Congress Takes Aim At Credit Card Policies
Lawmakers Threaten Legislation If Industry Doesn't Voluntarily Curb "Sky-High" Interest Rates And Fees
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Credit Card Issuers Take Heat
Consumer debt has reached an all-time high. Some senators say predatory credit card policies are a big part of the problem and want card issuers to change their practices. Sharyl Attkisson reports.
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Fixing Your Credit Card Bill
Anyone who uses credit or debit charges should be concerned about identity theft. Financial adviser Ray Martin tells Harry Smith how to get unauthorized charges taken off your bill.
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Bank of American Card Services President Bruce Hammonds, left, accompanied by Chase Bank USA Chief Executive Officer Richard Srednicki, center, and CITI Cards Chief Executive Officer Vikram Ata, testifies on Capitol Hill in Washington, Wednesday, March 7, 2007. (AP Photo/Dennis Cook)
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Executives of three major banks defended their credit card practices as responsible and responsive to consumers' needs in testimony at the hearing of the Senate Homeland Security and Governmental Affairs' investigative subcommittee. Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices — including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.
The interest charges and fees on Wannemacher's account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin, D-Mich., the subcommittee's chairman.
"Unfair? Clearly, I think," Levin said. He said an investigation by the panel found that "sky-high interest charges and fees are not uncommon in the credit card industry. While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers."
Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said.
Srednicki said the company has decided it no longer will charge over-the-credit-limit fees to customers who have been in a chronic over-limit position for 90 days.
Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance — which Chase agreed to waive after he contacted the subcommittee staff.
"Debt seems to invoke a feeling of hopelessness unlike any other problem I've encountered," Wannemacher testified at the hearing. "When a debtor calls you on the phone and you make a minimum payment, you know that you've made no real progress and that in a month, they will be calling again."
Sen. Norm Coleman of Minnesota, the panel's senior Republican, said high interest rates on credit cards, "hefty fees and crippling penalties impede more and more hard-working families from pursuing their American dream."
The problem is worsened by the "impenetrable" language of credit card disclosures provided to consumers, he said.
One hidden practice is called "universal default," reports CBS News correspondent Sharyl Attkisson. For example, say a person misses a car payment. That person's bank cards, even if unrelated, could use the missed payment to raise interest rates.
A similar chain of events happened to Bob Rolls, Attkisson reports. He charged $5,000 to a home improvement store credit card to buy materials to build a ramp for his 97-year-old father.
That purchase somehow triggered an incredible jump in the interest rate charged on his entirely unrelated Bank of America Visa — even though his credit is spotless.
"They said they were gonna raise my rate to 27.99 percent," Rolls said. "I said 27.99 percent. Forget it. I'm closing this account."
While the credit card practices in question are legal, Levin is threatening possible legislation to outlaw them as a spur to the banking industry for voluntary changes.
Senate Banking Committee Chairman Christopher Dodd and other Democratic senators challenged credit card executives at a hearing in January over rising late fees and other penalties and marketing practices they portrayed as predatory. Dodd, D-Conn., said he was putting the industry on notice that if it doesn't improve practices on its own, legislation may be warranted.
Since Democrats assumed control of Congress in January, they have put a number of consumer issues on the legislative agenda. With Americans weighed down by some $850 billion in consumer debt, the practices of the robustly profitable credit card industry are a compelling subject for scrutiny.
Citigroup, the nation's largest financial institution, announced last week that it was eliminating the practice of so-called universal default — raising interest rates for card customers because of their failure to pay other creditors on time. In addition, Citigroup said it would eliminate some types of interest rate increases that have been criticized.
Credit card issuers raise customers' rates and fees, for example, when they believe it is warranted by conditions in the financial markets. But under Citigroup's new policy, rates and fees will be increased before a card expires only if the customer pays late, exceeds his credit limit or pays with a check that bounces. If the rate is linked to the prime interest rate, it would rise or fall in tandem.
© MMVII, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.


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See all 87 CommentsI have ONE new card. I use it responsibly - what I can pay off within the grace period, I balance my budget, and I pay it off monthly. And it won't always be easy.
I will never abuse credit cards again.
And despite always making payments, I could have done bankruptcy 5 years ago... I didn't. That would have hurt a lot more and I hadn't been missing payments.
Of course, anyone reading the Bible will know its take on debtors - and it's a lot less stress-inducing than the corporeal reality of today.
I'm a conservative and an Republican and I have absolutely no problem with congress enacting laws to prevent credit card companies from *** their cistomers and taking advantage of their stupity.
As a society we frown on bartenders selling "another drink" to someone who is obviously drunk and we don't permit the sale of prescription drugs to over the counter customers. Bankers also have a responsibility when lending money.
Left to themselves, credit card companies have failed to act responsibly and now congress should take the steps to bring them under control.
If I loan my unemployed neighbor $10,000, I have no right to claim he should be penalized when he does not repay me. So it goes with credit card companies.
Credit card companies that issue credit to anyone who asks, regardless of income or any other factor, should not be allowed to seek recourse or redress from the courts for those poor decisions.
Congress needs to dramatically limit credit card companies' ability to use the courts to compensate for their refusal to adopt realistic lending practices.
If they had their way, almost all in this country would be poor; beholden to fees, late payments and sky high interest rates charged by the credit card companies. Only the very rich would really have any freedom. The rest of us would be drowning in a pool of indebtedness.
Reasonable restrictions are in order. And we must bring this mess under control (or better yet, repeal the 2005 law) before there is no more middle class to save.
Easy credit is the new slavery and there are millions lining up begging to be enslaved.
Billions are being spent to reinforce a get it now or it'll be too late state of mind. Spending addiction is the result.
I worry for the youth in America. With so much being spent to kill self control how can these people justify first creating the problem and then punishing the people that are sucked into the monster they've created.
Just because they don't see the social damage they've created doesn't mean it doesn't exist. A lot of people profited from slavery without actually directly participating. That doesn't absolve them from their part in the slavery system.
I can only imagine how many poor trees they slaughtered for the paper to send all that junk mail. They are obviously out of control on the issue end.
The Senate is being hypocritical to the max here. The banking and credit industry dumped piles of campaign cash into Congress for both parties in order to get free rein to do whatever they wanted with credit and lending. Congress paid them back in full and also passed legislation that makes it much more difficult to file for bankruptcy when they finally drive some unfortunate person or family into the dirt if they lose a job or get sick.
I believe the average credit card balance for the typical graduating college senior is in excess of $10,000. I'd guess that their average interest would be in excess of 18.5 ... maybe as high as 24 or 26 percent.
Extending easy credit to teenagers is about on par with giving them free cigarettes.
How many commercials and email ads offer Hundreds of thousands at some "cheap" variable rate on an overpriced house in order to "pay off" all those credit card bills. If you look closer a lot of those companies seem to be connected to the same banks that offer the "easy credit" cards.
Suckering the young and gullible into a lifetime of economic slavery and even more slavery and poverty for their children.
Now read the above paragraph again, only replace "banks" with "pharmaceutical companies," "insurance companies," and "Oil companies," and you'll see why the Dems are for the People and the GOP is for the rich and powerful. Are you rich and powerful? Think about it.
The two things I find more disgusting than merciless credit card companies are (1) partisan politicial hacks that try to turn everything into a Democrats Vs Republicans squabble and (2) news organizations that manipulate the news in an attempt to advance their own political agendas.
I think there are good Republicans and good Democrats who sometimes agree and sopmetimes disagree, but in general place the interest of their constituents above that of their party.
Excessive anything isn't usually good for anybody and excessive profits at the expense of our society's future is just obscene.
I just took out an equity loan to pay my cards off sooner - am tired of paying on them - only to find out I still owe last months interest charges. I think that is so unfair - if I paid them in full it should have been left at that.
For example.. in the state of IL in 2003..
The State of Illinois at the State-level has approximately $17.47 billion of the taxpayer's money it is not using, i. e. surpluses equal to $1,386 for every man, woman and child in Illinois or $5,544 for a family of 4. This does not include all the additional surpluses that exist in the school districts, cities, or counties in Illinois, they all owe you a similar amount of money.
This money doesn't go back into the budget, it was never in the budget in the first place, it dissapears at the end of every year in their accounts. Wake up suckers, you left the bank vault open.
"Collecting more taxes than is absolutely necessary is legalized robbery" - Calvin Coolidge
"But then due to the money involved, government starting in 1946 evolved into what gives a new definition to the expression of letting the "Foxes guard the Hen house" and by definition of circumstance and reality of the current structure, has now given government the true title and has redefined the meaning of the words "Organized Crime." Or as the definition of RICO goes, "Extortion of money from the public through criminal enterprise."
www.cafrman.com and www.cafr1.com
No kidding, homespunlady. Well put.
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Tricky,congress,lets see if they are bought like the oil co. buy em ?
Posted by beehive21 at 09:00 PM : Mar 07, 2007
+ report this comment
K.M. Scott Reseda CA
Draft Republicans.
Yeah...I guess we are all VICTIMS. I'm sure that the courts will all figure it out. It'll only take about 5 years. I'm sure none of the politicians are not grandstading either. I myself want to make sure that legislation is passed that makes it hard for credit card companies to charge high rates to the parents buying PS2 games and XBOX 360's for their kids 2 at a time. And let's not forgtet the poor "inner city" kids that need those stereo "systems" in their cars.
Every school district, city, county, state, and the feds are playing this scam and have hoarded away massive amounts of our wealth folks. Don't vote for democrats and republicans and don't vote for weak people. This money needs to be redistributed back to all americans, they've been running this scam since 1946. It's time to get some real independent candidates who will really get the job done and clean up this mess... this is how they're enslaving us, they've stolen our money so they can use it as the invisible boot on the back of our neck.
absolutely not
you look away for 1 second, the thief will still be a thief, and will walk away scott free.
If congress tries to force a change, it may look good on the front pages of the news papers, but in reality, it will be a superficial slight of hand.
We cant trust Congress any more than we can trust the big bucks behind both credit cards and the banking industry, as well as election campains.
Posted by Winstrv at 08:57 PM : Mar 07, 2007
Based on the tone of your comments, it appears you only refer to the victims of predatory loan sharks, and not the loan sharks who loan money to desperate people who have no realistic chance of paying it back.
Loan sharks should bear the responsibility for their actions. Congress should prohibit them from using the courts to help collect their foolishly made loans.
If they loan money to people who won't or can't pay it back, too bad for them. Taxpayers have no obligation to provide loan sharks with collection agents in the form of courts and court orders.
For once I agree with you.
and you only get 1% interest per year in return
http://www.chase.com/ccp/index.jsp?pg_name=ccpmapp/individuals/savings/page/moneymarket_savings
Borrow money via a credit card from that same bank and you pay 14% to 29% interest per year
http://www.chase.com/ccp/jsps/cards/dynapp_popup.jsp?type=terms&sourcecode=646Z
Such extreme interest rates, as compared to the cost that banks are paying for the funds via deposits, create a debt buried society comparable to the old "company store" situations of the old days. When people run into trouble the banks raise the interest rates to 30%+ and tack on prohibitive late fees that can create a situation from which there may be no escape.
hmmm ... that's like saying that drug distributors share none of the blame for our children and young adults becoming addicted to drugs.
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Exactly. They charge 18 to 25% interest based on the -MYTH- that they are assuming a risk of not getting paid back. The truth is that they have very little risk because there is no such thing as unsecured credit anymore. With their new "government insured bankruptcy laws" intact, you basically have to be dead or homeless without a nickel in your pocket to not have to pay them back. Plus they know people can't financially function in this country without a credit card or with bad credit, so even if you do BK they know you'll be back. Hell, you can't even open a regular checking account anymore, buy auto insurance or rent a car with bad/no credit.
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