Congress Takes Aim At Credit Card Policies

Lawmakers Threaten Legislation If Industry Doesn't Voluntarily Curb "Sky-High" Interest Rates And Fees

(CBS/AP)  An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators, who denounced the industry for confusing billing practices and shifting interest rates.

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.

[musty2u]

Yeah, right. The Senate is the epitome of fiscal responsibility. This is exactly why we deserve who we have, leading us where we go.

[finewoven]

Now here is a test of the Democratic-led Congress, to change legislation that occured last year concerning consumer bankruptcy. The Republican-led Congress decided to side with the Bank lobby to almost eliminate the possiblity of debt relief through bankruptcy. So the banking establishment is on a role (yes role), theirs is to be the slave-master over indentured Americans, with as little means to debt-relief through the courts as possible.

[mitywhity]

This is pathetic. Who in their right mind would use a credit card anyway? After what we went through, I will never open an account again. If you read the fine print you'll find no room for error on your part and no implied mercy on their part. Credit cards are the Devil's tools!!!!

[kevsan1]

Greed is killing this country. The bankers and the oil companies are making windfall profits. Rates continue to climb, companies tie increases to business you've done with other companies, even if you've been golden with them. They don't consider that possibly the other companies have messed up collection systems. And then there's the greed of investment bankers and stock market types. They are the basic reason for high unemployment and jobs leaving this country. They are legal terrorists. They should be illegal and treated like Osama and the rest.

[hypnotoad72]

I recently got out of debt. To the tune of $35,000.

I 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.

[musty2u]

Toad, congratulations. You are to be commended.

[themooniac]

This is the type of issues that the Democratic congress needs to take on and excel in. Ripoff credit card policies that steal the wealth of middle class America. After years of the Republican congress being in the banks' back pocket some leveling of the playing field is in order. Universal default should be done away with period. Banks, themselves, should take the hit for allowing people to receive inordinate amounts of credit they don't actually qualify for. Enough of using the goverment, via the new banruptcy law, as a leg breaker/enforcer for credit card banks and other varieties of predatory lenders.

[jebby_one]

I don't know how credit card company executives sleep at night.

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.

[tuckerndfw]

How about the government require companies that issue credit bear responsibility for their poor decisions? Why are credit companies exempted from the burden of shared responsibility?

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.

[shanev137]

It's pretty hilarious how our government "cracked down" on the bankruptcy laws to make it tougher for people to file, but yet allows predatory lenders get away with financial murder. Don't let any of this talk fool you....our government has always pandered to banks and credit card companies and always will.

[scott4261]

The Republican congress passed the bankruptcy reform bill and President Bush signed it into law. It went into effect on October 17, 2005. And the fleecing of the middle class went to a whole new level. It was a windfall for the banking industry. Capitalism run amok.

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.

[homespunlady]

Unfortunately, with the increasing "information" society, if you're anywhere above poverty using cash nowadays you get odd looks and comments and might even have someone claiming to some office that you must be doing something illegal.

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.

[jebby_one]

My household receives about TEN junk-mail advertisement letters from American Express and Capital One every week ... plus another five to ten junk mail come-on's from assorted Visa and Mastercharge companies. And I already have an American Express + a MC account!

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.

[shanev137]

Yup. I have a friend who filed for bankruptcy back in '05 before they changed the laws. The only way she could rebuild her credit was to get a whole bunch of those new bankruptcy credit cards that charge annual fees in excess of $200 to $300 per year and/or make you prepay them up front for your credit line. They say the reason for the 18% to 21% interest rates are for the "risk" they assume. I really can't see the risk or how a credit card company can lose money. Someone want to try and explain it to me? lol

[observantx]

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.

[homespunlady]

You do know that if you pay the card on time or early and pay a utility a day late they now have used the utility as an excuse to raise your interst rate.

[jebby_one]

"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."

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.

[shanev137]

Exactly. A person almost can't even use a public pay toilet anymore without a credit card. You can't have a cell phone or fly without one and you certainly can't rent a car without one. Everything is tied to our credit score now. The entire credit system preys upon the working poor and middle class people and the financially tragic events that happen to them.

[homespunlady]

It's not just cards.
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.

[tucson23]

All you Republicans can learn a lesson from this Democratic Congress. The GOP is happy to see big companies make all the money they can, even if they're unfairly raping people as these banks are. Democrats don't like this sort of thing, and will do all they can to put a stop to it. Now aren't you glad the Dems won the election?

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.

[jebby_one]

"All you Republicans can learn a lesson from this Democratic Congress. The GOP is happy to see big companies make all the money they can ...

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.

[homespunlady]

I'm solidly Independent so politics doesn't usually enter into it. Issues on the other hand do catch my attention especially when they become hazardous to our society and our children.
Excessive anything isn't usually good for anybody and excessive profits at the expense of our society's future is just obscene.

[xqsme1]

I am so glad that this Democratic Congress has begun seeing the light and taken a stand against credit card companies. In a day & time when American's use plastic more than cash, previous government officials should have known that this was coming one day. And to the Ohio man having a problem with Chase - I say more power to you buddy!!!! I think they are the worst company in the world - have had ongoing issues myself with them. I am glad they finally got exposed for the crooks they are!!!!

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.

[agnim]

Yes, about time these greedy and thieving vultures reigned in!

[bildooreilly]

The government is running double books on american taxpayers at all levels school and water districts, cities, counties, states, and the fed. All they show us is the "BUDGET" which is just a shell game, all the budget shows is their bills and very little of what they're taking in. The real book is called the CAFR or Comprehensive Annual Financial Report, fact is counties and states and cities are sitting on billions and trillions of taxpayer dollars and reinvesting them in the stock market. They've been running this scam since 1946, they now own most of the stock market this way. The corporations aren't running the government, the government is running the corporations and that my friends is classical communism. This is no conspiracy theory, this is all very proveable by their own books, the CAFR... investigate this people, your freedom and livelyhood depend upon exposing this scheme. The fact is our system(s) are so profitable they should be sending us a check instead of a tax bill, simple as that... and it's all very proveable with their own documents. Congress needs to release those surplus tax dollars back to We The People who it belongs to, unless we don't really own our own government anymore and are just slaves.. check out www.cafrman.com and www.cafr1.com and look up your state and local CAFR reports on google. Thank you.

[bildooreilly]

These counties are sitting on billions of taxpayer dollars then they're stealing old peoples homes because they can't afford their high commie taxes... when these crooks should actually be sending us all a check.

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.

[bildooreilly]

If congress would give us our surplus tax dollars back, not one american would NEED to borrow money. FACT! These con artists in both parties are thieves, they're running an organized criminal enterprise.

"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

[bildooreilly]

You people are going to have to make a decision, are you going to speak up or are you going to be total slaves.... seems like most of you have resigned yourself over to the communists... stop being a bootlicker, you're supposed to be Americans, this is our country, that is our money, it doesn't all belong to a few elitists.. This is why they're setting up cameras on every street corner, building prisons like it's going out of style, and wiring this country for sound, it isn't to protect you morons, they're very intent on making you their slaves.

[beehive21-2009]

Tricky,congress,lets see if they are bought like the oil co. buy em ?

[midwestview]

Finally. I'm a republican too and I am glad someone is looking at the credit card industry. Both parties have loved the pac money the money credit card comapanies throw at them. Maybe we can only hope this is not just a spotlight moment by the politicians and they actually do something. But I kind of doubt it...

[bellal-2009]

Winstrv, you'd have to hire a lawyer to read the fine print if we were to fully understand all the complex legal agreements that every company requires. Why can't companies be honest and fair to their customers. Is that too much to ask.

[bellal-2009]

Easy credit is the new slavery and there are millions lining up begging to be enslaved. Posted by homespunlady at 05:54 PM : Mar 07, 2007

No kidding, homespunlady. Well put.

[bildooreilly]

Beehive, you have it backwards, the oil companies didn't buy the government, the government bought the oil companies. With all of our tax money they've been pilferring through their double book accounting scheme. It's the old company store routine. They did the same with the insurance companies that's why they like to pass "laws" requiring people to have insurance. It's a commie take over, they've looted our money and our wealth, and it's a fact, all easily proveable by their own official books.



----------------------------
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

[kamascott]

It's about time they investigated the userous practices of credit card companies. Househod bank charged me thirty dollars on a twenty balance because the claimed that the payment was two days late. I mailed it five days before the due date. I refused to pay it and they messed with my credit. I hope congress calls them to task and make some serious changes. For one thing NO fee should be greater than the balance.

K.M. Scott Reseda CA

[bildooreilly]

Credit Score is a Slave Rating... are you a good slave, or a bad slave? Everyone went to sleep watching the boob tube, and let them dupe us out of our country. Enjoy your servant I mean service jobs.

[qwaszx1-2009]

The only time in American history this would have been permitted was within the last 12 years. Thank God Americans got their heads out of the sand and re-enfranchised the middle class. If we carrently had a Republican majority we would still be talking about American fries and intelligent design, not credit reform. Republicans work corporations, Democrats work for people. If you don't beleive me, read the story above.

Draft Republicans.

[walt1944-2009]

The GREEDY banks have turned credit cards into a money maker for them and they don't have to do a thing; just sit back and collect. And if you don't pay, or can't pay because you lost your job, they have the power to ruin your credit forever. It all goes back to that one word: GREED! Under dictator George Bush and his Republican gangsters, GREED is everywhere and its destroying this country, as if that matters to wealthy politicians and company executives.

[cbville72]

I have an excellent idea! How about people don't use credit cards for anything but emergencies! Oh Wait....that's just common sense.
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.

[bildooreilly]

Tell your city,county,state, and federal politicians to redistribute the massive surpluses of TAXPAYER MONEY that they hide back to WE THE PEOPLE whom it belongs to then we wouldn't even need the greedy banks.

[bildooreilly]

Jesse Ventura, when he was mayor of... a... I think it was Menlo [Brooklyn] Park, the city wanted to have a tax increase of $260,000, a small increase, for the school districts. They said they were at a short fall of money. He looked and saw a $48 million investment fund sitting there, listed as idle funds, so he goes, "Here, take it from here." And he was the first person to openly admit as to the difference between the budgetary basis and the liquid investment funds. He was elected governor, and also the first step he did was to target $7 billion in surplus funds for return to the public. Now, legislature, ok, who has their hands very deep in the pockets here, went to block him on the $7 billion and he was only able to free up about $1.8 billion, which equated to about a $800 check for every person living in the state.

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.

[standlee5]

Teach them a lesson, regulate the he11 out of them.

[pwrslm]

so, they think that a thief will all of a sudden be honest just because of what, because they think that the police will arrest them and punish them for being a thief?

absolutely not

you look away for 1 second, the thief will still be a thief, and will walk away scott free.

[pwrslm]

If everyone in the country would boycott credit cards, and withhold payments until credit card companies stopped being thieves, then they would do the right thing.

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.

[tuckerndfw]

People need to grow up and take responsibility for the decisions they make and stop blaming others.

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.

[bildooreilly]

If these politicians would give us the money they owe us back these people could pay off their credit card bills easily. Only vote for politicians that you believe in who will demand that tax surpluses be redistributed back to We The People whom they rightfully belong to. Even if you have to run for office yourself, don't vote for anymore of these metrosexual rich kid republicraps and democraps, they're looting the country blind at an ever increasing rate.

[bildooreilly]

These guys are all buddies with these politicians, enjoy the dog and pony show.. yee haw... they're all laughing all the way to the bank. They're some smart mean sharks, and they've taken us for the biggest ride ever.

[jimfinster]

bildooreilly:

For once I agree with you.

[jebby_one]

Put money in a bank savings account
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.

[jebby_one]

"People need to grow up and take responsibility for the decisions they make and stop blaming others.

hmmm ... that's like saying that drug distributors share none of the blame for our children and young adults becoming addicted to drugs.

[shanev137]

Loan sharks should bear the responsibility for their actions.

---------

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.