NEW YORK, May 19, 2009
Exploiting The Credit Card Law Loophole
Card Issuers May Hike Charges And Interest Rates Before New Regulations Take Effect; Borrowers Who Pay In Full Targeted
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Play CBS Video Video Notebook: Credit Card Fees Kelly Wallace discusses hidden credit card fees which are becoming increasingly prevalent as a result of the recession.
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Video Credit Card Debt Epidemic Millions of Americans have soaring levels of credit card debt. Nancy Cordes reports that U.S. lawmakers are now pushing for legislation and reform relating to interest rates and regulations.
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Video White House On Credit Cards Banks will likely resist congressional passage of a bill President Obama wants to expedite, a bill calling for cut backs on credit card fees, reports Bill Plante.
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(CBS/AP)
That's a nine-month loophole, and as CBS News business correspondent Anthony Mason reports, consumer groups are concerned the credit card companies will use the time to hike up interest rates and fees while they can.
At a credit counseling center in Dallas, calls for help are up 40 percent over a year ago. Many come from borrowers buried in credit card debt.
"It's amazing how much of the debt is actually fees and interest instead of principal," said Todd Mark of the Consumer Credit Counseling Service of Greater Dallas.
Comedians may joke about the banks - Stephen Colbert said this week that the card companies "simply change their rules and interest rates based on what the credit rule monkey spins on his rule randomizing wheel" - but they're not laughing on Capitol Hill anymore.
"They will go kicking and screaming into the night on this one," said Adam Levin of Credit.com.
Levin warns that lenders will use the nine months before the law in enacted to raise interest rates and hike fees.
During that time, he said, "We could face the continuing reign of terror."
Interest and fees are lenders' primary sources of profits. So to make up for lost revenue, credit card companies may now have to go after the 45 percent of borrowers who pay their bills on time.
Among the possibilities:
At the same time, lenders are making it tougher to borrow. Nearly 60 percent of banks say they've tightened credit card lending standards this year. That means less money for borrowers squeezed by the recession.
"And we still face the fact that Americans are debt-ridden and that Americans have to focus on developing a serious plan personally to reduce their debt. Because this is not going to solve that problem," Levin said.
Americans still owe $945 billion in "revolving" debt - most of it on credit cards. But that's down from $980 billion six months ago.
Tighter lending standards may be one reason. Another: Americans finally may be starting to pay down their credit card bills.
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Add a Comment See all 146 Comments
- Banks have huge debts, but they're getting a helping hand from the federal government. If you have overwhelming debt--perhaps from bad investments, or maybe a job loss, a medical crisis or just plain overspending--you're probably on your own. Check the website http://obamadebthelp2009.blogspot.com
to see if they can help. I am glad I did read it before I talk to my CC company and it helped - Jane Jim, California - Reply to this comment
- "The banks are not going to lose one thin dime and the people are not going to get one thin dime." If you really believe that, buy shares in banks. That's what I do.
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- Cut up your credit card. Consolidate your debt. Get a bank loan to pay it off. The interest rate is much lower. Quit blaming other people because you can't control your spending or make the right choices.
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- What fun to be a Republican. Now working to protect consumers is a bad thing. So when are we going to have a decent political party to stand against Democrats?
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- I had a WAMU card with a 9.9% rate then they were bought out by Chase (the crooks) who immediately raised my rate to 10.9% not 4 months ago. Today I got a message from them (the crooks) saying that my rate is jumping to 13.24% because "The principal factor we considered in amending your account is maintaining profitability on your account." I don?t have to accept the rate increase but they (the crooks) will close my account and still charge me the higher rate on the balance owed anyway. I have news for them (the crooks) as I am going to pay my account out then I am going to charge small amounts and pay off the card monthly before the due date. If everyone could afford to do this I think they might get the message but I also think they (the crooks) will terminate my account after a period of not making any money on it. All I have to say is S**ew You Chase (you crooks).
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- When republicans deregulated the credit card industry the beginning of the end occurred. We have yet to see these crooks begin their whine for a bail out. When that happens hold on to your wallet because it will bankrupt the system with their $5 trillion dollar burden. Credit Card Companies are simply loan sharks and MUST be regulated because of the extreme potential for abuse of charges for interest and penalties. They are the crooks of the lending industry preying off of those who will live beyond their means and resort to plastic money. That ends up driving the price of responsible living up. There needs to be a sector of the credit card industry that is created under the government which charges reasonable rates for honest responsible clients. This would hold the private sector criminals in check while providing a means for honest and responsible people to enjoy the American Dream.
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- Great to be a Republican. Now you have to defend legalized loan sharking. And you wonder why you have become unelectable?
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- I used to carry a balance on my cards. Never a late payment. Capitol One called last March and advised my rate was going from 8.99 to 14. If i didn't agree by the 14th of May my card would be cancelled. I have since paid all my balances on all cards. I will keep MY Capitol One card in service but unused. It will be a reminder that I will never give Capitol One my business again. Any card that requires an annual fee will be cancelled. I have joined a Credit Union and have New card at 8% from them. When this recession is over these Credit card businesses who decided to harass their better customers will pay a steep price. I don't forget! Everyone should contact their representatives about reseting Usury criterior back at 18%
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- what's a credit card?
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- Our government including Obama and Congress is beholden to the oligarchs of Wall Street and have refused to hold them accountable. Instead they reward their greed and stupidity with trillions of our tax dollars and have indebted future generations.
When the credit card oligarchs lose our identity, we their customers are held responsible for any resulting inconvenience or worse. The credit card companies are loan sharks who have been given a legal pass by their benefactors in Congress. Now they get a 9 month reprieve to figure out ways to screw consumers.
I can't speak for others, but I use a credit card for the rewards and I pay it off in full every month. The credit card companies call such people "deadbeats" yet they still make lots of money because of the fees on cash flow from vendors. They are use to receiving 35% interest. The moment they attempt to add fees to my credit card or charge interest will be the day I destroy the cards. - Reply to this comment
- I think everyone needs to view this report. The way that the credit card industries are set up, is a win-win situation for them and them only. We need to get back to pay as you go. They've sucked everyone into living way above their means.
http://www.pbs.org/wgbh/pages/frontline/shows/credit/view/ - Reply to this comment
- A country whose businesses are out to rape and pillage the average person will not survive. Greed has no bounds and does not have the aibility to see when it has gone to far, (thus blind) so the greedy will not see the errors of their ways until there is nothing left to rob. That is exactly what is happening to our country - we are consumed by the insatiable greed of business.
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- If people are worried about the state of the economy now, imagine the panic that would ensue when they realized people were no longer using credit cards. That would be a trillion dollar loss in the money system.
Posted by 12345-908903 at 1:13 PM : May 20, 2009,
Great post. Normally I would report it all, but I need some room to comment.
It would benefit us all if we could organize and get everyone who is able to cut up their credit cards and use checks or pay with cash as a protest to the law. The panic it would cause would be worth it since meaningful reforms would follow.
Has anyone noticed the 25% increase in gas prices right in time for the holiday weekend? I would guess its big money and greed wanted to cash in on our travel.
Perhaps a holiday strike where everyone stays hope is in order. The hedge fund managers who are creating this price spike with our bailout money would loose their tail if everyone decided to stay home this weekend.
Pass this idea on and lets put a litttle instability in oil futures. If anything it would keep the gas prices lower. - Reply to this comment
- To BerkeleySkirt - cutting up our credit cards is what we should all do, regardless of the fees the card companies are charging. If people are worried about the state of the economy now, imagine the panic that would ensue when they realized people were no longer using credit cards. That would be a trillion dollar loss in the money system.
Card companies and the American Banking Association are in the business of loan sharking. They will find a way around any law that is passed in favor of the consumer. You may have too many cards, or too few cards, carry no balance, or carry a too small or too large balance, pay on time, never default, and never universal default. It doesn't matter. They will screw you by tacking on charges, raising your interest rate, or by lowering your credit card limits, resulting in a lower credit score. Once they have successfully lowered your credit score, you become a greater loan risk and they can then charge a higher interest rate and tack on other "risk" charges. They long ago rejected the idea of simply not lending money to people they consider a risk in favor of making much more money by pegging all their customers a risk and charging them higher rates and fees. They have ways of putting it to us that we haven't even dreamed of yet. - Reply to this comment
- And we want these robber baron big corporations running ANYTHING? Name one thing that big corporations have done well except to rape and pillage and start disastrous wars for oil. We need Socialism now. We need a government not run by big money where our taxes pay for the benefit of the commons and the masses.
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- Ok, now I understand what's going on here...if you don't pay on time, miss a payment, etc., this new Nobama "socialism" plan will help you by penalizing the credit card companies for hiking your rate. They will in turn charge people like me (one that pays on time and has NEVER paid interest on a credit card in my life - I just use it for convenience) annual fees, and interest the moment I put something on the card to make up the difference. Well guess what liberals, if this happens...I will cut up the card and use cash from now on. I will fight "socialism" my way! Yes I can! Yes I can! Yes I can!
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- Article States:
"Interest and fees are lenders' primary sources of profits. So to make up for lost revenue, credit card companies may now have to go after the 45 percent of borrowers who pay their bills on time.
Among the possibilities:
# Reviving annual fees
# Charging interest immediately on purchases instead of offering grace periods
# Eliminating rewards programs"
Merchants pay the equivalent of up to 36% APR for the privilege of accepting the credit card.
A very large percentage of Credit Card Customer, like myself, never pay interest on purchases on credit cards. I will simply stop using any of my cards which eliminate the grace period.
The only loser will be the bank that does away with grace periods.
Most consumers refuse credit card offers with annual fees.
Rewards programs are intended to lure new customers to use those cards over competitors.
Any of these changes would cost the bank more than it makes them - not likely to be implemented. - Reply to this comment
- When they initially sign you up under certain conditions and then, over the next several years, triple your interest rate even though you've never been late, never charged anything near the credit limit - that's abuse; that's buying legislative approval via lobbying - which should be criminalized. This Bill does not go anywhere near far enough. Of course, we also have those who enjoy smirking at well-intentioned debtors caught in the premeditated snare of entrapment.
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- If your credit card threatens to increase your interest rates for no reason, call them up and threaten to cancel the card. A consumer canceling a credit card is the worst thing for the company. They'll do anything to keep you.
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- Everyone can make bad judgments that gets them in hot water with CCards. Just look at the gigantic errors in judgment that the Wall Street banks made that brought down the economy. They made humongous mistakes and they got bailed out for it. The average consumer makes a mistake of missing 1 payment by 1 day and their interest rate goes to 41% or higher. Think about it for a minute. The huge institution goofs up in a major way and gets taxpayer bailout money to keep it going and the average consumer goofs up and gets hit with incredible rates of interest on their cards! Make any sense to you. The credit card Co's made an error of judgment when they extended large amounts of credit to people who shouldn't have got it. The only thing we have to protect us from an abusive industry is to have goven't rules in place to protect the average person. The rules as they now are simply not enough obviously. Government should be there to protect our citizens from things that are way bigger and stronger.
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