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Credit card companies scramble to rip off consumers
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Take a good look at your credit card statements over the next couple of months. Be on the lookout for notices about fee or interest rate increases.
Many credit card companies are eager to exploit the loopholes barring last minute rate hikes and fee increases before the consumer protection bill becomes law in February.
It is appalling that the lag between politicians creating an agency to patrol for illegal behavior and when the agency officially takes power provides a splendid window of opportunity for companies to flagrantly violate every edict that the agency is designed to watchdog (while it is still legal to do so).
Rep. Betsy Markey, D-Colorado, and 17 other lawmakers sent letters to credit card banks asking them to voluntarily freeze their rates while Congress decides whether to move up the date for the new law to December.
The impact and timing of these actions couldn’t be worse. If credit card companies dramatically increase the payment on existing balances, it could have dire consequences for the economy.
1) How will it impact consumer spending during the holiday season? How much Christmas shopping is done on credit cards? How much Christmas shopping is done on credit cards when you are unemployed?
2) For many Americans, hanging on be a tenuous financial thread, there is no disposable income to absorb a significant increase in monthly obligations. How many people, at the tipping point of bankruptcy and foreclosure, will throw in the towel?
3) How would this impact consumer spending? How would this impact consumer perception of the economy as a whole? How many people will clip the cards?
Credit card debt has steadily increased for the last three decades. Americans are not saving. Most of the people that I have spoken to, that are my age or younger, seem to understand that Social Security is not going to be there for us. That leaves a large portion of the population with no savings, no retirement safety net and a lot of debt.
I found an interesting article on consumerwatchdog.org:
(Excerpt) The latest version of legislation (PDF) that would create the Consumer Financial Protection Agency carves out wide-ranging exceptions for the nation's credit reporting agencies, car dealerships, realtors, and tax preparation firms, among others.
Carmen Balber, head of Consumer Watchdog's Washington, D.C., office, said the new agency won't be able to do its job unless it has oversight over firms like Experian, Equifax and Trans Union, which help determine consumer interest rates through credit scores, or car dealerships, which engage in complex loan transactions.
"A new consumer protection agency should be looking at any company that provides a loan or has impact on loans," she said. If consumers who feel they've been treated unfairly by these industries can't turn to the new agency, they won't know where to turn, she said, adding, "That's the kind of confusion over what's covered by what (agency) that this is legislation is supposed to fix."
Many members of Congress, Frank in particular, have received political contributions from the credit bureaus. The three firms have given about $1.6 million to Congress since 2002, including $40,000 to Frank.
Balber sees a connection between the political donations and the new provision that benefits the credit reporting agencies.
"Companies that collect, analyze and sell our private financial information are off the hook in the current bill,” Balber said. “Campaign contributions to Congress should not buy the Big Three data collectors an exemption from oversight.”
But Steven Adamske, a spokesman from Frank, accused Consumer Watchdog of grandstanding.
“It only demonstrates the shallowness of their argument, that they are saying there’s some kind of cause and effect (between contributions and changes in the legislation),” he said. “If they spent more time talking to members of Congress and being a part of the process and less time writing press releases they would be more effective at helping consumers. … I don’t think anyone can call into question (Frank’s) dedication to protecting consumers.”
Agency powers shrink
As the bill stands now, many industries would not face regulation by the new agency, including:
* Merchants, retailers, and sellers of non-financial services.
* Retirement plan providers and educational savings 529 plan providers.
* Accountants, tax preparers like H&R Block and attorneys.
* Real estate agents acting to buy, sell, or rent residential properties. Mortgage lenders would be covered.
* Auto dealers who lease or sell cars and market financing arrangements.
* Credit reporting agencies when they are "assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties."
The current version of the law also includes an explicit statement that the agency would have "no authority ... to establish a usury limit applicable to an extension of credit."
None of those exceptions was in the initial version of the Consumer Financial Protection Agency proposed by the Obama administration.
Balber said corporate influence led to the changes.
"Every one of those exemptions is the result of intense lobbying efforts by those industries," Balber said. For example, she said, "The auto dealers say, 'We are struggling, you put these new rules on us.' But the problem is by carving out all these exemptions you are making the job harder to for the agency to look at the whole consumer credit transaction."
After spending years poring over the details of people’s credit reports, I can attest to the number of errors and discrepancies. The mortgage industry has given me an appreciation for the importance of accurate credit information that I never had as a consumer. Getting the bureaus to correct errors is a nightmare. An entire industry has emerged to help you navigate the nightmare. It takes time and that time can hamper your access to car loans, mortgages, credit cards and student loans. You can expect to pay higher interest rates on all of the above if your scores are impaired. In a risk adverse credit market, consumers pay in more ways than they realize. Who profits by muting regulation designed to protect consumers? Why is the government more concerned about protecting profit than people?
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