There’s a disheartening article on the front page of The New York Times web site this morning: “Pay Garnishments Rise as Debtors Fall Behind“. Every article has a slant and story to tell. This one tells a story that isn’t pretty. It offers examples of lenders, credit card companies, and banks asserting their advantage over …
You Can’t Sue Your Credit Card Company … Yet
Credit card companies are feeling the pressure of additional legislation that may come down on the side of consumers. A Congressional committee met last week to consider the Obama administration’s proposal to eliminate arbitration clauses from credit card agreements. This proposal is part of the administration’s push for more consumer protections. Arbitration clauses can prohibit …
Advanta Credit Cards Cannot Be Used After Next Saturday
Advanta Corp. announced it is freezing almost a million accounts as a consequence of an unprecedented 20.15 percent default rate in April. The Philadelphia Enquirer has the story in “Advanta moves up card-freeze date“. This article begs the question, what does a credit card company do when the default rate climbs so high that being …
Credit Card Defaults Rose in April
They rose to record highs. And banks like Citigroup, Wells Fargo, JPMorgan Chase and Discover Financial Services are trying to figure out what to do. They’re raising rates, lowering limits, closing accounts and hiring psychologists to teach debt collectors how to persuade card holders to pay down their balance. CNBC.com has the article: “Credit Card …
Banks are Hurt by Credit Cards
The New York Times has this story: “Rising Credit Card Losses Are Next Challenge for Banks“. Eric Dash and Andrew Martin do a good job of explaining the extent of trouble banks are having and are going to have with credit cards. “Even the government’s grim projections may vastly understate the size of the credit …
Are Banks Helping Cardholders?
I watched NBC’s Nightly News tonight and wasn’t surprised to see the segment about the gentleman whose Bank of America credit card account’s interest rate was nearly doubled without cause. The man reportedly hasn’t made a late payment in more than a decade and wasn’t over his limit. Bank of America and other banks have …
Time for Credit Card Reform
Want to do something in support of credit card reform? Visit CreditCardReform.org and use the template to contact your legislators in support of credit card reform. It’s easy and the more your congress-critter hears you complain about credit card pain, the more likely he or she will be to support the initiatives in the U.S. …
Homeland Security vs. Credit Card Companies
The United States House of Representative’s Committee on Homeland Security is looking at something other than terrorists. This past week they put their sights on credit card companies like MasterCard and Visa.
Get Paid to Close a Credit Card Account
Yahoo Finance has the news, “AmEx paying card holders to close their accounts“. What an odd thing. Certainly, a sign of our times. American Express Co is apparently offering a limited number of card holders $300 if they will pay off their balances and then close their American Express accounts. So, if you’ve got an …
The Coin of Capitalism is Two-Sided
In the post I wrote yesterday, Garnishments Increase, I began a paragraph with, “every article has a slant and story to tell”. In a similar fashion, every party to the credit card bubble has its own slant and story.
Reduce the discussion to borrowers and lenders and it’s easy to see both parties in a bad light when they act without good faith. Obviously, our financial system is designed so that those with capital have power over those without capital. And this is not a new thing. The writer of the Old Testament’s Book of Proverbs put it this way: “The rich ruleth over the poor, and the borrower is servant to the lender” (Pro 22:7). It’s an old story.
A person who borrowers responsibly what he or she can afford to pay back and who repays the debt as contractually agreed is usually seen a good light. The person is usually rewarded with an improved credit score and enhances his or her ability to borrow more in the future. In a perfect world, that’s how it works.
But our world is not perfect. One can have resources and great intentions when he borrows, but life is unpredictable. Resources can be taken, lost or used up. Life happens. Borrowers lose jobs, lose health … we all know how unpredictable life can be. Lenders know this, too. And, therefore, they charge interest rates that, in a perfect world, accurately reflect the risk and earn a fair profit for lending.
Lenders know that some loans will fall apart because life happens. Large lenders spread this risk. You’ve seen it happen recently with the blanket increases in credit card interest rates that happened before Federal protections kicked in. To people who have been responsible and have been able to repay their debts, these blankets increases seem unfair. And they are. But capitalism isn’t based on “fair”. Capitalism is based on greed. It thrives on it.
What’s a borrower to do when they feel they’ve been treated unfairly by a lender? Jump ship. Find another lender. And this is exactly what credit card companies have hoped to have happen with those borrowers who caused them losses. Borrowers and lenders are two sides of the same coin.
It only becomes problematic when it becomes personal. The story of the disabled Chicago woman mentioned in the New York Times article is a personal slant. I don’t know. It probably all comes down to personal ethics. And you can’t expect a corporation to have personal ethics. Corporations have corporate ethics and responsibilities to shareholders.
If you’re a borrower, get to know a local, community banker or become a member of a local credit union. Borrow from community banks and credit unions and act responsibly.
If “life happens” and you cannot make a payment, don’t hide from it. Call the local banker you know and explain the situation. If you’ve acted responsibly, then you will have done all you can.
Just as lenders have risks, borrowers do to. It seems like five or six banks fail every Friday because of poor lending practices. Borrowers fail, too, because of poor borrowing practices.
The coin of capitalism has two sides. Someone wins and someone loses. Greed makes it difficult for both parties to win. And as someone said, “there may be something better than capitalism … but no one’s found it.”