, we are all dirty b*stards...), we have to guard against human nature. Legislation must IMPOSE these protections against human-nature, and it is wholly irresponsible to "wait until July of next year" to do it. Mr. Becket's famous play comes to mind . . .
i have skimmed over schumer's S. 235 and menendez's S. 392 . i didn't notice if s. 235 had a Prohibits Universal Default clause, which i think would be necessary. that and the ban on soliciting customers under the age of 21 make senator menendez's plan a better option.
Very good bill Senator. Except one provision
"Requires Verification of Ability to Pay
Credit card issuers may not offer credit or raise credit limits to consumers unless they determine that the consumer will be able to make the scheduled payments under the terms of the agreement based on their current income, obligations, and employment status. The Federal Reserve would provide the appropriate formula for determining ability to pay."
Not only this has zero chance of passing, but it also too burdensome to both companies and consumers. There's no need to protect people from themselves.
I don't see it as protecting people from themselves - I see it as a means of preventing credit card companies from exploiting people.
I agree wholeheartedly.
Any lender has a fiduciary duty -- to its shareholders, to its depositors, to the Federal government, and yes, to its DEBTORS -- to ensure that all of its loan-agreements are plausible and defensible.
When banks dreamed-up these "credit default swaps," they not-only felt that they had no need to worry about whether the loans they made could be repaid ... they had a huge incentive to create loans that they knew COULD NOT be repaid. But the cold, hard reality of banking never changed.
If you issue a loan, then not only has the debtor created a binding promise to you to repay his debt, but YOU have created a promise, binding upon yourself and answerable to all of your regulators and stakeholders, that the obligation is "good." All of these stakeholders must rely upon that promise.
Because these promises are not reliable ... it is, let's call it true, a FRAUD. The simple language of this clause merely outlines a particular FRAUD, and expressly forbids it.
Also, how you know it's a scam:
If they wanted to deal with you like a real customer, people would be able to negotiate lower interest rates after a certain period of keeping up with payments or paying off a balance and NOT closing the card.
Sen. Menendez - why not just co-sponsor Schumer's S 235 bill which is the same as HR 627 that passed the house last fall.
Your bill does not specifically address items like 'double-cycle billing' and number of bill vs. pay dates, and erroneous fees - which are very important.
I appreciate your addressing the abuse of Credit Card Issuers - but S 235 is a better bill. Please Co-Sponsor.
Once upon a time there were anti-usury laws. Then, along came Biden. The rest is history.
There should be a late fee for each occurance of a late payment- - and it should be minimal. They should not be allowed to raise the rate of the account over such a whimsical thing as a late payment. That is BS.
Maybe credit should be limited to a percent of GDP or something. Treat that amount as a commodity and let the banks fight over how much credit they can get hold of to extend to consumers. That might keep the "easy prey' out of the mix and put a cap on profits/losses and gouging-ability. The way banking is now, the system is out of control.
I just recieved a notice from my credit card company, Capital One, that if I am late just one time on a payment, my interest rate will go up from the 11.9% it is at present, to 23% and stay that way for a year of being paid on the due date.
I have the choice of doing nothing which automaticaaly implies I agree, in 30 days, or, telling them I do not agree, within 30 days, and tearing up my credit card and my credit will be cancelled.
Considering what these lending companies have just done to our economy, and the tax payer $$ they are asking for...CAN WE TALK?!
I think that more then doubling my interest rate for one late payment...even if it is just one day late...is rather OVER THE TOP and hi-way robbery!
Seriously!
As long as Joe Biden, the Senator from the credit industry, is in the White House, we will continue to allow credit card companies to fleece customers. Biden has backed them up on every thing they've asked for. He was a big supporter of the "bankruptcy reform" bill that works heavily in favor of predatory lenders. His efforts on their behalf mocks his claims to be looking out for the middle class. Thanks, "champ."
Very True, Citizen54, Delaware is the shelter for most big banks, but lets hope Obama trumps Biden on this issue, after all the president voted against the Bankruptcy Bill when he was a senator.
Yes, this is about time. The credit card industry has prayed to long in this economy and has much to blame for the current crisis. They have relied on loose money to lend and drawn innocent people in who probably shouldn't have been given credit. Now they put the burden on consumers during this crisis by lowering limits, increasing fees, and interest. They are the worst of the worst and need to be rained in quickly. Thank you Senator Menendez.
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