Unintended consequences cont.
August 28, 2010 | alternatives, federal legislation | Comments (0)Banks have found away around credit card reform rules. From the story:
Professional cards aren’t covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009, or Card Act for short. Among other things, the law prohibits issuers from controversial billing practices such as hair-trigger interest rate increases, shortened payment cycles and inactivity fees—but it doesn’t apply to professional cards (see table).
Until recently professional cards largely had been reserved for small-business owners or corporate executives. But since the Card Act was passed in March 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.
Some bad people out there
August 27, 2010 | customers | Comments (0)And Illinois Attorney General Lisa Madigan is after them.
Wow
August 25, 2010 | alternatives, industry | Comments (0)Credit card debt dropping like a stone. From the story:
The average combined debt for bank-issued credit cards – like those with a MasterCard or Visa logo – fell to $4,951 in the three months ended June 30, down more than 13 percent from $5,719 in the same period a year ago, according to TransUnion.
The credit reporting agency said it was the first three-month period during which card debt fell below $5,000 since the first quarter of 2002.
The amount consumers owed on their credit cards in this year’s second quarter dropped to the lowest level in more than eight years as cardholders continued to pay off balances in the uncertain economy.
Bank fees on rise
August 24, 2010 | Financial Reform Bill - CFPB, alternatives, customers | Comments (0)From the story:
Already, about 20% of banks in the country, including Fifth Third and TCF Bank, have moved away from providing free checking accounts, according to Michael Moebs, who runs an independent financial services research firm in Lake Bluff, Ill.
He and other banking experts predict that in coming months, consumers also will be hit with a number of other new charges and cost-saving restrictions as banks try to offset the billions in overdraft, credit card and other fees they are expected to lose. The changes are likely to include shorter grace periods for credit card payments, bigger minimum balances needed to qualify for free checking and higher fees on everything from certified checks to ATMs.
Obama on credit card bill
August 24, 2010 | Financial Reform Bill - CFPB, alternatives, federal legislation | Comments (2)From the story:
Obama tied the credit card regulations to those in the financial regulatory reform legislation he signed into law last month, specifically calling out the Consumer Financial Protection Bureau.
Taken together, Obama said, the regulations in the two bills “will empower a new Consumer Financial Protection Bureau with just one job: looking out for consumers in our financial system.”
“This includes making sure that credit card reforms are implemented forcefully and that big banks and lenders are living up to their responsibilities under the law,” Obama said in the statement. “And in the wake of a terrible recession, these reforms and this independent consumer watchdog will not only protect consumers, they’ll strengthen our economy as a whole, leveling the playing field for responsible lenders and ensuring that families and small business owners are better able to make financial decisions that work for them.”
War on credit cards
August 24, 2010 | CFPB Nomination, Elizabeth Warren, Financial Reform Bill - CFPB, alternatives | Comments (0)Wall Street Journal is unhappy:
How much more consumer protection can credit-card customers stand? If President Obama selects activist law professor Elizabeth Warren to head the new Bureau of Consumer Financial Protection, we will soon have an answer. Meantime, thanks to a recent flurry of federal rule-making and legislating, consumers are already learning that “consumer protection” means higher interest rates and fewer card options.
It was among our safest predictions that reduced credit to consumers would result when the Federal Reserve announced new credit-card rules in 2008, and then Congress followed up with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. By limiting the ability of banks to increase rates on delinquent borrowers and to charge fees on unprofitable customers, Washington encouraged card issuers to be more selective in advancing credit and to demand higher rates when they do.
Does financial reform create a nanny state?
August 23, 2010 | Financial Reform Bill - CFPB, alternatives, federal legislation | Comments (0)Interesting piece from Frank A. Weil on The Huffington Post:
So we are facing a conundrum in how to break the vicious cycle of misunderstanding that can lead to perverse government policy action and mistakes. If knowledgeable and sincere elected officials are out of reach, along with a well-educated citizenry, perhaps something like the trade legislation method is needed to get complex economic/tax/financial matters passed through Congress. Such an approach might allow us to overcome the limited understanding that undermines our democracy and puts us all at risk.
Debate brewing in Wyoming?
August 23, 2010 | Wyoming, customers | Comments (1)From the story:
According to a press release from the Wyoming Children’s Action Alliance and Kids Count, citing figures from the Wyoming Department of Audit, the amount loaned was about $26 million in 2000. That amount has increased each year, with about $92 million loaned in 2009.
The figures indicate that more and more people are coming up short in paying their bills, said Marc Homer, director of Kids Count in Wyoming.
“As times are getting tougher, you see people seeking out more desperate means,” he said.
Homer criticized payday loan companies for taking advantage of low-income people and charging outrageous interest rates, which ultimately trap people in debt and hurt children and families.
The news release said that the typical payday borrower ultimately pays $793 back for an initial loan of $325, and that 90 percent of loans go to people who have borrowed five or more times per year.
But Kevin Williams, the owner of Advance Cash Services here, said his business does not take advantage of people or charge unreasonable amounts, and that payday loan companies have gotten a bad rap.
The industry is growing because it provides a service that customers can’t get elsewhere, he said.
“We service a segment of the community that is ignored by the standard banking and credit card industries,” he said. “(The loans) offer a solution to a short-term problem that a family has.”
Defending the industry
August 23, 2010 | Financial Reform Bill - CFPB, Mississippi, regulation | Comments (0)BorrowSmart of Mississippi is alway out front. From the story:
Borrow Smart Mississippi, an association that regulates payday lenders, say their practices are fair.
Spokesperson, Dan Robinson says often the misconception is payday lenders over charge customers because of their 18 percent fee for every $100 dollar transaction.
He says they are not like banks and credit unions that operate on an annual percentage rate basis.
“I know that the rates are much cheaper than what the other services out there are,” Robinson said.
He disagrees with the Center for Justice’s approach to lawmakers and says payday lending in Mississippi would go out of business if this legislation passed.
“There’s no possible way to do it for 36 percent, you can’t pay the rent on this building for $1.38 cents on a hundred.”
In addition, Robinson says the claims from the Center for Justice are false, and they will not pursue immediate legal action if a customer can’t pay.
New credit card rules
August 23, 2010 | alternatives, customers | Comments (0)They took effect this weekend. From the story:
To begin with, consumers can expect their February credit card statements to have a new look, such as providing more information about how long it will take to payoff debt as well as contact information for nonprofit credit counseling agencies.
Hard to argue with that rule.
