Congress is renewing its scrutiny of the credit card industry, as some lawmakers denounce the practice of raising customers' interest rates when their credit scores decline, even if they make their card payments on time.
Industry critics say it's another example of abusive, confusing credit card practices that can push consumers deeper into debt.
- Associated Press
While Congress is considering legislation, they are hopeful the industry will do the right thing (LOL) and regulate itself.
Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, is holding out the club of possible legislation to spur voluntary changes by the industry.
"Working people are being squeezed," Levin told reporters Monday. In a call for "good, strong legislation" to be enacted next year, Levin said that "these abuses need to be remedied. ... We have some real momentum for reform."
With Americans weighed down by some $900 billion in credit card debt — an average $2,200 per household — practices of the very profitable industry have been ripe for scrutiny by the Democrat-controlled Congress. They have also grabbed the attention of the Federal Reserve, which plans to require credit-card issuers to give customers at least 45 days' notice before raising interest rates and to provide clearer information on fees.
At a hearing Tuesday, Levin's subcommittee, which has been investigating the industry, planned to look at how credit-card issuers raise consumers' rates, to as high as 30 percent, when their so-called FICO credit scores decline — even if they've paid credit card bills regularly and promptly. In many cases, consumers have little notice of the increased rate, which are automatically triggered by declines in FICO scores for reasons left unexplained, the subcommittee found.
In some cases, just opening another account, such as a department store credit card, could trigger the downgrade in credit score.
- Associated Press
I hate credit card companies as much as the next person, but it isn't any of congress's business to make legislation in this matter.
ReplyDeleteThe government should always err on the side of liberty rather than on legislation. Americans need to stop depending on the government to take care of them so much.
Sunny -
ReplyDeleteYou are right. Consumers should take responsibility for their own actions and so should the credit card companies.
Personally, I don't see the credit card companies taking responsibility, but am hopeful they will.
I am waiting for the day they pull this on me. I'll do anything in my power to pay them off AND CLOSE THEM OUT. The funniest thing I ever heard was Discover saying they "had the right" to charge me some money for the check I wrote to bring the balance to zero. YEAH AND I "HAVE THE RIGHT" TO CLOSE YOU OUT, SO GOOD RIDDENS! But so far I have not experienced any kind of "universal default" action.
ReplyDeleteActions such as missing a payment, or opening up another credit account are a sign of greater credit risk. Therefore it's perfectly reasonable to increase rates charged in those cases IF you have adjustable personal interest rates.
ReplyDeleteThe alternative is the situation we have in Australia, where, once your application for a credit card is approved, the rate is at a set rate for that type of card (it does go up and down occasionally when interest rates in general move). However, the downside is that those with poor credit history won't qualify for a CC at all. And those with a good credit rating don't get a better rate than is 'standard'.
Consumers agree to letting the credit card companies raise the rates, it's called fine print. It says "we can change this rate at any time for any reason and we will" (in not so many words.) We need to educate ourselves first and save 10 % of each paycheck from day one (which I did not always do, but am doing now, even with very little income and 2 boys I am raising alone.) I now have no debt and no credit cards.
ReplyDeleteBy the way if you are paying all that interest what are you giving back to God each month?
I do not think the government should step in, though.
The credit card comapanies do not care about you, they care about PROFIT, we can't blame them for wanting more of it. We have to blame ourselves.
I get so frustrated because of how hard I (with God) struggled to get out of debt. I have sacrificed so much, but it was all at my own hands.
enoughwealth -
ReplyDeletegood...credit cards should be banned, so NO ONE can get a credit card.
Call me old! I remember when credit card rates were capped, nationally in the USA, at 10%. Then, the government turned it over to the states to individually regulate. South Dakota was one of those states that had no limit on interest rates, and the credit card companies went there in droves.
ReplyDeleteI think a lot of what credit cards do it predatory lending and loan sharking. I am not normally an advocate of government regulation, but I call for the national cap of 10% to be re-enacted. That would give people a chance to clear it up and get rid of their credit cards.
I was listening to this one woman on the radio yesterday. She had never made a late credit card payment (or any other payment) in her life. In the past year, her credit card sky-rocketed to 30%. Of the past 5K she has paid almost 3K of that was interest!! And she's still not late or behind.
This is predatory lending and loan-sharking at it's finest....
edie -
ReplyDeleteI would agree it is predatory and your suggestion of a cap is an interesting proposal, if Congress can't get the banks to regulate themselves.