Seems Congress is hearing from consumers who are outraged that their credit card has not only raised their interest rates but their minimum payment on balance due is skyrocketing as well. When Congress passed the Credit Card Holders Bill of Rights in May, they neglected to implement them immediately. Advocates tried in vain to warn them that if the effective date of credit card reforms didn't go into play until a delayed date of Feb. 2010, the credit card companies would take advantage of that time and implement their own changes that would not only harm consumers, but our economic recovery as well.
And the advocates were right.
It appears the lending industry has been busy doing all they can to beat the clock searching for ways around reforms coming down the road. They've been raising interest rates, credit card fees, overdraft fines, late charges, ATM fees and now minimum payments due on outstanding balances. Some cardholders are reporting increases from 2% of the balance due to 5% -tripling already sizable payments. And when struggling borrowers fail to meet their payment obligations -guess what happens. They are then hit with hefty late fees and/or overdraft charges, and forced to look at turning towards bankruptcy, all actions having a negative impact on their credit rating.
Many believe the very same tricks and traps that the Credit Card Holder Bill of Rights was intended to stop -are now flourishing due to the delay in implementing them. As credit card companies rush to beat the new reforms, that are not due to take effect until February, 2010 consumers are bracing themselves for more assaults as creditors continue to find new and creative ways to make profits. The new reforms will eventually block creditors from raising interest rates, anytime and for any reason on the balances consumers owe from earlier borrowed money -but by the time they are go into effect the rates will be so high - will it really matter?
When cutting off a consumer's available credit -it has widespread costly effects. When credit limits are reduced it triggers the credit scoring system to recalculate scores using the currently reported data. And that current data may now inaccurately portray that the consumer has maxed out their credit card -when they didn't! The scoring algorithms are not designed to detect why or how that credit line was reduced. If the consumer's credit line is cut it appears he/she has maxed out the card -and that causes the score to tumble. Since credit scores determine the price of insurance premiums and interest rates, that lowered credit score carries costly consequences.
These types of ongoing abusive lending practices only serve to prove why we need a Consumer Financial Protection Agency -an oversight and regulatory agency that the lending industry Does NOT want.
According to Ed Mierzwinski at US PIRG, "The banks like the current system that has failed us and will be doing all they can to maintain it. Expect nothing less than a full-scale assault on the Obama plan over the next few months."
Read yesterday's Consume Affairs article: "Congress fumes over credit card rate hikes" and see what you think.
...Here's a small excerpt:
Congress is pretty much powerless to stop credit card companies from raising rates and adjusting minimum payments, because they are allowed to do so under current laws and regulations. The changes do not take effect until February 2010.
"This is what many of us feared about a law that didn't take effect right away," Sen. Chuck Schumer (D-NY) told The Washington Post.. "It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law, and it is just plain wrong."
Rep. Carolyn Maloney (D-NY) authored the Credit Card Holder Bill of Rights legislation signed into law in May. She has been besieged with complaints from angry consumers. MORE
Let your Legislators know it's time to put some teeth in consumer protection!
And the advocates were right.
It appears the lending industry has been busy doing all they can to beat the clock searching for ways around reforms coming down the road. They've been raising interest rates, credit card fees, overdraft fines, late charges, ATM fees and now minimum payments due on outstanding balances. Some cardholders are reporting increases from 2% of the balance due to 5% -tripling already sizable payments. And when struggling borrowers fail to meet their payment obligations -guess what happens. They are then hit with hefty late fees and/or overdraft charges, and forced to look at turning towards bankruptcy, all actions having a negative impact on their credit rating.
Many believe the very same tricks and traps that the Credit Card Holder Bill of Rights was intended to stop -are now flourishing due to the delay in implementing them. As credit card companies rush to beat the new reforms, that are not due to take effect until February, 2010 consumers are bracing themselves for more assaults as creditors continue to find new and creative ways to make profits. The new reforms will eventually block creditors from raising interest rates, anytime and for any reason on the balances consumers owe from earlier borrowed money -but by the time they are go into effect the rates will be so high - will it really matter?
When cutting off a consumer's available credit -it has widespread costly effects. When credit limits are reduced it triggers the credit scoring system to recalculate scores using the currently reported data. And that current data may now inaccurately portray that the consumer has maxed out their credit card -when they didn't! The scoring algorithms are not designed to detect why or how that credit line was reduced. If the consumer's credit line is cut it appears he/she has maxed out the card -and that causes the score to tumble. Since credit scores determine the price of insurance premiums and interest rates, that lowered credit score carries costly consequences.
These types of ongoing abusive lending practices only serve to prove why we need a Consumer Financial Protection Agency -an oversight and regulatory agency that the lending industry Does NOT want.
According to Ed Mierzwinski at US PIRG, "The banks like the current system that has failed us and will be doing all they can to maintain it. Expect nothing less than a full-scale assault on the Obama plan over the next few months."
Read yesterday's Consume Affairs article: "Congress fumes over credit card rate hikes" and see what you think.
...Here's a small excerpt:
Congress is pretty much powerless to stop credit card companies from raising rates and adjusting minimum payments, because they are allowed to do so under current laws and regulations. The changes do not take effect until February 2010.
"This is what many of us feared about a law that didn't take effect right away," Sen. Chuck Schumer (D-NY) told The Washington Post.. "It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law, and it is just plain wrong."
Rep. Carolyn Maloney (D-NY) authored the Credit Card Holder Bill of Rights legislation signed into law in May. She has been besieged with complaints from angry consumers. MORE
Let your Legislators know it's time to put some teeth in consumer protection!
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How do you keep from having this hike in payments and interest rates?
That's a great question. If you do receive notice from your creditors, try contacting them and asking them to reduce. Also -it's always good to let your legislators know so they can get a handle on how many people are hit with this types of unfair practice -for a simple way to do so go to affil.org -click on take action and fill in your zip code. Also -you can check out what your local credit union has to offer. Their rates are often much better than big banks. See a few earlier blogs here on that issue. Keep us posted how you make out...
Thank you. I am writing my legislator. I just got the letter today that my interest rate is going up 10 percentage points and I am going to have to pay a $96 annual fee. I have until the end of the month to "opt out." I think it's sad that they knew this would happen. Chuck Schumer is right. I hope they help. Thank you for your help.
I just received my payment hike, from 250.00 per month to 495.00 per month. They told me that they wanted me to pay my balance off more quickly. When I said I couldn't afford it they offered me a higher interest rate of 8% and a lower monthly payment. After two years the interest would go to 15%. Nice huh? And completely contradictory to their wish to have me reduce my balance more quickly. No they simply want to raise my interest rate. The is a broken agreement. Once again Bank fraud. Is fraud and swindle the only way these corporations can make money.
And the worst is that my senators and congressperson seem ignorant of, or disinterested in this issue. Why is this not a bigger story in the news?
If you are still paying 2 percent of balance as a minimum payment, your card issuer did not comply with the 2005 bankruptcy reform act. Card lenders are supposed to charge a minimum payment that will allow repayment to happen in a reasonable time, 8-10 years (vice 20 years if 2 %) and that means a 4-5 percent minimum payment.
You should be dancing that you got by so long. More importantly , it should not matter as you should be paying more and get the heck out of debt and stop being owned by the credit card company.