It would have been nice if these hearings could have been held before the big lenders pushed through the new bankruptcy law...but better late than never. Thank you for the report.

Politics is the art of preventing people from taking part in affairs which properly concern them. --Paul Valery

Seconding Wordie's Comment,

Is it likely that these hearings will lead to revisions in the bankruptcy act? Or do you think the focus will be more narrow than that?  

Also, do you think that the hearings will get into the question of practices of the collection agencies to whom the credit card companies sell bad debts.   In the last several months I've noticed a dramatic upswing of phone calls from debt collectors...it seems they must be calling everyone with the same last name as the person they're after.  Ugh. 

Thanks for keeping us up to date.

aMike

One of the topics that got slight coverage was the rate of interest charged on credit cards before the "fees". We used to have usury laws in this country but they have all been abolished. With the base interest rates ranging between 1-5% for much of the past decade how can firms justify charging 19-29%?

The default rate on credit cards seems to be 2-4% which means that allowing for a reasonable markup of 3% over the cost of borrowing the cards should be charging (5% prime rate + 3% markup + 3% risk) no more than 11% in times such as now and lower rates when the base rates drop.

--- Policies not Politics
Daily Landscape

On the evening's dance card that's listed as the Rostenkowski Two-Step.

Forgive my cynicism here but the last senate past a bankruptcy reform bill without even discussing the credit industry's practices. Now, after the industry was given the bill they wanted, we finally turn to how they sell their product? Too little, too late.

Well, here's a question for some one on the committee to ask the credit card companies: Given that the new bankruptcy bill reduces risk to lenders by making a "start over" bankruptcy more difficult to obtain, why haven't lending rates and fees dropped to reflect that drop in risk? Isn't a lender, after all, basically paid to accept the risk of nonpayment?

thosethingswesay.blogspot.com

Actually, rdf, the most insidious fee charged by the credit card companies is the one you've probably never heard of: the interchange fee. These fees generate far more income for the credit card companies each year than all the other fees and interest rates combined, as consumers pay $30 Billion (yes, with a "B") each year in interchange fees. Of course, the system through which these fees are levied is highly secretive and mind-boggling complex, as the card companies would much rather you not know about them. Hopefully Sen. Dodd and company can force some disclosure on what amounts to legalized extortion.

Mainly one pays rent on borrowed money. If all loans were repaid on time banks still see income. Revolving charge accounts do have a slightly different history, where the convenience to consumer supposedly encouraged sales, so the seller would accept paying a service fee which was not passed on in the sale price. American Express did quite well for years without charging interest, making the income from service fees to vendors.

But overall, no, it should not be the case that interest paid only covers bad loans. Interest should be proper income, defaults should be low. If a company is in fact depending on defaults that is a fraudulent activity, I'd say. That is why I resent banks encouraging check bouncing to earn the fees.

I watched your testimony before the committee on C-SPAN. Good job! I am curious about why the company people came to the "party." And I was struck by the difference in tone between the female PR type, and the CEO.
You have helped all consumers who listened to the hearing. Thanks.
South by Southwest

def. Elizabeth Warren: (1) Heroine to those with nothing financial to offer in return. (2) A person whose tuition and fees were a well-spent investment for the entire American middle class. (3) All around great person. (4) Unmercenary Joan d'Arc of economics, finance and debt ethics.

You mom didn't even have to tell me to post this definition.

Strong work Ms. Warren. You're an inspirational intellectual who actually brings practical follow-through toward solving the problems that distress so many good people. Thank you.

Remember: The run on the bank scene in "It's a Wonderful Life."

Re: Though a different bank chain, it hit my acount in a couple of hours at most. This in spite of not crediting her account for three days as a non-local check. I consider it fraud.

Checks clear overnight now. There is absolutely no excuse for not crediting the depositor's account the next business day for any US-written check. (Some banks will do this; my own, Suntrust, is one of them and I would gladly recommend them to anyone, having had only the best of customer service from them whenever problems or mistakes have arisen, including mistakes that were not their fault.)

18% to 29%? That would be nice. Try 38%. That is usary, and if Congress can't protect the people from such blatent robbery, then what good ARE they?

God forbid anyone else here get the double financial whammy of catastrophic illness followed by divorce.

"Credit ratings" are also a scam that disproportionately harms regular citizens while delivering obscene ill-gotten gains to an undeserving industry that profits off the misfortune of others. Now this scam has been expanded to the Insurance industry as well. A poor credit rating now results in higher premiums. Even if you have an excellent driving record, that makes no difference. These vultures can legally prey on the most vunerable in our society, and we've been conditioned very ingeniously to blame the victims of these immoral business practices. Legalized graft. That's the American Credit Card industry and Insurance industry in a nutshell.

They do not face any risk whatsoever. If the scenario in "Rosie goes shopping" were even remotely possible, I'd recommend we all "shop until we drop" with no intention of EVER repaying these arrogant petty thieves. It would be a thousand years before it even made a dent in their financial well-being.

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I just read that there are 640 Million credit cards in use in the U.S.; the average balance is now $7,700 and thirty to forty percent of them are paid in full each month. That means 60% to 70% are not. Bankruptcy studies are showing that even after the changes to the bankruptcy laws, the causation of 92% of all filings fall into three major categories which are major medical emergency or catastrophe, divorce; and job lay off. Not intentional abuse or fraud.

While Viet Nam, I mean Iraq, will undoubtedly be the major issue for the next presidential elections, using the above figures I have to estimate maybe 100 million Americans are experiencing usury interest rates and predatory fees on a monthly basis by the credit card industry.

The fastest growing market for credit cards is teens and young adults because they are being super aggressively targeted with marketing tactics like placing an application booth on the beach at spring break, but the group with the fastest growing debt is seniors and especially those 75 and older because they are using them to pay their.....medical expenses.

I don't know about you, but I smell a campaign issue here and it just seems to me that the candidate that recognizes it as such and addresses the abuses will garner at least some of those potential 100 million votes. Even three million of them can turn an election.

While undoubtedly there is cynical posturing going on with this committee hearing, and the banks have and will spend millions to defeat any regulatory bill, the reality is that the abuses are taking place and are getting worse. The numbers can't be ignored and close to 100 million is a big number.