Hello Oprah – An Elder Advocate's Appeal – Part 2
The Deck Farm Chez Bennett

Credit Card Loan Sharks

So even with tens of billions of dollars from you and Crabby Old Lady to save their sorry asses, credit card banks need legislation to keep them from acting like the local loan shark.

Yesterday, the House of Representatives overwhelming passed the Credit Card Accountability, Responsibility and Disclosure Act of 2009 which the Senate had overwhelming passed on Tuesday. President Obama is expected to sign the new rules into law.

In their story immediately following the Senate vote yesterday, The New York Times reported:

"Democrats said the rules were needed because the companies were engaging in abusive practices at a time when Americans were more reliant on their cards because of the recession."

Crabby Old Lady can't help but wonder if that means Democrats believe abusive practices by the banks are acceptable during non-recessionary times.

The mandated changes in the Senate bill reveal the extent to which credit card banks have been abusiing customers for decades:

• Banks will now be required to send out bills at least 21 days before payment is due rather than 14 days or, as happened to Crabby once, seven days before the due date

• The cutoff time before late charges kick in on the due date would now be 5PM instead of an early morning hour as in the past

• No more late charges if the due date falls on a Sunday or holiday and your payment arrives a day later

• If there are charges on your bill with several different interest rates and you make a partial payment, now the payment would be applied first to the highest rate charges, not the lowest

• You must be given at least 45 days notice of increased interest rates (Crabby just received an increase that goes into effect in 30 days)

• Penalty fees and penalty interest rates can no longer be applied until you are at least 60 days late with the minimum payment

• Overdraft privileges are now “opt in” rather than applied automatically – with a big, fat fee – if you go over your credit limit

These are the major changes. There are others and more details in the full text of the bill.

It sounds pretty good, right? And the restrictions are needed. But did you notice the giant hole in this legislation? That's right – there is no cap on interest rates. Some individual states limit interest rates, but this bill is silent on the issue. You can thank the banking lobby our senators are beholden to for that.

While the bill was being written, Senator Bernie Sanders tried to add an amendment that would have capped interest rates at 15 percent which is still unreasonable, but better. It got only 33 votes of support.

"When banks are charging 30 percent interest rates, they are not making credit available," said Senator Sanders. "They are engaged in loan sharking."

But Congress is listening to the bank lobby, not one of their own, so we are stuck with credit card “reform” that leaves the biggest outrage intact. And mark Crabby's word – the banks will figure out new ways to further gouge us.

Oh, wait. They have already announced (threatened?) one such method - they will reinstitute annual fees:

“People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, [David Robertson, publisher of the Nilson Report, which tracks the credit card business], said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

“'Despite all the terrible things that have been said, you’re making out like a bandit,' he said. 'That’s a third of credit card customers, 50 million people who have gotten a great deal.'”
The New York Times, 19 May 2008

That's just horse pucky. Banks charge merchants up to six percent for each credit card transaction. They charge outrageously high fees to customers for cash advances and other transactions that don't relate to paying in full each month. And there is no requirement to offer cash back, travel points and other incentives - Crabby Old Lady has never used them anyway.

Whatever default trouble the credit card divisions of banks say they are suffering is similar to the bank housing collapse: they handed out billions of credit cards to people without the means to pay. That is just dumb and Crabby Old Lady is incensed that the banking industry will now require their customers to pay for their own bad business practices.

Congress and the media are crowing about the wonderful legislation that has been created. But it falls far short of real reform and leaves the banks a lot of room to continue their predator/prey business model.

At The Elder Storytelling Place today, Camille Koepnick Shaffer: The Tag Team Rascals.

Comments

Too bad so many of us have to rely on credit card debt to survive. But, it's a fact of life now, so we do need protection. I envy the air fern.

Brilliant post. I especially appreciate you calling out those who claim we get all the perks and "free-rides", and the fact that here too, credit is offered to those who cannot or do not PAY, which in my view simply creates more deeply dug financial holes for us all.

There's even one more scam that's out there. I'm one of those bandits - I pay my credit charges in full every month. Shame on me! So, as a result, one credit card has REDUCED my allowable credit limit from $2500 to $1500 - I'm not giving them enough "action."
Yesterday's mail brought the best one yet - not the offer of a new credit card, but an offer from my bank to offer me, as a "pre-screened" customer with a super duper credit rating, the chance for a "Prime Equity Line of Credit," a/k/a a home equity loan. So now I can, if I choose, spend up to $76,000 on just anything and put my only asset, my home, in jeopardy. Is this less toxic than a sub-prime mortgage? Is there no end to the snarky, underhanded, greedy methods that banks will resort to in order to grab my hard-earned money? Oh, yeah, they are also offering a 2% yield on a one-year CD. Argggh!

"Bill Changing Credit Card Rules Is Sent to Obama with Gun Measure Included" is headline on today's NY Times story.

This was an unrelated addition to allow gun-licensed visitors to national parks and wildlife refuges to carry loaded weapons. I'm thinking the Natl. Rifle Assn. is even more to be feared than the soulless banking industry.

I just get disgusted every time a spokesperson for the American Bankers Assocation gives their soundbite that this will just make it harder for people to get credit and this is their big "worry", Yeah, right. Meanwhile I just received a spiffy "invitation" to apply for a Visa "Black" card (oh, the honor). I just about spit out my diet coke when I saw that the annual fee is $495.00!!!!

And yes, I am INCENSED about the tacking on of the loaded weapons into national parks provision.

By their nature, bankers worship at the altar named "All the Traffic Will Bear." Apparently what the traffic will not bear, even in this economy, is the combination of 29% interest plus a full menu of miscellaneous fees and other nasty surprises.

The credit card industry has billions to throw at lobbying efforts, so any legislation that reins them in is an accomplishment. I will, however, be glad when/if the dust is blown off the concept of usury.

Usury is still a sin even if it isn't currently a crime, but that hasn't been much of a deterrent.

Crabby Old Lady didn't mention the loaded gun amendment because that's a separate issue that deserves its own discussion.

However, Crabby will not be going to a national park or wildlife refuge any time soon. Isn't that a shame. And shame on Congress.

I got a letter from my CC company this week, informing me my rate would go up 10%. I called and eventually talked to a chirpy voiced young "supervisor" who informed me I could either accept the rate hike or close the account. Period.

I almost always pay in full every month. Which means it doesn't matter a whole lot what my interest rate is. But it just makes me mad. I'm thinking I could use my debit card instead and my finances would all come out the same at the end of the month. Then the credit cards wouldn't get whatever kickbacks they currently get from my charges.

Virginia...

Crabby once tried that debit card routine and it made her nuts. She couldn't keep track of how much money was in her checking account.

And, Crabby would rather not let merchants have direct access to her bank account. If someone uses her credit card number illegally, there is relatively easy recourse for getting the charges removed. But that isn't as well established for debit cards.

We are trying a debit card this spring for the first time because we get 4.1% interest on up to $25,000. It is through a credit union and we will see how it works. My kids have gone to all cash to pay anything or online. We pay a lot online. One of our credit cards did the exorbitant penalties on an account that we had paid and they had missed the payment, but they took it off. We also took them off. We are reducing the number of cards we have and if their fees get ridiculous, we will get rid of them all and go back to checks. We always pay it off at the end of the month; but as was mentioned, they are getting kickbacks from the merchants for us using it there.

The problem is our whole system is badly skewed toward greed, inefficiency, mistakes, and even fraud. I wonder now if it can be fixed. Maybe we went too far and as individuals we have to protect ourselves through what is likely to be a very painful transition time.

I heard the other day air controllers talking about how bad their system has become the last 8 years. We just don't know the half of how bad this is.

I had had a lot of reluctance about debit cards but talking it through with the agent answered a lot of them. With the internet, it's easy to keep up to date every night if we want, and my husband liked it for how it easily imports into Quicken which he uses. So far so good but I am keeping an eye on it.

I had a credit card while back. My credit was in ruins due to my divorce so I followed advice thst a credit card with a small limit was a good way to restore my credit. Wrong! The I finally said to hell with it and busted my asker to pay it off. I realized that cash is the only way to go for me.

Bankers prey on those who can least afford it. What galls me is most of them claim to be Christians. I think Jesus needs to show up again and drive the money changers out of the temple.

I'm ready to just stuff what little I have in a sock and forget about it. What I get in interest isn't worth the hassle of dealing with the thieves in the banking industry.

Someone wiser that I said, "You aren't paranoid if the really are out to get you." And so it goes with bankers.


I pay the balance in full every month, but I fully expect my bank to charge me an annual fee for the privilege (?) soon. I will cut up my card on that date and tell them to 'stuff it'.

I've used a visa debit card through my credit union exclusively for the past 15 years with no problems. With the internet it is extremely easy to keep track of my balance. I guess there are some inherent risks but I've never experienced them.

I'm one of those that got "got" by my citibank card. Not only did they raise the rate from 7 percent, unannounced, to 14 percent, they made the rate retroactive. They obviously didn't want my business....since I was one that consistently paid off my card every month.

Hey, they didn't want anybody's business. I have really juicy stories about Chase, B of A, and Union Bank too. :)

To avoid these outrageous bank and credit card fees, I manage my finances using four major credit cards, an equity line of credit, a checking account, a debit card, online bill pay, and cash. Although this may sound like it's complicated, it's not, and has made my financial management much simpler and much more convenient.

My bank provides the equity line of credit, checking account, debit card, and online bill pay services. My major credit cards, of course are provided by the issuers.

I only use the debit card locally (supermarket, drug store, gas station, etc.) because it's usually much more convenient than cash. But for those instances when the purchase price is only a few dollars, I use cash. When I get home, I enter the debit card charges in my checkbook register, then go online to check that these charges have been deducted from my checking account.

For non-local purchases, I use my credit cards. Since the credit card payment dates are staggered, I rotate card use so that I always have three or four weeks before I receive the bill. Then, using online bill pay, I pay them before the due date. But, like several of you, this practice of paying off the bills every month has recently earned me a reduction in the credit limit for two of the cards.

For unexpected expenses that I'm unable to pay off in a month, such as car or household repairs, I write a check on my equity line of credit instead of charging them to a credit card. A pretty good deal since the interest rate is only 3.25%, not the 15+% charged by the credit card companies.

My bank is small, independently-owned (no stockholders to please, no outrageous executive salaries and benefits, etc.), and has been in business for about 100 years. Its main office is in the center of a small city and its two branches on the outskirts. It's conservative, though still progressive, and uses stringent requirements to determine who's credit worthy and who's not. Consequently, it's weathering this financial crisis extremely well.

This bank provides me with free checking and free checks (also interest on the money in the account), a debit card with no fees (even for ATM transactions), free online bill pay service, an equity line of credit at 3.25%, and great service in a friendly atmosphere. With all this, they're still making a profit, they've had no layoffs, their employees are happy and friendly, and the bank is consistently rated in the top 1% of the banks in the nation.

If only Wall St. and the big banks had been as responsible and well managed as this small bank, we taxpayers wouldn't be on the hook for billions in bail-out money.

Damn the check book – Praise the debit card!

I personally love the debit card. I use it solely. As soon as I purchase anything it immediately hits my checking account. I can verify my account on-line at any time to ensure no hanky-panky. There are a few times when it is necessary for me to write a check – maybe once every two months. Any monies I have coming such as Social Security are deposited directly to my checking account. If my checking account happens to fall to a balance I am not comfortable with, I simply transfer funds from my savings to checking on line…..it all happens instantly!

Every cent I spend is documented in one type transaction or another. I set up a system for tracking my financial activities some fifteen years ago as a way of ensuring I was ready for retirement, financially speaking. It takes perhaps fifteen minutes a week to maintain and allows me to monitor and evaluate every category of expenditures. It takes about one minute to balance my checking account. That’s a fact.

As far as cash, I hardly ever use cash. I will withdraw $100 as a cash reserve perhaps buying a burger or some small item. When that $100 begins to dwindle, I simply withdraw another $100. Over the last five years I have averaged spending about $400 cash a year. Every other expenditure is accounted for. And….let me reiterate, I only spend around fifteen minutes a week dealing with accounting chores.

I do have a credit card but use it “only” for Internet purchases and I have requested the credit card company to never raise my available credit above $1500. That’s for my own peace of mind, even though they say they will back up any fraudulent charges. I also pay fully any charges incurred monthly.

I personally wish folks would wean themselves off credit cards. They would be so much better off and further ahead in the long run. I would think most from our generation would know what it means be financially patient verses instant materialistic gratification, not to mention the price you pay for it what is actually what this post is all about.

If it wasn't for Martin Luther and some of his princely friends, we'd still be burning usurers at the stake.
Wouldn't it be fun to go out to a "banker barbecue" this weekend and watch some of those stuffed shirt, "holier than thou" "financiers" get what they deserve?

(I'm talking about the original, 14th century priest, Martin Luther,who wrote in support of loan-sharking, not his saintly 20th century namesake)

Crabby
The guns in National Parks IS a separate issue.

The fact that those hockey pucks in the US Congress attached such a lame amendment to the credit card bill shows stupidity of the inth degree.

Don't get me started or I may explode.

We have a credit card which is used for travel or internet purchases but I really like cash. I find it is much harder for me to actually part with those dollars bills than with a credit or even a debit card.

the one thing I made sure of before I retired was to pay off my credit cards. The irony of all this is that one's credit rating depends on using them. so I can be solvent but have bad credit. Where is the sense in that?

We agree on all counts. My first comment on the interest rate hole was 'Can anyone spell and define usury?' Mom uses one card for all her purchases and pays it off each month. We have already decided that if her card issuer decides to institute a membership fee or change to an interest from day of purchase scheme, she will simply go to using her debit card instead. Otherwise she will go back to cash or check only. I am already on that. I will not EVER have a credit card again.

Where did you get the information that "banks charge merchants up to 6%"? I was involved in tracking those rates and the most I saw charged a merchant was 3%. Back up your claim with references, please.

Secondly, where else can you get an unsecured loan? The interest rates reflect the risk of giving someone one plus the cost of providing it. As the risk increases, the rate increases, seems obvious.

Am I really entitled to credit? No, I have to EARN it. What seems to upset people is that they are getting notice that they are no longer creditworthy. Guess the truth hurts.

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