Posts Tagged ‘banking reform’
Worsening Economy = Credit Card & Mortgage Defaults
We all know that joblessness has hit double digits. We know the official rate is far below the actual jobless rate when you take into account people who have stopped filing for unemployment benefits. Just as significant, if people are able to find work, the jobs will almost definitely pay less than what was available in the past. However, the cost of living continues to go in the opposite direction — higher. No wonder people with jobs are working more hours than ever and barely staying afloat. A high percentage of college students were enticed by credit card’s lure of easy money can’t find work and are unable to keep up with payments. This all translates into record levels in credit card and mortgage defaults.
Just do a Google search on “credit card default rate 2009″ and 4,710,000 pages turn up. You’ll learn points like the following:
- Advanta’s default rate more than doubled in June from May to 56.95 percent, and they’ve shut down lamost 1 million accounts after posting three quarterly losses. In Nov. Advanta filed for bankruptcy. This came just after another lender to small business, CIT, filed for bankruptcy.
- We know credit card companies have jacked up their interest rates sky-high to 32% and more. Since the new Credit Cardholders Bill of Rights Act takes effect in Feb. 2010, banks have done all they can to pre-emptively gouge the consumer.
- In August it was reported that Canadian credit card default rates hit record levels. Obviously, this economic strain has hit almost all “first-world” countries.
- In August it was reported that banks were cutting credit limits for 58 million card holders.
According to the LA Times, in August mortgage default rates soared to 13%. - The third-largest issuer of Visa credit cards, Capital One Financial Corp. (COF) stated a rise in its net annual charge-off rate to 9.60% in Nov 2009 from 9.04% in Oct 2009. See more figures in this Reuters article.
Throughout the spring and summer articles report that default rates by major lenders increased. This is all the more reason to learn what CRC has to teach about the true nature of banking and debt, as well as what you can do if faced with debt collection actions or foreclosure. Learn how members are being successful in stopping these collections and foreclosures. Also, being part of an excellent support network is key. Having the right knowledge and connecting with the right people will make all the difference.
If you’re in search of knowledge and support, find out how you can become part of CRC’s Legal Club.
Credit Card Companies Still Raising Rates
The credit card companies simply have no shame. Regardless of the political pressure and public backlash they’re likely to experience from raising interest rates before the new law takes effect, they’re raising them anyway.
What can you do? Call and complain. Threaten to take your business elsewhere. Get a card through a credit union. According to a news report on Channel 10 in central Ohio…
“Consumer Reports says you can often find better credit cards from professional organizations, such as teachers’ associations, from credit unions, and from community and regional banks.
“There are now often one-time fees on balance transfers, so before you switch to a new card make sure you check that,” Kleman said.
Also check if the new card carries an annual fee. The kind of charge is making an unwelcome comeback. Credit unions can be a good place to get a credit card. These days it’s easier to join a credit union than it used to be.”
Read about the entire report here.
So This is Credit Card Reform?
The Credit Card Accountability, Responsibility and Disclosure Act (for short, the Credit Card Act) was passed on May 22, 2009. Its purpose is to finally reign in the unfettered usurious practices of credit card issuers who have made hundreds of billions of dollars in interest and fees from the public, regardless of the fact that credit is based on book entries rather than actual bank assets according to many official industry sources. After many congressional hearings took place over past years addressing abuses by credit card companies and the absence of consumer protections, finally an initial step has been taken to limit banking practices designed to create debt slaves out the vast majority of people. Strangely, the much-needed reforms won’t take effect for 9 months! This gives the banks plenty of time to gouge the public some more before their practices become illegal. What was Congress thinking? This only gives credence to Sen. Dick Durbin’s admission that “the banks own Congress”.
In any event, here are some of the changes to come:
The credit card act, effective Feb. 22, 2010, won’t slap caps on issuers’ rates and fees. But, it will usher in consumer-friendly changes, such as:
- No more universal default. Except under certain circumstances — for example, if a cardholder is 60 days or more late on a bill — card companies won’t be able to raise rates on existing balances.
- Consumers will get their statements at least 21 days before the due date, instead of 14 days, giving them longer to pay before late fees kick in.
- Issuers can’t charge over-limit fees unless the cardholder agrees to over-limit transactions.
- Annual percentage rates can’t be changed for the first year after a card account is opened, unless the person pays late by 60 days or more.
- Issuers must apply payments to the highest-rate balance first.