It's Official: The New Credit Card Rules Suck Wind

Back in August I wrote an article for Parade on the perils of credit cards, and I looked ahead to legislation that was moving ahead to enactment, as well as a Federal Reserve rulemaking.

Well, all that has come to pass and it's official: consumers are as prone to abuse by credit card companies, most of them beneficiaries of TARP largesse, as ever before.

Gretchen Morgenson's column in the New York Times today describes how banks are figuring out new ways of rooking customers, and regulators are doing nothing about it. One back is charging for statements, which

certainly seems to flout the spirit of both the Fed’s regulations and the Credit Card Accountability Responsibility and Disclosure Act of 2009. But because it is labeled a statement fee, it does not appear to violate the letter of the law, which barred credit card issuers from levying separate fees when a consumer submitted a payment, whether “by mail, electronic transfer, telephone authorization, or other means, unless such payment involves an expedited service by a service representative of the creditor.”

The Washington Post points out that the new rules don't cover rebate cards.

Expiration dates on those cards typically range from two weeks to three months, said Brian Riley, an analyst with the research firm Tower Group. In addition, the programs are often designed to discourage consumers from redeeming the offer, he said. Riley estimated about 20 percent of $4 billion in annual rebate offers are left on the table.

Here's a laundry list (PDF file) of other methods card issuers have used to circumvent the new credit card rules, compiled by a confederation of consumer groups.

There's a lot that Congress and the Fed are totally neglecting, such as unfair collection methods that include sewer service. I'm glad that the media is focusing on the deficiencies of the credit card legislation, but there needs to be more coverage of the general sleaze involved, and the need to rebuild consumer protection laws.

© 2010 Gary Weiss. All rights reserved.

The Times Flip-Flops on Credit Cards

The New York Times yesterday ran a simply atrocious front-page article on the credit card legislation that is sailing through Congress. CJR's Audit column has a good rundown of the article's deficiencies, which included omission of a basic fact--that credit card companies make money from every transaction, through fees paid by merchants.

The article basically swallowed the credit card industry's line that the pending card legislation would hurt good customers who pay off their balances every month, since such "deadbeats" are subsidized by the absurd fees and charges paid by millions of consumers.

By not mentioning the transaction fees, which let the card companies profit from "deadbeats" and interest-payers alike, the article was downright misleading.

Today, the Times ran what was tantamount to a front-page correction, in the form of a column by Ron Lieber. He points out allt he stuff that yesterday's article didn't have, and downplays the possibility that card issuers will withdraw all the perks cardholders currently get. After all, there are transaction fees!

Nowhere is yesterday's article mentioned, which is understandable I suppose. But still, the Times has run two contradictory front-page articles on consecutive days, and the overall impression is a bit rancid--and odd, considering that the Times has pushed hard for card reforms in its editorial page.

© 2009 Gary Weiss. All rights reserved.

Credit Card Legislation May Screw Small Business

The Republican Party is always yammering about how they protect small business, right up there with mom, cherry pie, and the right to bear semi-automatic arms. In the debate on the credit card bill of rights, Rep. Pete Sessions, R-Texas, said the legislation could prompt lenders to restrict credit. "And small businesses that count on this credit," he said.

Well, the legislation passed the House. So let's see these protectors of small business fight for inclusion of small business in the credit card bill of rights legislation as it winds its way through the Senate. Business Week Online says the House version specifically exempts businesses with under 500 employees.

BW notes:

If the House version passed today becomes law, credit card companies will have a loophole to subject small business customers to the tactics that ordinary consumers will be protected from. Of course, small business owners could just opt to use personal cards in their own name instead of small business credit cards, since they’re essentially the same.

So let's see Republicans rally to the defense of small business, which they profess to love. They will, won't they? Or are they (and the Democrats who went along with that anti-small-business provision) too much in the pocket of the big banks?

© 2009 Gary Weiss. All rights reserved.

Geithner Gets it Right on Credit Cards

Since my Portfolio story on Tim Geithner was not altogether favorable, I've been scratching around for something good to say about him. At last I've found it: Geithner today endorsed legislation in the House and Senate that would curtail unfair rate increases and fees.

When I described the menace of credit cards in a Parade Magazine article last August, the possibility of reform seemed remote. But with Obama in the White House and Democrats holding a nearly filibuster-proof majority, it seems that card reforms may finally be happening. Maybe. The banking lobby is going to fight hard to water down the card legislation. Stay tuned.



© 2009 Gary Weiss. All rights reserved.

Treasury Releases Depressing Monthly Lending Numbers

The Treasury just released its first monthly lending snapshot for the banks which are on the federal dole. I don't have a link at present, which is probably just as well because it is depressing and not worth dwelling on before dinner.

Here are the "highlights": banks are lending! Sort of.

Despite significant headwinds posed by unprecedented financial market crisis and economic turn, banks continued to originate, refinance and renew loans. [emphasis in original]

Great! But......

Significant challenges facing both banks and consumers that impact demand for and extension of credit include the shut down of various credit markets and the process of loan securitization.

Surely that has to be the end of the bad news. No... wait, there's more..

Due to decreasing loan demand and tighter underwriting standards, as well as other factors such as charge-offs, or losses written off on loans, banks reported a general trend of modestly declining total loan balances. [Emphasis in original]

So they're still lending! Just lending less. There's more:

a.From October to December, total residential mortgage balances across the twenty banks was essentially flat. The median percent change in total residential mortgage balances was a decrease of 1 percent.

Ok, that sucks. And so it goes. Corporate loan balances down, and now this goody:

c.Credit card borrowing increased, while available credit decreased. The median percent change in average total loan balance for U.S. credit cards was an increase of 2 percent. The median percent change in total used and unused commitments for U.S. credit cards was essentially flat. For banks with the largest credit card loan balances, the decrease was more marked.

Wow! Wonderful! An area of prosperity: usurious loans to the poor, though banks are cutting back on that too. What a great economy we have.

© 2009 Gary Weiss. All rights reserved.

The Evils of Credit Card Arbitration

That's the subject of my latest Forbes.com "Muckraker" column, available here.

© 2007 Gary Weiss. All rights reserved.



-----------

Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.