All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Yesterday, Bloomberg reported that Wells Fargo plans to raise interest rates on all credit card customers by 3% on November 30th. Funny coincidence- House Financial Services Committee Chairman Barney Frank wants to speed up the enactment of the Credit Card Act from February 22, 2010 to December 1.

Sometimes I wonder just how low the credit card companies can sink, but then I remember that some of the card company practices are akin to legalized drug dealing. Once they got you hooked, it sure is hard to get off the stuff. For more on this analogy, check out my appearance on CNET's 404 podcast with my pals Jeff, Wilson and Justin.

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This post by Kathy Kristof originally appeared on CBS' MoneyWatch.com.

Erik Weech learned about sneaky banking polices the hard way.

A few weeks ago, Bank of America hit the Chicago marketing man with a $35 overdraft fee when he had more than $130 in his account. The bank was apparently "holding" his money for charges that hadn't cleared - only they appear to have been holding three times more than he actually spent. Then, if that wasn't enough, they "reordered" his subsequent purchases in a way that tripled his overdraft charges. Within a couple days, he had racked up $140 in fees.

Authorization holds and transaction reordering are among the banking practices taking increasing heat recently from both consumers and lawmakers. Although nickel-and-dime fees are pervasive - just check your cable bill - the big financial institutions have become poster children for customer abuse. With direct access to your cash, they have developed a range of sneaky tricks that can quickly whittle down your account.


Use your credit card and you’re likely to find that they’ve hiked your interest rate, perhaps switching it from a fixed-rate to a variable. Don’t use your card and you could get hit with an inactivity fee. Fail to fix an overdraft promptly and you could get hit with a zero balance fee — in addition to overdraft charges. Flee the bank and they’re likely to slap you with an exit fee.

“Consumers would be shocked at how many different tricks the regulators allow banks to use to take money out of their wallets,” said Ed Mierzwinski, consumer services projects director at the U.S. Public Interest Research Group in Washington. “As long as the banks disclose in the small print that they are going to rob you, it’s legal to rob you.”

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Starting today, the nation's banks must comply with the Credit Card Act of 2009. Although most of the legislation's key provisions will not take effect until February 2010, credit card companies must immediately begin to mail bills at least 21 days before their due dates and provide at least 45 days' notice before making a significant change to their rates or fees.

Credit card reform was needed, but it's not likely to help Americans kick their credit card habit just yet.

The credit card phenomenon has always felt eerily similar to a drinking problem. In moderation, it works for most of us. But once there's a habit of overindulgence, things go south quickly. And with credit cards, the drinker doesn't even have to pay up front for his martini.

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With bailouts all the rage, it was only a matter of time before people who racked up large debts on their credit cards would see some of the debt forgiveness action.

As The New York Times reports, some companies are working with their delinquent customers to eliminate balances. The companies have revised guidelines, the Times reports, and in some cases are calling up customers before they call the companies.

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Ever since the extent of this economic crisis became clear, Washington politicians have been informing us that keeping a torrent of credit flowing to consumers and businesses justifies government bailouts and other extraordinary measures.

President Obama recently pledged to "focus on restoring the flow of credit that is the lifeblood of a growing global economy." House Majority Leader Steny Hoyer, a Democrat, said during the debate over last fall's TARP bailout that, without it, "credit, the lifeblood of any economy, might dry up across America." And the Treasury Department claims to be ensuring that credit is "flowing again to entrepreneurs and business owners."

Yet Mr. Obama signed legislation this afternoon that levies a slew of new regulations on credit card companies -- which lenders say will actually reduce the availability of credit. That's from no less an authority than American Express CEO Kenneth Chenault, who said his concern is with "credit being available, particularly to consumers who need it," according to Bloomberg.

Which, if you've been following along so far, is exactly the opposite of what Mr. Obama and his political allies say they wanted to achieve.

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This post was written by Stephanie Condon.

While President Obama met today with executives from the leading credit card companies, two senators called on the Federal Reserve to immediately implement an emergency freeze on interest rates tied to existing balances on credit cards.

The Federal Reserve plans to implement a new set of rules for credit card lending beginning July 2010, but that is too long to wait, Senators Chris Dodd (D-Conn.) and Chuck Schumer (D-N.Y.) said in a letter sent today to Federal Reserve Chairman Ben Bernanke and other regulators. Companies are increasing interest rates now before the new rules go into effect, they said.

"Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part," the letter says. "This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal."

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This post was written by Stephanie Condon.

While President Obama met today with executives from the leading credit card companies, two senators called on the Federal Reserve to immediately implement an emergency freeze on interest rates tied to existing balances on credit cards.

The Federal Reserve plans to implement a new set of rules for credit card lending beginning July 2010, but that is too long to wait, Senators Chris Dodd (D-Conn.) and Chuck Schumer (D-N.Y.) said in a letter sent to Federal Reserve Chairman Ben Bernanke and other regulators. Companies are increasing interest rates now before the new rules go into effect, they said.

"Consumers describe situations to our offices in which the interest rates on their accounts have doubled or tripled overnight, without any misconduct on their part," the letter says. "This kind of practice clearly violates the spirit and intention of the rules, even if the delayed implementation date has the effect of making such behavior legal."

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This post was written by Stephanie Condon.

Even though some credit card companies have received taxpayer bailouts, many Americans are seeing higher rates for credit cards, a practice that is drawing new scrutiny in Washington, D.C.

Congress and the Obama administration say they want to take steps to aid consumers blindsided by suddenly higher interest rates, new fees or other unexpected changes to their credit card terms.

President Obama, National Economic Council Director Lawrence Summers, and White House officials are meeting today with 14 executives from credit card companies to discuss the impact of the current economic crisis on consumers.

The White House said in a statement after the meeting that the president highlighted a set of principles that he'd like to see in the final legislation, including "protections that ban unfair rate increases and forbid abusive fees and penalties," plain language in statements, "increased accountability," and a requirement that all issuers offer at least one "simple" credit card with straightforward terms and prices.

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