New Credit Card Bill

[jpeyton]

Originally posted by: mugs
I'll give you an example of a provision I don't like.

http://news.yahoo.com/s/ap/200..._congress_credit_cards

Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.

That is an unreasonable limit on a credit card company's ability to manage risk.

What's a reasonable limit? 1 day? 30 minutes? Whatever the credit card companies want? Is this the only government mandated regulation you want to do away with, or can we just get rid of all of it and let all industries/corporations regulate themselves on the honor system?

I don't know if the universal default prohibition made it into the final bill, but that is also an unreasonable limit on their ability to manage risk. Someone who is risky for one creditor is risky to other creditors.

If a borrower hasn't broken the terms of their contract with a lender, why is the lender allowed to change the terms of their contract with the borrower? Sounds like common sense contract reform to me.

Are you open to allowing all kinds of contracts being open to changes of terms even if you fully honored the contract? Maybe health insurance contracts should be given the same leeway you want to give credit card companies. That way, when a patient is diagnosed with cancer, the insurance company can just raise their rates or cut/cancel their coverage. I mean, the risk obviously changed from the time the contract was signed, so that's okay in your eyes right?

 

[frostedflakes]

Because they reserve the right to change the contract at any time for any reason. Screw contract law, they need money for those rewards programs.

 

[jpeyton]

Originally posted by: frostedflakes
Screw contract law, they need money for those rewards programs.

mugs might need that rewards money for a seat cushion. The ride on the bandwagon ended up being a lot bumpier than expected.

 

[mugs]

Originally posted by: jpeyton

Originally posted by: mugs
I'll give you an example of a provision I don't like.

http://news.yahoo.com/s/ap/200..._congress_credit_cards

Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.

That is an unreasonable limit on a credit card company's ability to manage risk.

What's a reasonable limit? 1 day? 30 minutes? Whatever the credit card companies want? Is this the only government mandated regulation you want to do away with, or can we just get rid of all of it and let all industries/corporations regulate themselves on the honor system?

I don't know if the universal default prohibition made it into the final bill, but that is also an unreasonable limit on their ability to manage risk. Someone who is risky for one creditor is risky to other creditors.

If a borrower hasn't broken the terms of their contract with a lender, why is the lender allowed to change the terms of their contract with the borrower? Sounds like common sense contract reform to me.

Are you open to allowing all kinds of contracts being open to changes of terms even if you fully honored the contract? Maybe health insurance contracts should be given the same leeway you want to give credit card companies. That way, when a patient is diagnosed with cancer, the insurance company can just raise their rates or cut/cancel their coverage. I mean, the risk obviously changed from the time the contract was signed, so that's okay in your eyes right?

1 day, 30 minutes, 1 minute, 1 second, all fine. They give you a long grace period, you know. You don't seem to get this. You don't need a reason to allow something, you need a reason to prohibit it. You haven't even tried to give a reason why it is unacceptable to raise a person's interest rate when they are less than 60 days late. That possibility is covered in the contract.

Universal default is part of the contract.

You don't have to accept the new contract when they change the terms.

 

[mugs]

Originally posted by: jpeyton

Originally posted by: frostedflakes
Screw contract law, they need money for those rewards programs.

mugs might need that rewards money for a seat cushion. The ride on the bandwagon ended up being a lot bumpier than expected.

Not a bandwagon. I've been saying the same things since before this credit card reform bill was even proposed. If you feel like searching, you can find posts where I say similar things about the "unreasonable" fees for checking account screw-ups.

 

[jpeyton]

Originally posted by: mugs
Universal default is part of the contract.

You don't have to accept the new contract when they change the terms.

So as long as it's written in the contract, it's legal? Interesting theory.

Well no sense bickering about water under the bridge. These reforms will be signed into US law by the end of the week.

If you live in the US, practice your best groveling routine and maybe...*just maybe*...the big bad credit card companies will let you keep your low APRs and rewards programs.

 

[Paperdoc]

There are no free lunches!

When a merchant accepts your credit card to pay for a purchase, then submits the bill to the card company, the company pays the merchant less than the bill. For most the discount rate is 2% to 3%, and the credit card companies make a bunch of money this way to cover their costs and generate a profit. But then, if you fail to pay the full balance every month they charge you an interest rate on that automatic loan of 20% to 30%, or more, which is HUGE compared to normal loan rates. So they make a whole lot more money this way. They are right to claim that the rates are high because they are granting credit with few questions to some unqualified borrowers who will default, and those losses have to be covered. But they still turn out to be among the most profitable businesses in the country, so they're not exactly shaving their rates to the minimum! And let's face it, the credit card companies are not paying the price for their lack of attention to the quality of their borrowers - we the consumers are!

Now, enter the "Premium" cards that give cardholders benefits like Cash Back or airline travel points, etc. Who do you think pays for those benefits? Some of that is in the annual fees charged to the cardholder. But the card companies have started a new process unrecognized by most. They have created some new "classes" of card. When these cards are used in a store, the card company charges the store a HIGHER DISCOUNT RATE on the purchase, so the merchant is paying extra for the bonus the cardholder receives. Anyone want to bet what merchants will do to cover that increased cost? They will have to raise their retail prices by 1% to 2% on EVERYTHING to cover it, so now the bonus is being paid for by EVERYONE!! The card companies are NOT paying for your bonus benefit on your "Premium" card; in fact, they take a small margin of the increased discount rate and further increase their profits! Why else would the be so magnanimous and "give" you these bonuses?

 

[puffff]

Originally posted by: jpeyton

Originally posted by: puffff
I disagree with the universal default provision. If I mess up somewhere else, they ought to be able to take that into account, as it speaks to my credit worthiness overall.

At least you were brave enough to speak up; I'll give you kudos for that.

No kudos for supporting universal default, however. If I have fully honored my contract with a lender, that lender has no right to change the terms of their contract with me.

This bill does not prevent lenders from changing the terms of their contracts with borrowers who have not honored their terms. So if you're a deadbeat and you don't pay your bill, you will still get charged fees and your interest rate will still go up.

Lenders ought to be able write into the terms of the contract that any credit related event can be taken into consideration. Thus, by being late on another account, you DO violate the terms of your contract.

I would support banning raising rates on existing balances, but increasing rates on new charges should be allowed immediately, and the bank should have the option of reducing the credit line to whatever they see fit.

 

[Juddog]

Bah! I just got a letter in the mail from Chase stating that they are boosting my card's interest rate to something like 25% :| I haven't missed a single payment over the last 5 years and my credit rating is the best it's ever been. The letter they sent me stated that if I didn't agree to the terms I could keep the old rate but wouldn't be able to purchase anything with the card and that once it was paid off the account would be closed forever.

 

[Train]

Fortunately I have the USAA credit card... my wife does too.

I dumped Discover after 11 years with them because they decided to get lame.

About to get rid of Providian, or whatever they are now, stupid card got bought out 3 times in the past 2 years. They like to jack up rates and fees too.

 

[mugs]

Originally posted by: Juddog
Bah! I just got a letter in the mail from Chase stating that they are boosting my card's interest rate to something like 25% :| I haven't missed a single payment over the last 5 years and my credit rating is the best it's ever been. The letter they sent me stated that if I didn't agree to the terms I could keep the old rate but wouldn't be able to purchase anything with the card and that once it was paid off the account would be closed forever.

There is no way that new regulations could negatively impact consumers. Anyone who says otherwise is just jumping on the bandwagon.

 

[jpeyton]

Originally posted by: Juddog
Bah! I just got a letter in the mail from Chase stating that they are boosting my card's interest rate to something like 25% :| I haven't missed a single payment over the last 5 years and my credit rating is the best it's ever been. The letter they sent me stated that if I didn't agree to the terms I could keep the old rate but wouldn't be able to purchase anything with the card and that once it was paid off the account would be closed forever.

Looks like you're a victim of universal default, exactly what this new bill is designed to prevent. Too bad Congress didn't pass this bill sooner, because your situation could have been avoided; Chase would not have been able to arbitrarily change interest rates on you for no reason.

Of course, there are plenty of people on this board (like mugs) who fully support Chase and think it's okay for them to change the terms of their contract at any time on anyone, even people like you who have never missed a payment.

 

[Miramonti]

Banks should have been happy just raping poor people because no one cared, but they had to start fvcking with middle class america's credit cards, getting the politicians involved.

This is a slapdown long overdue.

 

[SagaLore]

Originally posted by: Special K

Originally posted by: SagaLore

<snip>
As banks scramble to make up for the lost revenue, cardholders who pay off their balance in full each month could see annual fees become the norm and lucrative rewards programs canceled.
<snip>

I think this is a good thing. People will be discouraged to have so many cards - then cards will become competitive again.

Yeah, but then FICO scores will suffer.

And?

 

[BoberFett]

Originally posted by: jpeyton

Originally posted by: cheezy321
How are you supposed to build credit if your parents dont agree to co-sign for you?

Proof of income? There's a thought.

And if you can't provide that, that means you don't have the income necessary to acquire an unsecured line of credit.

I don't think you understand how credit scores work. Do you think only unsecured debt is affected by credit history? Ever bought a house?

 

[PingSpike]

Originally posted by: joshsquall
Pretty typical. The people who do the right thing are usually the ones that get screwed by big government.

Thats because losers don't have any money to take. Its like the "rich pay the most in taxes thing". Of course they pay more taxes, the poor people don't have any money to tax!

 

[jpeyton]

Originally posted by: jjsole
Banks should have been happy just raping poor people because no one cared, but they had to start fvcking with middle class america's credit cards, getting the politicians involved.

This is a slapdown long overdue.

And the funny thing is, people defending these snakes have no reason to be up-in-arms about this bill. Banks will still charge fees, hike interest rates, etc. with people who default on their loans. This bill simply adjusts the schedule with which they can do so. It's not like irresponsible people will suddenly become responsible overnight because of this bill.

 

[jpeyton]

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: cheezy321
How are you supposed to build credit if your parents dont agree to co-sign for you?

Proof of income? There's a thought.

And if you can't provide that, that means you don't have the income necessary to acquire an unsecured line of credit.

I don't think you understand how credit scores work. Do you think only unsecured debt is affected by credit history? Ever bought a house?

Do you disagree with the new proof-of-income requirements for people under 21 to obtain an unsecured line of credit?

 

[PingSpike]

Originally posted by: TheVrolok

Originally posted by: randomlinh
blah. i hate to say it, but I'd probably pay the annual fee if it were like $30. It's worth it to me not to use my debit card online (yeah, call me paranoid or whatever).

Same for me. I really dislike the idea of an annual fee and I also pay my bill in full every month. But the kind of fraud / theft protection afforded by credit cards may be worth sucking up the extra fee. Sad as it may be.

Personally, I think this is exaggerated. There's enough competition that no annual fee cards aren't going to disappear any time soon. Rewards may shrink or disappear but they've already been doing that anyway.

 

[BoberFett]

Originally posted by: jpeyton

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: cheezy321
How are you supposed to build credit if your parents dont agree to co-sign for you?

Proof of income? There's a thought.

And if you can't provide that, that means you don't have the income necessary to acquire an unsecured line of credit.

I don't think you understand how credit scores work. Do you think only unsecured debt is affected by credit history? Ever bought a house?

Do you disagree with the new proof-of-income requirements for people under 21 to obtain an unsecured line of credit?

Yes, actually. Is 18 an adult or not?

 

[jpeyton]

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: cheezy321
How are you supposed to build credit if your parents dont agree to co-sign for you?

Proof of income? There's a thought.

And if you can't provide that, that means you don't have the income necessary to acquire an unsecured line of credit.

I don't think you understand how credit scores work. Do you think only unsecured debt is affected by credit history? Ever bought a house?

Do you disagree with the new proof-of-income requirements for people under 21 to obtain an unsecured line of credit?

Yes, actually. Is 18 an adult or not?

18 is an adult, which is why people under 18 can't have credit cards and people over 18 can.

What's wrong with requiring proof of income on an unsecured debt? Are you afraid young people won't be able to get away with lying on their credit card apps anymore?

 

[BoberFett]

Originally posted by: jpeyton

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: BoberFett

Originally posted by: jpeyton

Originally posted by: cheezy321
How are you supposed to build credit if your parents dont agree to co-sign for you?

Proof of income? There's a thought.

And if you can't provide that, that means you don't have the income necessary to acquire an unsecured line of credit.

I don't think you understand how credit scores work. Do you think only unsecured debt is affected by credit history? Ever bought a house?

Do you disagree with the new proof-of-income requirements for people under 21 to obtain an unsecured line of credit?

Yes, actually. Is 18 an adult or not?

18 is an adult, which is why people under 18 can't have credit cards and people over 18 can.

What's wrong with requiring proof of income on an unsecured debt? Are you afraid young people won't be able to get away with lying on their credit card apps anymore?

Why 21? Why not apply it across the board? Why not do away with unsecured completely? If you want a loan, put up collateral.

 

[jpeyton]

Originally posted by: BoberFett
Why 21? Why not apply it across the board?

Some cards do so voluntarily. It depends on the credit card company and their risk assessment policies. Requiring it for people under 21 makes sense because people from 18-21 have little or no credit history.

Why not do away with unsecured completely? If you want a loan, put up collateral.

I'm surprised you feel that strongly against credit card companies.

 

[alkemyst]

As banks scramble to make up for the lost revenue, cardholders who pay off their balance in full each month could see annual fees become the norm and lucrative rewards programs canceled.

well the rewards programs are just icing, but consumers will react by not using these cards.

Those with the best credit will still dictate there terms.

This is getting the WalMart crowd up in arms though.

I never saw the 3-5% cash back systems working in the long run.

 

[BoberFett]

Originally posted by: jpeyton

Originally posted by: BoberFett
Why 21? Why not apply it across the board?

Some cards do so voluntarily. It depends on the credit card company and their risk assessment policies. Requiring it for people under 21 makes sense because people from 18-21 have little or no credit history.

Why not do away with unsecured completely? If you want a loan, put up collateral.

I'm surprised you feel that strongly against credit card companies.

:roll: :roll: :roll:

That's not my course of action, I'm suggesting that you should pursue that if you truly are against abuse by unsecured creditors.

The only thing I'm against is one sided alterations to a contract. I think adults should be able to enter into any stupid contract they want. If some 18 year old idiot wants to agrees to 100% interest, let him. But then I also believe in survival of the fittest. We coddle people too much and the stupid are taking over. Natural selection needs to be allowed to function.