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.
Wait, wait, I can hardly read these sad statements through my tears - of laughter! This, from the people who brought us this entire house of cards that just collapsed? The people whose lobbyists have stacked the financial deck against people like us with late fees, pre-payment penalties and unregulated interest rates are actually telling us IT ISN'T FAIR?
WASHINGTON -- The banking industry is aggressively lobbying the Treasury Department to make it less costly for financial institutions to get out of the Troubled Asset Relief Program.
The move could prove controversial for the banking industry, which is busy deflecting criticism about higher fees it is charging consumers for credit cards and other products and services.
At issue are "warrants" the government received when it bought preferred stock in roughly 500 banks over the past six months as part of TARP. The warrants allow the government to buy common stock in the banks at a later date so taxpayers can receive more of a return on their investment when the banking industry recovers.
Many banks want to return their TARP money and, as part of that effort, want to expunge the warrants. To do that, banks must either buy them back from the government or allow the Treasury to sell them to private investors.
Today, most of the warrants are essentially worthless, because their exercise price is higher than where most banks' stocks are trading. But the government believes the warrants still have value, since they give the Treasury the right to buy common stock at a set price for 10 years.
Bankers say it is unfair to charge what amounts to a "prepayment penalty," which makes it additionally onerous to escape TARP. Bank representatives say the cost of buying back the warrants could be equivalent to paying 60% annual interest on short-term loans. That, they argue, would exacerbate banks' existing problems.
After years of brutal and what should be criminal business practices by America's credit card industry, it appears that some relief may be in sight.
WASHINGTON – Federal regulators on Thursday adopted sweeping new rules for the credit card industry that will shield consumers from increases in interest rates on existing account balances among other changes.
The new rules aren't set to take effect until 2010, but they're welcome nevertheless.
The new rules prohibit:
_Placing unfair time constraints on payments. A payment could not be deemed late unless the borrower is given a reasonable period of time, such as 21 days, to pay.
_Placing too-high fees for exceeding the credit limit solely because of a hold placed on the account.
_Unfairly computing balances in a computing tactic known as double-cycle billing.
_Unfairly adding security deposits and fees for issuing credit or making it available.
_Making deceptive offers of credit.
I've had to deal with several of the above issues in the past and know first hand how quickly credit card fees and increased interest rates can bloat your balance and spiral out of control. Luckily, I was able to stop the bleeding, but thousands of people have not been able to do so and have ended up in financial and personal ruin. These regulations are long overdue.
