We are told, fairly constantly, that there is a credit crunch and people are having a hard time getting credit. Although I have no direct evidence that this is not the case, the notion doesn’t explain the pile of credit card offers that continue to arrive in satchels every week. To be accurate, of course, the drying up of credit began in one sector and has spread up the multi-tentacled tree where, in many cases, it hasn’t reached the places where some banks can still charge 31-percent interest.
And why would it? Banks are making money off the cards because, according to Adam Levitin, who writes the blog Credit Slips, “teaser rates and frequent flier miles encourage card usage–it looks like a great deal. But at the same time back end fees have soared (160% and 115% for late and overlimit fees from 1990 to 2005). And billing tricks and traps have sprouted up like crabgrass.”
Levitin, who specializes in bankruptcy law at Georgetown University, says you can’t possibly use a credit card efficiently because the credit card companies — banks — have made it impossible for you to figure out all the various fees that can be piled upon the interest rates.
And it’ll probably stay that way. The credit card companies have a lot of friends in Washington. A week or so ago, when Levitin was testifying before a subcommittee hearing a bill that would further regulate credit card practices, four “average” people who had stories to tell, decided they couldn’t testify after Republicans and Democrats, he says, cut a deal that if they testified, the credit card companies could make the witnesses’ entire financial data available to the public. Nice.
Steven Autrey was one of those who had something to say, but couldn’t. So he made his “testimony” available online:
Last October, she experienced a medical emergency and had to leave work to spend hours at a medical facility to receive tests and treatment. Arriving home later that evening, she immediately logged on to the CapitalOne.com website to pay her bill online. It was approx. 9:00pm on the due date. Although she made the payment on the due date, it was 6 hours past the 3:00pm cutoff time. For being six hours late on her payment, she was hit with a $39.00 punitive fine labeled as a “late fee.”
That late fee, when added to her account, pushed her balance over the limit by $16.00. It was at this point that Capital One added a second $39.00 fine in the form of an “Over the limit fee” to her account.
In tears, my wife called Capital One and explained her situation and the emergency medical treatment. She was told the late fee was not going to be removed, she was late and that was that. They did tell her that as a “courtesy” they would remove the over limit fee on a one-time-only basis. Ironically, at the same time, my wife had a credit balance of over $300.00 for her overpayment on the total balance of her Capital One Auto loan.
Sound at all familiar? (Tell your story in the comments section below.)
Credit card companies can change their “contract” with consumers anytime they wish, and they’ve been doing it, partially to offset their losses in the subprime mortgage market.
Beyond addressing odious billing practices, the Cardholders’ Bill of Rights also has some other important provisions. It requires issuers to define the due date, requires payments received by 5pm EST on the due date be treated as timely, and creates a presumption of timely payment for payments sent by common carrier at least 7 days before due. It also defines the terms “Fixed Rate” and “Prime Rate” that are often used in cardholder agreements so as to eliminate consumer confusion about what these terms mean.
At the moment, however, the legislation is going nowhere. It has three Minnesota co-sponsors in Reps. Tim Walz, Betty McCollum, and Keith Ellison.
Ellison and Rep. Michele Bachmann serve on the subcommittee that wouldn’t let the consumers testify without allowing the companies to release all of their financial information.
According to the Web site, Open Secrets, Bachmann has received campaign contributions in this cycle from Capitol One ($1,000), American Express ($2,000), and American Financial Services ($1,000). Ellison has received a single contribution from HSBC ($1,000). Sen. Norm Coleman has accepted contributions from Capitol One ($3,500), American Express ($3,000), Mastercard ($1,000) and American Financial Services ($2,000). Sen. Amy Klobuchar has accepted a contribution from Capitol One ($1,000).