Credit Card Companies: The Next Big Meltdown?
By Number Six
Tuesday, December 04, 2007 at 09:10 PM
And it's wah, wah, wah as our government starts to turn the tables on the credit card issuers, what with their quantum math, statements that read like Tolstoy, and well, unfair practices. And the cool part? They're not happy, of course. Didn't they, using their lobby dollars, revise the bankruptcy laws to their liking? Yes. So, what are they unhappy about now?
Apparently, our senators have these goons on the senatorial carpet, twice this year so far, according to CNN Money:For the second time this year, irate lawmakers on Tuesday took credit card industry executives to task over what they claim are "unfair" practices, such as increasing interest rates on debt even when customers make payments on time or when their credit scores fluctuate. "If (these) credit card dangers lurk, it could damage the financial future of Americans," Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, said during a hearing to discuss industry practices.Unfair practices? Gee, like those nice notes you get with your bill that 7 out of 10 lawyers cannot decipher? Using some arcane mathematic up their with calculating spacetime denisty at warp factor four?
In May, Senator Levin introduced the Stop Unfair Practices in Credit Cards Act. If passed, the law would stop credit card issuers from charging interest rates on debt that is paid on time and require that interest rate hikes apply only to future credit card debt and not debt already incurred. However, credit card companies say such a law would have dire consequences on all consumers by making credit more expensive and less easily available.MmmHmm. Like so many of us being in debt management or bankruptcy and they STILL send you cute little invites? "INCREDIBLY LOW RATES!". Maybe we need to start thinking of these morons the same as one does those cute things from Publisher's Clearinghouse? Y'know....junk mail? It's all too simple, see. The credit card goons have had it made-in-the-shade for some time now. And now? Gee, you mean...gasp....regulations?? Imposing limits on the finance rates???? Say it ain't so, Batman! And yes, they whine, and they whine, oh, do they whine...
Capital One's Schneider said his company had instituted changes to its credit card policy, including warning cardholders before raising rates on their balances and allowing cardmembers to earn back their old rates. "The onus is on us to improve. We applaud measures to avoid aggressive debt repricing, but imposing restrictions on all repricing could reduce credit availability and make debt much more expensive for all consumers," Schneider said.Oh, then, shed a tear for these Shylocks and, hopefully, an end to their brand of usury. Like the mortgage houses that were giving away all those cheap, sub-prime loans, the wolf is staring down from the mountain, and he ain't thinking sex, kids. He may be thinking the "D" word. Yeppers.
Comments
Hi, I am upset because there are civil solutions to the Credit Card Mess.
I have created two websites about how to easily overhaul the credit card industry. The ideas I present are logical and could easily be implemented.
http://www.credit-card-cap.com and
The http://www.credit-card-cap.com
link did not take in the previous comment, hopefully this one does.
"unfair" practices
Good article, Six!
Sommat Spud just heard today. Ya know how credit card companies have jumped on the whole Xmas gift card bandwagon? Apparently, there are hidden fees to those things that make it so that by the time you go to spend it it's not worth the value of the card. A little thing perhaps but indicative of the whole stinking ball of wax, no?
Savings rates in Canada have gone down to just under 2% in the last ten years, down from almost 11%. In the US there is a negative savings rate. Too easy credit and an incresingly unfair economy are principle factors by Spud's lights.
Now the legal sharks are gathering fer a mass blood letting in the sub prime debacle looking forward to their 33% of the cut.
Meanwhile Dumbya (Cheney's Pet Chimp) in running the ship of State into the Red-ink Sea over in Iraq and all on a Chi-Com credit card.
Speaking of incomprehensible statements. Have you ever tried reading the small print in a Cantonese Credit Card bill?
Holly Jolly it aint out there.
Be Well.
Worse, comrade, this is just what we hear aloud. Keep in mind, these are the same animals that created CDO's, hedge funds and all the other crapola that have us where we are right now: Orbiting the Event Horizon of yet another financial Black Hole.
What kills me is that the Fed is going to bail many of them out, the cover story is to help out poor Mr and Ms Mortgage Holder and the cheap note they were handed with Vulcan differential calc in the small print. Sound familiar? A few of my colleagues recently snapped awake when their monthly payments just went UP...on their homes, not to mention, oh, yes, ANY CDO.
Ultimately, who is going to make out like bandits? Why, golly gosh, the very asswipes who invented all that bad paper to begin with. Who will lose? Outfits like Citi, who bought a carload of bad paper from other mortgage sharks. Some financial pages suggest that many other note holders are not sharing the real damage with the stockholders.
Now, the informed know: Money is synthesized out of debt. It is called Fractional Reserve Banking, a practice now going into the 500-plus year era. A credit card is issued, that is money. A car purchased, that is new money. On and on and on.
But, money-as-debt has an Achille's tendon showing, a violation of Six' Second Law: Everything comes with limits.. You cannot continue to poop debt, debt and more debt without figuring out a way to generate sufficient profit to pay it back. So, add an economy retrofitted by feudalistic goons (The Fake Pilot and company), the mass contracts, and now, we're sailing haplessly into a financial Kerr Black Hole.
And like such, the closer we get to the gravitic draw, the bitch will be how to pull out. My money says 2nd Great Depression dead ahead, skipper.
After watching some of the testimony on CSPAN, I decided that the dream-like financial Armageddon at the end of the film "Fight CLub" was not very radical at all, inasmuch as these financial institutions pose a greater threat to the well-being of citizens than Iran ever did.
A fact mostly lost to the fog of deliberate BS and obfuscation is that a Supreme Court decision (Marquette?) in the 1970s unleashed these dollar sharks. That case ruled that the usury laws of the state where the cardholder resided were irrelevant; only the laws of the state where the issuer resided governed the rates that could be charged on credit cards. That decision came the day before all the credit card cmpanies started hunting for real estate in states with weak or no usury laws (i.e., South Dakota if you ever wondered why that's the site of so many credit card issuers).
If you're looking for some free comedic entertainment, check out the testimony of the CEO of Barclays Bank Delaware at the January hearing before the Senate Banking Committee (available via link from this Committee web page).
By odd coincidence, the guy's name is actually Richard Vague. And among the other funny attempts to make credit card issuers seem like fuzzy warm bunnies seeking ony to comfort us all, he actually claims that card issuers have nothing to gain by issuing cards to people who can't afford to make their payments.
Which is even funnier if you read the testimony of Harvard Law Professor Elizabeth Warren (link available from the same web page linked above) submitted at the same hearing:
But the most valuable customers are not those who pay in full each month. Instead, the customers who generate the real profits for the credit card companies are those who stumble and slide, who make payments and miss payments, and who end up paying default rates of interest and penalty fees. To maximize profits from this group, the credit card issuers have a second tier to their business model: they load their initial card agreements with tricks and traps so that they can maximize income from interest rates and fees.
Somebody's lying, huh?
Very true. Borrowers like Ben Stein, for example, I forget where this is mentioned, are considered "bad", as he pays the balance in full every month, thus eliminating their sacred profits.
I would then mention that those who cannot comprehend this need to go to You Tube:
Merry freaking xmas, all, and to all, a good trip to court.