Posts Tagged ‘credit card companies’

Liberals Take Us On Another Good-Intentioned Road To Hell With Credit Card ‘Reform’

February 24, 2010

Have you ever been on the receiving end of an “I-told-you-so” moment?  You know, where you’re about to do something, and somebody warns you, “If you do that, X will happen” where “X” is a bad thing.  And then sure enough, X happens?

The Democrats live in that world.

They get through it by constantly lacking the wisdom to admit they screwed up.  That way they can keep making the same mistakes over and over again, and never have to admit their mistakes.

Well, let’s take another ride on the “I-told-you-so” train:

Credit Card Issuers Raising Rates Ahead of New Law
By Nancy Trejos
Washington Post Staff Writer
Thursday, July 2, 2009

Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.

Chase, for instance, will raise the minimum payment required of some of its customers from 2 percent to 5 percent of the statement balance starting in August. Chase and Discover have increased the maximum fee charged for transferring a balance to the card to 5 percent of the amount, up from 3 and 4 percent, respectively. Bank of America last month raised the transaction fee for balance transfers and cash advances from 3 to 4 percent. Card issuers including Bank of America and Citi also continue to cut limits and hike up rates, which they have been doing with more frequency since January.

“This is a common practice and will continue to be common, because issuers can do these things for really no reason until February,” said John Ulzheimer, president of consumer education for Credit.com, which tracks the industry. “It’s what I call the Credit Card Trifecta — lower limits, higher rates, higher minimum payments.”

It’s not just the top card issuers making changes. Atlanta-based InfiBank, for example, will raise the minimum annual percentage rate it charges nearly all of its customers in September “in order to more effectively manage the profitability of our credit card account portfolio in a very challenging economic environment,” said spokesman Kevin C. Langin.

The flurry of activity, which the banks say is necessary to shore up their revenue losses, has irked members of Congress, who passed a new credit card law, which was signed by President Obama in May. The law, among other things, would prevent card companies from raising rates on existing balances unless the borrower was at least 60 days late and would require the original rate to be restored if payments are received on time for six months. The law would also require banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee.

Yesterday, Sen. Charles E. Schumer (D-N.Y.) once again requested that the Federal Reserve invoke its emergency powers to place a limit on interest rate hikes.

“This is what many of us feared about a law that didn’t take effect right away,” Schumer said. “It was never going to take this long for the credit card companies to get ready for the new reforms. Instead, issuers are using the delay in the effective date to wring more dollars out of their customers. It is against the spirit of the law, and it is just plain wrong.”

Rep. Carolyn B. Maloney (D-N.Y.) said the recent rate and fee hikes were “unfair and deceptive and must be stopped.”

“Capricious actions like these are why Congress overwhelmingly passed, and President Obama signed, my credit card reform bill: to level the playing field on behalf of consumers,” she said.

Bank executives had warned that the new law would force them to increase rates and fees because it would keep them from properly managing borrowers’ risk. The argument is that if banks can’t raise rates on riskier customers, they will have to raise rates on all.

Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, an industry group, said there are two reasons for the rate increases. First, he said, consumer credit scores, which banks use to determine if they should lend and at what price, have decreased. Second, the cost of providing credit has increased. “Once the new law is in effect, we anticipate a further reduction in the availability of credit and additional increases in the cost of credit,” he said.

Banks have been hit with a record number of charge-offs, or debts they give up on because the borrowers have no way of paying them back. In June, credit card losses hit a record 10.44 percent, according to Fitch Ratings.

Increasing rates and fees is one way they can make up for lost revenue. Since January, of the six major card issuers, Citi has had the largest increase in rates for purchases, according to a report by Credit Suisse.

The boldfaced paragraph in red font says it all.  And the paragraph directly beneath the red-font paragraph explains why the Democrats’ interference in the free market and in private businesses’ business won’t do anything but hurt the overall system.  Because they didn’t do anything to fix the actual problems.

Democrats are so shocked and outraged about something that they were repeatedly TOLD would happen.

Which makes it absurd, asinine, demagogic outrage, at best.

In tough times, credit card companies are likely to raise rates to squeeze more revenue out of a hurting market, yes.  But many of those companies would have reduced rates and fees as the market improved in order to compete with other companies and attract more customers.

But those credit card companies won’t be doing that now.  Why?  Because Democrats have essentially locked those shockingly high- rate and fee-hikes in.  They went up, and up, and up.  But they will never go back down until those stupid Democrat laws are rescinded.

This is precisely what happened during the Great Depression, and why it dragged on and on and on in America when virtually every other nation had long since bounced back [see the World Economic Survey: Eighth Year, 1938/39 (Geneva: League of Nations, 1939), p. 128].  American liberals just kept passing one market-killing measure after another that prevented businesses, the markets, or the economy in general from reaching equilibrium and bouncing back.

In the situation above, credit card companies are being forced to jack up their rates, jack up their fees, cut credit lines, and adjust their cardholder policies to preclude riskier applicants from being able to borrow in the first place, because the rules Democrats forced on them won’t allow them to manage or balance their own risks in the future.

In other words, the credit card companies have joined the 77% of investors in this country who view Obama and his market-killing policies as “anti-business.”

So if you find that your rates have skyrocketed, if you find that your minimum payment has tripled, if you find that you’re suddenly paying a $500 annual fee, if you find that your credit line has been chopped in half, don’t blame the credit card companies.  Blame Obama.  He’s the one who screwed you.  Because he wouldn’t allow credit card companies to raise rates on the risky customers, and insisted that instead they raise rates on everybody.

These drastic changes from your credit card lender is a direct result of Obama’s policies.

It is often said that “the road to hell is paved with good intentions.”  I can only imagine that whoever coined this phrase to begin with had the Democrat Party in mind.

Obama V.P. Pick Joe Biden Shares Direct Blame For Foreclosure Disaster

August 28, 2008

Barack Obama – you know, the guy who tells us he can fix all the problems that Bush and Republicans caused – has an uncanny track record of picking the people who actually caused all the problems in the first place for key campaign positions.

Should Joe Biden Share Blame for Foreclosure Crisis?  At least two major studies and an ABC News investigative report say “YES.”  According to interviews with financial “Experts: Many Americans Lost Homes Due to a Bill Championed by Biden.”

Add that to Penny Pritzker – Obama’s National Finance Chairpersonwho was at the epicenter of the sub prime loan scandal that caused the foreclosure meltdown in the first place.  She paid $460 million of her family fortune through trusts to avoid going to jail.  And add that to Jim Johnson, Obama’s pick to chair his important Vice Presidential selection committee until he resigned amidst revelations that he had received sweetheart deals from sub-prime king Countrywide.  And Jim Johnson joined other key Democrats like Senate Banking Committee Chairman Christopher Dodd and Senate Banking Committee Chairman Kent Conrad, who received similar sweetheart deals.  And you can add to that the fact that federal regulators are pointedly blaming U.S. Sen. Charles Schumer, D-NY for the run that caused the IndyMac bank failure.

This is just like Democrats: behind all the  ostentatious and pretentious chants that they are fighting the battles for the little guy, they do what is best for their political futures at the behest of big money donors.  And when what they do in the name of the “little guy” ends up blowing up in the little guys’ face, they wash their hands of it and try to blame Republicans for it (after all, it’s all President Bush’s fault).

Hey, Democrats: President Bush’s Vice President didn’t cause the foreclosure meltdown; Barack Obama’s did.  And President Bush’s national finance chair wasn’t involved in the sub prime scandal from the very beginning; Barack Obama’s was.

Read the ABC investigative report on Joe Biden below.  Warning: it’s damning.  You’ve got Biden fighting for a law that directly led to the foreclosure meltdown, which wouldn’t have passed without his efforts.  You’ve got banks and credit card companies headquartered in Delaware.  You’ve got Biden’s own son working as an executive, lobbyists, and consultant for one of the players.

Should Biden Share Blame for Foreclosure Crisis?
Experts: Many Americans Lost Homes Due to a Bill Championed by Biden

By JUSTIN ROOD

August 28, 2008Experts say hundreds of thousands of Americans may have lost their homes due to a bill championed by Sen. Joseph Biden, D-Del., Barack Obama’s vice-presidential running mate.

At least two studies have concluded that the United States’ foreclosure crisis was exacerbated by a 2005 law that overhauled the nation’s bankruptcy law. That conclusion is echoed by other experts, although the banking and credit industry disputes it.

Congressional Republicans drove the effort to pass the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005. But Biden – who has enjoyed hundreds of thousands of dollars in campaign donations from credit industry executives – endorsed the measure early on and worked to gather Democratic support for it.

Biden’s early and vocal support was “essential” to the bill’s passage, said Travis Plunkett of the Washington D.C.-based advocacy group Consumer Federation, which opposed the measure. Biden “went out of his way to undermine criticism of the legislation,” and his efforts helped convince other Democrats to support the bill.

“Biden was a fairly strong proponent of that bankruptcy bill,” said Philip Corwin, a consultant for the American Bankers Association, which represents banks and lenders. However, Biden was “not in our pocket in any way,” he added.

Biden’s Senate office did not provide comment for this story.

Asked if the Obama/Biden campaign was concerned Biden’s record was a liability when discussing economic security, David Wade, a spokesman for the Obama/Biden campaign, said, “Barack Obama and Joe Biden have real solutions for struggling families in danger of losing their homes because of the Bush economy and abusive lending practices.”

BAPCPA “is directly responsible for the rising foreclosure rate since the end of 2005,” concluded a 2007 study by Credit Suisse. The law “increased foreclosures and the number of homes for sale,” echoed a July 2008 study by U.S. Treasury researcher David Bernstein. That study estimated the law had pushed foreclosures or forced sales on 200,000 homeowners since it went into effect, but noted that was a rough, “back-of-the-envelope” calculation.

“Trying to tie the forclosure crisis to the [2005 bankruptcy] bill is a stretch,” said the ABA’s Corwin. Corwin called the Credit Suisse report “junk” and said the Bernstein study wasn’t “worth the paper it was written on.”

The head author of the 2007 Credit Suisse report clarified his earlier findings in an email Wednesday. “The law likely contributed to increased foreclosures early on,” said researcher Don Ravitsky, but combined with other key factors, including subprime lending practices, to create the current crisis. Bernstein did not respond to a request for an interview.

The bill was backed by banks and credit card companies including MBNA, which is headquartered in Delaware, Biden’s home state. They wanted the bill because it would make it harder for Americans to use bankruptcy to avoid repaying credit card debt. MBNA executives had been Biden’s single largest source of campaign donations, and MBNA has employed Biden’s son Hunter as a company executive, lobbyist and consultant. The Obama campaign has said Hunter Biden did no work for MBNA on the bankruptcy bill. MBNA has since been bought by Bank of America.

Over the past two years, sub-prime mortgage borrowing and a weakening economy have pushed increasing numbers of Americans into dire financial straits. Under the old rules, many could have declared bankruptcy, shed much of their debt, restructured their mortgages and held onto their homes, according to experts and the two reports.

But the 2005 law Biden championed made it more expensive and more difficult to declare bankruptcy, experts conclude. That forced hundreds of thousands of distressed homeowners to sell their homes, or default on their mortgages, after which the bank would sell their former home, according to the studies. That flood of homes going up for sale in an already-weakening market further depressed home prices, according to the two reports, snowballing into the current crisis.

BAPCPA “increased home foreclosures, increased the dollar value of financial assets in default, and put additional downward price pressure on real estate markets,” concluded the Bernstein report. Bernstein conducted the report as an individual, not as a representative the Treasury Department.