Don't Let Consumers Speak
What if you held a hearing, but the people who were most directly affected by the proposals were barred from speaking? That's what happened yesterday.
The Financial Services Subcommittee on Financial Institutions of the House Committee on Financial Services held hearings on credit cards. Congresswoman Maloney (D-NY) has sponsored a bill with 82 coauthors that would outlaw some of the worst credit card tricks and traps. The card issuers were there in full force--complete with an army of lobbyists to pack the audience. The professors--Katie Porter, Adam Levitin, Larry Ausubel and I--were there to try to give the other side.
Our panel was supposed to be the second panel. The first panel was four regular people who wanted to give first-hand information about their experiences with their credit cards. While the reps from Cap One, Chase and Bank of America went on for hours about their customer friendly policies and how much value they provided free to consumers, the people who had different stories were never allowed to utter a single word.
The people who had been invited to testify had flown in from around the country with their credit card bills in hand, only to learn that they couldn't talk unless they would sign a waiver that would permit the credit card companies to make public anything they wanted to tell about their financial records, their credit histories, their purchases, and so on. The Republicans and Democrats had worked out a deal "to be fair to the credit card lenders." These people couldn't say anything unless they were willing to let the credit card companies strip them naked in public.
So that's where it stood when Congressman Bachus (R-AL) roared into the hearing about three and a half hours after the hearing started. It seems that someone in the press had made some critical statement about the deal, and he was furious. He kept talking about how it wasn't fair that someone could say something and there wouldn't be any way for the credit card companies to say whether it was true or not. Fair is fair, he kept insisting.
I had never heard of a deal that kept ordinary citizens from testifying, so I asked a question. I just wanted to understand the terms of the new arrangement. During the preceding 3 1/2 hours the credit card issuers had repeatedly made various factual statements about their practices, their customers, their revenues and so on (e.g., "College students have the same default rates as our other customers," "98% of payments are made for free," or companies raise interest rates "to control risk, not to increase profits.") So I asked if the credit card companies were going to testify to such factual statements, would they be required to produce the data to back up the claims so that we could all see it and evaluate it. Katie, Adam, Larry and I all used public data and footnoted our work. Surely it wouldn't be fair for the credit card companies to make factual assertions that no one could challenge because no one else had any access to their underlying data. If the new rule is that everyone has to release everything so others can challenge it, when the card issuers want to testify as to "facts," shouldn't hey have to back up their claims by showing us the numbers?
I never quite understood the Congressman's reply. I'm still waiting to find out what fair-is-fair really means.
Thanks Ms. Warren.
Yours is one of the few voices out there willing to stand up for us little guys.
Ms. Warren for prez.
:)
March 14, 2008 9:04 AM | Reply | Permalink
Thanks for trying, but we surely need to replace reps like Bachus before anything useful can be done.
Thanks, and keep us posted. We need you.
March 14, 2008 9:53 AM | Reply | Permalink
Baucus is a Republican.
With respect to the rules a House committee or subcommittee controlled by Democrats sets, I suspect he has little influence and no authority at all.
Maybe we ought to be replacing the Democrats.
March 14, 2008 10:48 AM | Reply | Permalink
How about we lose the political party tag altogether for this and just correctly name them "corporate whores?" I bet they pay better than $4500 an hour.
March 14, 2008 11:22 AM | Reply | Permalink
Ellen,
I think the Democrats have too many wusses and/or Republican lites chairing Full and Sub committees.
March 14, 2008 3:10 PM | Reply | Permalink
American democracy at work. It's sort of like Calvinball, the rules change by the moment to perpetually ensure that the winners are winners, the losers stay losers, and everyone is happy as the dead come home.
Evil is an exact science.
March 14, 2008 11:14 AM | Reply | Permalink
Reminds me of the Net Neutrality bill recently where the telecoms bought enough people to fill up the room so no opposition could attend.
March 14, 2008 11:20 AM | Reply | Permalink
It is too bad that none of the consumers were able to call the Repub's bluff. I FULLY UNDERSTAND WHY they wouldn't want to. The financial institutions would rip them apart and impugn their character--which is what credit scores are now being used for in employment situations--an evaluation of an individuals character--based on how they handle their money.
From my experience working with people who are in tough financial situations they are embarrassed have difficulty admitting to their own failures in this area.
This is, obviously, what the financial institutions counted on when they negotiated for "fairness". What a bunch of cowards that they wouldn't then, in fairness, open up their data for the world to see. (Of course you can probably purchase it from them...)
What I tell people that I'm teaching/counseling--the best way to "stick it to" the credit card companies is to become what they refer to as a "deadbeat"--pay your balance in full every month--then you won't owe them a dime but will get a free 30 day loan 12 times a year.
Before you reply-- I do know how hard this is to do--with wages falling, the cost of living increasing and our government increasingly turning a deaf year to the struggle to get by for a great many Americans--this being a good example of the kind of government we now have.
I would encourage you all to vote--but it almost seems futile. Maybe there needs to be a "consumer revolution". I, for one, would be happy to stand in front of the Financial Services Committee and the Financial Services representatives and lobbyists and cut up my credit cards. Any one care to join me?
March 14, 2008 11:27 AM | Reply | Permalink
I don't care to join you, because with a credit card, as you have written, I "get a free 30 day loan 12 times a year." Why should I give that up?
March 14, 2008 12:18 PM | Reply | Permalink
Full disclosure: I have no credit card debt and DO take advantage of my free 30 day loan--but I'm willing to give it up if it gets the government to listen to consumers--instead of thumbing their collective noses at them...
March 14, 2008 6:28 PM | Reply | Permalink
Don,
Why give up your free 30 day loan? Because it is a trap. It really isn't free, it is actually very expensive in the end.
March 15, 2008 1:32 AM | Reply | Permalink
How is it expensive "in the long run"? Maybe for others, but not for me. I get no annual fee, and when I pay my card at the end of each cycle, I pay no interest. Plus, by doing so, I increase my credit score and increase my ability to get a low interest loan for a car or a home when I need it.
In fact, one of my cards gave me a no-interest cash advance for 12 months. I took $10,000, put it in a promotional 5% interest bank CD, and will pay it off at the end of 12 months and pocket the $500 interest.
My credit card company is banking on the odds that I'll be improvident with my money. But if I'm not, I can profit from that gamble.
March 15, 2008 7:17 PM | Reply | Permalink
What Allsburg said. Plus I get a one percent dividend on my expenses, so I use it for all my expenses including food, gas and rent. Seems like a good deal to me!
March 16, 2008 12:18 PM | Reply | Permalink
Don and Allsburg,
Here are four ways it will cost you more.
1. On larger purchases, you can bargain with cash. You don't have as much bargaining power with the convenience of a credit card. Being able to tell a salesperson that you don't borrow money is a powerful negotiation tool. I have personally saved thousands of dollars on purchases by bargaining with cash. When I flash it in front of them, the salesman salivates and will bargain with me. It works.
2. If you do get into a financial crisis, chances are very high you will carry a balance on your credit card and spiral into debt, using it as an emergency fund. That is when universal default will kick in. You'll pay more than enough to compensate for all those "free" 30 day loans. Everyone has a financial crisis at one time or another. Credit card companies can afford to be patient.
3. A Dunn & Bradstreet report found that credit card users spend 12 to 18% more when using a credit card because they don't feel it impact their budget as much. Convenience is proven to increase spending. Convenience is now being sold as a necessity by the credit card companies for that reason. Look at the VISA commercials and their USP "Life takes VISA". It works for them.
4. The American Bankruptcy Institute found that 69% of bankruptcy filers cite credit cards as leading to their bankruptcy. This can be found related to #2. Elizabeth Warren published a report showing 50% of bankruptcies were caused by medical catastrophes. What you typically see in those bankruptcies is the attempt to pay medical bills with their credit cards in hopes of bridging the gap. They end up in bankruptcy anyway, and at the high interest rates and fees accumulated are at least twice as deep as they would have been. The other 31% were probably spending irresponsibly anyway and recognize that as the cause, however, they probably involve credit card debt as well. The convenience of credit cards are the enemy of spending discipline.
March 16, 2008 1:23 PM | Reply | Permalink
The Democrats that agreed to these rules should be kicked in the ass.
March 14, 2008 11:51 AM | Reply | Permalink
This makes me sad. Keep fighting professor you make a difference.
March 14, 2008 11:53 AM | Reply | Permalink
Wow. Elizabeth Warren has uncovered something significant here. Let me tell you why I believe this...
I fought Citibank in court. I had to do it pro se because I couldn't afford to hire an attorney. When you are in dire financial straights, the last thing you need is attorney's fees. I did get help though. I pleaded for court to have Citibank prove that the transactions that were on the statements that made up the balance I was disputing. So I asked for documentation in discovery. I knew they didn't exist, because I didn't approve them. Citibank's attorneys decided that they would plead the court that disclosing proof that I approved the transactions would be an unfair burden on Citibank. The judge agreed. Citibank could sue me for the balance they claimed I owed, and only had to offer a photocopy of a credit card application with my signature on it and copies of statements. Somehow that was proof enough that I owed whatever they put on the statements. I was required to prove that my assertion that the tens of thousands of dollars in charges were not mine. Folks, it is much harder to prove something doesn't exist, than to prove something does.
The credit card companies have all these statistics, but they don't keep the data to back it up that Elizabeth Warren could reasonably expect in this hearing. Their argument is that they don't have to have it. They believe that since they are who they are, they can be trusted to testify only to the truth without any verification and everyone should believe it. On the other hand, their customers should provide all proof of any argument they make and must meet the highest standards of proof, or it will be rejected. The general train of thought is that individual cardholders can't be trusted. They lie and cheat the credit card companies, and the credit card companies are the victim in these disputes. That is before anyone says a word. The credit card company representatives have relationships with these Senators and the individuals don't. Senators believe the credit card company representatives before they believe the cardholders. Evidence just gets in the way and makes their job more difficult, unless it supports their preconceived conclusion.
This is a mindset that needs to be exposed, for the sake of our court system and the biases that get in the way of justice. It it isn't, there is no recourse for cardholders in disputes with credit card companies, especially if cardholders are required to waive their constitutional right to a hearing of their dispute in court with mandatory arbitration.
March 14, 2008 11:55 AM | Reply | Permalink
Jim ---
Your sad tale's getting old (going on three years, now, isn't it?). It seems pretty obvious you owed what the credit card statement said you owed. How do we know that?
Because if you hadn't owed what the statement showed you owed, you would have had proof that at the time the statement was rendered you'd objected and put the charge(s) into "dispute."
You didn't -- a failure to act which constitutes an admission of the accuracy of the statement and its attendant obligation.*
* At law the monthly credit card statement is called an "account stated." Same goes for your bank statement. Unless you object to its accuracy at the time it's rendered, you're pretty much stuck with it -- at least as to that particular "accountant."
March 14, 2008 12:23 PM | Reply | Permalink
Ellen,
You are wrong. I disputed all the charges in a timely fashion. The charges were made without my permission, and I didn't personally receive any benefits from them. The credit card company disagreed. In hindsight, I might have handled it a bit differently. However, I didn't realize how dasterdly this would become. Your stated argument about proof here is typical, and makes sense. However, it isn't always as simple as that. My point in my post was to show the biased attitude, which it seems you share. That anyone accused of a debt in court must be guilty of that debt. It is a preconceived conclusion.
My story is an illustration. Sorry if you are tired of it. I think it makes a point that people should be aware of.
March 14, 2008 12:53 PM | Reply | Permalink
Oops, I meant to say Congressmen, not "Senators". It is true of the Senators as well, however. Remember when Louis Freeh lied about MBNA's Universal Default policy before a similar Senate hearing a number of years ago? He was acting as MBNA's general counsel at the time. No one seemed to care. Here is the link.
http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=154
(I can't figure out why providing links in comments has been changed so that we must manually use html code. The only way around it is to paste the entire link in the post. It would be nice to get that feature back.)
March 14, 2008 12:40 PM | Reply | Permalink
Jim: Keep fighting. No matter what "Ellen" or other blind CC-holders or CC-apologists say (btw, why someone would stand up FOR Visa is beyond me....). I do not have a Credit Card; life does exist beyond that Matrix.
For those who want further reading, CHECK OUT DAVE RAMSEY. The guy is incredible and offers the most systematic approach for NORMAL people (ie - he's not freakin' Suze Orman.)
Change? Congress will not fix it. I think CC Companies are the new Tobacco industry. There is a smoking gun out there about INTENDING to trap people (college students, the recently bankrupt, and single moms with 2-3 jobs are the tip of the iceburg...). Once it's found, we can sue and stop this usury.
WHISTLEBLOWERS! Please act now!
March 17, 2008 11:00 AM | Reply | Permalink
You mean Bachus. Baucus is one of the senators from Montana.
March 14, 2008 1:02 PM | Reply | Permalink
Thank you Ms. Warren. Very disappointing that Congress would agree to this behavior where it offers the Corporate Goliath to crush the complaining consumer and not allow any dissenting opinions.
Rep. Bachus (R-AL) has received over $124,000 from Commercial Banks for 2008 alone - 2 months!!. Plus $60,000 for his PAC from the banks.
Someone should have put that information on the record after his complaint!
March 14, 2008 1:05 PM | Reply | Permalink
financial situations they are embarrassed have difficulty admitting to their own failures in this area.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
I think your statement is so true.
Embarrassment and shame are what keeps many plodding along for years paying debt with loan shark interest and outrageous fees and not getting very far. Being held hostage!
It doesn't help that some well known financail "experts" are beating them over the head with Bible verses trying to make them feel guilty!
I no longer have my copy of Professor Warrns book All Your Worth, because I gave it to my son, but I
love what she has to say about someone deep in debt.
When push comes to shove, you need to put yourself and your family first!
If you can't pay off debt in a timely manner, consider filing bankruptcy.
March 14, 2008 4:48 PM | Reply | Permalink
Is there any hope of regulating the credit cards until there is campaign finance reform?
As long as there are so many people in congress who are being punted large sums of money from the credit card industry and their enablers, our legislators have a disincentive to fight for the fair treatment of consumers.
We are lucky to have people like Ms. Warren on our side. What a pity that our representatives have gone over to the dark side.
March 14, 2008 4:50 PM | Reply | Permalink
Contact me if you want any help analyzing the data. I won't hold my breath though waiting for the companies to release their data.
March 14, 2008 5:42 PM | Reply | Permalink
Who are the Democrats who agreed to this horror?
March 14, 2008 7:39 PM | Reply | Permalink
Elizabeth,
ask yourself how that could happen with Democrats in control.
March 14, 2008 8:59 PM | Reply | Permalink
If you don't like credit cards, don't get one. It really is as simple as that.
March 14, 2008 9:09 PM | Reply | Permalink
chemjeff,
simple minded solutions to complicatd problems is a tool offered by right wing radio.
Its not only easy access credit cards that the Corporate Sharks use to prey on the unsophisticated, now its sub prime mortgages.
One would need to be a Wharton PhD to be able to understand the fine print in Credit Card Company's contracts. And this doesn't include how they unilaterally change the rules in the middle of the game.
March 15, 2008 9:29 AM | Reply | Permalink
Actually, John. I think the solution is pretty simple. It is the implementation that isn't. It seems that our society is beginning to swallow the propoganda that credit cards are a necessary financial tool. They say "Life takes VISA". And when you try to live on cash, people scoff. So instead of being an outcast, we sign a one sided abusive adhesion contract that waives contstitutional rights, so we are part of the cool crowd.
In reality, I think they got it wrong. VISA takes life. We don't understand that until we experience the financial freedom we get from spending more wisely and avoiding the headaches of doing business with an abusive company.
Jim
http://www.thetruthaboutcredit.com
http://www.thejimanderson.com
March 15, 2008 3:18 PM | Reply | Permalink
Keep in mind Jim, Ellen has only one eye open. When one looks at things with one eye, one loses depth perception. All things look two dimensional. Actually, I think Ellen may have both eyes closed, becasuse the one she uses for this site isn't her's.
March 14, 2008 10:04 PM | Reply | Permalink
Your testimony was great.
Once again, consumers were broadsided. Without question, there are thousands of consumers who would be willing to sign a release in return for opportunity to tell their horror stories, but by making their objection at the last minute, the credit card companies were able to dodge a bullet.
Where are our politicians? As you suggest, disclosure is a two-way street. If consumers have to open their books, then the credit card companies should do the same. Why can't our elected officials serve the electorate instead of the moneyed interests?
March 14, 2008 10:09 PM | Reply | Permalink
Elizabeth, thank you for doing this work. I had no idea there were hearings going on about this issue. It's so important.
And to chemjeff: No, it's really not as simple as that. Please, please, consider not voicing such certainty about a subject you obviously know very little, if anything, about. Talk to people who do have experience, read books and magazines and blogs, walk a mile...
And if you are not inclined to do that, or don't want to, or can't, or don't feel you need to, then the next best thing you can do is keep your simple-minded, ignorant opinions to yourself.
March 14, 2008 11:48 PM | Reply | Permalink
They don't have credit cards in Canada?
March 15, 2008 6:46 AM | Reply | Permalink
No, it really is as simple as that. If you think credit cards are tools used by corporate sharks to keep us down, then don't get them. If you think credit card companies are evil, then don't do business with them.
But, if instead, you want the flexible credit terms and the convenience that credit cards offer, but you also think credit card companies are evil preying monsters, THAT'S when it gets complicated. In this case, you want to have your cake and eat it too. Well, good luck with that.
March 15, 2008 1:53 PM | Reply | Permalink
If the credit card companies aren't bad, then why do they feel they must hide information? Why are they foaming at the mouth (or having members of Congress do it for them) to keep consumers from testifying?
For me, the most important issue is, Why are they getting preferential treatment? In our "capitalism is great, we love capitalism" society, what bugs me most is that those who are hawking the virtues of capitalism are the ones that seem to get the most preferential treatment, i.e., huge tax breaks. If they really love competition as much as they profess, then why are they afraid of having a level playing field?
So why are the credit card companies getting preferential treatment? To me, that was the whole point of Ms. Warren's great post.
March 16, 2008 7:56 PM | Reply | Permalink
The solution to all the debt is to allow all debtors to PAYDOWN their debts INTEREST FREE.
The second solution is to CAP the total amount of interest one pays on a credit card debt. Once that interest paid cap is reached, the remaining debt is paid off interest free.
Our economy has only experienced rising debt, it's time to reign this in with incentives that reward people who have paid way too much in interest charges already.
ALL interest charges ARE TAXES.
http://www.credit-card-cap.com
March 16, 2008 12:24 AM | Reply | Permalink
I hope you never need to make a trip in a hurry, or have any kind of emergency, because with no plastic, you'll be up the creek and trying to wade home.
Simplistic is: 'don't get a credit card'.
Better is: 'don't put any more debt on your card than you can pay off easily'.
March 16, 2008 5:22 PM | Reply | Permalink
You don't need a credit card to travel. You can use a debit card, it works just as good. Some rental car companies have problems accepting debit cards, but that can be worked out. I have done it numerous times. Usually all they need is a deposit. I have never run into a problem with a hotel. The one thing a debit card will not do is get you into debt.
Using a credit card for emergencies is an invitation for financial disaster. Save 3 to 6 months of expenses for an emergency fund, and get rid of the credit card. If you use a credit card for emergencies, that is the very time that universal default triggers alert the credit card company to change the credit card terms under the default terms. All you need is a drop in your FICO score, which can happen with rising credit card balances.
March 16, 2008 6:38 PM | Reply | Permalink
The right thing to do is have an operating fund for quick-travel expenses, and an EMERGENCY fund for the real emergencies.
If you can counsel that people shouldn't put "too much debt" on a Card, then you can also counsel that they should have thought ahead to grow and maintain an Emergency Fund.
Credit Cards prey on people's real life emergencies and so-called "emergencies."
March 17, 2008 7:10 PM | Reply | Permalink
There are some protections using a credit card.
As an example , if you book a cruise and the co goes belly up, paying with a credit card you will get your money back. It's the law!
If you use a debit card, cash or a check you may or you may not.
I am not a fan of credit card co's and the banks that issue them . I am aware of their dirty tricks, but I am also aware of the protections .
March 16, 2008 9:41 PM | Reply | Permalink
I agree, some people argue this. It is really an illusion though. You still don't save money. If you paid cash for the cruise you mention, you have a claim against the cruise company. You can still get your money back. It might not be as easy, but the law is still on your side. The difference is that since you didn't get the cruise, you can dispute the charge on your credit card. In the big picture, since credit cards are so much more expensive to have, you still end up paying for that cruise in many other ways though you may not realize it, even if you don't get stiffed by a cruise company going out of business.
Some say you get identity theft protection. That isn't true either. These days the only way to protect your identity is to have a credit bureau alert, to catch the thief when they try to use your identity in some way that requires a credit check.
Don't be lulled into a false sense of security by the credit card protection myth propogated in their advertising.
March 16, 2008 10:09 PM | Reply | Permalink
Oh, I missed the debit card thing.
VISA has a Zero Liability policy that took effect April 4, 2000. The liability protection for debit cards is the same as with credit cards for any fraudulent transactions.
March 16, 2008 10:17 PM | Reply | Permalink
Millions of people use credit cards and have no problem. I had problems because I foolishly maxed out some cards . In my opinion, the punishment didn't fit the "crime" of my stupidity. But that is history now.
You seem to be convinced that everyone who gets a credit card is at some point going to get screwed.
That is simply not true.
I never saw the Frontline show about credit card co's, but I read the transcripts online.
I remember an intereview I read with Professor Warren. She was asked if she had a credit card and she said yes. I beleive she said she was one of the deadbeats who paid the balance every month and avoided paying interest.
I have six sisters who I have discussed credit cards with. Those who have them do the same as Professor Warren and many others and have not had any problems.
I think it is better to teach people to use credit cards responsibily, than to tell them to avoid them.
March 17, 2008 7:51 AM | Reply | Permalink
BabyBelle,
True, millions do use credit cards. Just because everyone does it doesn't make it wise. It is a trap, plain and simple. Given the contract you sign when you use them,there is no responsible use of credit cards. It is irresponsible to sign that agreement, I don't care who it is. You are taking an unnecessary risk. Do you really think it is wise to teach our children to sign agreements that waive constitutional rights? Or that place them at the mercy of a powerful company that can change the terms of the agreement to fit their purposes at any time? Is that teaching them to act responsibly? It may seem reasonable when everyone else is doing it, but that is dangerous reasoning. It is also the paradigm that has let our congressmen and government leaders slowly disregard the wishes of the people and have strayed from the values that made this country strong.
Look at what happened to Bear Stearns this weekend. We are primed now for a repeat of bank failures like the Panic of 1907. We didn't learn our lesson it seems. The difference now? The Federal Reserve will be positioned for bailouts. We'll print whatever money it takes, damn inflation, full speed ahead. We founded the Federal Reserve Bank in 1913 for just such purpose. Look where it led us in 1928. This isn't just about whether credit cards are financial tools that can be used responsibly. It is a much bigger economic issue.
March 17, 2008 10:31 AM | Reply | Permalink
I am not on any crusade to encourage or discourage anyone from using credit cards. It is a personal choice.
Since ones credit score can be improved by using
credit cards wisely , I think it is a good idea to have at least one and use it responsibility.
It may not be fair that credit scores are being used for so many things like some job hiring, renting an apt, getting a good mortgage rate and financinbg a car, but that's the way it is. Period!
Using a debit card is fine, but it won't help build a credit score.
March 17, 2008 10:53 AM | Reply | Permalink
BabyBelle,
You just keep the justifications coming. I've heard them all. The argument that a credit card is necessary to build credit is also a myth propogated by credit card advertising.
Remember, it is bankers telling you to borrow money so you can borrow more money. They are selling loans, the banker you are talking to is paid on commission. If people saved for large purchases, they wouldn't need to borrow money and those purchases would cost them a lot less.
The main argument for building a credit score is to buy a home. This is also a myth. You simply need to find a mortgage company that does actual underwriting and looks beyond your FICO or Beacon score. You will qualify if you have paid your rent on time for two years, been in the same career two years, have a large down payment (20% or better), have no other credit good or bad, and the payment is no more that 25% of your take home w-2 pay. If our society hadn't gone down the path of easy mortgages and tax deductions for mortgage interest, the prices of homes would not be so high and we could pay cash for them by saving. People used to do it that way less than 100 years ago. It is the debt mindset that has caused the inflation problem.
As for other reasons for a credit score, jobs that where you will be handling money, some insurance applications, rental housing, etc., are just looking to make sure you don't have bad credit. If you have a policy of not borrowing money, they will have more confidence in you than the highest FICO score. If you have a solid income, a landlord won't be bothered if you don't have a FICO score. He'll know you will be able to pay rent.
Everybody thinks they must borrow money to be able to qualify for a rental or get a job. In reality, it isn't true. It is a myth everyone buys into.
March 17, 2008 11:45 AM | Reply | Permalink
I live in a house, but if I didn't, I may have a difficult time renting an apt in this area. There are signs at some apt complexes that say
"If you don't have a credit score of at least 700 don't bother to apply here "
You don't want to hear about people who have used credit wisely for decades and never had a problem.
Like my sister in her late 60's.
You apparently think because YOU had a problem, that everyone else will! That is ridiclous!
I wonder if your problems with Citi bank were partly your own unwise use of credit and you are in deniel.
March 17, 2008 12:35 PM | Reply | Permalink
Signs like you see in your area are just expressions of concerns over people who have bad credit. If you have no BAD credit, you should be fine. Some landlords may be lazy and think the FICO score is the end all, but he is foolish. There are countless errors on the vast majority of credit reports.
People can go on how everyone is fine and cite the experiences of many people. However, the point is that everyone dismissing the kind of power they give banks over their lives is taking an uncessary risk. It seems we are like sheep. If we would think more clearly about what we are doing, and not put such a premium on convenience and "I want it now", we'd be better off in the long run. What "everyone" else does, affects me. It changes the economy. Thats why I can't stay silent about it.
My situation with Citibank came about due to an unwise decision to accept the open ended, one sided agreement for the account, as everyone else does. They have a "signature on file" policy that allows any company you buy something with the card, to keep your card on file and charge it later without your direct approval. In my case, I foolishly used my personal credit card for corporate expenses, which I reimbursed myself for. When the company went down, my personal credit card was charged for corporate obligations because of that policy. I personally did not owe those charges and the corporation had not authorized my purchase of them. Yes, it was unwise for me to think that the credit card company would hang me out to dry as collectors for corporate vendors, and pierce the corporate veil with this underhanded tactic. That was my mistake. I learn from my mistakes, and I care enough about other people to warn them so they can avoid the same mistakes. These things may not happen often, but when they do they can be devastating. Why put yourself at risk, for what, convenience? The risk is not worth it. The principle here is about who you are doing business with and the unknown contractual promises you are making with the tricks and traps in credit card agreements. If you don't see that, you very well may, someday.
It is your choice what you do. Just pay close attention to what you are obligating yourself to contractually. Contracts will be enforced, even if they conflict with common sense and decency, sometimes even the governing law. Don't make promises you can't keep. With credit cards, you are doing just that, even if you don't realize it. Ignorance is no defense in court.
March 17, 2008 2:13 PM | Reply | Permalink
You have an axe to grind with Citibank .
When I had CC trouble I asked many people their experiences with credit card co's. Those who
paid their balances in full every month had NO PROBLEMS.
Those who carried balances, paid late, and maxed out cards had problems.
I know the Ramsey folowers don't think a credit score is important, but others do. Think what you want about apt complexes not renting to people with a score lower than 700. It's a reality for many who are having a hard time finding a place to live.
And a low score has denied some people a job!
I don't currently have a credit card, but I am not ruling it out. I know what CC co's can do when when credit is used foolishly. And I know used wisely, they can help build a credit score which can affect many areas of a persons life, whether you believe it or not!
March 17, 2008 5:11 PM | Reply | Permalink
BABYBELLE - Rule out getting a card. Worshipping a Credit Score as you do in your last sentence, is no reason to accept that much risk into your life, "whether you believe it or not".
PS - Jim Anderson: Keep up the fight!!
March 17, 2008 6:03 PM | Reply | Permalink
Oh the drama! LOL!
Worshipping a credit score ???? Since when?
Do you know me? I don't recall ever meeting you. ROTFL!!!
I will not rule out getting a credit card.
March 17, 2008 6:44 PM | Reply | Permalink
If I worship a credit score, maybe you worship Dave Ramsey ?
Why does Ramsey accept credit cards on his website? Oh, he says he doesn't but Visa and MC will not allow a merchant to only accecp debit cards.
So Ramsey has to pay a hefty merchant fee to Visa/MC to sell his junk online. And all merchants who accept plastic pass the cost onto the consumer! Ah yes, Dave... always looking out for his lemmings! LOL!
He could eliminate plastic and only take echecks, but face it, Ramsey is looking out for himself.
When you put down Suze Orman, you sound like a
typical narrow minded Ramsey sucker!
Ms. Orman got to the top on her own. She didn't file bakruptcy like Ramsey did, and then tell followers to eat beans and rice! She has a hell of a lot more good advice for people than Ramsey ever will!
March 17, 2008 6:56 PM | Reply | Permalink
BabyBelle,
Suzy Orman is sponsored by the makers of the FICO Score, Fair Isaac Corporation. It is no wonder she preaches FICO score so strongly. She got where she is knowing how to promote to the media. I met her once at a CEO conference with Michael Gerber of E-Myth, and I found her quite arrogant and self righteous. Her attitude is really making herself the center of attention, she doesn't really care about other people as much as you might think. Listen to the tone she uses when she gives advice. It makes one feel diminished.
http://www.hillisslacksettlement.com/ is a website you should take a look at. Suzy Orman and Fair Isaac have just settled a class action lawsuit against them for violating the Federal Credit Repair Organizations Act and similar laws.
Dave Ramsey is quite a contrast. He tells you like it is, but he doesn't talk down to you. He genuinely cares about people. He doesn't have sponsorship deals like Ms. Orman, dividing his loyalties.
March 17, 2008 8:10 PM | Reply | Permalink
If you want to know what Dave Ramsey has to say about accepting VISA and Mastercard on his website you can read his comments here:
http://www.daveramsey.com/shop/_W26C113.cfm#debitcardpolicy
March 17, 2008 8:19 PM | Reply | Permalink
I do not respect Dave Ramsey . He doesn't talk down to people? Who are you kidding?
I think he is a hypocrite.
The only reason he tells his followers not to get a credit card is because he has so little faith in those who follow him that he doesn't belive they have the discipline or smarts to use credit wisely!
Save your time. I have no interest in reading anything on Ramseys site.
I am not interested in his garbage!
March 17, 2008 9:31 PM | Reply | Permalink
Interesting response.
I'm not trying to fight with you, it doesn't matter much to me what you do. I'm just encouraging making an informed decision, based on the facts. Weigh the evidence. No one is perfect, no one has the panacea for all problems.
Have a happy Easter. ;-)
March 17, 2008 11:05 PM | Reply | Permalink
I find it difficult to take what you write seriously.
You seem have an ax to grind with Citibank so you assume that anyone who uses a credit card is at risk.. even those who have used credit cards wisely for decades and have only benefited from them.
Those benefits being a high credit score which led to great rates for a mortgage and other things they wanted to finance.
But then, a high credit score is of no importance to those who follow Ramsey.
March 18, 2008 12:20 AM | Reply | Permalink
You don't understand. I'm done fighting Citibank, that matter is settled, but in the process I learned something important about the legalities of credit cards in general.
I've learned how fighting for an accurate credit record is futile because the credit bureaus work for the banks, not the consumers. The credit score is designed to encourage borrowing. I just hope you are lucky enough to not get trapped in the web they weave.
March 18, 2008 9:50 AM | Reply | Permalink
Here are problems with credit cards taken from Elizabeth Warren's published testimony in this hearing.
1. Constantly advancing due dates each month and other due date tricks. (Bankrate.com survey found nearly half of all credit card holders missed payments in 2006, the latest info available.)
2. Double-cycle billing, collecting interest on balances already paid
3. Imposition of repeated fees for one single credit limit violation
4. Always applying payments to lower interest balances first, regardless of what came first.
5. Disclosure requirements are used to obfuscate, not to inform.
6. The typical agreement is over 30 pages of incomprehensible text, to discourage anyone from reading it, or understanding it.
7. Referencing complex and technical terms referring to interest rate calculations for pages, only to conclude that they reserve to change the terms at any time for any reason.
8. Bank of America, Capital One, Citibank, and J.P. Morgan Chase have all testified before congress that they will not engage in universal default, yet in Feb. 2008 issue of Money magazine observed the five major issuers (80% of the market) officially practiced it.
The agreements violate basic contract law, yet the courts will still enforce these provisions.
1. Using universal default and any-time, any-reason re-pricing.
2. Not giving fair notice of interest rate increases
3. Refusing to let card applicants read the terms of the agreement before the card is issued (and I say hiding material terms from the language of the agreement through open ended clauses.)
4. Redefining the ordinary meaning of terms such as "fixed rate" and "prime rate" to deceive cardholders with hidden meanings.
5. Unlimited ability to change the credit limit without the consent of the customer.
Sound reasonable enough to carry a credit card? Think they'll never enforce those terms? Think again. These companies will charge a late fee for a payment that is one day late, default the account under universal default terms, and raise the interest to the default terms. If that puts the account over its credit limit, they charge over limit fees - all for a payment that is credited to the account one day late, sometimes at the negligence of the creditcard company themselves.
March 18, 2008 12:21 PM | Reply | Permalink
Guess what?? According to interviews Professor Warren has done, she uses credit cards!!!
There is a smart way to use them !!!!!
Millions of people know that and have reaped the benefits!
March 18, 2008 1:05 PM | Reply | Permalink
One should weigh the evidence. Maybe Elizabeth Warren should reconsider, especially given the news in the credit markets lately. As a leader in the effort to protect consumers against these abusive terms, she is sending a mixed message by agreeing to them herself. Case in point. You are using her as justification. If you have children and you use a credit card, you are teaching them it is okay to agree to these kinds of terms as well. Is it no wonder that we are building a country where people become executives of companies like Enron and feel justified violating very basic principles like this because thinking a big company like Enron would never get into that kind of trouble?
Look at what happened to Bear Stearns this week. The implications of this is far reaching. We have stretched the concept of lending beyond reason. As a result the world is losing confidence in the dollar. Take a look at this recent report http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/17/ccview117.xml where foreign investors are shunning U.S. Treasury notes. It is all connected. This is the very kind of thing that preceded the Great Depression. Everyone is poised to pay the price for this foolishness, even if they didn't take part.
March 18, 2008 1:35 PM | Reply | Permalink
I believe Professor Warren is trying her best to change the abusive tactics of the CC industry to help all of us, including our children.
She is not sending a mixed message.
Your pal Ramsey gives a mixed message when he rails against the evils of credit card co's and yet pays them a merchants fee in order to make it easier to sell more merchandise.
Professor Warren has NEVER given the message that we should all just stop using credit cards. They are here to stay whether you, Ramsey or anyone else likes it.
It's much better to teach a child to use them responsibility and warn them of the dangers when they fail to do so, than to tell them to avoid them all together.
But of course the best teaching in the world is by example, and yet, we all know sometimes our children go astray. But each parent must decide for themself what is best.
March 18, 2008 2:32 PM | Reply | Permalink
I see a mixed message. The most effective way to create change in a company's offerings is to boycott what you don't like. Buying it is tacit approval of it.
You're pretty harsh on Dave Ramsey, and then refusing to read his reasoning for offering to let people use debit cards on his website. It certainly isn't ideal for his message. At least Dave Ramsey has not had any class action suits filed against him. I see that as a bit more serious.
Time will tell what the truth really is about all this.
March 18, 2008 6:16 PM | Reply | Permalink
I see a mixed message. The most effective way to create change in a company's offerings is to boycott what you don't like. Buying it is tacit approval of it.
You're pretty harsh on Dave Ramsey, and then refusing to read his reasoning for offering to let people use debit cards on his website. It certainly isn't ideal for his message. At least Dave Ramsey has not had any class action suits filed against him. I see that as a bit more serious.
Time will tell what the truth really is about all this.
March 18, 2008 6:16 PM | Reply | Permalink
Well, maybe we should all boycott businesses that accept credit cards. Only problem with that is there would be very few places to shop!
Since we all pay these merchant fees in the form of higher prices why not use a rewards credit card if one is able to pay the balance off every month and get some of your money back ?
Maybe that is one of the reasons Professor Warren uses a credit card. I don't know.
I don't have as much faith in Ramsey as you apparently do. I believe he is very capable of shading the truth. I have been to his website and have no reason to waste anymore time there.
The fact is that if a merchant accepts debit cards ,
Visa and MC will not allow them to only accept
debit cards. And even if Ramsey is making sure
that nobody gets by with using a credit card, he is still paying Visa MC a fee. If he is going to rail about the evils of these co's then take the money he is paying them and give it to a charity!
Ramsey has made some very harsh comments about
people who have filed bankruptcy.
I won't go into detail because I know that his followers always defend him. It was OK for Ramsey to file but his followers are quick to judge anyone else who files. Where do they get their attitudes? From Ramsey I am sure! Maybe you are the exception but I have encountered many of his faithful following online who are truley disgusting human beings!
March 18, 2008 7:44 PM | Reply | Permalink
Don't boycott all businesses that accept credit cards, thats ridiculous. Just don't use credit cards, thats what I meant. Merchant accounts are so widely used precisely because customers use them. If more people paid cash, businesses would adjust. They don't necessarily like paying the discount fees any more than we do. But since people spend 12% to 18% more than if they used cash, it makes it worth it to them. (this is a selling point that VISA and Mastercard use to get merchants to sign up.)
Don't kid yourself, you pay for the rewards many times over. I'm not so sure that the merchants increase their prices to cover the merchant fees. They increase their sales by offering the convenience of the merchant accounts by 12% to 18% as I said. That more than makes up for the fees.
I know everyone thinks VISA and Mastercard are like the Borg in Star Trek, "resistance is futile, your culture will adapt to service us." They are a business just like all the others. Consumers can band together and get what they want. Resistance is not futile. If they played fair, I wouldn't be so against them, and would agree that there could be a responsible use of the cards. But that isn't the case right now.
I'm sorry if Dave Ramsey offended you with a statement about filing bankruptcy. Since he has been through it, he has learned a lesson and feels strongly about it. Its tough. It doesn't have to be that hard. There are usually better solutions, but of course each case has its own issues.
March 19, 2008 1:20 AM | Reply | Permalink
All this sticking-up for VISA/MC & the mysterious, supposedly beneficial wonders of the Credit Score is depressing. It's like advocating that cigarettes and McDonald's as a nutritious and healthy lifestyle for kids.
$100 bucks to whoever can explain in 500 words or less how the FICO credit score is calculated.
JIM: I've said it before, and I'll say it again, you're awesome. I will now read your blog - www.thetruthaboutcredit.com - regularly... Favorited.
March 19, 2008 1:50 PM | Reply | Permalink
Thanks for the moral support. :-) Sometimes I do feel like I'm swimming up stream. It is amazing how well VISA and MCs marketing has been effective. Any lie is believable if you hear it enough.
March 19, 2008 2:05 PM | Reply | Permalink
You are so incredibly childish!
I haven't seen any posts where anyone is sticking up for Visa and MC.
Like it or not, a credit score is important for many areas of life!
Oh, BTW, your comment about me worshing a credit score is so far out.
I am a 60 year old woman who got my credit sacore for the first time in my life several weeks ago. And the only reason I got it was because I got a good deal at my bank to see the score for less than $6.00.
That sure makes me someone who worships my score! LOL!
You are a true Ramsey Stepford child!
March 19, 2008 2:55 PM | Reply | Permalink
AGAIN, I THROUGH DOWN THE GAUNTLET: $1,000 bucks to anyone who can explain in 1000 words or less how the FICO credit score is calculated.
ANYWAY: Come on, BabyBelle, I'm not trying to needle you unnecessarily, seriously. On another post last week I think I sent you a complimentary post actually...
But I'm not going to fall for the CC company advertising tricks and say that FICO and using "a bit of responsible" credit is OK. It's not. Risk is risk. People should not and can not invite it into their lives.
March 19, 2008 9:59 PM | Reply | Permalink
I guess alot of people are kidding themself getting their rewards according to you.
I don't think they agree with that!
Just like that sign at that apt copmplex that says don't apply unless you have a credit score of at least 700,
you just brush things off if you don't agree with them.
Ramsey may have learned his lesson from his bankruptcy, and that is good. But his comments in some of his interviews leave the impression that he doesn't believe anyone else can learn their lesson. No, they need to go to the Ramsey plan. Pay pentance in the form of eating beans and rice , selling everything they own , that even the kids wonder if you are going to sell them. Oh, and get 2, 3 or even four jobs! Then if all that doesn;t get you out of debt, then maybe you can file BK.
Sometimes filing bankruptcy CAN be the best option. One needs to put themself and their family first! They can always repay creditors once they get back on their feet! Oh, and elimate
all the loan shark interest and outrageous fees.
March 19, 2008 3:05 PM | Reply | Permalink
BabyBelle,
Well, I suppose you haven't been reading my responses. I have given you a ton of ways that it costs you to have a credit card. In addition, according to Consumer Reports, 75% of airline miles are never redeemed. You see, the premiums are paid for one way or another. The credit card companies make their investment in these premiums back in excessive fees and interest. Deadbeats are simply ticking time bombs, and the credit card company knows it. Accounts are treated as emergency funds. All that has to happen is a medical catastrophe that puts you on disability, for example. Medical bills mount, no job, and limited insurance. Have you seen the movie "Maxed Out"? They also know that you will spend more impulsively (12% to 18% more)if you carry a card, so they still make money from you, though nothing like those who carry a balance. The math is complicated, that way it is difficult for people to make the connection. If you look at the big picture, you will see that you are worse off in the end, and VISA is laughing all the way to the bank. You might seem to be benefiting today, but it is an illusion.
A cavalier attitude toward bankruptcy makes the case for those Senators who passed the Bankruptcy Reform Act of 2005. If you really believe it is an easier way to go, you are unintentially implying that the House and Senate did the right thing making it into law. According to the Bankruptcy Court statistics over 75% of bankruptcies fall out of bankruptcy from repeated default of the terms of the bankruptcy, before the new law. The new law made the requirements even tougher to maintain the payments in bankruptcy. So tough that you would literally live on beans and rice, likely in a homeless shelter. The new law ignores what a family realistically needs. With that new standard, I'd expect the failures to be close to 100%. Bankruptcy is certainly not the way to take care of your family. The courts are not given much latitude anymore and some justices have protested. The law is very tough and unforgiving. If you had it easy, you are lucky. Your defense of it as a good option conflicts with Elizabeth Warren's efforts. It is intended to be a last resort.
March 19, 2008 3:51 PM | Reply | Permalink
You must not be reading what I write or else you misunderstood! . I said nothing to indicate a cavalier attitude! I said a person MUST put themself and their family first. And if that means filing bankruptrcy then so be it!
If your mission in life is to prevent people from using credit cards, you are probaly wasting your time.
You haven;t sold me! I am still convinced you have an ax to grind with Citibank.
It would be much more helpful to teach people how to use credit responsibily and build a good credit score!
That is what reponsible financial counselors do!
March 19, 2008 4:10 PM | Reply | Permalink
Denial is not just a river in Egypt. Good luck. :) We've had quite a long conversation. Thanks.
March 19, 2008 6:21 PM | Reply | Permalink
Denial is not just a river in Egypt.
~~~~~
You should know Jim!
You should know! LOL!
March 19, 2008 6:40 PM | Reply | Permalink
Famous last words... "It'll never happen to me"
March 19, 2008 7:54 PM | Reply | Permalink
I did not post on this thread to get advice.
I find your constant warnings about the dangers of credit to be very annoying.
I believe most of the people that post at TPM are adults and can make their own decisions.
If and when I need your advice, I will ask.
March 20, 2008 12:48 PM | Reply | Permalink
I did not post on this thread to get advice.
Neither did I.
I believe most of the people that post at TPM are adults and can make their own decisions.
I agree.
March 22, 2008 2:03 PM | Reply | Permalink