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There have been several diaries here of late concerning Citigroup and its essentially "predatory" credit card practices.  Certainly Citigroup is not alone in its practices, although at the present time they may be one of the worst.

Today's news reveals new "regulation" being offered by the Federal Reserve.  My first thought on reading about the regulations was:  "What the hell took them so long."

Personally, I have advocated for Congress actually legislating on the issue, but first things first...

What is the news coming out of the Fed?

The new regulation is expected to:

-- Prohibit issuers from raising interest rates on existing debt except in certain circumstances, such as when promotional rates expire or when payments are at least 30 days late.

-- Require card issuers to apply monthly payments that exceed the required minimum at least partly to higher-rate card debt. Currently, most issuers apply payments first to lower-rate debt, causing consumers to pay more finance charges.

-- Bar banks from charging a late fee unless they've given borrowers a "reasonable" amount of time to pay. (The rule is expected to say that 21 days will be considered reasonable.) Some consumers complain that by the time they get their bill, they only have a few days to pay it. If they're late, they're hit with a fee of up to $39, and charged a higher interest rate.

Now, in the current credit crunch, with rising unemployment, excessive debit, and the American consumer essentially sinking while the "experts" stumble from attempting to save one industry to the next...when would this new regulation actually take effect?  Hmm...Not until JULY, 2010!  Wow, the Fed is really putting credit card companies on notice hey?

What I advocate is for immediate legislation that will put a Federal usury limit on credit card debt...I suggest 12% as a cap (I know this is high, but I am just trying to be reasonable in light of some companies who charge as much as 35%).  I suggest that interest be assessed per annum, rather than "compound" (compound enables a credit card company to add the interest to your principal and then essentially charge interest on interest) I suggest there be no late fees or over the limit fees over the sum of $10.00.  I suggest that there be no reduction in the "limit" that would cause any consumer to be "over the limit".  I suggest that this legislation be enacted NOW.

An additional thought would be that any credit card company or banking industry receiving Federal taxpayer dollars charge consumers the exact amount of interest they are paying the Federal Government for their bailout money.  As a debtor nation, real people should be given first priority, rather than the institutions who aided and abetted creating that debt...

Originally posted to LtdEdishn on Thu Dec 18, 2008 at 06:41 PM PST.

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Comment Preferences

  •  As always... (13+ / 0-)

    offer your thoughts, comments, or even expertise on the topic...

  •  18 months until implementation?!?!?! WTF?! (12+ / 0-)

    It doesn't take THAT long to change computer programs.

    And until July 2010 rates will be going to what?  37%?

    •  Credit card companies (11+ / 0-)

      can now change the terms of their card with about a 15 day notice.  It appears the Fed desires that "notice" on a change for the same companies requires at least 18 months.  

      While I don't suggest the new "regulations" are bad, certainly they could be "better" for the consumer, as well as more immediate, if not enacted long ago.  We need Congressional Action, and we need it NOW.

    •  They Don't Want 10 Million Depression Defaulters (2+ / 0-)
      Recommended by:
      blueyedace2, LtdEdishn

      coming soon to get away Scot free.

      Personally, I'm all for Scot free.
      Image Hosted by

      We are called to speak for the weak, for the voiceless, for victims of our nation and for those it calls enemy.... --ML King "Beyond Vietnam"

      by Gooserock on Thu Dec 18, 2008 at 06:59:41 PM PST

      [ Parent ]

    •  On the news tonight (0+ / 0-)

      they said that the time lag is due to the credit card companies having to completely revise their business model in order to acclimatize themselves to the new changes. I thought that a pretty overt statement that their present business model is based upon usury and malpractice.

      •  Sad but true (1+ / 0-)
        Recommended by:

        The big card issuers make most of their money on the people who do not pay on time. There are going to be huge changes in the cc industry because of this and many of them will be painful to the average consumer.

        Now, that does not mean I don't think the cc companies should follow rules and play fair - but this will hurt many people who rely on cheap money to manage their debt, or those who are bad credit risks who need to use a credit card for emergency spending.

        What's on the horizon?

        No more balance transfer offers. If they can't make money by increasing rates on those who make late payments and by paying off the low interest rate balances first, you won't be able to move a balance to another card and get 6 months at 0%.

        Credit limits will be drastically lowered for high risk borrowers and they will pay higher interest rates. Rate and limit will be directly tied to risk. The outrageous rates and fees make cc's a profitable business, even with huge chargeoffs. That is changing.

        Because no one included a rate cap in these reg changes, I would guess somewhere around 18% is going to be the new standard APR if you have good credit. That's what people paid back in the days when credit cards didn't come in cracker jack boxes (like the 1980s) and the companies had to make money on interest, not fees.

        Finally, there is a lot of reprogramming needed for computer processing systems and statements. So watch your statements for errors in the months following the changes.

        They always say time changes things, but you actually have to change them yourself. - Andy Warhol

        by 1864 House on Thu Dec 18, 2008 at 08:46:08 PM PST

        [ Parent ]

    •  There is no good reason (0+ / 0-)

      for this to wait 18 months. It does nothing to help people and the economy right now!

      In reality, the changes should not only be immediate, they should be retro-active, rolling back the past several years of immoral changes.

  •  Pat Moynihan... (6+ / 0-)

    proposed limiting the excess of bank credit card policies in the late 1980s, I believe.

    Prime rate went up to close to 20% in the late sixties, and banks always charged interest at prime plus a percentage.  This was fine when prime was 5% but they never lowered it from its peak.

    The banks notified Moynihan that if his bill passes, about fifty percent or more of banks revenue will end. I think it was even more.

    In other words the banks live on those who can't make their minimum payment and pay these outragious rates.

    And we are keeping banks on life support.  Well, not their execs and shareholders.

    But don't get me started.......

  •  "Usury" limits (2+ / 0-)
    Recommended by:
    Justanothernyer, CanyonWren

    Won't really fly. These other things are more or less common sense, but restricting credit card issuers to 12% will simply deny credit to people who need it most and don't qualify for lower interest rates.

    That is why:

    Prohibit issuers from raising interest rates on existing debt except in certain circumstances, such as when promotional rates expire or when payments are at least 30 days late.

    ...this is a problem, too. Since the CC company no longer has this remedy at their disposal, they will simply either charge you a higher "fixed" interest rate, or simply deny you credit if they consider you a risk. No use allowing you to have access to $20,000 at a fixed 10% interest rate if you suddenly become a huge credit risk.

    In short, every regulation on credit cards, justified or otherwise, is something that someone will have to pay for somehow.

    •  I have noticed that... (2+ / 0-)
      Recommended by:
      Mangrove Blues, Econaut

      "layaway" has been something that most retail businesses are reconsidering or enacting.  This is "credit" for people who need it most, without exactly offering "credit" at interest.  An old thought that is certainly worth re-exploring.

      As for "credit to people who need it most", what do you suppose this credit is needed for?  If one cannot afford shelter, should credit be enabled at interest, leaving this for private enterprise to solve?  If one cannot afford food, or heat, or appropriate clothing, should credit be enabled at interest, leaving this for private enterprise to solve?

      I must admit, I don't understand this drive for providing "credit to people who need it most", when I thought that government existed for ensuring essential needs were met by government at a time when an individual could not meet his or her needs by any other means.

      •  If you're going to argue... (2+ / 0-)
        Recommended by:
        LtdEdishn, Justanothernyer

        ...that the government should be more involved with social welfare, I can't help but agree. I'm just pointing out that there's another side to the meme that these regulations reign in "abusive" credit card practices, it also equates to the government passing a law saying that certain people are to be denied access to credit by government fiat, even people who would otherwise have qualified on the free market.

        •  Would you agree that loan sharking... (3+ / 0-)
          Recommended by:
          Sparhawk, palantir, Econaut

          should be illegal?  I mean the charging of excessive interest rates...and then added fees for late charges and over the limit fees?  Charging compound interest of 35% or even 28% is loan sharking in my humble opinion.  

          Reducing someone's credit limit to an amount belong what they currently owe, and then charging them a "fee" plus increased interest is loan sharking imho.  

          There have to be some consumer protections here, and they must be offered at a national level.  State laws no longer apply and it is time for Federal action.

          In the total picture, we cannot bail out banks and credit card companies, while leaving consumers hanging out to dry.  For essential needs, this is where I believe people shouldn't rely on private industry "credit" and where government should really be working...

          •  Define "excessive" (2+ / 0-)
            Recommended by:
            LtdEdishn, Justanothernyer

            One man's loan sharking is another man's lifeline.

            Without this kind of loan, the single mother in Chicago in August at 100 degrees whose air conditioner breaks will not be able to get one if she has bad credit, and she and her kids will have to sit in an insanely hot apartment.

            Anti-"excessive" lending laws will simply remove from her the option of getting a loan where without them she would have had that option.

            See where I'm coming from? Sure, I'd like the government to help her out as well, but we don't live in that world now and probably won't all through Obama's term.

            •  Oddly enough... (0+ / 0-)

              people lived from BC times until the mid 20th century without air do you suppose they survived?

              Honestly, I don't believe you see where I am coming from.  You started your response with people who need it most being denied "credit".  I suggest that what people need "most" in times of need is what government is for...

              Then again, I suggest that when people borrow on credit, they should not be scammed into ever changing credit terms, there should be a cap in the rates charged, as well as the "fees" associated with the credit terms, that terms should not be randomly changed.

              •  Well (1+ / 0-)
                Recommended by:

                people lived from BC times until the mid 20th century without air do you suppose they survived?

                A lot of people died is how they survived, but that's beside the point.

                Anyway, this bill doesn't provide any more government help to people who need credit, so it only removes options in the (IMO vain) hope of solving these problems later. Your problem here isn't credit cards by your own admission, your problem is that the government isn't doing enough to help people. If so, pass that bill.

                Then again, I suggest that when people borrow on credit, they should not be scammed into ever changing credit terms

                Credit card agreements are pretty standard, actually.

                there should be a cap in the rates charged

                Again, you are telling people by government fiat that they will not be allowed to have a credit card. If you are OK with this, that's fine I guess.

                as well as the "fees" associated with the credit terms, that terms should not be randomly changed.

                There are certainly appropriate regulations to be placed on credit card companies, in my opinion, mostly around forcing them to be transparent about the rates they charge, and full disclosure of other points on the credit agreement.

                •  I will not engage tonight... (2+ / 0-)
                  Recommended by:
                  Sparhawk, Econaut

                  about air conditioning versus heating, leaving this for someone else to debate (although I still believe you are inaccurate <g>).

                  If credit card agreements are pretty standard, the standard is that the terms can be changed whenever the issuer darn well pleases.  The only message I am offering is that there should be a usury limit as well as regulation concerning fees associated with usage.

                  You cannot be "transparent" about rates if the rates can be changed at will.

                  •  Maybe it's not so good to extend credit (0+ / 0-)

                    to people who can't afford it.  Especially credit that can't be discharged in bankruptcy.

                    If that mom who needs the A/C needs it so badly, we should help her get it.  As a general rule, however, someone who can't afford a hundred bucks for a small window unit sure as hell can't afford 100 bucks plus 35% interest.  Plus penalties and fees.

                    What the hell is this individual doing with credit anyway?  Look, I have been so poor that I hocked a radio several times for ten bucks in order to eat.  That was actually all I had at the time even worth ten bucks.  The vig was two bucks a week, so I never left it in more than a week.  Dunno what 20% a week adds up to in APR but it's pretty serious.

                    Credit isn't a human right; for lower income people, it's a trap, often an inescapable trap.

                    Ninth amendment: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

                    by UneasyOne on Thu Dec 18, 2008 at 09:08:56 PM PST

                    [ Parent ]

                    •  Re (0+ / 0-)

                      Credit isn't a human right; for lower income people, it's a trap, often an inescapable trap.

                      I never claimed it is. I just think it's generally inappropriate for the government to pass laws denying people credit "for their own good".

                      And I know you didn't mean it that way, but talking about "lower income" people's difficulties with credit comes across as elitist, considering a lot of middle class and rich people have problems with credit as well.

              •  I think people survived (1+ / 0-)
                Recommended by:

                bcause they didn't live in airless apartments in concrete jungles with windows that are painted shut.

                Temps in big cities do not go down at night because of the retained heat in the concrete and asphalt. Temps in the country drop considerably at night, and my guess is in BC times, most people lived in what could be considered "rural" settings.

                They always say time changes things, but you actually have to change them yourself. - Andy Warhol

                by 1864 House on Thu Dec 18, 2008 at 08:52:32 PM PST

                [ Parent ]

              •  People also survived (1+ / 0-)
                Recommended by:
                1864 House

                without antibiotics...

                Ever try a Texas summer without a/c?  People actually do die.  Older houses were designed for flow-through ventilation and had attic fans, etc. My uncle's house in Houston was like that and it wasn't so bad.  Newer houses are not built to those standards.  

                •  In Houston, we have cooling centers (0+ / 0-)

                  Also many programs to provide A/Cs to the poor.  Paying for the electricity is a bigger problem - since thanks to our Repuke legislature, we have electricity deregulation - and the highest electricity prices in the nation.  (The good ol' Texas lege and Gov Goodhair visited this boon on us right after dereg in Cal enabled Enron to rip off that entire state.)  There are also programs to deal with that - and I am in favor of beefing them up.

                  Extending credit to these people at usurious rates is throwing an anchor to a drowning person.

                  Ninth amendment: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

                  by UneasyOne on Thu Dec 18, 2008 at 09:30:34 PM PST

                  [ Parent ]

      •  Example of credit (2+ / 0-)
        Recommended by:
        Sparhawk, 1864 House

        needed most--a single mom who is making it, barely, but has a major car repair bill of $1,000.  She needs to car to get to work but doesn't have that kind of cash on hand.  Being able to charge it, even at high interest rates, is better than the alternative.  How do I know?  I have been that single mom and survived with credit to finance emergencies.  People will say that everyone should have a nice savings account to draw from, but that isn't always possible.

        •  I've been in that exact situation many years ago (1+ / 0-)
          Recommended by:

          And yes, it's practically impossible to recover, but when the baby needs the pink medicine for her ear infection and the car doesn't work and it's Minnesota in the winter and the child support check bounced and the only way to survive until payday is a credit card... you do what you have to do.

          They always say time changes things, but you actually have to change them yourself. - Andy Warhol

          by 1864 House on Thu Dec 18, 2008 at 09:17:45 PM PST

          [ Parent ]

          •  Maybe every American citizen with a job (1+ / 0-)
            Recommended by:
            1864 House

            should have an emergency line of credit (of say $1,000 - adjusted annually for inflation) provided by the government at say, the inflation rate plus 3%.

            Direct deposit would be required, with provisions for a small payment to be deducted as soon as it hits the bank.  These loans should be payable early without fee or penalty - and payment of all or part of the loan restores the credit line.

            Now that CC debt can't be discharged in bankruptcy (nor can school loans - they are forever), if you need em for emergencies, you can't afford them.  Every borrower in my scheme would have one month (after starting a new job) to set up direct deposit, banks would be notified that payments were due.  If after one month, the employee did not set up the DD account standard garnishment would apply.  (Garnishment is a stigma with many employers, this plan would avoid that.)

            The most desperate among us should not be lured into a credit trap with payday loans and usurious credit cards.

            Ninth amendment: The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

            by UneasyOne on Thu Dec 18, 2008 at 09:55:14 PM PST

            [ Parent ]

  •  It is absurd that there would even have to be (11+ / 0-)

    a law that prohibits cc companies from raising the interest rate of someone who has never made a late payment. But that is what this regulation is proposing. And does not apply to those who make late payments. And seriously, what could they possibly need to wait till the middle of 2010 for? Half their customers may have declared bankruptcy by then.

    •  CC companies (2+ / 0-)
      Recommended by:
      Justanothernyer, CanyonWren

      Do this so they can limit their risk and exposure. CC companies will issue much smaller lines without this ability (which I don't think is necessarily bad, just don't complain when there are more "X bank is cutting credit lines" headlines.

    •  Yeah (5+ / 0-)

      Half their customers may have declared bankruptcy by then.

      Or if not that, they'll likely have been late on at least one payment so that the new regulations won't be applicable.

      "A country that doesn't make anything doesn't need a financial sector as there is nothing to finance." Paul Craig Roberts

      by Sagebrush Bob on Thu Dec 18, 2008 at 06:56:32 PM PST

      [ Parent ]

      •  Who can't make... (0+ / 0-)

        ...a minimum credit card payment? On a ten thousand dollar balance it's $200?!?

        •  not if your interest rate is 28% nt (0+ / 0-)
        •  ME ! I am an official Poverty Level Worker ! (3+ / 0-)
          Recommended by:
          LtdEdishn, Econaut, Black Mare

          $200 is nearly one whole paycheck. Thank god I had the brains to NEVER apply for a credit card. Of course I am unable to travel (can't rent a car , hotel room, or buy a plane ticket) (essentially it is financial industry induced travel restrictions not unlike the type dictatorships impose on people)or respond to financial emergencies. I think the whole point of the credit crisis is being missed here. People do not need better credit they need better pay so that they do not need credit. This whole system of not paying people living wages and then extending loan shark credit is a giant version of "I owe my soul to the company store" Those who do not study history are doomed to repeat it. And those who say "It can,t happen here" will live

        •  Someone who has a deceased mother and a (0+ / 0-)

          total fuckhead for a brother.  Said  brother swoops into family business he knows nothing of since he's never been part of family activities.  Brother threatens quadriplegic sister.  Sister no longer gets $300/month paid towards bills, formerly provided by mother.

          Sister calls credit card company to renegotiate payment amount.  Bank says no.  Sister warns bank it will not get paid.  Bank still says no.  Sister stops paying bank in full.  Interest rises from 9.9 to 29.9.  Sister stops paying anything at all.

          There is absolutely NO downside to this.  Once your credit rating is gone, there is no reason on earth ever to pay the bills which for years were paid promptly and perfectly.  It'll all be over in 7 years, which pass quickly.

          Am I advocating this?  After this bank bailout, hell yes.

    •  Here's a neat hat trick: (4+ / 0-)
      Recommended by:
      LtdEdishn, palantir, Econaut, eXtina

      Because of the credit squeeze, B of A lower my available credit by several thousand dollars, which in turn increased the percentage of available credit to debt ratio causing my credit rating to be lowered and as a result they increase the monthly interest rate. All this while never missing a payment.  The big kicker is B of A was given a few billion of our tax dollars in the bailout.  

      I'll tell you, we've been robbed.

      •  It is more than robbed... (2+ / 0-)
        Recommended by:
        goodasgold, eXtina

        there is a collusion thought to all of this, in that other institutions toward whom you might owe money are watching your credit rating, and your obligations toward other institutions, and might unexpectedly lower your limit, raise your interest, or even cut off your credit with very limited notice.

        The three credit reporting agencies seemingly work together.  It is easier for a creditor to give you a negative than it is for a consumer to set things right.  

        We need real action, and while regulatory helps somewhat, a delay of 19 months doesn't do this matter justice.  Congressional action is necessary.  I have offered some thoughts on what I believe is appropriate...

  •  how about - if your bank gets bailout money (4+ / 0-)
    Recommended by:
    LtdEdishn, wbr, goodasgold, eXtina

    you have to restructure all the debt you are owed and lower the interest rate on it

  •  Assholes! (9+ / 0-)

    They act like they are doing us all a frickin' favor.  Why couldn't they make the rules effective Jan. 1, 2009?  What frickin' assholes!

    If the people lead, the leaders will follow.

    by Mz Kleen on Thu Dec 18, 2008 at 07:01:34 PM PST

    •  The Feds are trying to rush through some bullshit (4+ / 0-)
      Recommended by:
      LtdEdishn, Mz Kleen, wbr, eXtina

      in the hopes that the Obama administration will lay off on further changes.

      This is just another parting gift from George Bush.  The bastard.

      •  You do have to wonder why... (3+ / 0-)
        Recommended by:
        Mz Kleen, wbr, goodasgold

        this action has now been taken by the "Fed".  After all, it is not a "new" problem, and of course, even the new regulation won't take effect for some 19 months...

        I love how "media" reports how the "left" is in an uproar about things like Obama's invitation to Warren; yet ignores things like how credit card companies are screwed the average consumer.  

        I watched the "major" cable news shows tonight, and didn't see a thing about the "new" regulations I diary on here.  Why is that?

    •  Won't the lag time (1+ / 0-)
      Recommended by:
      Mz Kleen

      pretty much guarantee a year and a half long frenzy of consumer buggery as CC issuers rush to jam it in while they still have the chance?

  •  Yesterday I got a statement from Exxon Mobil (5+ / 0-)
    Recommended by:
    wbr, palantir, ggwoman55, Econaut, eXtina

    and the Annual Percentage Rate is 56.04%!  I couldn't believe what I was seeing.  I checked an older statement from a couple months ago and the APR was 36.04%.  

    WTF? Exxon is seeing enough profit with the drop in gas prices so they feel justified in gouging their customers?

    I usually don't pay attention to the statements other than to pay them off every month, but there's something seriously wrong that a company is allowed to charge such high interest.  That rate is criminal.  

    •  If you actually received such a statement... (2+ / 0-)
      Recommended by:
      goodasgold, palantir

      I hope you send copies to all of your reps in Congress, as well as in your State.  

      •  The way you worded your comment (1+ / 0-)
        Recommended by:

        is exactly the reaction I expected when I posted mine because 56.04% APR is so outrageous.  I actually did receive such as statement and I thank you for your suggestion.  It's a great idea.

        •  It is so outrageous... (3+ / 0-)
          Recommended by:
          goodasgold, nippersdad, Econaut

          I wondered if you were just posting it for reaction.   Seriously, I have seen interest rates of 35% being charged, I have never seen 56.4% or even anything over 35%.  I consider 35% outrageous.  

          Despite the efforts of one responding here who justifies the outrageous charges offered by those who provide credit, I believe serious reform is necessary, including a Federal usury rate.  We need it NOW.

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