Who Hijacked Our Country

Thursday, April 30, 2009

Reining In Credit Card Abuses

Finally. It isn’t a done deal yet, but the House has passed a bill to protect consumers against being suckerpunched by their credit card carriers. The House vote was 357-70. The bill is expected to be passed by the Senate and signed by Obama.

Sudden and/or retroactive interest rate hikes, double-cycle billing, issuing credit cards to anyone under 18 — say goodbye. This law won’t take effect until next year, except for the provision requiring 45 days notice before increasing interest rates. That will be effective in 90 days.

The bill has bipartisan support, but some Republicans trotted out their tired cliché that this bill would take away choices and credit opportunities for consumers. [yawn]

I agree with the other main conservative argument against laws like this: that it’s up to everybody to read something before they sign it. No argument there. But that doesn’t mean these underhanded fees and penalties hidden in the fine print — known as “Gotcha Capitalism” — should be legal.

It’s up to everybody to defend themselves against being attacked on the street, but that doesn’t mean robbery and assault should be legal.

Now, about that conservative mantra of “Read the fine print, Stupid!” — check out this other story and see how they react. The Washington legislature has passed a law — it hasn’t been signed by the governor yet — that’s designed to keep state parks open.

When Washington motorists pay their annual vehicle license fee, they have the option (“Opting In”) of paying an extra $5, which goes toward maintaining the state’s parks. This new law changes “Opt In” to “Opt Out.” Until now, motorists would pay this extra $5 only if they put a checkmark in the Yes box. Now, they’ll be paying that extra $5 automatically UNLESS they check the No box.

Lawmakers are expecting this “adjustment” to raise an extra $20 million to keep state parks off the chopping block. Personally I don’t think it’ll raise anywhere near that amount, just because the public is getting more skeptical and more wary about everything.

But for some odd reason, those same “Why didn’t you read the contract first, you Idiot?!?!?!?” Republicans are just appalled — sick with worry — that a few harried vehicle owners might be unwittingly donating $5 towards keeping state parks open.

Go figure.

cross-posted at Bring It On!

Labels: , , , , ,


Blogger People in the Sun said...

I think some people just don't have the head for that. If you told me the fine print included a way to get a million dollars I'd still throw it in the trash. I wouldn't know it if the banks doubled my APR tomorrow and charged me Raising Fees to do it.

So I'm glad at least the government is on the side of people like me.

April 30, 2009 at 3:08 PM  
Anonymous Bee said...

I read the Capital One fine print years ago when I got the "fixed rate" card. It was fixed rate, 9.99%, and stayed that way for 10 years. This year, they gave me 2 nasty choices:
1. Go with their plan to raise my rate to 19.99% variable, or;
2. Let them close my card, and take the hit on my credit score.

That's not exactly 2 choices, that's really 1 choice. The repubes can take their "consumer choice" and stick it where the sun don't shine - this bill is long overdue.

April 30, 2009 at 6:01 PM  
Blogger Lew Scannon said...

Geez! How do the Dems expect a guy to be able to buy a $35,000 antique Venitian bidet when they pass crazy laws like this?

April 30, 2009 at 6:15 PM  
Blogger Tom Harper said...

PITS: I hate reading long legal forms in a size .001 font.

Bee: The one time I got snagged by the fine print was with our cell phone carrier. Neither of us knew there was an early termination fee. We canceled our service after 2 months and had no intention of paying the $300 penalty. We just kept ignoring all their threatening letters and they finally gave up.

Lew: Damn right. These cumbersome leftist regulations are strangling the economy and punishing successful people.

April 30, 2009 at 11:19 PM  
Blogger Demeur said...

I have an English degree and I have a hard time understanding the legaleze.
I always vote with my feet.They did that with one card I had so I dumped them and got a new card elsewhere.
Easy way to spot a bad deal. If it comes from Delaware shred it.

As for $5 for the parks, I say if they can save the parks for $5 I'm for it. You can't even see a movie for that. And I'm sure the opt out isn't in micro print.

May 1, 2009 at 12:04 AM  
Blogger Tom Harper said...

Demeur: I think there's one other state besides Delaware that's also a headquarters for sleazy corporations. I'm pretty sure it's either North or South Dakota.

Their outcry over that $5 for parks reminds me of last summer's gas prices. $5 a gallon, and people just shrug and say "oh well, free enterprise." But let the gas tax go up a few cents and they start screaming about high taxes and government tyranny.

May 1, 2009 at 1:33 AM  
Blogger Randal Graves said...

You can have my teabag when you pry it out of my cold dead hands.

I'm glad these new laws are coming. Now I can save the six figures I waste on a fancy lawyer to read all my legalese for me. What, none of you have one? That's socialism for you.

May 1, 2009 at 9:25 AM  
Blogger Tom Harper said...

Randal: As I was saying to my hedge fund manager...

May 1, 2009 at 12:11 PM  
Blogger Snave said...

Right on, Randal... from my cold, dead hands!!!

Seriously, I like to think globally but I have to act locally when it comes to credit cards.

I won't divulge how ridiculously high our family's credit card debt is. It's BAD. And we got ourselves into the mess.

But now, as long as Bank of America doesn't pull the rug out from under us at the last moment, we have been approved for a home refinance that will allow us to not only pay off our massive credit card debt in the next 4-6 weeks, but to also own our house in 15 years instead of 17... while having an extra $1000+ in our pockets each month. If the refi is indeed happening, we will see enough money to pay off our MasterCard and Discover cards by late May or early June.

So what will we do with the extra money we will have each month? Sorry economy, but we won't be spending it! At least not for a while. For quite some time we will be putting lots of the extra bucks away into a savings to use as an emergency fund. We basically do not have one of those at the moment, so we need to put money into such a fund for at least a year or two.

The credit cards? The Discover card goes into the dumper as soon as it's paid off. It has an interest rate that just went up to 18.99 percent. That is our reward for making payments on time for the last 15 years, I guess. I can't describe how excited I am about paying that one off and cutting the card into pieces.

We will keep the MasterCard and use it sparingly, only when we know we will be able to pay it off immediately. It will be good for trips, and for an occasional emergency.

At the House of Snave, if things go like B of A says they will, we are getting our house in order. I hope other households around America can find similar good fortune.

And as for cracking down on the credit card companies and their practices, I'm all for it. People need to be mindful of what they are getting into when they use their cards (we weren't but it looks like we are lucky enough to get ourselves off the hook), but those who issue the cards and run the card services need to use practices designed to be helpful, not harmful, to consumers.

Bravo to the administration for taking this on. And while they are at it, maybe they should also be running ads and promoting programs which help consumers to learn fiscal responsibility...

Of course the far right yellers would have a field day with that one. "Look at this! They tell us all to be fiscally responsible and then they run up trillions of dollars in debt!"

Funny thing is, many of those joining in with the yelling will be ones have run up debt by their own faults, and who'll benefit from what the administration will achieve in regard to credit cards...

May 1, 2009 at 1:52 PM  
Anonymous Bee said...

Snave: Good for you!!! I hope that refi works out for you, you'll be in such a more secure position. Life is really, really a lot better when you get out from under that debt. Me and the hubby where there, now we're not, and I can't stomach the idea of going back into credit card debt - it really worries you to death.

May 1, 2009 at 5:19 PM  
Blogger Tom Harper said...

Snave: Sounds like you've got a good plan worked out.

Discover really sucks. We used to have that card but we dumped it a long time ago. I don't remember what their rates were; this was before credit lenders got totally out of control. We dumped them because: it's late Friday afternoon or early evening, and I've just gotten home from work. There's a new improved upgraded Discover card in the mail (which neither of us ever asked for). This new card had a larger credit line but also higher interest rates, or higher penalties, I forget exactly. And the new card automatically replaced our existing one. If we didn't want to upgrade, we had to call their toll-free phone tree and tell them. So here it is, Friday evening, just home from work, looking forward to the weekend. And that "Thank God It's Friday!" euphoria has given way to fuming and cussing through their phone tree and then waiting on hold because both operators were busy.

When somebody finally answered, I canceled our Discover account.

Right now we just have AmEx and MasterCard -- for occasional use only.

May 1, 2009 at 7:33 PM  
Blogger Ricardo said...

You know the fine print is structured in a way that a person without legal experience can't read it and sorry to say, even the most reputable of card companies have fine print designed to exploit. So when people with sterling credit find their interest rates jumping from 9% to 19%, it's time to reign this morons in.

Personally I think it all stems from the pressure to impress wall street and since they can't come up with business models to show massive growth from quarter to quarter they resort to these card scams and my other favorite, arbitrary fees.

May 1, 2009 at 10:00 PM  
Anonymous S.W. anderson said...

Reading that story in my local paper Friday morning, I saw that my conservative Republican representative in Congress voted IN FAVOR of double-cycle billing, sudden-death interest hikes, even on people who've never missed a payment or been late with one, and all the rest. Really got my day off to a great start.

Re: the fine print. If you actually read that fine print, you'll learn reading the contract means little because one party to the deal gets to change the contract terms whenever and however they want. If the legislation actually puts a stop to that, it will be a godsend.

That's especially true for people struggling to make it month to month. They're the ones who get in trouble for passing the plastic when their child gets an ear infection shortly before payday, or for using it for an emergency plane ticket when a family member in a distant state has died.

After what the Senate did with Sen. Dick Durbin's banking bill this week, though, I won't count on the credit card bill making through until I see it.

May 2, 2009 at 1:58 AM  
Blogger Tom Harper said...

Ricardo: Exactly. Those companies are hoping to snag as many victims as possible, and the easiest way to do that is to have 97 pages of legalese, written in a size .01 font.

If a company can't make money by selling a better product, the second choice is to trick millions of customers with hidden fees and penalties.

SW: That's true, these contracts give the credit card companies the ability to change the rules any time they want. It's only binding for the customer.

When I first read that article, I assumed this bill would be a breeze in the Senate. If the Senate fails to pass this, with 59 Democrats, it'll be a disgrace.

May 2, 2009 at 5:08 PM  

Post a Comment

Links to this post:

Create a Link

<< Home