Critics urge lawmakers to curb credit card abuses

[deadparrot]

WASHINGTON (Reuters) - Consumer advocates urged Congress on Thursday to limit the rates and fees that credit card companies can impose, saying the industry's heavy-handed tactics are piling on debt for many Americans.

"No industry in America is more deserving of oversight by Congress," Travis Plunkett, legislative director of the Consumer Federation of America, said in prepared testimony for a Senate Banking Committee hearing.

The panel, led by Democratic presidential hopeful Christopher Dodd (news, bio, voting record) of Connecticut, is looking at the billing, marketing and disclosure practices in the U.S. industry.

Critics say some credit card issuers use practices that victimize lower income households with an unexpected rise in interest rates or extra fees because of a drop in their credit scores. Meanwhile, richer Americans are able to pay off charges each month and enjoy perks such as frequent flier miles.

http://news.yahoo.com/s/nm/creditcards_congress_dc

[redqueen]

1. Hear hear! How is a rate of 29.99% legal?

There used to be laws against usury.

Gee, wonder who axed those? And why?

[Captain Hilts]

2. Tell Joe Biden that. nt

[CrispyQ]

3. They need to revisit that piece of shit bankruptcy law, too.

My insurance company recently sent a notice that they were doing a credit check & that your rates may be adjusted according to the results. ??? WTF is that about? Will someone with poor credit be charged more? Have we lost all our humanity in our quest for money?

[Purveyor]

4. Credit check / insurance...

AAA raised my sisters insurance rate by $170 per 6 months after performing the 'credit-check scam' on her. She had a nasty divorce and then health issues that led her into bankruptcy.

Mind you, she has not ever had an accident or moving violation in her 30 some years of driving.

But, the insurance companies will not take that into account. They have their 'statistics'.

Indeed it is a 'scam' and should be abolished.

[AndyA]

5. One has to wonder why an insurance company would need to pull a credit report.

If you don't pay the premium, they cancel the policy. Many insurance companies require payment in advance. So, no loss to them if you don't pay.

I think there need to be restrictions put on who can access credit reports. Credit issuers, banks, apartments, etc., are fine. But insurance companies? Potential employers? No way. If they offer you a job, then state that they want to check your credit, that's one thing. But to do it as a part of the application process is bull.

We need a Congress that will start working FOR the interests of the American people instead of AGAINST THEM. What the hell, I'd just like to have a human being for a Senator. I have Coburn and Inhofe instead.

Enough said. :eyes:

[Gormy Cuss]

6. Why should apartments need your credit card history either?

It's a similar creep away from intended use. Insurers believe that those who are late paying their bills are more likely to file claims. Landlords are using the same as a risk factor for a potential tenant even if the person has absolutely no history of late rent payments. Many people will do anything necessary to pay the rent even while they're paying their credit card bills late. Property managers will say that it cuts their losses but it also removes from consideration many tenants who would be as responsible about rent. It is parallel to the use by insurance companies to set higher rates.

As for employers, I agree that at point of interview it should be illegal to use a credit check in the application process and that employers should disclose in the job posting that a credit check is mandatory before hiring.

[AndyA]

8. Judgements from damages can be listed on credit reports.

I used to be in property management, and if someone moved out of an apartment and trashed it, the property could file a judgement against them for damages in an attempt to recoup the cost of repairs.

It keeps a lot of destructive people out so the property is nicer for the tenants who do pay on time and take care of their apartments.

[Gormy Cuss]

10. But what does that have to do with the rest of your credit history?

If the only information retrieved is past history of property judgments then that information is what should be obtained, not the person's overall credit score or the status of their J.C. Penney account. I know that some landlords are using low credit scores as an indicator even when there is no history of liens or late payments for past rentals. In addition, making credit reports a standard part of the application process means that tenants are required to furnish Social Security numbers without having sufficient legal sanctions on the safeguarding of the number that is key to identity theft.

While no one wants to rent to a known bad tenant, it's unfortunate that people who are good tenants are turned down because of unrelated credit issues.

[Mister K]

11. A study was done that's why

It's a common practice and it is unfortunate.

There is a direct correlation between credit risk and insurance claims.

A person who has spectacular credit (and excess money laying around) is less likely to file a claim for a small accident then a person with poor credit and possibly no money to fix their own car.

Geico and Progrssive are known to do this a lot.

Peace

[Gormy Cuss]

13. "A study was " done : by whom, and with what results?

The claim is that there is a correlation but I've never seen published independent data showing a correlation, never mind the degree of correlation. It's withheld as proprietary information. A weak correlation may be enough to induce insurers to add it to the underwriting formula but from a social policy standpoint if there is potential for an unfair burden on consumers who are required to buy that form of insurance,a good regulatory review of the practice would be in order along with regulations stipulating limits. Hiding being weak correlations can be a way to discriminate. Insurances companies have in the past refused to sell in neighborhoods based on a claim of higher risk regardless of the experience of individual consumers. The practice, called redlining, was shown to be based less on solid quantifiable data and more on weak correlation.

Without knowing anything else about the consumer,I'd guess that the people most likely to file claims are the ones with low deductibles. People with excess cash lying around are more willing to take the risk of a larger deductible in order to pay lower premiums.

[AndyA]

17. When I was in property management and development

we didn't have a choice as to what information we received. We actually had a computer in the office that pulled up credit reports. And those reports included everything, we couldn't pick and choose what information came through. It might be different now.

The company that I worked for had a policy of verifying previous residency, and we definitely considered rental payment history above all else. We knew that some people would pay their rent and utilities before anything else, so if they had a clean rental history, and hadn't trashed their previous apartments, but had some late credit card or loan payments they were usually approved.

I don't know if the same system is in place now or not, but we did get authorization to pull credit reports from the person, and that information was kept under lock and key at all times. And not everyone who worked on the property had access to that information, normally just the people who could make decisions to approve or deny residency.

Of course today there's more abuse of this type of data, so I would hope the laws have changed somewhat to reflect the increased abuse.

We did actually catch a guy once who was using someone else's information. When we called to verify previous residency, the manager was surprised to hear that the guy was moving out of state. Later, she saw the guy and told him about the call, and he then called us to find out what the heck was going on. Had the inquiry from his "old" landlord when he applied to move in two years earlier not been on the credit report, we would have never known who to contact. So in some cases, it can be a good thing.

[Gormy Cuss]

20. It's the abuse of data that is at issue.

The example you gave of someone attempting ID fraud being uncovered by a credit report query was a good thing, but it doesn't justify divulging full credit histories every time someone submits a rental application. It should be fairly straightforward to divulge past rental queries along with property judgments in a report tailored for that purpose. CRAs have no incentive to do so without regulations forcing them to change their practices. They make a fortune selling this one-size-fits-all report loaded with errors and there's no reason to change.

I've worked with credit report header data--the part of the report with current and past addresses, employment info if available but no credit data. We used it to track participants in long term studies. This was done with the informed consent of the participants. The amount of flat out wrong data in the headers was ridiculously high. I'm never surprised at reports of erroneous credit reports after that experience.

[wryter2000]

22. This is one of my sore spots

The dh and I had bad troubles when he lost his job under Raygun. I made sure we paid our rent, but the credit cards slipped. I had no idea a landlord would want to see our credit rating before they'd rent to us. We had 18.5 years in the same house, paying the rent the whole time when the landlord decided to sell the house. An apartment building wouldn't rent to us.

We finally found a nice couple who would rent to us, but it was touch and go for a while there. One of the lowest points of my life!

[TexasLawyer]

7. no more 300% penalties!

I accidentally missed a credit card payment last year with a $10.00 minimum payment. The next month they charged me $29.00 for missing the payment, a 300% fine. On a card that I'd had for years and never had a problem with.

What is the DEAL with these people? They're making WAY too much money off of people.

[Hobarticus]

9. Strangely enough, credit card company profits are down...

After the bankruptcy laws that they pretty much wrote themselves came into effect, people are making paying off their cards a priority.

And when people pay off their bills, there's no fees or interest. No profit in loaning money, now, for them. They're not raking in the cash like they used to; they're scrambling for new debtors, and it's their own damn fault.

And have they adjusted their rates, accordingly, to encourage more card use? Hardly. Why charge three million people 7%, when you can get away with charging two million 18%? Only that willing two million isn't there, anymore. Just charge your current customers outrageous fees, and make up the difference, which only motivates them to pay their balance off even faster.

Oh, the sweet irony. None of this panned out the way they expected.

[tblue37]

24. That's what I am doing. I am paying down my credit cards so fast their heads must eb spinning.

By this summer, I won't owe anyone anything. Hahahahaha!!! And I won't carry a balance again if I can help it. I was so poor for so long after my divorce when my kids were 21 months and 3 1/2 years old that I had to use credit to survive, but they are both adults now, with good careers, and since I no lonegr have little kids at home, I can have better-paying jobs (as well as lower expenses). By screwing people like me when we were down, these idiots have lost our business when we are in much better shape.

[Captain Hilts]

12. See what happened to Bank of America's profits after absorbing MBNA? nt

[Mister K]

15. all I know that after the merger, my rate went to 23.99%

Needless to say. I no longer have that card.

I am fortunate enough to be able to get out of that rate. I am sure that others are not so fortunate.

There is no reason for my rate to be that high. I have a good credit rating. No judgments. No late payments or delinquencies.

Peace.

[Zorra]

14. Credit cards have done more damage to American families than

any other single destructive phenomenon.

The stress brought on by the physical, emotional, and psychological ramifications of abusive credit card debt has been widespread and devastating.

I firmly believe that credit cards should be made illegal. IMO, they have done more long term damage to the people of our country than the abuse of hard drugs like meth, cocaine, and heroin combined.

[Missy M]

16. You are so right...

I've been through it, got out of it and will never go back there again. It would be nice if we could go back to the days of 'lay-a-ways' but it's not possible in this day and age with all the big stores. People also buy food, pay utility bills, doctor bills and even taxes on their credit cards because they can't make ends meet but then the monthly payments and catch up with them and they are doomed.

[depakid]

18. If the Dems would start taking on these abusive corporations

rather than lining their pockets with "donations" they'd never have to worry about being in the minority again. Unfortunately, to many DINO's will make sure that it never happens.

[Vincardog]

19. That is why WE have to demand clean elections and public financing

Kick the parasitic corporations out of our government. We have to make it happen.

[wryter2000]

21. Oh, please, please

Do this, Dodd. Do it right. Short of Halliburton, no companies need to be smacked down as much as the credit card companies. They're a plague.

[against all enemies]

23. Joe Biden - whore for the credit industry. F U Joe.

[gristy]

25. 32.24% APR

That's what my card is at. Incredible.

[ThoughtCriminal]

26. Changes in Terms of Service

Here I mentioned the latest outrageous "Change in terms of service" from Chase - Charging interest from "time of purchase":

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x23365

Cutting up that card.

It has become very much a bait and switch game since credit card companies seem to be able to alter the terms of service unilaterally from what the consumer originally agreed to as often as they want to.

[TexasLawyer]

27. I've been cutting up cards

I've also demanded that all minimum monthly payments be taken by automatic deposit. That way I am NEVER stuck with a late fee.

If a credit card company will not set me up on automatic pay, then BYE BYE.

[distantearlywarning]

28. Here's a little card company "trick" I discovered last year.

Credit card companies are now deliberately moving their due dates around in each month, presumably in the hope that people will not notice and pay late, allowing them to jack up the interest rates and charge late fees. I am convinced that they specifically target people who pay their bills on the same day each month (as I do). I caught one company doing this last year (luckily before the "new" due date so I didn't get charged). After that I started paying close attention to due dates and caught another company doing it. I have had months where I had to make TWO payments in a month because the card people suddenly moved a due date up by a week or two for no apparent reason other than to try to "catch" me in a late payment. It's crazyness and it infuriates me.

Yesterday, my husband discovered that the card he uses for monthly personal expenditures (he pays it all off on a certain date every month) had done that to him as well (for next month - again, he caught it in time). He called and bitched them out and they told him that it would take 3 months to "reset" his due date. Yeah, I bet. It took them about 5 minutes of tinkering this month to move it up 2 days before the date he always pays, but it takes three months to move it back? Riiiiggght. They're hoping he'll forget in the next three months and accidentally pay late.

Bastards. :mad: