An Ill Wind for Credit Card Companies
Is the wind blowing from a different direction on credit card issues? Today the Center for American Progress is hosting a program called “Who’s in Charge?” CAP doesn’t spend much time on lost causes; this is their second major event on consumer debt in less than six months.
The CAP event showcases strong, new voices in the consumer credit fights. CAP is also using the event to unveil an innovative idea to make credit safer for consumers using rating systems modeled on car safety systems. The people are terrific and the policy proposal is interesting, but what interests me most is whether middle class economic issues are beginning to take hold on the political agenda. Today a powerful senator, backed up by a professor and a GAO official presenting two pieces of solid research on credit cards, will be turning up the heat under the credit card issuers. A single conference won't spell the end of credit card influence, but it may signal that the climate for the card issues will not be so favorable in the future.
Over the past twenty-five years, the credit card industry has grown like the blob, sucking up money from working families across the country. New tricks, traps and tickles have left millions of families mired in debts they may never pay off. Even as the industry "innovates" with cross-default clauses, double-cycle billing, multiple low-balance cards, and a dozen other practices designed to deceive, there hasn't been a whiff of new regulation. But some new players are taking the field.
Carl Levin, D-MI, the senator who will be kicking off the CAP event, has a perfect background for wrestling with the credit card companies. He jumped into the Enron mess and led efforts to control money laundering, showing that he isn’t buffaloed by complex financial issues. He’s launched investigations on gas price manipulation, suggesting an interest in consumer issues. He also led the effort to ban Senators’ acceptance of gifts and honoraria, which may have given him a little practice in dealing with his colleagues who take money from the groups under investigation. Now he’s sinking his teeth into consumer credit issues.
The CAP program will be long on solid research. Ronald Mann, Professor of Law at the University of Texas, will be talking about his new book, Charging Ahead! Mann pulls together comparative data on credit card and other payment use around the globe, pushing on the US policies that have caused Americans to sink much deeper into debt than their counterparts in Europe, Japan and Australia.
Adding to the hard data at the event will be David G. Wood, Director, Financial Markets and Community Investment of the GAO. Mr. Wood is responsible for a powerful GAO report that shows that most consumers don’t understand the terms of the credit cards. The book lays a solid foundation for better regulation of credit card disclosures.
CAP also adds its own proposal to the mix, initiating a discussion about whether evaluations of credit card safety would have the same benefits that evaluation of car safety produced.
One more conference, one more gust of wind.
Good. The other things that they should tackle are cell phone billing practices, the predatory credit outfits like rent-to-blah your x, y, and z, and the payday loan places.
November 30, 2006 11:45 AM | Reply | Permalink
"and the payday loan places."
I have a pet peeve against these places. i live in an area with lots of poor immigrants and they just put a paday loan place in the local supermarket. needless to say, I stopped shopping there because they were adding misery onto misery.
I suppose, though, that the other stores do the same thing with credit cards...
November 30, 2006 4:18 PM | Reply | Permalink
Hmm... is there such a thing as "safe credit". I think any form of lending where you pay interest is not safe. Borrowing is simply hazardous to your financial health. I'm not sure this will go far toward really helping consumers. It does, however, sound like a good new marketing angle for a lending industry looking to convert critics to customers.
Jim Anderson
The Truth About Credit
November 30, 2006 5:17 PM | Reply | Permalink
I have to agree that there is no such thing as "safe" credit as if we're talking about having safe sex. Nor is a credit card something you drive or use as if it were a manufactured item where concerns of physical safety are in fact genuine.
The problem with this whole idea is that it will NOT lead to saving anything, i.e., opening a Christmas gift account and putting regular deposits in it so that all gifts are paid for in full at the time of purchase.
As much as this is a good thing that CAP is doing, they are not nearly as progessive as they pretend to be. They are still living too cushy lives. When they hit the place where most people actually need representation, then they'll be doing the job their name implies. That is unless "American Progress" isn't about progressivism but rather protecting the sacred cow of profit.
To which Mencius blew that one out of the water 2300 years ago when he told King Hui of Liang that "if righteousness be put last and profit put first, the people will not be satisfied unless they are snatching."
NeoLotus
********
- Making judgements without intellectual justification is prejudice.
- We do not act rightly because we have virture, we have virtue because we act rightly.
- To know a truth well, one must have fought it out.
November 30, 2006 6:35 PM | Reply | Permalink
Maybe if Lieberman had lost there might have been some movement by the Dems in this area. Since Lieberman actually won, I think we can take it as certain that there will be no pro-consumer changes to bankruptcy or credit card law for at least the next two years.
sPh
December 1, 2006 7:25 AM | Reply | Permalink
Banks make more money from "fees" than they do from interest. I can't see them giving this up without a fight. And as in all fights of this nature one side is organized, has lots of money and lobbyists, and the other is a disorganized mass of consumers with only a handful of idealistic interest groups supporting their concerns. This is hardly a fair fight.
We see the same pattern everywhere: union organizing rights, health care, public funding of elections, immigration reform, tax policy, etc. etc. etc.
With the exception of the flawed expansion of Medicare to cover drugs we haven't seen a people-oriented, progressive policy put in place in decades. It is regarded as a victory if we just keep things from getting worse.
--- Policies not Politics
Daily Landscape
December 1, 2006 7:44 AM | Reply | Permalink
Me? I long for the good old days when the Three Card Monte sharks set up their boxes just outside the door of the Department of Unemployment office. There was something refreshingly transparent about that. Perhaps it's time for all grifters to organize and file a class action suit against the CCCs. Unfair competition - under the common carriers law.
Neoboho
December 1, 2006 8:40 AM | Reply | Permalink
Frontline had a recent piece on the CC companies which pointed out, amoungst other things, an obscure Federal agency - Office of Comptroller of the Currency (http://www.occ.treas.gov/) - that is charged with oversite (or lack there of) of many of the consumer issues people have with CC's.
Gov.-elect Spitzer has a small segment where he states that OCC is countering state efforts to protect comsumers.
Also, Sen. Dodd (D-CT) is also featured near the end. He has tried to get a bill moved through Congress but has found resistance from the very powerful banking lobby. Surprise!
Worth a watch.
http://www.pbs.org/wgbh/pages/frontline/shows/credit/
December 4, 2006 11:17 AM | Reply | Permalink
I think credit card companies should pay reparations for all of the stolen work and productivity they have eaten. This is a form of financial corruption.
For every hour worked to pay the exhorbitant interest rates that compound again and again, what extra service has the credit card company provided for each successive interest charge on the interest previously charged but not paid off.
For every dollar earned by a person but spent on those unearned applications of interest to interest, some other more productive industry, health care for example, receives fewer funds.
Some companies have special programs for people, dropping to 1 percent for a term while they pay back. Those programs are to be lauded to a degree, however, they still don't rehab credit.
The compound interest system is parasitic.
The credit reporting system under compound interest circumstances is not a merit system, or even a penalty box system as in a game for a term. It is every bit as much as if a consumer was a financial chicken that is not free roaming or range fed, but stuck in a cage with his feet growing to the wires, financial angst and worry built up all over his feet in the cage, and a pale, sickly look to the drooping crown and hollow eyes. And all of this because a man or a woman is trusting, basically good and tries to take care of the debt, but frequently can't make ends meet. Also, the consumer culture itself advertises indulgence and spends trucks of cash on psychological persuasion that makes people equate happiness with going out and spending money or being forever 21 without a family to think about.
The practice of raising the interest rate for any little thing, including a late payment on some other bill, is absolutely draconian. If they can do that, "debtors" ought to be able to knock the principal down by $100 every time a credit card company makes an unsolicited call to disturb their household peace with a sales pitch; every time a credit card company tries to overcome an objection or "no thank you" on the phone; every time an unsolicited CC mail piece arrives and wastes resources; every time the CC company representative makes a mistake of any kind on the phone; and so on.
If this system had existed in its current form in the 1770s, it would have been added to the list of grievances the US colonies had against the corrupt George III in Britain in the Declaration of Independence.
December 4, 2006 7:45 PM | Reply | Permalink
I saw this show when it first aired a number of years ago. After seeing this report I called MBNA to apply for a credit card based on their online application. I asked for a copy of the contract I would be agreeing to according to the application. They refused to show me a copy before they issue me a card.
I wrote the OCC and complained about this idea that I must agree to a complex onesided contract before I can even see it. The response was that there was nothing they could do about it.
I wrote the Federal Reserve Board, the response was that they could do nothing about it, and that it would take a act of congress to create a law against it.
I wrote my Senators and Representatives. Only one responded, and she responded with a suggestion to call the credit card company and ask for a reduction in my rate. (total disconnect, or a total blow off) When I pushed the issue, I got a personal response which essentially shared my concern, but offered a band-aid solution that didn't address the issue. See the OCC's response and my Senator's response here.
The only way I can see this abuse is going to go away, is to stop using credit cards and borrowing money. Our government isn't going to protect us from this abuse - they are partners in it through the Federal Reserve Bank and a fiat currency. What is so hard about living within your means, and waiting to do things until you can afford to do them? Our appetite for convenience and our impatience and materialism is being used against us to make other people rich and powerful. If it continues, we WILL lose our liberty.
Jim Anderson
The Truth About Credit
December 5, 2006 8:08 AM | Reply | Permalink