Senate committee tackling credit card debt, interest rates

[babylonsister]

Debating a Ceiling On Credit Card Fees
Bankruptcy Bill Would Shield People From Firms' Punitive Interest Rates

By V. Dion Haynes
Washington Post Staff Writer
Wednesday, March 25, 2009; Page D01


Seeking a new intervention for financially distressed consumers, a Senate Judiciary subcommittee yesterday heard debate on a measure that would wipe out credit card debt for people in bankruptcy.

Under current law, people filing for chapters 7 and 13 bankruptcy protection are obligated to pay credit card balances along with secured debts, such as house and auto loans. The measure is aimed at punishing credit card companies that raise their interest rates to a high level and at giving consumers who may be on the verge of bankruptcy greater leverage to negotiate better deals with those lenders.

The bill, introduced in January by Sens. Sheldon Whitehouse (D-R.I.) and Richard J. Durbin (D-Ill.), is another weapon the government is wielding against exorbitant rates charged by credit card companies. New regulations issued by the Federal Reserve targeting predatory lending practices are scheduled to go into effect next year.

"The standard credit card agreement gives the lender the power to bleed their customer through evolving and ever more crafty tricks and traps," Whitehouse said at the hearing. "Under this business model, the lender focuses on squeezing out as much revenue as possible in penalty rates and fees, pushing the customer closer and closer to the edge of bankruptcy."

The bill would apply to companies that raise rates higher than 15 percent plus the current yield on the 30-year Treasury bond. That combined rate currently is 18.5 percent.

Douglas Corey, a salesman from North Scituate, R.I., who was unemployed for several months, said that despite six years of on-time payments, Bank of America increased his rate to 29 percent from 13 percent after he inadvertently paid less than the minimum on his outstanding balance for two months. Corey said his interest payments shot up to $792 a month from $360.

Instead of rolling back the rate, Corey said the bank offered him loans that would have pushed him further into debt.

more...

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/24/AR2009032400808.html?hpid=topnews

[customerserviceguy]

1. A bit of quick calculator math

shows that Mr. Corey had about $33,000 as his balance on this credit card. I despise Bank of America, but he's not exactly the most sympathetic 'victim' to base a case on.

How about highlighting stories of people who got rates bumped up because of reported delinquencies on other accounts? I'm sure you could find people who had something erroneously reported against them, and saw a cascade of rate increases as a result, that would have remained even after removing the disputed item.

[babylonsister]

2. Sorry you can't muster any sympathy for Mr. Corey's balance.

fyi, I didn't write this, I'm just the messenger.

[KittyWampus]

3. suppose that $33,000 was due to illness? Lost job? Behind on mortgage payments?

Divorce? Death? Spouse lying about what they were doing/spending on?

Suppose that $33,000 was for a pick-up truck or materials for debtor's business venture? Banks don't give unsecured loans. I tried long ago. Had to go with a crappy used pick-up, for instance.

[customerserviceguy]

7. Then good reporting demands

that those be part of the story. All I see is some salesman that's been trying to maintain a "let the good times roll" lifestyle on his credit card, and that's possibly what the people reading this story perceive also.

There are surely compelling stories out there that would make the point about the unfairness of the way the credit card companies treat us.

[aquamarina]

4. Perhaps you should not be so judgmental about why his blance is so high.

It might be due to medical expenses and/or divorce.

[customerserviceguy]

8. I'd find that easier to believe if it was Visa or MasterCard

but American Express is not taken by too many medical providers. Besides, if that's the case, then the story really should be about getting universal coverage, and perhaps single-payer, shouldn't it?

How does a divorce rack up over thirty K in charges? I've been divorced three times, and the worse I ever got stuck with was about four K in bills for a business that I had started out of my home.

[napi21]

5. I don't care how big Mr. Corey's balance was, or that he's a Pub, BofA was deep

nto usery rates, and THAT should be illegal! Perhapse $33,000 to him might be equal to $5,000 or $6,000 to you & I.

[Bluenorthwest]

6. BofA did the same to me

not one missed payment, always more than the minimum, always thousands below the limit. Jacked the rates. To 29%. And so, when all I hear from DC is how the banks will be helped, I do not feel as if they are on my side at all. The banks are mistreating excellent customers, and the politicians defend them, fund them and speak only of them, never of the people they are cheating. Yes. Cheating.
I'm taking my business elsewhere, but many can not do so. I'll never deal with them again. I'm almost 50, they were my bank, my Dad's bank too, for biz and for personal. No more, and never more. And the politicians who defend them without a word about the people, well, it is clear where they stand, each and every one of them.