Really Pissed Off!

Just in case you haven’t looked at your latest credit card statement or that letter in fine print from your bank regarding your credit card that you tossed away, there is a good chance that your interest rate just went up! The banks that you and I have just bailed out to the tune of nearly $200 billion taxpayer dollars are arbitrarily increasing their interest rates on nearly any account they decide is delinquent, endanger of default or in good standing! On top of that, it’s with our money and if you don’t believe that this is absurd, then you shouldn’t have gone to college! The banking industry is celebrating their bailout by the same taxpayers that are now getting slammed by astronomical increases in their interest rates!

Several months ago, RPO warned the general public that the next crisis would be the “Credit Card Crunch.” At that time, the TARP had just been approved by the Senate and signed by then President Bush. The House of Representatives had passed “The Credit Cardholder’s Bill of Rights” H.R. 5244 and sent it to the Senate. It was a forgone conclusion that the Senate was going let it die, and it did! Rep. Carolyn Maloney (D) of NY took little time to re-introduce the bill in 2009, under the same name, now H.R. 627, which passed in the House on April 30, 2009 by a vote of 357 to 70. The bill now goes on to the Senate where battle lines are being drawn, as the banking industry’s lobbyists are pulling out all stops! In a nutshell, the “Credit Cardholder’s Bill of Rights” would make illegal double-cycle billing, retroactive rate hikes and the issuance of credit cards to anyone under the age of 18. On April 16th, President Obama and Advisor Larry Summers met with credit card executives to seek their cooperation, as this issue had become a matter of importance to the Administration. By the battle lines being drawn in the Senate, it appears that those executives were not buying it!

How did the banking industry become so powerful? The answer goes back to 1980 when the Depository Institutions Deregulation and Monitory Control Act was passed by the Congress, which lifted the Usury limits of what banks could charge interest. Prior to this, banks were restricted as to what interest that could charge. Those over 50 will remember trying to obtain their first credit card. Up to then, it was nearly impossible, except from the bank with which you personally were doing business with. Suddenly, credit became available to anyone who could place an X on an application and your mailboxes have been flooded with offers ever since! The banks are not totally to blame. The American consumer decided that with this flow of credit, they could now purchase with a swipe of a card what took years of saving to purchase “The “American Dream.” The means to this dream was now in your wallet and you could buy as much as your limit would allow, and the banks would gladly increase that limit to satisfy your continuing appetite. This continued through the 1990s and right up to the Crash last Fall. By then, the revolving debt of the American consumer rose to $970 billon dollars, and the average household owes a whooping $10,678 in credit card debt, which is up nearly 30 % from the year 2000, according to the research firm CardWeb.com.

Credit cards are unsecured loans and the banks saw their delinquency rate increase 11% going into 2009. The Federal Government remains in the wings with TALF, Term Asset-Back Securities Loan Facility, which is specifically designed for credit card debt. Yet, the banks continue to lie in the bushes and wait for any opportunity to raise the interest rate of your credit card. By missing one payment, your rate may jump as much as 20%. Without any reason, banks can change your rate, even if you are on time with your payments. If you want to know exactly what the bank can do, click here and look for yourself. On the other hand, if you want to see what you can do to avoid this, click on this link. In the meantime, The Senate is now deliberating on the Credit Cardholder’s Bill of Rights, and this time they can’t let it die as they did at the end of 2008. If the banks had any sense, they would lower interest rates on credit cards wherever they could as to lower the default rate. It is in their best interests to do so, but as Sen. Dick Durbin (D) IL spoke candidly during a radio interview, as the Senate was debating the new bankruptcy legislation, “The Banks frankly own the place!"

Hear for yourself Sen. Dick Durbin on “Mornings with Ray Hanania”, carried by WJJG, Radio Chicagoland!