I received a notice about my change in terms and conditions from Chase today in the mail. Even I was shocked at how far they are going to fight back against credit card legislation. I thought I would write about some of the highlights.

(1) Change to variable rates – This was a no brainer and sure to happen. Credit card companies couldn’t continue to operate with fixed interest rates. So, they changed the fixed rate to a variable rate. The new variable rate is prime rate plus 8.99%. You can be assured that the prime rate will be going up in the future along with these credit card interest rates. If you want a cash advance, it is prime plus 15.99%! That would put a cash advance at 19.9% at today’s rate. It is pretty sad when a payday lender starts to look like a better deal.

(2) Change of balance transfer fee to 5% – Wow! That is pretty steep.

(3) Balance transfers can be declined – If I initiate a balance transfer with my available credit limit, they can decline it.

(4) The rewording of the Universal Default – Now this is sleazy. The biggest gripe about credit card companies is their ability to change the interest rates for any reason. Well, they redefined the universal default rate. Of course, they don’t dare call it that. The new universal default definition is the ability for Chase to charge me the default rate in the event that I am late with a payment or default on any account that I might have with Chase or its related companies. Of course, most consumers have numerous credit card accounts that are backed by Chase.

(5) They can stop a cash advance – They are notifying me that they can stop a cash advance if they choose.

(6) Communication – They go into detail about how they can communicate with me. They state that if there is a fee incurred while contacting me via e-mail, text, or phone, I am responsible for that fee although I didn’t initiate the communication. That is an interesting one.

(7) Closing of account – This is a dangerous one. If you close your account, the NEW fine print states that they “may require you (me) to pay the outstanding balance immediately or at any time after your (my) account is closed.” Of course, they give me the ability to close my account in the event that I don’t like their new terms and conditions.

The only difference between the old fine print and the new fine print is that they are just spelling out how many ways they are going to take advantage of me should I choose to keep a balance on my Chase card. With the new card agreement, how much of that will actually change when the new laws go into effect in February 2010? This should be interesting. Personally, I think that they are just laying the groundwork to get around the law. This is what this crooked industry has done for decades.

Tags: balance transfer fee, Bob Brooks, Chase, Credit Card Companies, credit card legislation, credit limit, Deceptive Money, fee, fixed interest rates, interest rates, payday lender, prime rate, Prudent Money, terms and conditions, Universal Default, variable rates

The credit card and debt collection industries are quickly losing their ability to collect using the legal system which is good news for the consumer. When you sign a credit card agreement, you grant the credit industry the ability to settle any debts against you through arbitration. The credit industry uses arbitration because it is almost impossible for a consumer to win.

The debt collector has 1 of 2 ways to collect a defaulted debt. First, they can go about it the traditional way of being persistent and going through the debt collection process. If the consumer still doesn’t pay, they either give up and give the debt back to the original creditor or sell it to another debt collector, or they take legal action.

They take legal action in order to get awarded a judgment against the consumer. Once they have the judgment, the debt collector or original creditor has other avenues of collection available to them. For the consumer, this is the one thing you want to avoid. They can go about getting a judgment through the filing of a lawsuit or through the arbitration process.

Arbitration is much a different process than going through a lawsuit. There are no official papers served to the consumer. A letter is sent to the consumer alerting them that the arbitration process has been started against them. They are asked to respond to the letter. The vast majority of time the consumer doesn’t even show up for the arbitration proceedings. The main reason for not showing up is that they are forced to travel to the state where the arbitration proceedings are held. In addition, arbitration is industry friendly and is a process that always stacks the cards against the consumer.

The consumer doesn’t show up, they lose the arbitration, and then the debt collector or creditor is awarded a judgment through a court of law. It is anti-consumer and another way the debt industry traps the consumer.

The two largest arbitration associations in the country are National Arbitration Forum (NAF) and the American Arbitration Association (AAA). The NAF had a lawsuit filed against them last week for their secret association with a large debt collection firm. Apparently, the arbitration association and the debt collector owned a hedge fund and they were filing arbitration proceedings against consumers right and left. Both parties were owned by the same company. There was no impartiality at all. It was a consumer scam.

As a result, the NAF stated they will no longer participate in consumer based arbitrations. Just this week, the second largest association dropped out of the debt collection arbitration business as well. This takes away the two of the biggest players available to debt collectors, which is a huge victory for consumers. Now, it is going to be tougher for debt collectors to collect through legal means unless they want to file lawsuits.

As a result, consumers might have a better chance of getting through the collection process without the potential of legal action taken against them. As I write in my book, the key to surviving the debt collection process is to stay out of legal problems. In the state of Texas, you have 4 years past the first missed payment (statute of limitation period) to have legal action successfully pursued against you. Now, it looks as if a victory has been scored for those who need it most.

Tags: American Arbitration Association, Arbitration, Bob Brooks, consumer scam, credit card, credit card agreement, credit industry, creditor, Debt, debt collection, debt collector, Deceptive Money, hedge fund, lawsuit, National Arbitration Forum, Prudent Money, statute of limitations

Much has been written lately about the credit card companies changing fixed interest rate cards to variable interest rates. The gripe is that they are doing this to get around the new regulations for the Credit CARD Act. I really wanted to jump on this bandwagon. I love writing about the loopholes in these laws. However, after thinking through it, there isn’t anything to the gripe.

I have gone through the Credit CARD Act or (aka The Credit Card Accountability, Responsibility and Disclosure Act) to look for the loopholes. When politicians write these pieces of legislation, they always leave loopholes to protect those who keep them in office.

The art of politics is the ability to protect the big businesses and special interest groups that keep the politicians in office while appearing to protect voters from these same big businesses. This is accomplished by writing legislation that offers great sound bites for the politicians, looks great on paper, and is filled with tons of loopholes making it for the most part a less effective piece of legislation. The Credit CARD Act is no different.

One press release noted:

“There is a tremendous loophole in this law and it is those credit cards with variable rates. Now that we are learning more about the details of the bill, surprises like this may start coming out. The law requires credit card companies give 45 days notice of a rate increase, but only if the card has a fixed rate. The law also requires rates to stay the same for one year after a new account is open, but only for fixed rates. Many credit card issuers and banks are rushing to switch their fixed rate cards to variable rates ahead of the new law.”

It is no surprise that credit card companies are making this change. This is actually good business for the credit card companies. The rate changes aren’t anything that can be manipulated because it is tied to a publically recognized index. In addition, credit card companies will need to protect their book of business once the Federal Reserve Board starts to raise rates, which may be well into the future. These variable rates are tied to very low rates currently. They have to rush to make these changes before the law changes

I never thought I would see the day where I actually wrote something that defended the credit card companies. Believe me, there is plenty to gripe about with this new Credit CARD Act. A credit card company raising their rates is not one of them.

For more information of how the credit card game is played and the step by step manual for getting out of debt, go check out my book Deceptive Money.

Tags: Bob Brooks, Credit CARD act, Credit Card Companies, Debt, Deceptive Money, Federal Reserve Board, fixed rates, legislation, loopholes, politicians, Prudent Money, rate changes, Responsibility and Disclosure Act, The Credit Card Accountability, variable rates

New stock market alert – Will the Government Bail-Out CIT?

New Debt Tip – Stay Away from the Loan Sharks at all Costs

Our blog was selected to be in the Festival of Stocks and the Bobo Carnival of Politics along with some other great blogs. Be sure to check them out!

One of the big complaints with the new credit card laws is that the vast majority of the law does not go into effect until February 2010. Of course, that gives credit card companies ample time to make changes to interest rates and terms of your credit card accounts. Well, if you can make it to August 20th, you will at least have options afforded by law with a change to your contract.

The Credit CARD Act required credit card companies to implement phase one of the new Credit CARD Act August 20th of 2009. The following is expected to go into effect:

(1) Creditors are now required to provide consumers with a 45 day notice prior to raising interest rates or changing terms and conditions on the credit card.

(2) Statements must be mailed 21 days in advanced to the due date (pretty sad that the lawmakers had to write this into a law).

(3) Credit card holders are given the right to opt out of any changes made by the credit card company prior to the changes going into effect.

The third rule can give consumers some relief. Some credit card companies will give the credit card holder the right to opt out of the changes. In other words, the credit card company would give the consumer the option to close the account and retain the current terms and conditions prior to the announcement of the change. Now, all card companies will have to give the customer that option. What happens if the consumer does not reject the changes before the 45 days? I haven’t seen anything that addresses the failure to contact the credit card company prior to the changes going into effect. Thus, it might be a good idea to make that call immediately.

Of course, the downside is that you can no longer use the account and the potential negative implications on your credit score. However, at least you maintain the original terms of the contract. One other note concerning the 45 day notice is that this does not apply to the reduction of credit limits. The credit card company can reduce the credit limit without providing notice.

Tags: Bob Brooks, Bobo carnival of politics, consumers, Credit CARD act, Credit Card Companies, credit card holders, credit card laws, credit limit, creditors, Deceptive Money, Festival of Stocks, interest rates, Prudent Money

Well it appears that Citigroup is having a tough time keeping their word to Congress. Over the past few years, Congress has done a lot of talking about credit card reform with one of the focuses of eliminating the universal default clause. This is the clause that every consumer signs off on, allowing the credit card company to change the terms and conditions, interest rates, etc just because they want to do so.

In 2007 as Congress was talking about credit card reform, Citigroup promised that they would not raise rates on any cardholder as long as they were in good standing.
Last November, Citigroup went back on its word and started raising fees on customers in good standing. The notice that they sent out said the following:

If the customer had not enjoyed a rate increase in two years, he or she could expect to enjoy one in January. No, I cannot make this stuff up!
So why would they go back on their word? Company spokesman told the New York Times that the business environment was tough and hurting bank profits. As a result, they were forced to raise rates.

This is an unfortunate trend that we are seeing all across the credit card industry. However, not all companies are utilizing the universal default clause. If this happens to you, take these action steps:

1) As a general rule of thumb, be paying very close attention to your statements. The credit card industry has at least until July 2010 to change anything it wants on your credit card account. Make sure that you stay aware. They don’t send out a lot of fan fair announcing these changes.

2) If your rates go up, check your credit score. If your credit score is in the 700’s, find some other company and transfer the balance to a lower rate.

3) If your credit score is not very good, call the credit card company and aggressively find out what has to be done to get interest rates lowered. When I say be aggressive, that means to be polite, persistent, and determined. If you don’t get a good answer, call back and or ask to talk to a supervisor. It is hit or miss and sometimes depends on the supervisor and/or the credit card company.

4) Don’t close the account. Sometimes you get the option to do so. Closing accounts has no benefit and can lower your credit score.

5) Don’t claim that you are being treated unfairly and just stop paying based on principle. This is the worst thing that you can do. By not paying, you will create a whole set of problems. Remember when you sign a credit card application, you just signed away the option to be treated fairly.

Tags: Bob Brooks, citigroup, Congress, credit card company, credit card reform, Credit Score, Deceptive Money, Prudent Money

A small number of Visa cardholders were surprised to find that recent purchases cost them a little more than expected – $23 quadrillion, plus change.

A man in New Hampshire used his card to purchase a pack of cigarettes only to find out later that he had been charged $23,148,855,308,184,500.

The same thing happened to a North Texas man who saw the same 17-figure bill on his credit card statement for a meal at a restaurant.

The first error was made with Visa through a Wachovia card. With a little work, the cardholder assured the bank that he hadn’t actually spent that much money.

The North Texas man had to spend two hours sorting out the problem with Bank of America and get the overdraft fee of $15 credited back. Visa stated that it was an obvious technical glitz in the system.

This story brings up some questions.

First, wouldn’t bells and whistles go off at a bank or credit card company in the event a 23 quadrillion dollar charge came through?

Second, how come it took two hours on the phone to sort this out with Bank of America? Wouldn’t this be an obvious mistake requiring a call to Visa and maybe a total of 10 minutes on the phone?

Third, how does a 23 quadrillion dollar transaction get approved in the first place?

Fourth, if you go 23 quadrillion dollars over your credit limit, is a $15 overdraft limit the only penalty? What would the new penalty interest rate be for going over the limit by a few quadrillion and how much would one day’s interest be on that type of money?

Finally, did either guy have trouble getting the overdraft fee credited back? After all, these are big money makers for credit card companies.

It really does make you wonder.

Tags: 23 quadrillion dollars, Bank of America, Bob Brooks, Cardholders, Credit Card Companies, Deceptive Money, overdraft fee, Prudent Money, Visa, Wachovia

38.9 billion dollars…This is the estimated revenue that the banking system will make this year in overdraft fees. Overdraft fees have become an enormous revenue producer for banks.

The Federal Deposit Insurance Corporation estimates that 81% of all banks now allow customers to exceed their account balances. Most banks in America will automatically sign you up for overdraft protection. Then, you are protected against embarrassment in the event you pull that debit card out to pay for a transaction and there is no money in the account.

What’s worse, Bank of America has a policy that they will approve up to 10 overdrafts PER DAY. Last year, their policy only allowed for 5 daily overdrafts.

In a USA Today article, a spokesperson for the American Bankers Association states that banks adopted this policy as a “convenience” for customers because they didn’t want transactions denied. A survey conducted by the Center for Responsible Lending showed the exact opposite. The CRL states “most people would prefer that the bank deny their withdrawal or purchase when they don’t have the money to pay for it.”

Investigations into bank practices also have found that banks are clearing checks and debits based on the size of the transaction rather than the order in which they arrive at the bank. A big transaction has a better chance of putting a customer into an overdraft situation then a smaller transaction. So, if that $100 transaction puts a customer into an overdraft situation, the next 2 to 3 transactions of $10 to $15 will rack up overdrafts fees ranging from $50 to $70 dollars depending on the bank’s fee schedule.

In 2004, the Check Clearing for the 21st Century act has increased the ability for banks to clear these checks and debits much more quickly as well as to practice “check and debit ordering.” Prior to the passing of this act, the process of clearing transactions took a very long time. This act speeds up the process. However, the act does not force banks to post deposits at a faster pace.

It is no wonder that since that act has passed overdraft fees have increased almost 4 times. Banks made $10 billion in overdrafts fees in 2004 compared to the estimated $38.9 billion that will be made this year.

Don’t fear because Congress is going to fix this problem. They are trying to pass new legislation to make banks stop with this abusive practice. They will spend tons of time in committees and in discussion crafting out new legislation. Basically, they will waste a lot of time while looking like they are doing something for the American voter.

To our politicians in Washington who continue to allow these abuses to occur:

Pass a new law that simply bans overdraft protection. It can be a one page act. If consumers don’t have the money, then banks shouldn’t allow the transaction. It really is that easy.

Tags: account balances, American Bankers Association, Bank of America, Banking System, banks, Bob Brooks, Center for Responsible Lending, checks, Congress, debit card, debits, Deceptive Money, Federal Deposit Insurance Corporation, legislation, money, overdraft fees, overdrafts, Prudent Money, transaction fees, USA Today

If you were to listen to the political sound bites, you would think that the politicians have done an amazing job protecting the American Consumer through the credit card legislation that was passed in May and goes into effect February 2010. Just like everything in Washington, the sound bites don’t reflect reality. Politicians have done it again. They have opted to protect those who contribute to their campaigns versus passing legislation that protects the American people.

As I have pointed out in past writings, there are a ton of loopholes in this legislation. One of the more disturbing aspects of this bill is the lack of protection for the small business owner. The bill excludes protection for any small business that has credit card debt. I have yet to see a statistic that shows the amount of credit card debt that applies to small business owners. However, I would suspect it is a large percentage.

The National Small Business Association’s latest survey (2008) states that credit cards are now the most common source of financing for America’s small-business owners. The survey showed that 44% of small-business owner identified credit cards as a source of financing that their company had used in the previous 12 months. This was more than any other source of financing.

Business credit was probably one of the easiest forms of credit to obtain prior to the debt bubble bursting. Opening up lines of credit through a credit card in the name of business was very easy. Although the business owner was personally responsible for it just like a personal credit card, the item never was reported to the credit reporting agencies and was never reflected as debt which could lower a credit score. It gave a small-business owner the ability to hide tons of debt within the business without it ever being reflected on their credit score. This enabled small-business owners to obtain large amounts of debt. Of course, the credit card companies aggressively went after small-business owners giving them ample lines of credit through credit cards.

For many credit card companies, this is a big percentage of their business. It is also a big percentage that falls outside the new laws that were designed to protect card holders. Unfortunately, a small-business owner is not considered worthy enough to be protected from the abuse of the credit card industry. Score one for the credit card companies and the politicians that protect them. I wonder what it would be like to actually own a politician?

Tags: American Consumer, bill, Bob Brooks, credit, Credit Card Companies, credit card debt, Debt, Deceptive Money, financing, legislation, National Small Business Association, politicians, Prudent Money, small business owner, Washington

New Deceptive Money Posting – Bank of America charging $1 per debit?

New Prudent Money Outlook – The One Reason this Bear Market Is not Over

OK, I typically don’t reproduce e-mails.  However, I really found this to be funny.   I think that we can all use some humor.  Full disclaimer – I did not write or come up with this list and have no idea who created it.  

The Top Twelve Indicators that the Economy is Bad  

12.   CEO’s are now playing miniature golf. 
11.   I got a pre-declined credit card in the mail. 
10.   I went to buy a toaster oven and they gave me a bank.
  9.   Hot wheels and Matchbox car companies are now trading higher than GM in the stock market. 
  8.   Obama met with small businesses -  GE, Pfizer, Chrysler, Citigroup and GM, to discuss the Stimulus Package. 
  7.   McDonalds is selling the 1/4 ouncer. 
  6.   People in Beverly Hills fired their nannies and are learning their children’s names. 
  5.   The most highly-paid job is now jury duty. 
  4.   People in Africa are donating money to Americans. Mothers in Ethiopia are telling their kids, “finish your plate; do you know how many kids are starving in America?”
  3.   Motel Six won’t leave the lights on. 
  2.   The Mafia is laying off judges. 

And my favorite indicator of all. 

  1. If the bank returns your check marked as “insufficient funds,” you have to call them and ask if they meant you or them.

Tags: Bad Economy, Bank of America, bear market, Bob Brooks, Chrysler, citigroup, credit card, Deceptive Money, GE, GM, Pfizer, Prudent Money, Prudent Money Outlook, Stimulus package

Get ready for fees and more fees.  The banking industry is doing their part in response to the latest credit card legislation that limits their ability to raise their revenue through excessive interest rate increases.  Well, it sort of limits their ability.  Remember, this legislation is far from perfect and does give them some wiggle room. 

Unfortunately, the law does not adequately address fees.   So, this is where banks are going to get their new revenue stream.  In June, led by Bank of America, many of the banks are going to be raising various fees based on account type.   For right now, it looks like overdraft fees could be one of the benefits of an increase in fee.   Overdraft fees have always been big revenue producers for banks.  Overdraft fees represent 74% of banks’ service charges on deposit accounts.  

The debit card is one of the biggest reasons that overdraft fees have become so prevalent.  This is precisely why I don’t like debit cards.  I have always believed that banks rely on human nature to take over, mistakes to be made, and overdraft fees to be charged because of error with the debit cards.   These cards make it easy to make mistakes.  Banks became very smart by giving people overdraft protection. This bank benefit will allow you to go ahead and make a charge on your debit card even though your account might be overdrawn.   So, you could use your debit card multiple times in a day, be in overdraft, and not even know it.  Meanwhile, that Venti Starbucks that typically costs you $2.11 just cost you an extra $30 due to the additional overdraft fee. 

I have heard stories where a consumer would rack up as much as $300 in a single day in overdraft charges.    A recent study of 462 banks by the FDIC found that three quarters of those institutions automatically enrolled customers in fee-based overdraft protection programs, in some cases not giving them the opportunity to cancel.   This is just more abuse that Congress had the opportunity to address and did not do so.  Once again, they are not going to take everything away from their campaign contributors, the banking system.

Don’t feel too sorry for the credit card companies and this latest legislation.  As I said earlier, they will replace lost revenue with new fees.  A recent study showed that only 85% of the banks charge an annual fee.  Well, that is about to change.    If you look at the top 10 banks, they have roughly 540 million credit cards in circulation.  Let’s assume that 85% of them (460 million of those cards) don’t charge annual fees.  A traditional charge of $75 a year would generate additional revenue of roughly $35 billion in new fees each year for the top 10 banks.   It is estimated before any new fee increases that fees are likely to cost consumers $39 billion this year.  

Make sure that you stay informed on changes to the fee structures of your accounts. If they haven’t already started showing up, they are coming.

Tags: Bank of America, banking industry, Bob Brooks, debit cards, Deceptive Money, FDIC, Fees, overdraft fees, Prudent Money

I knew that the exclusion would be in the new laws. When I found a copy of the Credit Card Accountability Responsibility and Disclosure Act, I immediately went to the section that detailed when credit card companies can raise your rates.  For the most part, this new law stops credit card companies from utilizing the Universal Default Clause. This is the part of the credit contract that allows the credit card company to change the terms and conditions of the credit agreement for really no reason.  However, there are still parts of the law that give the credit card companies the ability to raise rates.

If you are over 60 days late, they can raise your interest rates.  Section 171 Part 3 is where the credit card companies are going to get millions of Americans.  The law states that “an increase (in interest rates is allowed) due to the completion of a workout or temporary hardship arrangement by the obligor (debtor) or the failure of the obligor (debtor) to comply with the terms of a workout or temporary hardship arrangement.”

IN PLAIN ENGLISH – If you rework your credit card debt, they can raise your rates.  A debt management program is a workout.  What these companies do for (to) consumers, in my opinion, fit the exception that is stated in the new law that allows credit card companies to raise interest rates and charge fees.  Why is that significant?  The credit card industry has put together this new campaign to “help” people who cannot make their payments.  The site is www.helpwithmycredit.org.  It is billed as a site you can go to get educated on your options.  Actually, it is a front for consumer credit counseling and basically steers you towards a credit counselor who then pitches a debt management program or a workout.  Plus consumer credit counseling is in overdrive advertising their services.

I believe that the credit card industry will steer as many people as possible towards those programs in order to get as much of the outstanding debt as possible away from the protection of this new law.  It is actually ingenious.  The credit card industry has always been ingenious in finding ways to make as much money as possible at the consumer’s expense.  As I stated yesterday, Congress is going to make sure that their campaign contributors (the credit industry) are just fine.

You not only need to read the fine print of credit card agreements. You also need to read the fine print of the credit card laws.

Tags: Bob Brooks, campaign contributors, Congress, Credit Card Accountability Responsibility and Disclosure Act, Credit Card Companies, credit card debt, Debt, Deceptive Money, Prudent Money, rates, Universal Default Clause

Please answer one question for me – Why can’t politicians write laws that are easy to interpret?  Maybe it is because they don’t want them to be easy to interpret?  Maybe they want to keep it confusing?    

I think I have done something that not even all of the politicians have done prior to voting.  I have read over the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Cardholders Bill of Rights – the Senate had to rename it of course) and still am trying to make appropriate interpretations of some of these laws.  The bottom line is that the politicians give the industry plenty of wiggle room.  In other words, this appears to be nothing more than a slap on the hand.  With the exception of a few aspects of these laws, this is not a huge victory for the consumer.

As I will demonstrate over the next several days, this is one big victory for the credit card companies and not so much for the consumer.  Let’s take a look at a few facts.

There are two clear cut facts about this new legislation.  First, it will force the credit card company to make disclosures about credit more “suspicious” and readily available for consumers.  Second, it gets rid of the credit card company’s ability to increase interest rates for no reason.  This bill just defines how credit card companies can raise rates on you.

There are 3 major reasons why this is a victory for the credit card companies:

(1)     Gives the go ahead to raise fees – This is where the consumer is going to get hurt.  The credit card industry will just figure out ways to add more fees.  Now this adds up when you start thinking about the sheer number of cards in circulation.  Let’s take Chase for example. They have 119.4 million credit cards in circulation.  If they just started charging or increasing annual fees by $25, they would bring onto their balance sheet, either through an increase in money owed to them or fees paid by credit card holders, almost 3 billion dollars a year.  That is not bad for a hand slap.  They can easily get away with it now because of the new laws.

(2)     Bans the Universal Default Clause – Congress says credit card companies can no longer raise rates for any reason. They are claiming this to be a huge victory for the consumers and are declaring that they have hit the credit industry hard.  Actually, this is far from the truth.  The ability for the credit card industry to raise rates for any reason was going away regardless of these new laws. Realistically, there was a shelf life on how long they could get away with it.  The credit party is over.  Plus, they have 9 months to comply with the new laws (thanks to the Senate) and have plenty of time to raise rates and do whatever they want.  The House version of the bill only gave them 3 months to comply with the new laws.

(3)     They finally have Congress off of their back – The staged drama is over.  Congress has defeated the big bad credit industry.  Senator Dodd might have saved his political career.  Now, they don’t have to bother the industry that contributes heavily to their campaigns.  They did so without even having to inflict any real pain on the credit card industry.  This was political mastery.    

This is just another dog and pony show by our politicians.  Make no mistake about it – besides inconveniences, the credit industry wins on this one. The player with the biggest campaign contributions always wins in the fight for power and greed.

Tags: annual fees, Bob Brooks, Chase, Credit Card Accountability Responsibility and Disclosure Act of 2009, Credit Card Companies, credit card holders, Credit Cardholders Bill of Rights, Deceptive Money, Fees, House, politicians, Prudent Money, Senate, Senator Dodd, Universal Default Clause

As everyone applauds the protection offered by the Credit Cardholders Bill of Rights, there is one group that gets no benefit from these laws at all.  The LA Times reports:

“The new law, which shields consumers from predatory fees and sudden rate hikes, doesn’t include customers holding credit cards backed by their companies. An amendment that would have extended the protections to cardholders whose businesses have fewer than 50 employees was killed before the final bill was voted on.”

So the small business owner that has relied on lines of credits through business credit cards throughout the past 5 years or so is still going to be subject to the abuse of the credit card industry.  I haven’t been able to find the total amount of small business credit card debt.  However, I would imagine that it is sizeable.  Over the past 5 years, credit card companies were handing out small business credit cards like candy. You could get credit limits as high as $50,000 per card in most cases.  None of these credit cards would show up on a business owner’s credit report.  So, a small business owner could have an enormous amount of business credit card debt and it never be reflected on a credit score.  This of course enabled the small business owner to obtain more and more credit.

It makes no sense to exclude small business owners.  Leave it up to Congress to pass laws that do not protect everyone in the system.  It is not like the business debt (separate from the business owner) belongs to the company or small business. The business owner is personally responsible for that debt as he or she would be if it were personal debt. 

Then I came across this article in Inc.  that stated the following:

“….the National Federation of Independent Business, an advocacy group, supported the bill. Brad Close, the NFIB’s director of public policy in the House, said it was a straightforward piece of legislation to address the needs of entrepreneurs who use their personal credit cards for business.” 

That makes no sense at all since there is no distinction between a business credit card and a personal credit card.  How could this organization that is supposed to be the voice of small businesses ever think that this is a good thing?  Once again, it would be different if the business rather than the business owner was personally liable for the business card.  Besides, it makes no sense for a small business owner to use personal credit cards for business purposes when he or she can obtain a credit card in the small business name and the credit limit never be reflected on the credit report. 

For all of the politicians that voted to not protect small business owners, you have once again not done your job as an elected official.  The small business owner represents the backbone of capitalism which is probably the reason there is no protection.  It is a little disingenuous for the politicians to talk about helping the small business owner thrive when they don’t even have the backbone to stand up against the credit card companies and protect them.

Tags: Bob Brooks, business debt, Congress, credit, Credit Card Industry, Credit Cardholders Bill of Rights, credit report, Debt, Deceptive Money, LA Times, lines of credit, politicians, Prudent Money, small business credit card debt, small business owners

The house of representatives voted to pass the credit card holders bill of rights and the President will be signing that bill into law today. 

To further increase your protection from the credit card industry, politicians added a “special” piece of legislation.  I appreciate that the politicians are working hard to protect consumers.  This “special” piece of legislation completes the package!! 

The credit card holders bill of rights makes it legal for you to carry a gun in National Parks – you know, just in case a credit card executive tries to attack you while vacationing in Big Bend.

It is amazing to me (not surprising) that the politicians will slip a piece of totally non-related legislation (making it lawful to allow guns in National Parks) into a bill as important as credit card legislation. 

“Today is a victory for every American who holds a credit card,” said Rep. Carolyn Maloney, D-N.Y. “I regret that added to it was the unrelated and dangerous gun bill, and we should not have had to do credit card reform at the barrel of a gun.”   

All of the politicians must get their sound bites in on this legislation. 

With all due respect Representative Maloney this would have been a victory had this happened years ago or, at least, if Congress hadn’t given the credit industry a 9-month timeframe to comply. 

The credit card companies will have plenty of time to do three things to consumers – cut your credit limits, close your accounts, and raise your rates.

Thank you to all of the politicians who continue to work hard for the consumers. 

After I get a chance to go through the bill, I will write more about it.  For now, I am taking some time off for Memorial Day and will see you next Tuesday.  Have a great holiday weekend!

Tags: Bob Brooks, consumers, Credit Card Companies, Credit Card Industry, credit cardholder bill of rights, Debt, Deceptive Money, federal regulators, Fees, legislation, politicians, Prudent Money

 (This is Part II of my new series on debt solution companies)

I was reading an article written by a TIME magazine writer entitled, “The Real Problem with Credit Cards:  The Cardholders.”  This writer basically states that it is the people in debt that are the problem.   I really had to take a step back and think through the content of the article to determine where I stood.

She writes, “There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest.”

She says that “the seeming solution would be to make clear to consumers exactly how much their credit cards are costing them.”

Although I agree that we all need to take personal responsibility with credit cards and the choices we make, I don’t think that her thesis flies.  It is true that no one stuck a gun to your head and made you buy the big screen TV at Circuit City (Oh, I miss Circuit City).  The blame clearly lies on an industry that sets the consumer up to fail. 

There is a reason that cocaine is illegal.  There is a reason that there are laws prohibiting excessive speed on highways.  There are reasons that laws are in place.  They are written to offer a layer of protection for the American citizen.  In my book Deceptive Money, I fully document how crooked the credit card industry has been through the years.  The consumer never had a chance.  There is no other consumer contract in existence to where one party can change the terms and conditions at will.  Credit card companies can change anything that they want after the consumer signs on the dotted line.

The problem is not fixed by telling people the fees and how much they are spending.  If you are going to rack up debt, you are going to do it whether or not the fine print is in big bold letters or not.  The solution is passing laws that state credit card companies cannot practice abusive tactics anymore.  That is the solution.  Another problem is the politicians that big businesses elect and put in office.  They have protected the credit industry for years and are only reluctantly pseudo doing something about it now. 

Yes, we all have to take personal responsibility. At the same time, the system has failed America because the politicians enabled it to do so.  It is a crooked system that should have been regulated by good laws a long time ago.  Had that been the case, we would not have the problem we have today.

Tags: Bob Brooks, credit cards, Debt, Deceptive Money, laws, Prudent Money, TIME magazine