April 30, 2009
Credit Card Crackdown: 8 Key Issues
Monday, April 27, 2009
The momentum for tighter regulation of credit card issuers continues to grow, with President Obama promising to push for stronger legal protections for consumers.
In a meeting with the heads of 14 major banks last week, President Obama said he'd support legislation that bans unfair rate increases and fees, pushes for clear and transparent contract terms and card statements, and increases industry accountability.
All of this comes at a time when two main pieces of legislation are working their way through Congress. One of which, a proposed Cardholders' Bill of Rights from Rep. Carolyn Mahoney, D.-NY, has already cleared the House Financial Services Committee by a decisive 48 to 19 vote. The bill would strengthen consumer protections offered by Federal Reserve rules and possibly speed up the date they go into effect (which, for now, is July 1, 2010). Also, Sen. Chris Dodd (D., Conn.), chairman of the Banking, Housing and Urban Affairs committee, has proposed a bill dubbed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that would offer even more consumer protections, including banning practices such as "any time, any reason" interest rate increases. (Last week, Sen. Dodd also called for an emergency freeze on credit card rates to be imposed by the Fed.)
What should legislators and regulators be focusing on right now? SmartMoney has been reporting card issuers' practices throughout the financial crisis. Here are eight of the most controversial issues for consumers.
1. Cutting card holders' credit limits -- even below their balance
The issue: As SmartMoney has reported, credit-card companies have been slashing borrowers' credit limits in an effort to contain their rising default rates, in some cases to below the borrowers' outstanding balances. The targets? Their best customers, says Dennis Moroney, research director and senior analyst for Tower Group, a research and advisory services firm focused exclusively on the financial-services industry. "They're reducing lines on the [people with] better scores so that they can minimize the impact on the FICO score deterioration," he says. (The higher one's credit score, the more likely it is they are using a small portion of their available credit, which means their score will suffer less if the limit on one or more of their cards is lowered. Read more on this below.)
Impact on cardholders: Reducing one's limit close to or below the outstanding balance may not only trigger an over-limit fee, it can also hurts the cardholder's credit score. That's because the credit utilization ratio, or the amount of credit used relative to the available limit, determines 30% of your credit score.
The fix: Under the new Fed rules, issuers have to give 45 days' notice if the reduction brings the cardholder close to their outstanding balance, says Linda Sherry, spokeswoman for advocacy group Consumer Action. But these rules don't take effect until July 1, 2010. Maloney's bill would let consumers set "hard" credit limits that cannot be exceeded in the first place.
2. Raising interest rates, even for the best customers
The issue: The Fed may have brought short-term interest rates close to 0%, but credit-card issuers have been lifting interest rates across the board. "At a time when banks are receiving federal aid and can borrow from the Federal Reserve at almost [no cost], it just does not make sense that interest rates should be that high," says Nick Bourke, manager of the Safe Credit Cards Project at the Pew Charitable Trusts, a nonprofit group. A recent survey by the organization found that 93% of credit cards offered by the largest 12 issuers have contract terms that allow them to hike rates at any time, for any reason.
Impact on cardholders: Borrowers will take longer to pay off debts -- and will pay more interest as they do so. To crunch the numbers yourself, use SmartMoney's "How Much Interest Will You Pay?" worksheet.
The fix: The Fed rules prohibit banks from increasing rates in the first year after opening a credit card. Afterwards, a 45-day notice is required. Dodd's Credit CARD Act would ban "any time, any reason" rate increases.
3. Penalty APRs as high as 32%
The issue: Even the most responsible credit card user could get hit with a 30% or higher penalty rate if they pay a day late or exceed their limit by $1. According to the Pew Charitable Trusts survey, 87% of cards allowed such automatic penalty increases, while the median penalty rate was 27.99%.
Impact on cardholders: Consumers end up paying high interest on past purchases.
The fix: The Fed prohibits such rate increases, except when a payment is more than 30 days late. Under Dodd's CARD Act any rate increases would only apply to subsequent purchases.
4. Banks make consumers pay down low-rate balances before high-rate debt
The issue: Issuers apply consumer payments to low-rate balances while their high-rate balances keep growing.
Impact on cardholders: Anyone who takes advantage of a low-rate promotion, such as a 0% APR balance transfer, will pay more than 0% if they use the same card for purchases at a regular rate. "Any payment you send in will go to the 0% balance while your purchases keep running up high interest charges," says Bourke.
The fix: Fed rules require payments exceeding the minimum to be allocated to highest-rate balance, or to all balances on a pro-rated basis. Dodd's CARD Act would require allocation of the whole payment to the highest rate balance.
5. Shutting down people's accounts
The issue: In an effort to limit their risk exposure, banks have been closing unused credit cards. Consumers who dust off such a card in hopes of keeping it may run into a surprise. "If someone is inactive for a long period of time and out of the blue the card comes out of the kitchen drawer and they start using it, chances are things have changed, and not in a good way," says Tower Group's Moroney.
Impact on cardholders: Closing an unused credit card can lower your score, since it lowers your available credit and increases your credit utilization ratio.
The fix: So far, there is little to address this in the Fed rules and proposed bills.
6. Cutting back rewards
The issue: Scaling down on rewards programs, some issuers have been quietly slipping in expiration dates for rewards points, cutting back promotional programs and asking cardholders to spend more points or miles for free flights.
Impact on consumers: It may do no monetary harm, but is unfair to consumers who may favor one card over another because of its rewards program, says Sherry.
The fix: The Fed doesn't address rewards programs. Dodd's CARD Act prohibits any changes to account terms until the card's expiration date, which according to Sherry may include changes to the rewards program affiliated with the card.
7. Shrinking grace periods
The issue: Grace periods -- the time between the statement closing date and the date by which cardholders must pay to avoid interest charges -- have been shrinking, from an average 25 days in 1995 to 22.5 days in 2008, according to Consumer Action's annual credit card survey.
Impact on cardholders: By the time they receive their statement, cardholders may have just days to mail a payment or risk being hit with late fees and penalty rates.
The fix: The Fed rules require that banks send statements at least 21 days before the payment due date. Legally, the end of a grace period doesn't have to coincide with the payment due date, though it usually does, says Chi Chi Wu, staff attorney with the National Consumer Law Center.
8. Getting students hooked on debt
The issue: On college campuses, card issuers are practically shoving credit cards in students' pockets, making credit seem easy for those already taking on the burden of tuition and student loans.
Impact on cardholders: Debt levels have increased 44% among college seniors since 2004, who now owe an average $4,100 on credit cards, according to a recent survey by education loan provider Sallie Mae.
The fix: Dodd's CARD Act prohibits companies from issuing cards to people under age of 21 unless they complete a certified financial literacy course. Maloney's Bill of Rights prohibits issuers from knowingly issuing cards to individuals under 18 who are not emancipated minors.
Copyrighted, SmartMoney.com. All Rights Reserved.
June 21, 2006
Credit Card Late Fees Average $35, Over-the-Limit Fees Top $32
“It takes just one false move to get hit,” says Justin McHenry, Research Director for IndexCreditCards.com. “To put these numbers in perspective, the $35 average late fee is roughly equivalent to the monthly finance charge you’d pay if you carried a $2,100 balance at 14% interest — in other words, fairly steep.
“Over-the-limit fees aren’t quite as high, but to many cardholders, they’re even more galling, the logic being that a card should simply be rejected if it hits the limit. Instead, it may or may not be rejected, but the fee will always be applied.”
To read the full article click here.
Rudeness, Verbal Abuse Top Complaint List
That echoes the types of complaints received by the Federal Trade Commission (FTC), where collection agencies are the most complained about business group in the country.
The FTC has stated that a collector’s use of “religious slurs, profanity, obscenity, calling the consumer a liar or a deadbeat, and the use of racial or sexual epithets” is abusive.
Whether a collector intends to abuse a consumer by using such language is irrelevant. Regardless of his or her intention, if the consequence of using such language while trying to collect a debt results in abuse to the consumer, a violation occurs.
Source: Credit and Collections World
June 16, 2006
FTC Wins Settlement in Debt Management Plan Case
To read more of this article click here.
June 13, 2006
Guaranteed Debt Settlement
Being in trouble financially is hard enough, it can be even more strenous seaching for solutions to get out of the debt. And not one...not one...debt colsolidation or debt settlement, or even a credit repair company can offer a 100% guarantee that their service/system/method/plan will and can work...everytime.
BUT I CAN!
I'll tell you how in a moment...
My Brand new course.
Right now I putting the final touches on my brand new course that will teach you how to get out of debt and stay out of debt...and even how to transform your debt into wealth.
The course is going to be extensive...HUGE.
There are going to be several manuals to this plus many freebies. It will answer all your questions and then some. Here are just some of the manuals that I am planning (this is subject to change):
- The 5 most common debt elimination options.
- How to compare your debt settlement companies.
- How to choose the correct and most reliable debt settlement companies for you.
- How to prevent and stop creditor harassment.
- How to calculate a debt settlement offer.
- All of the forms and documents that you'll need for debt elimination.
- How to sue your creditors for thousands of dollars and have them pay your debt.
- Which laws are there to protect you and how to use them.
- How to settle your debts yourself.
- Plus much, much more.
There are going to be some freebies as well, such as:
- 2 secret membership-only websites that will answer any questions you may have.
- Access to my secret list of attorneys and debt settlement speacialists.
- Personal lifetime coaching.
- And much, much more.
I expect that this material should be available in the next month or two. My goal is to have it one hundred percent ready by the end of August.
I have not yet worked out the ordering system yet, but if you would like to purchase this before I make it public you may. When I release this huge course it will not be cheap. I am planning on selling it for at least $697. But if you order between now and when it is released I am willing to discount it tremendously. You can get a special pre-release price.
Plus you you will be the first to get it, before everyone else.
I'll give you details on how to order in a minute....
But first let me tell you of my guarantee.
My unprecedented guarantee.
Of course, there is the standard if-you-don't-like-it-send-back-and-i'll-refund-your-money guarantee. But I not going to give the the standard time...
No, I going to give you a pre-release guarantee of SIX months...180 days of kick the tires and test drive guarantee. If you are not happy, for whatever the circumstances, then just send it back. I'll refund all your money...including shipping and handling. No fuss, no muss.
But...there is more.
If you purchase the materials, and you use my materials, then, if you do not get out of debt and achieve your goals, or if you find yourself in a worst shape finacially than you were before you used my information then I will garuantee that I pay off all of your unsecured debt, any attorney fees, plus and any credit repair fees that you may have.
I will pay off your entire debt...
Plus any attorney and/or credit repair fees if you use my information and it does not work. This could be 10s of thousands of dollars for you and there is no risk. And there is no time limit.
Either way you WILL get out of debt. That is my mission.
But there is a catch...
I am not a fool. I know that there will be some unethical moron out there that will try to take advantage of this. So here is the catch.
After you purchase my materials, and BEFORE you put any of to use, you must have a one-time consultation with me or my staff. We will go over your particular situation and recommend a course of action for you. You must follow that course of action. If you deviate or do something else, then the guarantee is null and void.
And we will be checking up on you from time to time.
Also, any failure that you encounter on your road to debt freedom must because you used my information and it didn't work for you...It can not be because some external influence.
For example, we decided on a course of action in the form of a payment plan. This requires that you have a job, or some form of income, but if you get fired or layed-off for one reason or another so can not do the payment plan, then I can not and will not guarantee that.
That doesn't mean we won't give up on you, but I can not guarantee that you'll keep your job. Get the idea?
How to get your guarantee.
For you to be eligible for my guarantee you must first purchase the entire course. Right now I am offering it at a substantial pre-release disount of only $147. This price will go up to at least $697 after I fully release it. There will be no shipping and handling fees for the time being.
As I don't have yet have ordering system set up to take orders, you must order it the old-fashioned way. You'll have to send me a check or money order to:
515 Liberty St.
Grand Ledge, MI 48837
Please allow for 2 to 3 weeks for delivery as the course is in pre-release form and must be put together individually. I will send out the course materials immediately as possible priority mail. Also, if you send a check, it may take a bit longer for the checks to clear.
If you have any questions you may email me at email@example.com, or call me at (953)323-0704.
Bankruptcy Law Causes Confusion, Faces Court Challenges
Case law is piling up across the country as attorneys challenge the law and judges attempt to interpret it—one sign of the complexity is the number of judges who are citing Webster’s Dictionary in their opinions, panelists said yesterday at the Consumer Bankers Association’s collections conference in New Orleans.
to read more of this article...click here.
Don't Hand Your House to a Thief
Scammers know that people in trouble make easy victims. They're swooping in and offering to "help" beleaguered borrowers -- and ending up with their house keys. Victims sometimes spend years fighting to get their homes back and some never succeed.
Meet Carol and Anthony
Carol and Anthony Calvagno of Deer Park, N.Y., on Long Island are in a hell like this right now.
In 2003, the Calvagnos were in trouble. Anthony Calvagno had health troubles and had lost his job. In order to pay their bills, the couple took out a home equity loan on the Cape Cod-style house that had been in the family for three generations. (At the time, the couple had a $125,000 mortgage on a house worth about $290,000 -- a high-equity target.) But even the home equity loan wasn't enough.
That's when Mitchell Sims swooped in, offering to help, says the couple's attorney, Arshad Majid.
Sims told the couple that he would arrange a bailout, and that they should stop making mortgage payments while he worked out the details. When foreclosure notices started showing up, he told the couple to ignore them, saying he'd take care of it.
Nearly eight weeks after Sims had entered their lives, and the day before their foreclosure was scheduled, Sims told the Calvagnos that the arrangement hadn't worked. Instead, he said they'd have to file for bankruptcy and enter a "special program" in which they'd sign over their house's title to one of Sims' employees and another of his business associates, who also happened to be Sims' brother. They'd be allowed to live in their home as tenants, Sims told them, and their rent payments would go toward buying their home back from him, says Majid. "They were put in the position where they didn't have any choice" but to sell their deed, Majid says.
But Sims never made any mortgage payments. He kept the Calvagnos' rent money and about $50,000 of the couple's money that remained after their creditors were paid.
The Calvagnos had fallen victim to a scam known as equity stripping -- just one of the many flavors of mortgage fraud. Their house was sold. Sims and another person have been put in prison for their crimes. The couple has successfully fought eviction -- so far -- but not everyone is so lucky.
Here's a quick look at three of the main ways scammers can steal the roof over your head:
Scam No. 1: The bailout, aka 'equity stripping'
Scam No. 2: Phantom help
Scam No. 3: The bait-and-switch
So if you are looking to use your home for extra cash to help you through the hard times, and/or maybe just to pay off your bills, then there is an ethical, effective debt elimination and wealth building program that works wonders, and you'll never have to turn your greatest asset -- your home -- over to anyone else...EVER!
Just call Bill Pelletier at (818)237-6834 or email him at firstname.lastname@example.org. Over visit www.prosperityservices.org for more information.
To read this full article and get all of the Do's and Don'ts then click here.
June 5, 2006
'Buyers' Give Old Debts New Life Through Lawsuits
Used to be, banks didn’t waste much time chasing credit card deadbeats.
Their staffs would hound debtors by phone for six or seven months, then invite outside collection agencies to take a crack. Few debtors were sued. Those who hunkered down long enough could escape without paying.
In the brave new world of debt...unpaid bills never die.
Today speculators are buying thousands of these aging accounts at a time and extracting payments the original lenders could not.
Some debt buyers are hauling consumers into court and getting permission to garnish their wages, empty their bank accounts or even seize their cars. Others are convincing debtors to pay down old bills that are no longer legally enforceable.
The amount of written-off credit card debt sold to debt buyers in 2004 — $63-billion worth, according to the Nilson Report — was 100 times the amount sold in 1993. This year, a Las Vegas convention hosted by the Debt Buyers’ Association trade group drew 1,400 debt buyers, sellers, brokers, resellers and lawyers.
Other credit issuers are selling their unpaid bills, too, including such retailers as Radio Shack, Wal-Mart and Bally Total Fitness, and hospitals, auto lenders and utilities.
Asset Acceptance, one of five publicly traded debt buyers, operates a 52,000-square-foot collections center in Riverview. In 2000, the Michigan company sued 25 debtors. Last year, it sued 3,855 debtors.
Over the same period, the types of lawsuits debt buyers usually file — small-claims breach of contract, monies due or accounts suits — rose 56 percent .
With the new, stricter bankruptcy laws and the other statewide legislation you will see the trend increase, with more lawsuits coming every year...unless other laws are created to stop the trend and give power back to the consumers.
This doesn't have to happen to you. For more information go to www.reliable-debt-settlement-options.com and learn how you can stop creditors cold, the different debt settlement options, and the laws you need to know to protect yourself, etc.
To read the rest of this article then click here.
May 28, 2006
GOOD NEWS: The Credit-Card Industry Has A Problem
Although Americans are deeper in debt than ever, they are paying off bigger portions of their monthly credit-card bills.
For card issuers, which profit by collecting interest on unpaid balances, that's bad news. In the past, when interest rates crept up, as they are doing now, fewer cardholders could afford to pay down balances.
To make matters worse for card issuers, federal bank regulators issued new guidelines in 2003 meant to ensure that cardholders pay off more each month than just the fees and interest charges that have accumulated. To comply with the rules, many banks have raised minimum-payment requirements, bumping up the payment rate further.
Card issuers are trying to replace...revenue by increasing late-payment fees and raising interest rates for customers unable to pay their bills in full.
In an effort to build customer loyalty and increase spending, issuers have launched a slew of new cards and have introduced new checkout-counter technologies to encourage more card use. They have spent billions of dollars to grow through acquisitions, buying rival card issuers and specialized credit-card portfolios from retailers.
Credit-card companies make most of their money by charging interest to customers who don't pay off their balances each month. Such customers are known as "revolvers." Card issuers, who have raised interest rates in tandem with Federal Reserve increases, now charge an average interest rate of 17.9 percent on unpaid balances, according to the Nilson Report, which tracks the card industry.
to read the full article...click here.
May 24, 2006
City to hire ex-cons as collection agents
If you have an overdue Chicago parking ticket, water bill or police fine, the next call you get could be from an ex-con telling you to pay up.
Ex-offenders will not be handling cash or credit card information. They will merely be placing phone calls to scofflaws under rigid guidelines established by the Fair Debt Collections Act. If the person on the other end of the phone decides to pay up, the call will be transferred to a payment agent, she said.
"They will not have any access to credit card information or any detailed information on a customer," she said. "Various law firms and collection agencies are doing this now. This will save the city money. Collection costs will be lower. "
To read this full disgusting story...click here.
Consumers Making More Late Payments
Consumers are having more problems managing their debt, according to a study from Experian Consumer Direct. Late payments increased 19.2 percent during the past two years, Experian discovered.
Bankruptcy Law Will Have Little Long-term Impact on Filings
The sweeping bankruptcy reform legislation will have little long-term impact on filing levels or consumer debt levels, predicts industry consultant Auriemma Consulting Group. While filings have dropped significantly since the record high levels of 2005, when consumers rushed to file before the new law took effect, the filings will...rise again and return to pre-2005 numbers.
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