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 individual and class action law suits against credit card companies, even if the credit card company violates the terms of the agreement.
Reminds one of the old Financial Golden Rule: “Those who have the gold, make the rules.”
Advanta Credit Cards Cannot Be Used After Next Saturday
Filed under: Credit Bubble News and Views, Credit Card Industry
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 in the business costs more money than it takes to stay in business? How many borrowers of the 79.85 percent who have not defaulted will default now that their credit card company offers no services? In this case, the article notes, “The company hopes customers will pay off their balances, but it is not clear what business Advanta will have after that.”
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 Defaults Reach Record Highs in April“
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 card troubles in store for major U.S. banks.”
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 been reportedly increased credit card interest rates and tacked on or increased fees at will. This is to be expected of an industry that faces little regulation and is given permission by the State of Delaware to do as it wishes with interest rates.
On the other hand, reports indicate banks are trying to be helpful to credit card holders who are strapped for cash in this economic downturn.
In fact, a coalition of banks is running TV, web and print ads inviting credit-card holders who struggle with their payments to visit HelpWithMyCredit.org. There’s even an 800 number: call 1-866-941-1030. The coalition includes Bank of America, Citigroup, MasterCard, Visa, Capital One and Discover. (Chase and American Express are not participating because they wish to work directly with card holders.)
So which is true? Are banks being helpful or are they gouging account holders?
Both are partly true in a “partly cloudy” sort of way.
“Banks roll out efforts to aid strapped credit-card holders” MarketWatch’s take on the current consumer banking situation. The article states, “credit-aid effort (by the banks) doesn’t provide consumers the whole story.” It’s a must-read article if you’re in a credit card jam.
In fact, the helpful part appears to be self-serving. Banks know they’ll lose more money from bankruptcies than from offering ways for card holders to work out a payment plan.
It reminds me again of the famous, TANSTAAFL, from Economics 101: There ain’t no such thing as a free lunch!
If you want a great economic mind’s take on this banking initiative, check out Mike “Mish” Shedlock’s article, “Beware of ‘HelpWithMyCredit’”
What has stirred this sudden desire of banks to help card holders? I imagine it’s the current activity in both houses of Congress to increase regulation of a banking industry run amok with fees and outrageous interest rates.
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. House and Senate to reform the practices of credit card companies.
If you want to write your own letter, the bills to encourage lawmakers to support are S.392, S. 235, S. 414 and HR 627.
CreditCardReform.org is a site of Consumers Union, the Nonprofit Publisher of Consumer Reports.
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. (That isn’t to imply that the credit card companies are acting as terrorists … though some card holders may feel like they’ve been terrorized by credit card contracts that allow for self-modification.)
The credit card companies created and enforce the Payment Card Industry (PCI) security standards that apparently failed to prevent cybercriminals from accessing the information of millions of consumer’s credit card accounts in the Hannaford and Heartland cyber attacks.
According to “Visa, MasterCard In Security Hot Seat” on Forbes.com, Rep. Bennie Thompson, chairman of the Homeland Security Committee, suggested the credit card company developed the PCI standards, not to prevent cyberattacks, but to shift the blame onto retailers.
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 AmEx card you’re not using and don’t mind trading it in for $300.00, you might call the 800 number on the back and see if they’ll buy your account.
Credit Bubble News and Views
Changing credit card terms squeeze consumers
Losses Of Canadian Credit Card Firms Forecast To Hit $800 Million
Target credit card delinquencies up 4 percent in December
US credit card delinquencies at record highs -Fitch
FRB’s Bank Card and Mortgage Delinquencies Map
Filed under: Banking Industry, Credit Card Industry, Debt Statistics
This is a cool tool!
The Federal Reserve Bank of New York offers dynamic maps of bank card and mortgage delinquencies in the United States. It’s one of the coolest tools I’ve seen in a while.
The Credit Condition Map is actually fun to play with. The irony is that while you play with it, you’ll see some sad stats. The map offers two types of delinquency data: bank card delinquency rate of 60 or more days and mortgage delinquency rates of 90 or more days.
