Democrats Attack Credit Card Co’s

I don’t have to remind you that credit card companies have become in the last few years little more than loan sharks. Their interest rates are usury, the hidden fees and fines are out of control, and sudden, invisible rate hikes have shocked consumers pretty regularly. A friend of mine had a total of $7000 on 3 cards, and when she added up the charges, she discovered that she had paid $12,000 – nearly double what she owed – and still had almost $4000 left outstanding. Even if she tripled or quadrupled her monthly payment, it would virtually all be interest, leaving the principle balance almost untouched. She also noticed for the first time that there were large late fees tacked onto her payments even though she regularly mailed them the week before they were due.

That graf barely scratches the surface of the tricks, cons, and scams lenders have developed in the past 8 years to increase their already massive profits. And it isn’t like you can, you know, free-market-style, change your provider for a better deal. Nearly all the lenders who dish out cards do the same things. Some may be marginally worse than others, but they all pretty much use the same tricks to inflate what you owe them beyond all reason, and this despite interest rates that would make John Gotti blush. Well, WaPo business reporter Carrie Johnson writes today that the Democrats are preparing legislation to put a halt to the worst of the abuses.

Senior Democrats on Capitol Hill want to ban excessive credit card fees. Bank regulators are on the verge of forcing companies to give more notice before raising interest rates. And New York‘s attorney general, whose investigations transformed the student loan industry, now has his eye on conflicts of interest in the credit card sector.

After years of complaints about abusive practices that trap borrowers in an endless debt cycle, federal and state officials are shining light on the most controversial practices and preparing changes that would make card companies’ policies more consumer-friendly.

The fight between consumer advocates and the banks that issue credit cards has been simmering for decades. But a rise in cardholder complaints and the ascension of Democrats in the House and Senate is pushing companies to engage in preemptive damage control and is setting the stage for what could be the most significant changes to the industry in more than two decades.

Sen. Carl M. Levin (D-Mich.) said he will hold a hearing this week focused on card companies that raise interest rates for consumers who comply with the terms of their original agreement. “It is becoming increasingly difficult for the credit card industry to defend this type of unfair interest rate increase,” he said.

Well, it’s a start. With the abuses so similar and so widespread that one would be justified in suspecting collusion and conspiracy at an industry-wide level, Democrats could hardly ignore them, not with an election coming up and their popularity in the dumper because it has taken them a full year to get around to challenging Bush on Iraq. People are pissed.

Dennis Kocik of Charlottesville said he canceled one of his longstanding credit cards after reading the fine print and noticing that his interest rate almost had doubled. Kocik was so angry about the issue that he said he wrote a complaint letter to the Federal Reserve Board, the chief bank overseer. He said he is outraged on behalf of thousands of people who don’t scrutinize the leaflets that arrive with their card statements.

“Nobody reads that stuff,” Kocik said. “The banks that issue credit cards are like pigs feeding in a trough. . . . If the sun rises in the east and sets in the west, you get a fee.”

The card companies are not, of course, taking this threat lying down.

Card companies and banks are spending millions of dollars to hire well-connected lobbyists to argue their case. They say card issuers need flexibility to assess the risks posed by customers who may be on the verge of defaulting — and taking card companies along with them.

The American Bankers Association recently enlisted Jonathan Orszag, a former economic adviser to President Clinton, to research and issue a paper arguing that more federal oversight of the card industry would be counterproductive and would only hurt borrowers by reducing their access to credit.

New restrictions under congressional consideration, the companies say, would harm the consumers who pay their bills on time by subjecting them to a one-size-fits-all approach to fees and interest rates. More than 95 percent of customers stay current with their payments, said Ken Clayton, managing director of card policy at the ABA.

In fact, the possibility that Democrats may take on the credit crisis by slamming new regs on the finance industry, along with the rest of the corporatocracy’s flim-flammers and con-artists, has corporations in a real sweat. The corporate lobbyist industry is booming.

Business lobbyists, nervously anticipating Democratic gains in next year’s elections, are racing to secure final approval for a wide range of health, safety, labor and economic rules, in the belief that they can get better deals from the Bush administration than from its successor.

Hoping to lock in policies backed by a pro-business administration, poultry farmers are seeking an exemption for the smelly fumes produced by tons of chicken manure. Businesses are lobbying the Bush administration to roll back rules that let employees take time off for family needs and medical problems. And electric power companies are pushing the government to relax pollution-control requirements.


Randel K. Johnson, a vice president of the United States Chamber of Commerce, said, “I am beefing up my staff, putting more money aside for economic analysis of regulations that I foresee coming out of a possible new Democratic administration.”

At the Transportation Department, trucking companies are trying to get final approval for a rule increasing the maximum number of hours commercial truck drivers can work. And automakers are trying to persuade officials to set new standards for the strength of car roofs — standards far less stringent than what consumer advocates say is needed to protect riders in a rollover.

(emphasis added)

And we all know how susceptible Democrats are to lobbyists. Negotiations will by flying fast and furious all over town. So it’s anybody’s guess whether any of this legislation will ever see the light of day or how useful it will be if it does. Still, that the Donkeys have corporate honchos running scared can’t be entirely a Bad Thing. Some good may come of it. At least we can hope….

14 Responses to “Democrats Attack Credit Card Co’s”

  1. MK says:

    I agree that this is at least a start – and hopefully something good may come of it. The credit card companies really need to be held accountable for their often shady practices. Its not easy for an average American to understand all the terms and conditions that are already in all the fine print without the credit card companies employing practices that are predatory and immoral. The changing rates, hidden fees, the list goes on with the ways that they get you. I’ve done some work with the MPC on interchange fees and those hurt not just average Americans, but also the small business owners. Those are the fees that don’t show up on your bill but get tacked onto every purchase you make – they’re also why small business have minimum purchases, if they didn’t they would even make a profit because of interchange. It also causes business to hike their prices which also comes back to get us. But like I said before, hopefully this will get the ball rolling, and even if they don’t get significant legislation done this round – it will at least shed some light on this issue.

  2. xranger says:

    Thank God the Dems are there to save us from ourselves.

  3. mick says:

    Yeah, sorta like the cops protect us from murderers and thieves. You got a problem with that?

  4. Laura says:

    Just a little curiosity here; who owns “the credit card companies”? Are we even talking about US credit here or is this something that might fall under the WTO where the US can’t regulate too heavily because it would impede international business? Sorry if I’m not excited… Citibank (Citigroup) comes to mind. I know nothing.

  5. xranger says:

    I didn’t know there was a gun held to anyone’s head to use a credit card, max it out, and only pay the minimum.

    Ya know, you can’t always protect people from being idiots.

  6. Laura says:

    Now, X-ee. I think a lot of people end up with that ‘too much month at the end of the money’ syndrome, then the kid gets sick or a tire wears out or a waterpipe breaks or whatever. If you have to borrow that money, it should be affordable to repay.

    But I know there continues to be a good chunk of wreckless spending which I have no problem seeing regulated. It used to be when I was young (sigh) and stupid(er)… I couldn’t buy anything on credit because I had no repayment history or job history to speak of and couldn’t be trusted by the credit industry to pay my bills. Nothing wrong with regulating that kind of risk, is there? Maybe that was just the good ol’ days when broke was flat broke.

  7. xranger says:

    Not sure about your arguement. If you had no credit history, why should anyone give you a credit card? How would you regulate that? Would you force credit compnaies to give people loans who they are not sure will pay it back?

    The higher the risk to the credit companies, the higher the interest rate. Pay your bills, ask for a lower rate and you’ll get it.

    Can’t afford cool stuff? Tough.

  8. Laura says:

    Your logic is a bit less developed than I had expected. Nevermind.

  9. Georgia Dawg says:

    As I see it the problem does not stem from higher risk clients paying higher rates but from the manner in which the banking industry is using what I and from what I have read, many others, consider to be underhanded and shady practices. I still do not understand how the banking industry can justify raising someones interest rate on a credit card because they had one (yes, that is all it takes) late payment on a totally seperate account. Isn’t universal default wonderful. The newest trend is to raise someones interest rate due to their credit score going down. The problem here is that they don’t have to be late or over extended in order for their score to go down. They could be considering refinancing their home mortgage which triggers inquiries which in turn can and usually does affect their credit score. I can tell you from experience that no matter how easy the credit bureas say it is to get incorrect information off your credit report it can be a very arduous task. As for you Xranger. I am a former Marine, I pay my bills on time and try not to carry any credit card debt. However, sometimes things happen. I would like to know where this fantasy bank is that you can ask to lower your interest rate and they just do it is. One last comment, A very good friend of mine is a CPA and has been in practice for 25 years. I have heard him say time and again “banks are doing things now that were illegal 10 years ago”.

  10. xranger says:

    Not quite sure why I have to teach you all personal finance; but it is what it is.

    Sure things happen in life. Credit cards can help, on the short term. I advise you to pay them off tout-sweet :).

    Also, if you pay your bills regularly, I suggest you call the credit card company and ask for a lower rate. You might be pleasnatly surprised (I do this regularly)

    Finally, a wealthy man once told me that his secret to attaining wealth was to never carry a credit card debt. Sage advice, indeed.

  11. mick says:

    If you had no credit history, why should anyone give you a credit card? How would you regulate that?

    How, indeed? But of course they have. Credit card companies have foisted cards on elementary school kids and given free smart cards to college students that were also their college ID’s – a trick to get people not used to having credit to spend money they don’t have with a card they’re used to using for innocuous purposes. They’ve been handing out cards like Halloween candy for years, apparently with only the slightest of credit checks beforehand. And for them, “no credit history” means “no BAD credit history” and thus are 10-yr-olds approved for $1000 credit lines.

    Look, x, I know you consider it your mission to defend every single predatory practice of the rich and mighty as “the workings of the free market” and all that gobbledygook, but the credit industry is as low, sleazy, and contemptible as it gets. Used car salesman who lie about the car and hide defects with quick fixes and write contracts with $thousands$ in hidden fees look like angels by comparison. If you’re going to defend their worst and most inexcusable abuses, you’re going to sacrifice whatever shreds of credibility you have left. It’s the financial equivalent of defending child labor and biological warfare by saying the kids shouldn’t have taken the jobs if they didn’t want to work and the Geneva Convention is a “quaint document we should ignore because it doesn’t apply to us.

    Is that really what you want to do?

  12. mick says:

    Finally, a wealthy man once told me that his secret to attaining wealth was to never carry a credit card debt. Sage advice, indeed.

    And you bought that, did you?

  13. xranger says:

    Worked for me.

    By the way, I’m not really defending the credit card industry, I’m railing against the populace as a whole that is ignorant of personal finance, and should not go near a credit card.

    At the end of the day, there has to be some modicum of personal responsibility in any of your posts. I mean, surprise me some day and lead in a post that doesn’t say that all that is bad with America is the free market or Republicans, or both.

  14. mick says:

    I mean, surprise me some day and lead in a post that doesn’t say that all that is bad with America is the free market or Republicans, or both.

    You could surprise me someday (it’s one word) and write a comment when I rag on Democrats for the same bloody idiocy. It isn’t just the Pubs. But Bush ideologues and GOP extremists are, let’s face it, responsible for most of the major ills we’re suffering, from the economy they destroyed to the Constitution they shredded to turning America into a Empire to cutting the guts out of the VA and on and on and on. Demnocrats didn’t do those things.

    If you really want to surprise me, criticize the GOP for any of the above.

    BTW, I agree with you about the deplorable lack of financial education. However, “personal responsibility” never has been and never will be an excuse for shady and even illegal business practices. And that’s what we’re talking about.

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