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We need a whole lot more Bernies out there.
h/t Sen. Sanders

I have to laugh at this transparent ploy: Let us keep our usurious interest rates, Senator, or your American Express card is gonna get it! Apparently the fine folks of the credit card industry seem to believe they have an inherent right to obscene profits. Uh, ixnay, fellas. Usury is not only a sin, it's bad economic practice. Legislators have a right to control your out-of-control industry because credit has become something akin to a necessary public utility - especially when people can't even get a job due to a poor credit rating.

Seems to me it's time these companies learned to trim their expectations to fit current reality. I wonder if credit card executives have been asked to take off one day a week to save their company a day's pay?

Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.

Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

[...] As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

From the White House blog:

This week the President recaps a busy week, from strides on fiscal discipline, to financial stability, to cracking down on tax havens and tax breaks for shifting jobs overseas. For his next big step, he calls for a credit card reform bill: "Americans know that they have a responsibility to live within their means and pay what they owe. But they also have a right to not get ripped off by the sudden rate hikes, unfair penalties, and hidden fees that have become all-too common in our credit card industry." Watch Your Weekly Address to hear what he plans to do about it.

Transcript below the fold.

Continue reading »

Some good news, but I have to wonder: Why not simply cap credit card rates? Bring back the usury laws!

WASHINGTON (Reuters) - President Barack Obama plans to crack down on deceptive credit-card industry practices that have saddled U.S. consumers with huge debts and soaring interest rates, U.S. officials said on Sunday.

Top White House economic adviser Lawrence Summers said Obama would be "very focused in the very near term on a whole set of issues having to do with credit card abuses."

"We need to do things to stop the marketing of credit in ways that addict people to it," Summers said in an interview on the NBC television talk show "Meet the Press."

Summers, director of the White House National Economic Council, said the administration is concerned about practices that result in consumers being "deceived into paying extraordinarily high rates that they wouldn't have paid if they knew they were getting themselves into."

Summers and other officials are scheduled to meet on Thursday at the White House with top executives of credit card companies.

The meeting comes as lawmakers in the Democratic-led Congress have vented anger that banks with big credit card operations charging high interest rates and fees are the same institutions getting government bailouts from U.S. taxpayers who use these credit cards.

The House of Representatives and Senate are considering a credit card "bill of rights" that would limit the ability of credit card companies to raise interest rates on existing balances and require greater disclosure of terms.

Home equity loans are, after all, a major part of homeowner debt. The Obama proposal would allow homeowners to wipe out that debt in bankruptcy court, allowing homeowners to keep their houses. And of course the credit card industry (those usurious scoundrels!) is screaming.

Gee, that reminds me. Maybe it would be a good time to repeal all those changes in the bankruptcy laws the credit card industry won in the Bush era, too:

A key provision in President Obama's $75 billion foreclosure prevention plan would allow bankruptcy judges to modify home mortgages — a measure supported by bankruptcy attorneys and consumer groups but opposed by lenders.

The American Bankers Association has argued that allowing bankruptcy judges to change the terms of mortgages will increase the risks of mortgage lending at a time the market is already struggling.

The industry isn't unanimous in its opposition. Last month, Sen. Dick Durbin, D-Ill., announced that an agreement had been reached with Citigroup on legislation for bankruptcy mortgage modification.

"If enacted, this legislation would represent an important step forward," Vikram Pandit, chief executive officer at Citigroup, said in a letter to Durbin and three other senators. "Given today's exceptional economic environment, we support its swift passage."

The mortgage restructuring plan, called a mortgage cram-down, would give Chapter 13 bankruptcy judges the power to change loans for a primary residence.

Judges can already modify mortgages for second homes and commercial buildings.

"That's the rule for investors who own two, three and four homes," Obama said Wednesday. "It should be the rule for ordinary homeowners, too, as an alternative to foreclosure."

The change in the law would empower judges to lower interest rates, extend the repayment period, and change the principal amount owed on the mortgage to what is determined as the home's fair market value.

The banking and credit card industry say the proposal is too broad, because it could apply to any borrower, including those who aren't having trouble paying their mortgages.

To protect themselves, lenders want to be allowed to veto any alteration in a home mortgage, says Michael Calhoun, president of the Center for Responsible Lending, a consumer advocacy group.

Don't you love that? "Center for Responsible Lending." Right! Seducing people who are already on the ropes with credit cards so you can charge usurious rates is "responsible lending". But I digress: As it turns out, the Center for Responsible Lending is a group that fights predatory lending. I apologize for the mistake; they sounded like industry advocates from that isolated quote. My bad.

Bankruptcy attorneys argue that such a veto isn't necessary because under the proposed change, the homeowner and the lender would be able to present their case.

Each side could have an appraiser, and the judge would hear the testimony of both sides, including information about the borrower's income and expenses, says Joe Lee, bankruptcy judge for the Eastern District of Kentucky.

Many homeowners have two mortgages because they have taken out a home-equity loan to pay off their credit card debt.

Under the plan, the bankruptcy filing could wipe out the home-equity loan, enabling the family to keep their home, Lee says.