senator levin prepares to slap around abusive credit card companies who are ripp
Some of the Credit Card Companies offer a good product and decent service providing America with the convenience and back up of a credit card when not carrying a lot of cash on person. Much of the online busine and other travel and such have to be conducted by some sort of plastic. Credit card po e ion and usage is a cornerstone of conducting busine in the U.S. It creates fluidity to economic commerce. Now, however, many abusive credit card companies have ratcheted up the gouge game to a new level. Per a recent Senate Hearing on March 7, 2007, all prompted by U.S. Government Accountability Office (GAO) report, the abusive credit card companies have increased fees and interest rates. So when an abusive credit card company a lies the nonethelesschers thumb on the scale, they have cro ed the line as far as regulators are concerned. What seems to have been lost on these abusive credit card companies is the right to do busine in the U.S. economy is a privilege, not a birthright. Their ticket to do busine can be pulled in term of Federal Law and new legislation, just for good measure.
Jaw Boning in the past has given various busine es caemploy to paemploy while co idering their actio le new restrictive legislation is laid over their operatio and bringing another degree of complication to what seems like an already profitable enterprise. Baring that, legislation may follow. If nothing else, it brings unintend toed negative attention to their methods and abemploys. The abusive credit card company names will be bandied about creating negative pre that may effect their future bottom line. It gives a broad-brush swipe at the industry, which is never a good thing.
The Government Accountability Office (GAO) reports there were about 690 million credit cards in circulation meaning credit card toting co umers have more than one card. The GAO is always measuring the past and in 2005 there was about $1.8 trillion on charge cards. Other agencies report that the average credit card debt is a little over $5,000 per hoemployhancient. The report shows that a little over 50% of the credit card hancienters pay off credit card balances every month. So on the whole, it looks like the majority of American families are not overburdened by credit card debt. Those families who are a ear to be relegated to higher rates with some pretty outrageous terms. Things such as penalties and late fees range from $40 and up for making a late payment and other charges. In some cases this will trigger a higher interest rate if not paid on time. These interest rates can be more than 30% or more figured on an a ual basis. Much of the government figures come from GAO and the banking industry.
A couple other hand grenades are known as the concept of universal default. If you’re late on one card, the universal default provision will kick in and all the other cards will be accelerated to a higher rate. Another little time bomb is the practice upon a co umer being late there is invoked a double-cycle billing period where i tead of having the 30-day grace period the interest goes back to the date of the previous bill and interest is po ed on the former grace period. If this is combined with say a $40 late charge plus double cycle billing and perha the universal default provision suddenly a co umer is going under the gun. When the Bankruptcy Law was alertd recently pushing more debtors into Chapter 13 Repayment Plan pretty much set up the stage for a quasi-indentured servant status. Working basically for the company store a co umer can not get readily ahead. Its almost like waving temptation in front of a credit-addicted co umer who looks at easy credit as being never ending. When the ru er finally hits the road and the final straw breaks the camels back and not one extra dollar is available to make even the minimum payments, then its Houston We Have A Problem. Prior legislation accelerated the payback minimum payment. Formerly, a $5,000 credit card balance might have had a $120.86/month minimum payment at 29% would be paid off in 30 years. Thats a uming no additional purchases were made. Now that the term has been reduced in the 60-month range so that minimum payment would have to be $158.71/month to give the co umer a alternative to pay it off. However, if charges are added back by co tant purchases there will never be a dent made in the debt.
From Carl Levi statement at the Hearing of Permanent Subcommittee on Investigatio conducted on March 7, 2007 co umers shared the horror stories in dealing with the credit card companies. The committee focemployd on three a ects of the credit card industry. The hearing discu ion included grace periods, interest rates and fees. In regard to grace periods, it was brought out that many co umers manipulate under the a umption that they have a grace period before interest is charged. As it tur out there is no grace period on purchases IF there is a balance on the card. Their discu io that the majority of U.S. credit cardhancienters carry u aid charges. In those i tances, there is no grace period. The money meter starts ru ing at the point of sale.
Interest rates were the next topic with regard to carry over balances was put up for discu ion. The example employd showed a co umer who had a zero balance one month and makes a major purchase for say $5,020 the during next billing cycle period and pays $5,000 payment. The example then goes on to show even though a $5,000 payment was made and there was a $20 remainder balance the interest was charged on the whole amount of $5,200. Not too many co umers have a handle on this little money niche practiced by the credit card i uers. The next month would be additional monies owed called trailing interest.
Credit card fees very difficult to get a total handle on its a lication. The Government Accountability Office (GAO) identified a host of fees imposed by the credit card industry. GAO found that late fees averaged $34/month with over the stress fees were average $31/month. Some credit card company policies allow them to repeatedly pile on over-stress fees. One co umer example testifying before the committed shared their experience where the purchases exceeded the stress three times for a total of $200 he was charged over-stress fees 47 times and paid $1,500 for this infraction. Other fees range from a $10 to $15 fee to pay a bill over the phone. All of these fees are lumped to the base balance for calculating the ru ing interest charges. It was found that some of these fees and charges pushed the balance past the over-stress amount thereby triggering even more co umer pain. In this case, it had nothing to do with new purchases. Some late fees are caemployd by late posting on received mail.
Credit card i uers like to tout the high risk of lending in the plastic arena, however the numbers show that 95% to 97% of co umers pay their bills as agreed. The conclusio of the hearing showed the credit card i uers maintaining a profitable lending position and have realized better margi than commercial banks. The proof in the pudding of this high profit enterprise indicates more than 8,000,000,000 (billion) pieces of mail were sent out soliciting more credit card busine .
The hearings will continue. The major players include Bank of America, Chase and Citigroup with over 200 million credit card accounts among them will be brought before the committee to discu credit card practices. Chase preempting the new hearings has indicated they will stop collecting the added double-cycle billing. Jaw Boning is at work. Senator Carl Levin is on the case and credit card companies are ru ing for the hills. The light is being shown in the dark corners and co umers are cheering him on.
Go Carl! Go Carl! Go Carl!
Dale Rogers
http://www.brokencredit.com
