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Push to Curb Credit-Card Rates Fades
Democrats resist consumer outcry
WASHINGTON - Efforts in Congress to cap credit-card interest rates are faltering because of opposition from Democrats and a lack of specific support from the White House, despite growing consumer outrage over a rush by banks to impose rates as high as 30 percent.
A man shows some of his credit cards at a market in Miami, Florida. Amid complaints about interest rate spikes and new fees, US lawmakers have voted overwhelmingly to speed up the implementation of sweeping new rules to guard against abusive practices by credit card companies. (AFP/Getty Images/File/Joe Raedle) During the 2008 presidential campaign, Barack Obama vowed to back a strict limit on credit-card interest rates. But the White House is not yet behind any particular plan this year. While Obama has chastised credit-card companies, his spokeswoman declined to say this week how he planned to follow through on his campaign pledge.
Obama finds the behavior of credit-card lenders "outrageous'' and "looks forward to reviewing additional legislation that caps interest rates,'' but he has not taken a specific position, spokeswoman Jen Psaki said.
Vice President Joe Biden, whose home state of Delaware is headquarters to many credit-card companies, did not respond to requests for comment.
The Senate soundly defeated legislation in May that was introduced by Senator Bernard Sanders, the Vermont Independent, to cap most credit-card interest rates at 15 percent. Nearly half of the Democratic senators joined Republicans in defeating the measure, 60 to 33.
Consumer groups say the problem of skyrocketing interest rates has only worsened since that vote, as banks scramble to boost rates in advance of a new rule scheduled to take effect in February, requiring banks to give consumers a 45-day advance notice of rate increases.
Sanders said many of the credit cards in the hands of American consumers are issued by four banks that received taxpayer bailout money after last year's economic meltdown: Citigroup, Bank of America, JP Morgan Chase, and Wells Fargo.
"People are disgusted. We bailed these [companies] out and they then had the gumption to raise interest rates on the American people,'' Sanders said in an interview.
Sanders said he plans to reintroduce his proposal to cap rates at 15 percent; he predicted it will have more support this time. (Representing Massachusetts, Senator John F. Kerry supported the cap in May; the late Senator Edward M. Kennedy, who was fighting brain cancer, did not vote. Senator Paul Kirk, who took Kennedy's seat, has not declared a position on the issue, his spokesman said.)
But Sanders faces strong opposition from many Democrats, particularly those who have major credit-card business in their states. One prominent opponent, Senator Thomas R. Carper of Delaware, said in an interview that he understands the anger among consumers who have received letters from credit-card issuers informing them of big rate hikes. But Carper said he opposes any effort to cap the rates because it would hurt the ability of banks to charge higher rates to customers who have a greater risk of default.
"The question is, should banks be able to price for risk?'' Carper said. "In a free market economy, I think they should.''
Carper said that if consumers don't like the credit-card rates, they can pay off their balances and shop for a better rate from another company.
Senator Tim Johnson, a Democrat from South Dakota, another home to credit card companies, explained his vote against credit-card legislation in a May press release. The measure, he said, "could hurt South Dakota jobs and consumers.''
The threat of another vote on Sanders's proposal is prompting companies to make a renewed push against caps. Bill Himpler, executive vice president of the American Financial Services Association, an industry trade group, said it is easy "from a populist standpoint'' to embrace a cap on interest rates. But he said many firms could continue to offer credit if the rate was capped at 15 to 18 percent, as some have suggested.
"You lose money at 18 percent because it is a very labor-intensive business line to offer consumer credit,'' he said. "Where you cap rates you end up having credit tightened and the cost of credit being greater for the consumer.''
The Consumer Federation of America, which worked to pass the 45-day advance notice requirement on rate hikes that takes effect in February, said it has not taken a position on the Sanders proposal.
"We want to give the law a little time to work,'' legislative director Travis Plunkett said yesterday. He warned that the federation would closely monitor to see if credit-card companies stop "the most abusive practices.''
Senate Finance Committee chairman Christopher Dodd of Connecticut, who supported the 15 percent cap, has proposed legislation that would temporarily freeze certain interest rates, but only until February when the notification law takes effect.
For decades, many states had usury laws capping credit-card interest rates as low as 6 percent. But those rules were upended in 1978 by a Supreme Court ruling that a national lending company based in a state without a rate cap could charge any rate to customers who lived in a state with a cap. As a result, many credit card companies moved to states with lenient rules such as Delaware and South Dakota.
Biden, who served as Delaware's US senator from 1973 until last January, has long been noted for his ties to the credit-card business. Biden's top contributor has been MBNA Corp., a company based in Delaware that was a major credit-card issuer and was bought by Bank of America in 2005.
Biden received $214,000 during his Senate career from MBNA-related donors, according to the nonpartisan Center for Responsive Politics.
58 Comments so far
Show AllThis could be very good news. It could be the last straw that convinces Americans to cut up their credit cards and opt out of the consumer-credit-planet crashing economy.
the compassionate companies mentioned have raised my rates without cause, and I have thusly closed those accounts...one of them, chase, also holds my mortgage...I am comforted in the certainty that similar compassion for my condition awaits me in any future negotiation on that front...
When I went to hear Alexander Cockburn speak at the CUNY Graduate Center here in NYC, he suggested that we should all get together, hire/rent/lease a big truck that could travel across the country, stopping to pick up everyone's credit card bills until the truck was overflowing -- last stop for the truck -- D.C. and our very own elected officials.
I don't see any reason to cut up my credit card. They can raise the interest rates all they want. I will simply continue to pay off the balance each month.
If you regard your credit card as a line of credit to finance a lifestyle you can't afford, you're asking for trouble.
If you simply use it as an alternative to carrying around a lot of cash, maintain a zero monthly balance, and live within your means, it's a handy and convenient tool.
What does The Boston Globe mean, "rates as high as 30 percent?" Banks can charge ANY interest rate they choose. As the article correctly notes (second to last paragraph), many state usury laws cap interest rates as low as 6 percent but a 1978 Supreme Court decision allows banks that locate in non-usury-law states to "charge ANY rate to customers" in ALL states.
Obama is not backing efforts in Congress to cap credit card interest rates BECAUSE HE OPPOSES CAPS, in spite of his lies to the contrary.
As a Senator, Obama voted against the Dayton Amendment (S.Amdt. 31) to the 2005 Bankruptcy Act, which would have capped credit-card interest rates at 30 percent. (30% is extremely generous for the banks! Who wouldn't like to earn 30 percent annually on their money?) Senator Dayton (D-MN), presented examples on the Senate floor of predatory lenders charging vulnerable people 200 percent, 500 percent and in some cases more than 1000 percent interest! But, Republicans argued that "free-markets" should set interest rates and government should not interfere, and Obama voted with the Republicans to defeat the amendment.
Later, as a candidate for the Democratic nomination for President, Obama LIED about his vote AND got caught in his own lie! In a three-way debate with Hillary Clinton and John Edwards in South Carolina on January 21, 2008, a miffed John Edwards pushed Obama into admitting the true reason for his vote on the Dayton Amendment:
CLINTON: I voted for limiting to 30 percent what credit card companies could charge. Senator Obama did not. That’s a fact.
OBAMA: Absolutely. It is a fact, because I thought 30 percent potentially was too high of a ceiling. So we had had no hearings on that bill. It had not gone through the Banking Committee. I don’t know about a lot of folks here, most folks here, if they’ve got a credit card, are paying 29 percent. So under this provision, that would’ve been fine. And we had not created the kind of serious…
EDWARDS: You voted against it because the limit was too high, is that what you just said?
OBAMA: That is exactly what I just said, John, because…
EDWARDS: So there’s no limit at all.
OBAMA: … there had been no discussions… Hold on, John. Hold on. Listen to this. There had been no discussion about how we were going to structure this and this was something that had not gone through the committee and we hadn’t talked about. IT DIDN'T MAKE SENSE FOR US TO CAP INTEREST RATES.
Full transcript: http://www.cnn.com/2008/POLITICS/01/21/debate.transcript/index.html
Obama is NOT a weak, progressive Democrat being dragged down by moderate Democrats in Congress. He is a Republican in Democrat's clothing. A Trojan Horse. There will be no cap on credit card interest rates because Obama does not want a cap. Period.
"He is a Republican in Democrat's clothing."
In other words, he's a Democrat.
Senator Dayton, the author of the amendment capping credit card interest rates, is a Democrat. Hillary Clinton, who voted for the amendment, is a Democrat. John Edwards, who objected to Obama's lie, is a Democrat.
If your point it to tar everyone with the same brush, it is counterproductive and accomplishes nothing.
Imagine that,Obomba caught in a lie,hard to believe.Could it be,that he might even be a yes man.
Biden was selected for VP after the 'Obama plane incident',(quickly covered up, look it up, it really happened) where his campaign flight had to make an emergency landing in ST. Louis when an inflatible escape slide deployed putting the plane in a downward attitude. That was also the week of the infamous turnaround on the FISA vote and things all got stranger from there. I can't help but to keep going back to that incident, as the 'real deal' we found in Obama started to look a little more manipulated (by death threats maybe?) Ross Peroted...what would you do? And again, I recommend the reading of 'Confessions of an Economic Hitman',by Perkins (see his article earlier this week on CD) to see where the power lies...is...
I had been trying to responsibly pay off the card by not using it and by paying on time, often over-paying, each month.
This did not halt the ridiculous hikes in interest and impossible increased minimum
monthly payments, that I can no longer afford.
Filing for bankruptcy is not just personal necessity at this point,
it is a political action.
There is no shame.
Perhaps if more would file . . .
claughton says: There is no shame.
this is important...while some behavioral shame is appropriate, and helpful in guiding one peacefully through society, other forms of economic 'shame' that we have been handed are not legitimate, and are actually quite harmful, preventing individuals from coming together to share, forcing them to maintain competitive positions in a manner that makes it appear to be for the betterment of self-esteem...how to turn around to where cooperation and compassion are valued beyond competitive success...
if human economic success results in planetary death, there must not be shame in recognizing such folly, and taking steps to address...this must be seen as honorable, and wise...
Personally, I dont thnk that they should be able to raise the rate charged on outstanding balances borrowed at a certain rate, but shouldbe able to raise the rates on FUTURE purchases if they want...with appropriate notice.
I negotiate my credit card rates myself, and if a company does not want to lower my rate to be competative with other cards I carry, I pay it off ( or transfer balance to a card that DOES lower my rate.)and cut it up and cancel the account.
That said, I carry WAY too much debt, and hope to get rid of it ALL soon...if the economy does not tank again.
Good luck,mujeriego, with your debt agenda.
Everyone should take a good look at the scammers'enticement practices and run a mile in the other direction.Student campasses have been great places for the sharks to circle.
"In debt we trust"Aaron Russo.
some credit cards charge extra fees even if you do pay on time.
Exactly. It's called usury.
This has nothing to do with credit history. It is an across the board robbery. They raised my rate to 21.99%, citing that I was a valuable customer. We have paid on time for several decades, always over the minimum. One of my kids, who has a credit score of 790 and a small balance always paid on time, was raised to 26% with no explanation, except that they could. The credit card companies seem pretty assured that nobody is going to stop them.
Besides being immoral and oppressive, these rates put the credit card business in the position to be the source of the next default bubble. When people are suffering massive joblessness, perhaps depending on credit to tide them over, why do the politicians do nothing to protect them from these predators?
Call your useless legislators. Even more important, talk to your neighbors. Maybe we need to have some massive public credit card return ceremonies as we did with draft cards in the 60s. What we did was get together in a public place with signs, threw the cards into a box and mailed them back to the draft board.
For security sake, perhaps we should burn or cut up the credit cards. (I have already cut mine up.)
Joe
"Besides being immoral and oppressive, these rates put the credit card business in the position to be the source of the next default bubble."
This should not be a concern, as emergency legislation will mandate that taxpayers foot the bill to prevent defaults. The credit card companies will be "made whole" by the taxpayers. This of course is as it should be... in a FASCIST STATE LIKE THE USA.
won't things get interesting as the incomes of americans plummet, and their income taxes follow accordingly?
how amusing to watch national discussion begin around part-time employment, or 'zero-hour' status...all ways of maintaining some sort of economic activity without actually having to face collapsing industries and corresponding wage scales...we don't want to pay you, but we want you to keep spending...what?
will we simply borrow from other countries, and front that money to our citizens to fuel debt-based purchasing?
yes, interesting, indeed...making deals with the devil, watching the death throes of economic systems as the source of the wealth within those systems, the living world, begins to show definite signs of exhaustion...
The ruling Bushist regime has no position, WTF? If the bent-over Baract's response is like the Obamanible Snowman with a head Biden where the sun don't shine's glacial pace, by mid-winter in February the errant Bernanksters and Wall Street-walkers will have pocketed the rest of the chumps' CHANGE, AGAIN!
Repost: Collection agencies are on a tighter leash than credit card companies. Let the bills go to a collection agency, pay a small amount each month regularly and your credit rating will IMPROVE, not get worse. In other words, take away the credit card company weapon. Fear. Don't be afraid of a collection agency. Always contact the collection agency in writing. Never talk to them on the phone. "Go legal" on them. That's how you beat an extortionist.
http://www.commondreams.org/headline/2009/11/06
Credit Card Firms Hurry to Raise Rates
This is correct, actually. There are limits to what one can do, but the options are far, far more extensive than most people imagine.
Collection agencies and recording agencies do all sorts of illegal things. If you have a long credit history, they have almost certainly done something illegal with your account. If you can find that and point out what their weakness would be in a court case, the credit record folks and their flying monkeys will generally bargain by simply dismissing other problems from your record.
After you negotiate the dings removed from your credit record, be sure to check back with the 3 big companies afterwards to be sure they have not quietly put them back. Keep all your files so that you can threaten them more easily on the second round.
Take a look at the vote count in 2005 on the Bankruptcy Overhaul bill. Better yet, take a closer look at the Democrats who trashed all attempts at filibuster in the Senate and this includes even those few of the ones who voted against the bill in the end. Obama not only trashed the filibustering process and gave a token vote against it but he also chose the biggest pushover of that bill Joe Biden as VP. Even those who stood firmly against it aren't joining Sanders for real reform. Talk about lack of service and dedication.
In a recent conversation with a gentleman from the area in Africa where Obama has distant relatives I was told about certain English words that have a connection to those local tribes. Take the english word CHANGE for example, it is almost identical to the African word CHANGI which means BULLSHIT.
CHANGI YOU CAN BELIEVE IN!
That was a good one!
"You lose money at 18 percent because it is a very labor-intensive business line to offer consumer credit,'' he said.
-----------
Complete and utter B.S.
The truth:
At 18% CEOs would have to settle for pay packages in the single-digit millions.
At 30% they make tens of millions.
I had a few years in the industry, though not as a CEO.
18% would float anybody and any bonus I've heard of under anything like normal circumstances, including in current circumstances, assuming the bank's not looking to close already.
Some are fishing to pay of bad gambling debts. The rest are just fishing.
If everyone would just stop using their cards and stop paying the bill, the credit card companies would collapse. That would be a good thing!
How can we start a movement against them - push for legislation to reform credit amounts issued by doing a thorough credit report and keeping amount of credit issued in line with what their capabilities are. It's time for our country to come up with a better trade policy and start protecting our interests. Charge a fee for anything coming into our country that is priced below what it could be made for on ur soil.
There is a movement against them.It is called FORECLOSURE BANKRUPTCY UNEMPLOYMENT HOMELESSNESS and IN OVER YOUR HEAD.
I, personally, am paying off every credit card as quickly as possible. I should have that finished in another 30 days. I will then cancel every account except one (at this point, just one until they screw me around).
What no one is telling you is a) they can and will charge you a rate if you DO NOT USE YOUR CARD, b) they are O.K. with charging you for cancelling your card and closing your account and c) they can really and truly charge you anything they want. And they can charge you immediately and even twice a month...HSBC just did that on me. Charming. My credit rating is almost 800. I doubt I am a default risk.
I will pay by debit card as long as they don't charge me to use it.
I understand some places put charges on processing checks both at the store and the bank.
Some places are now putting a fee on each cash transaction.
So my question is WTF do we do now? I think we are at the point where we have to do the millions of people march on Washington and get rid of those people...pitch them out and replace them with our own people who owe nothing to lobbyists. Then the first law we change is the one letting lobbyists have anything to do with legistlation. If a legislature even talks with a lobbyists it will be a felony.
I will march if the march is strickly civil disobedience and peaceful. Just tell me the day and get me into a group of Elders of which I am one.
gem just pay off your debt. if you cancel your
cards you will destroy your credit rating!
don't cut off your nose to spite your face
then they win! every time someone closes
their card it lowers their rating. then
when you really need it you won't have
any!
THE CREDIT RATING!The biggest suckers game.Watch "In debt we trust" Aaron Russo.
The "credit rating" was also designed by the banksters to ensure that they have the sheeple by the balls at all times. You're screwed if you have cards, you're screwed if you don't, you're screwed if you open an account, you're screwed if you close it. No matter what, we're screwed because that's how they want it and that's how they've designed it.
Hmmm, 18% and they LOSE money??!! Don't tell that to my credit union. They charge a MAXIMUM of 18% to credit card holders in good standing.
Don't feed the corporation monster. Support your local credit unions and keep your hard earned money in your own community, not in pocket of some CEO who lives far away and doesn't care about you or your community.
I hate these people. I can't and won't do anything about it except for going through the usual channels (letters to congress and the editor, petitions, blah, blah, blah). With that said, I wish them the worst possible fate. I hope they suffer somewhere before they disappear. I hope they become as ruined as the people who have been affected by their decisions. Every last one of them.
They take and take and take; that's why they exist. Politicians in the US destroy hope through their cynicism, by breaking promises and fucking us over year after year and laughing all the way to the bank. Their sole motivations for going into politics are to stroke their egos and angle for a job working for their paymasters afterwords. Some of them play the good cop, but they all shake hands, slap backs, and go out for drinks at the end of the day. It would be nice, and more honest, if they dropped the phony pretense that this is a democracy. Your opinion, and my opinion, mean exactly squat and it will always be this way.
"Patriotism is the last refuge of the scoundrel."--(?).
I remember when there was a cap on credit cards and it worked very well because it made them more cautious to whom they extended credit. Why should we all pay the price for their greed in extending credit to individuals who do not pass a credit check? The rates that I've heard are nothing but predatory. While I always pay the balance when due, I recently cut up a card from J.C. Penny and returned it to them with a letter that while I have never carried a balance on that account, I know that many people cannot pay off their monthly balances so for them I am protesting your predatory rates. The best thing the American people can do is to quit spending, don't buy anything not made in America and cut up the credit cards, if we all did that it wouldn't be long before just maybe our Legislators will quit taking the lobbyist money and get busy and protect our interests.
Hooray for Bernie Sanders, we need more like him who are ready to protect the common man and not the rich and international corporate interests. Until we rise up and DEMAND changes in our election laws, NOTHING will change.
Begin the protest by helping Ct dump Dodd.
Sorry, I disagree . . . what we don't need is another Republican majority to make the International Corporations more powerful!
Dodd is already a Republican except in name. Who needs a Republican majority when the Democratic majority is already making Internation Corporations more powerful?
I dumped the card.
They lowered rates.
Let them stay dumped.
For those who cannot quit purchasing, there remains the possibility of not paying.
Corporate "persons" 1; flesh and blood persons 0.
Nothing will change in our republic until money ceases to be "speech."
By definition, any institution endowed by mere men with the near-unlimited power and ability to accumulate unlimited money from diverse sources/shareholders will always overwhelm an individual with a limited ability to "generate" money.
Hence, in the political "realm" the corporate "person" will always "out talk" an individual of flesh and blood. Why does the Shelly novel, Frankenstein come to mind or the Star Trek villain, "the borg?"
As per Supreme Court decisions, our political system was hijacked or "couped" by these money-amassing "persons." We merely vote; corporations, their boards and CEO's vet whom we "vote" for.
http://en.wikipedia.org/wiki/Buckley_v._Valeo
Ours has evolved into a corporatocracy or corporate fascism, from a once-vigorous Jeffersonian republic. No one votes for our "vetters," a true political minority: corporate shareholders and leadership. They have neither accountability to the voters nor come under "separation of powers" checks and balances type constraints.
Why anyone expects these corporate profiteers to fund candidates who will vote in the legislature to undermine profits, the raison d'etre of corporations, eludes me.
It's time we run grass-roots, Third Party, independent candidates that we vet, support, and campaign for. Corporate front men are worthless to the republic.
Carrying debt is very risky in this day and age. Credit card debit is like russian roulette--very dangerous! I just took money out of an investment account to pay off all my credit cards-one of which (Citibank)said they were going to raise my interest rate to 23% in December. This is outrageous since I have been a good standing customer for many years with no defaults or late payments, etc.
I strongly beleive credit card banks are greedy, reprehensible and heartless. Kind of like gangsters.
snydly
Greed is the creed
Debt is the net.
Stay out of debt. Period.
keep your money in a Local Credit Union
keep your money under your mattress
OUTRAGEOUS yelled obumma as he saw the latest checks
come in to his re election campaign coffers. YES smiled
david axlerod and rahm emanuel. "lets get em now" yelled
rahm as they lowered the boom on ---- us!
In Canada, we have a legal limit on credit card rates.
60%
Not exactly comforting.
Stop paying credit card companies. They have all the money they need, TARP money. Screw them. Your bills have already been paid.
peacekeepertwo:When there was no Consumer Credit. In the early Seventies, before most of us had a Credit Card, most of us were careful about how we spent our money. People paid cash for most items, except maybe a Refrigerator or Range. If you decided to buy a large appliance, the store where you purchased the Appliance, would loan you the money. If you were a reliable customer, the Store would issue you a Revolving Credit which you could use to buy things at that Store. In those days People could afford to wait, and save money to purchase most of what they wanted. Many people had Family Wage Jobs. If you purchased a Home, the lender required that your House payment would not Exceed ¼ of your monthly income before Taxes. People always saved for a rainy day. As wages declined in the 80’s, people had less disposable income, they needed to use most of what they earned to pay Bills. Corporation needed to have a way, to create a demand for increasing production. Credit cards made it possible for people to borrow against their future earnings. We have to raise Wages, so people can afford to put money in a Savings Account. Congress needs to act to force Creditors to forgive debt. Then pass laws that Repeal so called” Write to work laws”. More and easier get Credit is not the Answer to get our economy back on track. Give people a real choice about how we finance our lives.
While I hate so much of their platform, the conservatives have one thing right. People do need to become self-sufficient. For so long we've depended on Uncle Sam (what became of that old guy??) to do everything for us, and most of us have forgotten how to do anything for ourselves. Into that dependency came the corporations, and we were sitting ducks.
The current conditions are a perfect time for people to really look at their lives and hopefully figure out what it was that brought them to this sorry state and start working on getting back to where their ancestors were. Well, maybe not that far back. Say where their parents and grandparents were. Those people worked hard, depended on themselves, received help from friends, neighbors and family only when it was direly needed, and provided help to those others in kind. When the cash in their pockets ran out, it wasn't devastating because they'd planned ahead so there would be equal amounts spent through the month instead of having feasts for twenty days, and famine the other ten.
They didn't have credit cards, welfare, bank accounts, and fast foods on every corner. They knew how to keep their cars and everything else they owned running, and in good condition. They didn't run out and get the newest gadget the minute it was on the market. They weren't owned body and soul by the corporations.
I've had a VISA card through my Credit Union since the 1980s, and the interest rate has never changed from 13%, which was low, compared to the 21% of other cards of the time.
I closed every other card I had in the '90s, and use my VISA card only as a last resort now. I don't get letters threatening to cancel if I don't use it, and I always get my new card before the expiration date. I've also had a line of credit account with my Credit Union since 1990, and haven't used it in over ten years, but it's there if I need it, and all I have to do is call and request the money I need from it, and it'll be in my checking account immediately.
People really need to learn how to live in this corporate jungle the world has become. It's filled with quicksand, and so many other traps. As so many here have said, People really need to check out the Credit Unions.