House passes credit card bill

[riddler 0]

http://news.yahoo.com/s/ap/20090430/ap_on_go_co/us_congress_credit_cards

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WASHINGTON – Riding a crest of populist anger, the House on Thursday approved a bill to restrict credit card practices and eliminate sudden increases in interest rates and late fees that have entangled millions of consumers. The legislation passed by a bipartisan vote of 357-70 following lobbying by President Barack Obama and members of his administration.

So, come on, all you Obama-haters - let us know how you think this is a terrible service that he is doing for the country. I'm interested to hear the right-wing "spin".

Trapped on the surface of a sphere. XKCD

[BDashe 0]

Call it right wing or not, if you sign up for something that dictates 'this is the penalty for not paying,' you have signed a contract mandating you pay XXX amount given Y circumstance. Sure it's great for the individual idiot that is eyeball deep in debt, but will it fix their habits?

I say f*ck em. be responsible and don't buy sh*t you can't afford, otherwise pay the price!


I'm sure there are outlying circumstances, single mom of 4 or something etc etc, but for the vast majority: don't be an idiot, stop pointing fingers at the evil credit card companies that were doing you a service which you agreed to, and then ultimately quit relying on the government to bail you out. It's BS.

So there I was...

Making friends and playing nice since 1983

[mnealtx 0]

It's something that's been needed for years - too bad it took this sort of crisis to get it passed.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[riddler 0]

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you have signed a contract mandating you pay XXX amount given Y circumstance.

If you think a credit card contract gives you that level of detail, you've never read one. Maybe you can show me an example of any card contract that says under what circumstances and by how much they will randomly raise the interest rate.

Trapped on the surface of a sphere. XKCD

[TomAiello 26]

There actually are problems with some credit card contracts. Here's an example:

I had a particular credit card for several years. I never use it (it just sat in a drawer).

A few years back, the credit card company sent me a notice that they were raising my limit by some absurd amount. I shrugged and threw the notice away (because I never use the card anyway).

Then, last year, the company sent me a notice that they had re-evaluated their credit risks, and were reducing my credit limit. Again, I shrugged.

Then, the company sent me a notice that they were cancelling my card. Having a card cancelled hits your credit rating and drops it a few points.

I called them up to ask why. They told me that recent reductions in my credit rating indicated that I was a bad risk. I asked them what reductions those were. They referred me (quite a few times) back and forth to other departments, until I reached a credit counselor who was able to explain that the reduction they had based their cancellation decision on was their own reduction in my limit. Before that reduction, they had decided I was a good risk, but after they took some arbitrary action of their own, with me doing nothing, they changed their mind and cancelled the card.

To me the whole thing wasn't that big a deal, but I can see how it could be a major issue for some people. What if this had made the difference in a mortgage approval or something?

-- Tom Aiello

Tom@SnakeRiverBASE.com
SnakeRiverBASE.com

[ryoder 1,590]

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Call it right wing or not, if you sign up for something that dictates 'this is the penalty for not paying,' you have signed a contract mandating you pay XXX amount given Y circumstance. Sure it's great for the individual idiot that is eyeball deep in debt, but will it fix their habits?

Credit cards are the only financial lenders who can:

- Unilaterally change the interest rate (and other terms) on money you have already borrowed with no agreement from the borrower.

- Penalize you because you were late on a payment to a different creditor.
(Look up universal default.)


A bank can't pull this crap on a mortgage or an auto loan, so why should a CC company be able to get away with it?

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[kelpdiver 2]

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Call it right wing or not, if you sign up for something that dictates 'this is the penalty for not paying,' you have signed a contract mandating you pay XXX amount given Y circumstance. Sure it's great for the individual idiot that is eyeball deep in debt, but will it fix their habits?

I say f*ck em. be responsible and don't buy sh*t you can't afford, otherwise pay the price!

You must not know what these contracts are like, then. What this law effectively changes is to make the contract equally binding on the bank as well as the card holder. Right now we have a world where the bank can and does change the terms at will with a 30 day notice tucked away. (One reason I believe they pushed so hard to move to electronic statements is so these changes would be even less likely to be noticed)

The banks have themselves to blame for this legislation finally happening. Nothing subtle about their actions in the last year, in the face of incredibly low interest rates and federal bailouts.

[georgerussia 0]

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So, come on, all you Obama-haters - let us know how you think this is a terrible service that he is doing for the country. I'm interested to hear the right-wing "spin".

Well, personally I have no spin as I have never paid interest on a credit card bill in my life, so I could only discuss it from some abstract point. However the reason for those interest-rate increases is very obvious - the increased number of customers in default, who file for bankruptcy, and credit card debt is unsecured. Another point is that the inability of the business to increase the rate as necessary and when necessary will likely to result in higher rates for new accounts. Not to mention that the credit card company still needs to cover their losses, so they'll just find another way to charge money - or will go out of business.

* Don't pray for me if you wanna help - just send me a check. *

[georgerussia 0]

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Credit cards are the only financial lenders who can:
- Unilaterally change the interest rate (and other terms) on money you have already borrowed with no agreement from the borrower.
- Penalize you because you were late on a payment to a different creditor.

I've seen same (and often worse) clauses in commercial loans as well.

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A bank can't pull this crap on a mortgage or an auto loan, so why should a CC company be able to get away with it?

The difference is secured vs unsecured loan. If borrower files for bankruptcy, the bank will recover at least something from his home or auto loan because there is collateral. For credit card loans there is no collateral, and the debt seems to be usually wiped out completely.

* Don't pray for me if you wanna help - just send me a check. *

[riddler 0]

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For credit card loans there is no collateral, and the debt seems to be usually wiped out completely.

Not true. I worked for 8 months for a financial company that sold block default credit accounts. This aspect of the credit industry is as slimy and underhanded as the entire rest of the credit world. Typically, one or two people at a crediting company would decide who gets to buy the block debt. There were a number of buyers that had a huge profit incentive to buy this bad debt at pennies on the dollar, and frequently bribed the credit "official" (usually, some low-pay-grade desk jockey) to "win" the blocks - there were people that took them to strip bars and gave them wads of dollar bills, there were others that paid for home remodeling for them - all for the chance to acquire all this bad debt because they knew it would make them rich. The company I worked for was trying to change all that by creating an online auction process, similar to eBay, where every buyer would have an equal and legal chance to acquire the debt.

Bottom line is, there is plenty of recourse for credit card companies to make some money from bad debt, although they will take an overall loss, they will get a portion of the money back in the resale of the bad debt.

Trapped on the surface of a sphere. XKCD

[idrankwhat 0]

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To me the whole thing wasn't that big a deal, but I can see how it could be a major issue for some people. What if this had made the difference in a mortgage approval or something?

They also use your credit rating in some instances when considering the rate for your insurance and, in some cases, even employment.

[livendive 8]

There was already a way out...when they say they're changing the terms of your card, you can decline, pay it off, and close the account. I've had two credit card companies arbitrarily raise my interest rate in the last year for no reason at all, one to an absurd level. I simply paid them off and closed the accounts, which is exactly what I suspect they were hoping for (having less money on hand, they wanted to reduce the total credit they've extended).

Blues,
Dave

"I AM A PROFESSIONAL EXTREME ATHLETE!"
(drink Mountain Dew)

[loumeinhart 0]

My take

Banks that extend unsecured credit securitize and sell the debt. A single account is just a cog in the big machine. However, each account was originated independently based on many things. Each account can also be modified or closed based on many things. This is in writing and is verbally read if you are on the phone

To me, this is like the feds telling Burger King what to charge for fries.

My credit card is an agreement between me and the bank, not me, the government, and the bank.

parents/local schools should do their best in educating youth with things like this and to be wary of offers and read disclosures.

Who the hell else is going to front you $5,000 with no collateral then let you literally walk away/not pay for the small price of some harassing phone calls and a credit ding!

seeya

[riddler 0]

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There was already a way out...when they say they're changing the terms of your card, you can decline, pay it off, and close the account.

Oh, let me tell you about my experience with American Express 29.6%!

So they saw that I couldn't pay off the card, and without a steady paycheck, I had little chance of getting a different line of credit, and I had virtually no money in the bank, so I couldn't pay it off. Also, in all but five states, anything over 26% interest is illegal (it's considered loan-sharking). Guess which five states every major credit card company is incorporated in?

Trapped on the surface of a sphere. XKCD

[Rookie120 0]

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Guess which five states every major credit card company is incorporated in?

Hmmmmm, let me see, Texas, Florida, Delaware, South Dakota and Nevada?

If you find yourself in a fair fight, your tactics suck!

[JohnRich 4]

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eliminate sudden increases in interest rates and late fees that have entangled millions of consumers

I just find it incredibly humorous that a legislative body that is responsible for bankrupting this nation with credit spending, is now going to insist that credit companies act more responsibly.

[Thanatos340 1]

I am as far right as most anyone.. And I Applaud this Administration for stepping up and passing this legislation.

The idea that the banks could lend me money under one set of rules, terms and conditions and then arbitrarily change those rules at anytime (thus changing the agreement under which the money was borrowed).

Chase was the worst offender in all this. they canceled ALL signature series cards and transferred all balances to "New" credit Cards with far different terms and conditions. Further more they added a $10 a month ($120 a year) Service Fee with the new cards and jacked up the interest rates regardless of payment History and credit ratings.

I hate government meddling in Private business, But when the Business are FUCKING the American people every which way possible, I have no problem with them stepping up and saying "Dont change the rules once here is an agreement in place" or any rule changes only effect future Purchases.

I really wish New York and Cuomo had gone forward with the threatened criminal charges against Chase management for their actions. Racketeering at a minimum.

[marks2065 0]

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I am as far right as most anyone.. And I Applaud this Administration for stepping up and passing this legislation.

The idea that the banks could lend me money under one set of rules, terms and conditions and then arbitrarily change those rules at anytime (thus changing the agreement under which the money was borrowed).

Chase was the worst offender in all this. they canceled ALL signature series cards and transferred all balances to "New" credit Cards with far different terms and conditions. Further more they added a $10 a month ($120 a year) Service Fee with the new cards and jacked up the interest rates regardless of payment History and credit ratings.

I hate government meddling in Private business, But when the Business are FUCKING the American people every which way possible, I have no problem with them stepping up and saying "Dont change the rules once here is an agreement in place" or any rule changes only effect future Purchases.

I really wish New York and Cuomo had gone forward with the threatened criminal charges against Chase management for their actions. Racketeering at a minimum.

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I have mixed feelings on this. I am a card holder and a merchant, the merchant rates will go up and that could cost a business thousands of dollars a year in increase fees to process credit cards.Unfortunatly these added fees and other increases like taxes and inflation will cost the consumer millions in the long run. Credit card companies will make a profit and the consumer will pay those charges wether or not the government steps in.

[Capt.Slog 0]

Quote

I am as far right as most anyone.. And I Applaud this Administration for stepping up and passing this legislation.

The idea that the banks could lend me money under one set of rules, terms and conditions and then arbitrarily change those rules at anytime (thus changing the agreement under which the money was borrowed).

Chase was the worst offender in all this. they canceled ALL signature series cards and transferred all balances to "New" credit Cards with far different terms and conditions. Further more they added a $10 a month ($120 a year) Service Fee with the new cards and jacked up the interest rates regardless of payment History and credit ratings.

I hate government meddling in Private business, But when the Business are FUCKING the American people every which way possible, I have no problem with them stepping up and saying "Dont change the rules once here is an agreement in place" or any rule changes only effect future Purchases.

I really wish New York and Cuomo had gone forward with the threatened criminal charges against Chase management for their actions. Racketeering at a minimum.

Just this week Capital One sent my wife a new card under the pretext of a security breach having compromised her previous one (which had not expired). She was instructed to cut up the old card and immediately start using the new one. Buried in the fine print it turned out that the new card had a $39 annual fee whereas the old card was free. Good job she always reads fine print.

[georgerussia 0]

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Bottom line is, there is plenty of recourse for credit card companies to make some money from bad debt, although they will take an overall loss, they will get a portion of the money back in the resale of the bad debt.

Looks like you're trying to prove a different point. I didn't say nobody could make money from bad debts, including subprime mortgages - not everyone with such debt will file for bankruptcy. But for those who will file, the unsecured debt often gets discharged completely, and with the number of bankruptcies increasing it might be negative profit at the end.

* Don't pray for me if you wanna help - just send me a check. *

[billvon 3,006]

>I just find it incredibly humorous that a legislative body that is responsible for
>bankrupting this nation with credit spending, is now going to insist that credit
>companies act more responsibly.

I find it even funnier that a lot of republicans have just discovered what "fiscal responsibility" means. Better late than never, I suppose.

[mnealtx 0]

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I find it even funnier that a lot of republicans have just discovered what "fiscal responsibility" means. Better late than never, I suppose.

Now we're just waiting on the Dems...

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[georgerussia 0]

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See, I made the mistake of having both a personal bank account and a business credit card with American Express. It was a business credit card, with a fixed interest rate of 8%, which I thought was reasonable.

No, it was not. Technically it was a variable interest rate loan, which _currently_ was set up to 8%. This would be very cheap rate for an unsecured business loan, and it would be reasonable to consider it a teaser rate.

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So they saw that I couldn't pay off the card, and without a steady paycheck, I had little chance of getting a different line of credit, and I had virtually no money in the bank, so I couldn't pay it off.

I don't understand what you're trying to say. Are you saying that if your card agreement stated clearly that your interest rate will be 30% as soon as you have more than 5K balance on a card (which I believe will be part of most agreements under new law), you would not use this card, and therefore would not start business? What is your point here?

* Don't pray for me if you wanna help - just send me a check. *

[ryoder 1,590]

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I just find it incredibly humorous that a legislative body that is responsible for bankrupting this nation with credit spending, is now going to insist that credit companies act more responsibly.

I believe that falls under the "Do as we say, and not as we do" clause.

"There are only three things of value: younger women, faster airplanes, and bigger crocodiles" - Arthur Jones.

[riddler 0]

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No, it was not. Technically it was a variable interest rate loan, which _currently_ was set up to 8%. This would be very cheap rate for an unsecured business loan, and it would be reasonable to consider it a teaser rate.

So you're saying that when they gave me the initial card, and said that is was a fixed interest rate, and the terms and conditions stated that they could not change the interest rate without changing the cardholder agreement, that it was really a variable interest rate?

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Are you saying that if your card agreement stated clearly that your interest rate will be 30% as soon as you have more than 5K balance on a card (which I believe will be part of most agreements under new law), you would not use this card, and therefore would not start business?

It's more accurate to say that when I get a card, and have it for 6 years, and it's guarnateed to be a fixed interest rate at 8%, I do not expect them to send me routine cardholder contract changes (which I only agree to by not cancelling the card), and on one "routine" change, they bury, in the legalese, a change, which they promised would never change, and jack up the rate to close to 30%.

To be clear, the initial card was promised at 8%, and it was not a variable-rate card.

Trapped on the surface of a sphere. XKCD