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Thread: Good news? Could credit cards be forced to give up their tricks?

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    Default Good news? Could credit cards be forced to give up their tricks?

    In the sea of bad econmic news I thought the possiblity of credit cards changing could be some good news. I doubt all the changes would be made but I hope some of them will.

    http://articles.moneycentral.msn.com....aspx?page=all
    Sleazy credit card tactics under fire

    The Fed and Congress are considering changes that would make fine-print thievery illegal -- but they may need a little nudge from you.

    By Liz Pulliam Weston

    If you're tired of credit card issuers' evil tricks -- fine print that hides fees, rates that soar skyward for little or no reason, bait-and-switch tactics -- now is the time for your voice to be heard.

    Some of the credit card industry's most egregious practices are finally getting the regulatory and congressional scrutiny they so richly deserve. Consumers this month have the opportunity to weigh in on Federal Reserve reforms and on legislation that could make credit cards a lot more fair.


    Let's start with the Federal Reserve's proposed changes to Regulation Z, which covers Truth in Lending provisions. The public comment period on the changes is scheduled to expire Oct. 12, so if you want to weigh in, you'd better hurry. The new rules

    Among other things, the Fed proposes that:


    "Fixed" should mean "fixed."
    Those howls you heard earlier this year came from Capital One users who saw their supposedly "fixed" 4.99% rates more than double, with little warning. The users didn't do anything to trigger the higher rate; Cap One just changed its mind about how much to charge. And its decision isn't at all unusual among issuers; I've been advising readers for years that the term "fixed" has no real meaning in current credit card contracts.
    The Fed is proposing that any issuer advertising a fixed rate must specify how long the rate will remain unchanged. If no time period is specified, the issuer has to keep the rate the same "while the plan is open."

    Issuers should be clear about what triggers rate increases.
    If you think you know what could cause your rate to jump, perhaps you haven't read your account agreement closely enough. Many are filled with vague mutterings about "changes to your creditworthiness" but aren't terribly specific about what that means.
    A late payment generally triggers a higher penalty rate, of course. But how about a late payment to another creditor? Or carrying too high a balance? Or paying only the minimum for too long? Or exceeding your credit limit, even if the issuer approved the charge? Or having "too many" inquiries on your credit reports? The Fed proposes, shockingly enough, that issuers should be specific about what kind of behavior triggers penalty rates and how long those rates can last.

    Rates and fees should be clearly spelled out.
    Now here's a radical concept: The Fed is saying you should know how much you're being charged.
    Your statement should itemize the rates and actual charges for different types of transactions (purchases, balances transfers and cash advances), while providing separate totals for fees and finances charges for the month and for the year to date. I particularly like that last feature; it's hard to be in denial about what your credit card habit is costing you when your statement spells out the ever-mounting toll.
    Check out this model form for what a clearer statement would look like.

    Consumers should get 45 days' notice of any changes, instead of 15.
    As it stands now, a credit card issuer can change virtually everything about your card for any reason between one billing statement and the next. And given how poorly disclosed many changes are, the first inkling many consumers have that their accounts have changed is a big jump in their required payments.
    The Fed, again, wants clearer disclosure, plus more lead time. Adding 30 days to the notice requirement allows consumers, in the Fed's words, "to obtain alternative financing or change their account usage."




    This advance notice, by the way, also would apply to penalty rates for late payments. Yes, an issuer would actually have to alert you, in advance, before jacking your rate to loan-shark levels. And 45 days might actually give you enough time to find another card, pay down your balance or locate other financing that could save you from usurious rates.
    But wait -- there's more.
    Both the House and Senate have held hearings on what needs to be done about credit cards. Actual legislation is likely to be introduced in the House later this month, an effort spearheaded by Carolyn Maloney, the New York Democrat who chairs the Financial Institutions Subcommittee and who this summer issued four "gold standard" principles she said should guide future reforms. The four principles are:
    • Credit card companies should issue cards on terms individuals can repay.

    • Issuers should clearly explain account features, terms and pricing at relevant times.

    • Issuers should provide customers notice and choice with respect to changes in terms.

    • Issuers should encourage responsible, successful credit use, especially among new credit entrants and customers with special needs.
    4 foul plays

    None of those principles sounds all that drastic, but the devil will be in the details. You can expect a big push to eliminate the following four "foul play" practices:


    Universal default.
    Under universal default, your credit card issuer would regularly cruise your credit reports and raise your rates if you were late with another creditor. So an error on your credit report, a misunderstanding over a hospital bill or even a traffic ticket (yes, those go to collections now, too) could result in fantastic rate increases on your card, even if you were up to date in your payments.
    Interestingly, this once widespread practice is finally starting to wither. Citibank has publicly renounced it, and other issuers have more quietly followed suit. But an outright ban would prevent this nasty practice from rebounding once the congressional heat is off.

    Deceptive billing cycles.
    Most issuers play fair by using a single billing cycle to determine how much if any interest you pay on purchases. But some use practices, like double-cycle billing, that cause borrowers to essentially pay interest on charges they've already paid off.
    Chase abandoned the practice earlier this year, saying it was "confusing" to consumers.

    Anytime, any reason repricing.
    The Fed's Regulation Z proposals, if adopted, would slow issuers' ability to change rates, fees and terms, but the card companies could still change the rules on a relative whim.
    Forcing issuers to wait until a card expires (typically every two to four years) might impose some discipline.

    Pay to pay.
    Some issuers charge $15 if you want to make a last-minute payment by phone or on the Web. Given how little these transactions actually cost to complete, the fees are egregious.

    If you want to weigh in on what you think Congress should do, contact your House representative and your U.S. senators.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    ^^^ it can't hurt to go through the motions. However, ultimately, the underwriting banks are NOT going to lose money on credit card defaults. If regulations are changed to take away some of their more lucrative methods of 'revenue enhancement', or if regulations are changed to prevent underwriting banks from raising interest rates on 'good credit' cardholders to help subsidize defaults among 'subprime' cardholders, the underwriting banks will simply start to protect themselves from future default risk by cancelling the credit lines of the 'subprime' cardholders.

    As with all gov't attempts to intervene in free market pricing, mandatory caps on pricing / revenue will inevitably produce a shortage of that commodity ... in this case a shortage of available 'subprime' credit.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Well at this point I think that would be a good thing. It would force people to live within their means.

    The fact of the matter is that the only money these tricks generate is off of good cardholders. Those that just default on their credit cards do not generate funds through this method.
    But another dirty little secret of credit card companies is that their credit card defaults are written off at the end of the year on their taxes. So by using these tricks it increases the dollar amount on default accounts which in turn increases their tax write offs.

    Im sorry but increasing an interesat rate up to 30% because someone is late one time in 10yrs is beyond revenue enhancement, it is just plain robbery.

    Hopefully some good will come from this.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Quote Originally Posted by Melonie View Post
    As with all gov't attempts to intervene in free market pricing, mandatory caps on pricing / revenue will inevitably produce a shortage of that commodity ... in this case a shortage of available 'subprime' credit.
    Not about credit cards, but this supports the above,

    http://www.paydayloansabc.com/news/S...c-outlawed.htm

    Otoh, I wounder how J.C. would handle this, if his return really did occur. Given his "fondness" for those who lend money.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Otoh, I wounder how J.C. would handle this, if his return really did occur. Given his "fondness" for those who lend money.
    Wow, that brings to mind a really disturbing analogy ... i.e. that it is now the DC Gov't instead of J.C who causes bread and wine to appear out of thin air for 'free' consumption by the majority of DC residents. If people aren't required to pay (or pay anywhere near market prices) for food and drink, for housing, for utilities, for medical care etc. since all of these things are made to 'appear out of nowhere' by the all powerful DC Gov't and graciously given to the majority of DC residents at no (little) cost to them - for as long as those DC residents continue to 'keep the faith' in regard to the goodness of the benevolent power of that DC Gov't by voting it back into power anyhow - then who really needs a payday loan ?

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Quote Originally Posted by Vamp View Post
    Well at this point I think that would be a good thing. It would force people to live within their means.

    The fact of the matter is that the only money these tricks generate is off of good cardholders. Those that just default on their credit cards do not generate funds through this method.
    But another dirty little secret of credit card companies is that their credit card defaults are written off at the end of the year on their taxes. So by using these tricks it increases the dollar amount on default accounts which in turn increases their tax write offs.

    Im sorry but increasing an interesat rate up to 30% because someone is late one time in 10yrs is beyond revenue enhancement, it is just plain robbery.

    Hopefully some good will come from this.

    I totally agree. The bankers are basically using good consumers to cover for bad consumers that the bankers chose to do business with anyhow.

    Meanwhile, the "bad" consumers are people too ignorant about finance to make good choices about what they are doing (I'll give em the benefit of the doubt.)

    There are far to many "how much does it cost a month" people out there than "how much does it cost in total" people in this country.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    I was a great customer of Citibank for years. I had a $20K credit card at 0%APR, with 0% balance transfer. Each month it automatically drafted my minimum balance, and I would go in a few days later and pay off the remaining, or pay it down.

    Then one month the bankdraft didn't go through. They raised me to 20%. I yelled, screamed, cried, complained, offered my firstborn son, etc. They refused to lower it AND applied it the balance transfer interest rate as well. The reason why.....

    I now had a mortgage and that changed my debt/income ratio. As a stripper for all the previous years, I reported very little income compared to my deductions. Yes, I didn't cheat and everything is documented.

    No matter, they don't care. I fucking hate credit cards.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    People who fuck up their credit repeatedly have no respect. They won't ever own anything, or make enough money to pay significant taxes. They feel like they can buy things and not pay for them. Absolutely no values, borderline sociopathic. Or perhaps naive and uneducated?

    Shit, if you buy something, you've got to pay for it! If you can't afford it...ok, ok, enough out of me.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Quote Originally Posted by Katrine View Post
    People who fuck up their credit repeatedly have no respect. They won't ever own anything, or make enough money to pay significant taxes. They feel like they can buy things and not pay for them. Absolutely no values, borderline sociopathic. Or perhaps naive and uneducated?

    Shit, if you buy something, you've got to pay for it! If you can't afford it...ok, ok, enough out of me.

    or unlucky? Divorce, major illness, lay off, etc can cause good credit to go to hell fast.

    Just because you have bad credit, it doesn't mean you are poor. I have seen people making over a 100k a year with awful credit from total negligence. Always living beyond their means to keep up with the Jones. So yes they pay "significant" taxes, they just don't care.

    Btw the measure of values is not in a person's credit score but in their character, integrity, and honor.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Quote Originally Posted by Deogol View Post
    I totally agree. The bankers are basically using good consumers to cover for bad consumers that the bankers chose to do business with anyhow.

    Meanwhile, the "bad" consumers are people too ignorant about finance to make good choices about what they are doing (I'll give em the benefit of the doubt.)

    There are far to many "how much does it cost a month" people out there than "how much does it cost in total" people in this country.

    The reason they say "how much does it cost this month" is because about ten years ago banks and lenders started selling products this way. If you notice commercials everything is about small monthly payments. People who do not budget their money think " oh thats cheap". They end up having "small" monthly payments on a ton of stuff which over extends them each month and then think "gee where did all my money go".
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Quote Originally Posted by Vamp View Post
    or unlucky? Divorce, major illness, lay off, etc can cause good credit to go to hell fast.

    Just because you have bad credit, it doesn't mean you are poor. I have seen people making over a 100k a year with awful credit from total negligence. Always living beyond their means to keep up with the Jones. So yes they pay "significant" taxes, they just don't care.

    Btw the measure of values is not in a person's credit score but in their character, integrity, and honor.
    Oh god, I cannot believe I wrote this! I don't mean to say "people who fuck up their credit." I've seen everything you described above. What an asshole I was for writing this, especially given my line of work.

    I guess I was just complaining about people just not wanting to pay for shit. I'm sorry.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Katrine I don't think you were all that much out of line to write that. Especially considering your line of work! It's true that some people just don't give a shit about their responsibilities to pay for what they buy...there's always SOMEONE that will give them a credit card and a new car the same day the bankruptcy discharges!! It's like these people don't have severe enough consequences to keep them from, yes, borderline sociopathically borrowing.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    They feel like they can buy things and not pay for them. Absolutely no values, borderline sociopathic. Or perhaps naive and uneducated?
    In point of fact, it was arguably the exact opposite. Prior to the recent revision in federal bankruptcy laws, it was a frequent occurrence for highly educated highly organized people to 'game the system' to their own advantage. The classic example is of course the Florida Homestead Law Chapter 7 bankruptcy scenario.

    In this scenario, when it became apparent that a high-flying businessman / speculator was headed for trouble, that person would immediately go out and obtain as much additional unsecured credit as possible while attempting to keep the growing financial distress a secret. That person would then start liquidating assets. That person would then invest the say 2 million dollar proceeds of that additional borrowed money plus hastily liquidated assets into the purchase of a fully paid for mansion in Florida. That person would then default on the unsecured creditors and quickly file for Chapter 7 bankruptcy protection.

    Three years later, that person would emerge from bankruptcy totally free of financial obligations to his previous unsecured creditors. That person would also emerge from bankruptcy with a 2 million dollar mansion that he was now free to sell without having to share the proceeds with previous unsecured creditors - thanks to the existance of a Florida state law which prevented creditors from foreclosing on a bankrupt debtor's primary residence regardless of its market value. This was a highly thought out and very deliberate 'game the system' maneuver, which incidentally provided a large degree of 'legalized' de-facto income over the 3 year bankruptcy period.

    Was taking advantage of such loopholes in the state vs federal bankruptcy laws moral / ethical / fair ? - IMHO decidedly not. However it WAS legal ! There will always be ruthless business people who are willing to press every advantage, no matter what the fallout effects might be for others.

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    Default Re: Good news? Could credit cards be forced to give up their tricks?

    Aka the OJ loophole.

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