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View Full Version : Perhaps Credit Card Companies Will be Forced to STOP....


hentob
12-14-2008, 07:28 PM
I know some of you have said your interest rates have shot up on your credit cards...even though you make your payments on time:sad2: Looks like people are not putting up with it any more:thumbsup2

Keep Complaining:woohoo:

http://www.google.com/hostednews/ap/article/ALeqM5h0zsZMFyHhVSxVYfcgTexlKhvMYQD952BRRG0

Fed to rule soon on sweeping credit card changes
By CARSON WALKER – 17 hours ago

SIOUX FALLS, S.D. (AP) — Credit card companies could no longer boost interest rates on existing account balances if the Federal Reserve adopts new rules as written at a meeting set for Thursday.

But as proposed, the changes also could make it more difficult for millions of people with bad credit to get what's referred to as a subprime card.

The rules were proposed in May and drew more than 65,000 public comments.

"That's the highest number we've ever received," said Susan Stawick, a Federal Reserve Board spokeswoman.

Among them: a letter from a single mother of three in Florida who wrote she paid her bill on time but her interest rate shot up from 7.9 to 29.99 percent.

"I would have been better off going to a loan shark. I think their rates are more reasonable," she wrote.

The changes under consideration would ban that practice and others considered by some to be unfair.

"The proposed rules are intended to establish a new baseline for fairness in how credit card plans operate," Federal Reserve Chairman Ben Bernanke said in May. "Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs."

South Dakota eliminated the interest rate cap on credit cards almost 30 years ago and has thrived from the industry that employs as many as 20,000.

The proposed limits on subprime cards could cost the state of 788,000 people from 3,000 to 5,000 jobs, said Gov. Mike Rounds.

"In essence it would shut down the low-limit credit card business across the United States," the Republican said.

Prime credit card companies generally could adapt to the five other proposed rule changes, but there's not a business model that would work for dealing with the changes to subprime cards, he said.

Rounds said he's still urging the Fed to reconsider.

The state's two biggest subprime card issuers are Premier Bankcard and Total Card.

T. Denny Sanford, Premier's owner, is 15th on the Dec. 8 Business Week list of top American philanthropists with an estimated $706 million in giving since 2004. His estimated net worth is $2 billion.

Greg Ticknor, president of Total Card, said he won't know the effect until the change is announced Thursday but the company likely would survive by adjusting the types of cards it issues.

Under the current proposal, some of the 70 million Americans with "challenged credit" probably wouldn't qualify for a card, so they'll instead rely on payday loans, he said.

"In today's economy, that's the opposite of what they should be doing," Ticknor said of the loss of credit.

Prime card issuers such as Citibank South Dakota, which moved its credit card operation from New York after South Dakota's 1979 law change, would also feel the change, said Peter Garuccio, American Bankers Association spokesman.

"The Fed's proposal represents an unprecedented way customers will relate and work with their credit card issuers," he said.

"What it does, by and large, is limit the ability of issuers to use risk-based pricing. And in so doing, the card companies will have to sort of change their models to figure out how to protect changing risks going forward. It'll be a big challenge for the business."

On Thursday, the Fed could adopt the proposals as written or make changes. But it's unlikely the final rules will stray too far because otherwise, the Fed would have to seek public comment again, Garuccio said.

Travis Plunkett of the Consumer Federation of America said the public comments, most of which are posted on the Fed's Web site, show deep frustration.

"A good share of these comments weren't generated by people like me. They were spontaneous from consumers who feel they've been treated unfairly by their credit card companies and are literally begging the Fed for help," he said.

A lot of people acknowledged paying late, often mistakenly, and felt it was unreasonable for their card issuer to increase the interest rate on the balance, Plunkett said.

Another common theme is from people who always pay on time but were hit with a rate increase because the company needed to recoup losses from other cardholders, he said.

"They wake up and get a notice in the mail or a bill telling them that all of a sudden their interest rate is double or triple the rate what it was the day before," Plunkett said.

The proposed changes would let credit card companies increase the interest rate only on new cards and future purchases or advances, not any current balance.

Another new Fed rule would require firms to apply any payment above the minimum to the part of the balance with the highest interest rate.

Some companies now allow consumers to transfer other card debt at zero interest but then require all payments to go toward that amount, not the part of the balance carrying a higher interest rate, Plunkett said.

The other significant change would affect subprime or "fee harvester" cards used by people with a credit score too low to qualify for a normal card. They typically carry no more than a $500 limit but require a large upfront fee.

The Fed proposal would cap that fee at 50 percent of the credit limit and allow the cardholder to pay off the initial balance over a year, not immediately.

"They are both deceptive and unfair," the Consumer Federation's Plunkett said of the cards.

But many of the public comments urge the Fed not to limit the product because it's a way for some people to rebuild their credit rating.

"If adopted, this rule also would have a disproportionate and adverse impact on minority consumers, who historically have had difficulty obtaining access to credit," wrote one Arkansas woman.

Miles Beacom, president and CEO of Premier Bankcard, said in a statement the company supports most of the changes but opposes tighter controls on subprime cards.

"In order to be successful, credit card companies must have the ability to price the product based on customer risk," he wrote to The Associated Press.

Premier is the 10th largest issuer of MasterCard and Visa cards, has more than 3.5 million customers nationwide and a formal complaint rate that's one of the industry's lowest, Beacom wrote.

Roger Novotny, head of South Dakota's Banking Division, said his office typically gets 15 to 25 complaints a month about the state bank.

The company did refund $4.5 million last year to New York customers as part of a settlement reached by the state attorney general claiming Premier Bankcard used deceptive and illegal tactics to market its cards.

dclfun
12-15-2008, 06:03 AM
I recently spoke with a rep at Visa ( I have a Wells Fargo Signature Visa) regarding my rate going up from 5.99 to 14.99 and was told it was because I didn't call in to request that the lower rate be continued. Apparently I have to ask every year...duh! Anyway they lowered it back and refunded the interest I had paid on the higher rate. At that time I discussed my issue with them constantly changing the due date for my monthly payment and that if someone isn't diligent or sets up their account on auto-pay for the same date every month, eventually the date will reset to make someone pay late. She agreed. It's sad when a CC company intentionally tries to up someone's rate by changing the payment due date.---Kathy

MrsPete
12-15-2008, 06:41 AM
"In essence it would shut down the low-limit credit card business across the United States," the Republican said.And that's supposed to be a bad thing? The credit card market -- in its present form -- is tremendously bad for most Americans! For too many people credit has been too easy to obtain, and it has allowed too many people to live beyond their means. The credit card industry is taking advantage of people -- many times people who don't understand what they're getting into -- and they need to be made to stop. Deregulation of banking was a bad, bad thing. Under the current proposal, some of the 70 million Americans with "challenged credit" probably wouldn't qualify for a card, so they'll instead rely on payday loans, he said.Learning to live within a budget isn't an option?

Cheshire Figment
12-15-2008, 08:29 AM
Two things.

One is write a well-thought out letter to your Congresscritter (snail-mail is best) listing your concerns about what things some CC companies do which you feel are aimed at damaging consumers and what should be restricted.

Second does not apply to me (as my credit score is over 800) but I have had some tax clients who have had financial problems and I have analyzed some of the vary high risk card applications for them. They start off with an application fee. Then if they do give you credit they charge an activatios fee. In addition to any interest there is a monthly credit access fee. The initial fees that they charge you you tend to be more than 1/3 of the credit limit they set. And then, after a certain period (which can vary to between six months and a year) if you request it they will review your account (again charging a fee) to make a decision to increase your limit. The first year fees charged, including the review to increase the limit, will usually be a lot more than half of your original credit limit. When I looked at some of these I was appalled.

hentob
12-15-2008, 03:10 PM
And that's supposed to be a bad thing? The credit card market -- in its present form -- is tremendously bad for most Americans! For too many people credit has been too easy to obtain, and it has allowed too many people to live beyond their means. The credit card industry is taking advantage of people -- many times people who don't understand what they're getting into -- and they need to be made to stop. Deregulation of banking was a bad, bad thing. Learning to live within a budget isn't an option?


Sorry. My post was towards those people that pay their bill on time.

I agree, I not care about the people who do not pay on time or at all. They are the ones that have messed up the credit card system, causing the card companies to prey on the responsible card holders:mad:

eliza61
12-15-2008, 03:25 PM
And that's supposed to be a bad thing? The credit card market -- in its present form -- is tremendously bad for most Americans! For too many people credit has been too easy to obtain, and it has allowed too many people to live beyond their means. The credit card industry is taking advantage of people -- many times people who don't understand what they're getting into -- and they need to be made to stop. Deregulation of banking was a bad, bad thing. Learning to live within a budget isn't an option?

I agree to some extent Mrs. Pete. Yes far too many people are living beyond their means but what the cc companies are doing is basically "changing the rules in the middle of the game"
If I am your customer, if I met the credit standards that you set up and if I adhere to the rules by paying on time and not going over my limit, then I think you should uphold your end of the bargain.

You can't regulate morality or common sense. Changing the rules of the game is not going to force people to live with in their means.

Lastly,
most often the people they punish or nickel and dime are the "good" customers. I mainly pay of my cc every month, some times I go 2 or 3 months but the majority of times there is no carry over balance. Bank of America raised my rate 8% because I was not a "desirable" customer, after speaking with 7 managers I was finally able to find out that since I pay my balance off every month and only use it spardoically I was not considered their "target" customer.

That's a load of crap!!

Magix
12-15-2008, 05:19 PM
I don't think it should be legal for cc companies to change the APR on existing balances. I made those purchases under the agreement that they were being assesed a specific APR. That should be a binding agreement on both sides, they uphold that APR and I make my payments on time. How am I supposed to determine which cc is best to use, if I have no idea what the APR on today's purchase will be a few months from now?

But, that's why American Express no longer has my considerable balance and will not see any new charges from me.

branv
12-15-2008, 06:01 PM
I am certainly for more regulation and standardization for credit card practices. And I truly get being flumoxed and annoyed when you are a good customer and yet you get pinged with a raised interest rate or lowered limit. Been there!

But in some of these circumstances, I wonder where is the personal responsibility? People can be annoyed as they want at the cc company, but to blame them for the situation they're now in...hmmmm.

When people are upset that the cc company abruptly raised their interest rate or changed the terms while they're carrying a balance, I often suspect that that person didn't bother to read the contract before they signed up. Otherwise they'd realize that they were making a personal choice that in racking up charges they can't pay in total, they are choosing to gamble that their interest rate wouldn't go up. This would be clear if they had, prior to signing on the dotted line for that credit card, read the contract that states that the company can adjust the interest rate, or can change the terms of the contract with proper notification. And if the contract was too confusing, there are a billion resources online detailing what one should consider when signing up for credit cards. It's just the same as those people who signed up for mortgages and are now in trouble b/c they they failed to do research on what could happen with an ARM, balloon payments, or even property taxes, etc. and on and on. If one is going to play the credit game, whether it's carrying a balance on a card, or taking out a loan, and yet fail to make sure they understand what they are signing on for, then they are the ones who are responsible.

I realize and mourn that there are times people accrue credit card debt due to tragic and unforeseen circumstances, who need just time and compassion to work it out, and have to take chances others wouldn't. But it would seem that more often we're dealing with people who, at some point, decided to play now and pay later. That's fine, that's their business...but they should at least know how the game is played before they sign up. And when they lose that gamble, while the cc companies may not be the most ethical, these customers are still NOT victims.

dclfun
12-16-2008, 06:37 AM
I too normally pay my cc in full but there were several months last year where that was not possible due to excess medical and dental bills, not an extravagant lifestyle. The fact that my payment due date jumps around is my biggest beef. All my other bills are on auto-pay and I've worked hard to have stellar credit. If I hadn't looked closely at each statement I'd probably not have realized that my due date for payment had changed.The statement I received that noted the higher interest rate had a line stating that I'd had a late payment as the reason for the change. When I called Wells Fargo and spoke with a rep, he agreed that I'd never been late. That's when I was told that unless I call yearly, my rate automatically goes up whether I've paid on time, paid in full, etc. My father had his Discover card revoked. He received a letter saying he was not a desirable customer as his cc was paid in full every month ( and he'd been earning cash-back from Discover). So basically, if you don't carry a balance and you're not late, your company would prefer you not have their card.---Kathy

mtblujeans
12-16-2008, 06:48 AM
Nightline on ABC (http://abcnews.go.com/Business/story?id=6465050&page=1) did a story about the credit card companies last night.

hentob
12-16-2008, 02:39 PM
Thank you for the Nightline link.

SandrA9810
12-16-2008, 07:15 PM
We're one of those awful CC holders. Of course our interest rate shows for it. It's always been high. Our highest is 26% (3,500$ limit) and our lowest is 6.49% (300$ limit).

At the same time of this whole "why are you raising our rates??" If you pay it off on time every month, you're not getting charged the interest rate any ways.
And what about the other way around. Our cards are high, and every so often I call to try to get them lowered. Sometimes by a few points. So if I signed the contract at 19%, made the purchases at the rate... But I'd still like to see if it could be lowered over time with on-time and more than the min payments. So no, I don't think there should be a fixed rate that can't ever change. Because I sure would like it to go down.
And yes, we did understand everything above the dotted line. And sometimes, most people have never had to experience the living below the means of neccesity. So CC can be the answer. And now we are paying it off, little by little, month by month.

SandrA9810
12-16-2008, 07:28 PM
I don't see how people aren't paying down on balances unless they're charging more each month. As of last year or the year before the credit cards all adopted a 1% towards the balance. Yes our mins went up. But at the same time with that minimum payment even, I was still paying off the balance, as well as paying all the interest fees for that month.
There's one card that still only gets the min, so others can get more, and I've still seen a 1,000$ paid off within the past year alone.