The Fed rolls over on credit cards
AP Photo/Mark Lennihan
We now know — thanks to, among other things, the revelations of whistle-blowers whose warnings went unheeded — that the explosion in home mortgage defaults and the ongoing credit crisis might have been avoided if the Federal Reserve had been mildly attentive to companies that abused their regulatory freedom and to the interests of ordinary consumers and investors.
When everything fell apart, former Fed Chairman Alan Greenspan proclaimed his “shocked disbelief” at the lending institutions’ suicidal greed.
Yet regulators seem to have learned little from the experience. Mr. Greenspan’s successor at the Fed, Ben Bernanke, linked arms with Treasury Secretary Henry Paulson to prop up failing financial firms quickly, but they have been notably slow to address the concerns of strapped individual mortgage holders or to focus on reforms to rein in consumer abuses.
Last month, the topic was credit cards, another area of consumer finance in which companies create a market — and then exploit it to their financial advantage the confusion of ordinary Americans. Indeed, Business Week has pointed to credit cards debt as the likely location of “the next meltdown” as more and more customers fall further and further behind in repaying the nearly $1 trillion they owe.
Credit card operations — in some instances, divisions of the same financial institutions needing multi-billion-dollar federal bailouts — have burned consumers and businesses with practices similar to those of their counterparts in the mortgage lending industry. Both enticed borrowers with endless solicitations. Both extended credit with little consideration of the ability to repay. And like the mortgage debt that has become so toxic that it has frozen the credit markets, much of the credit debt has been bundled into securities and resold to investors in packages for which it may prove impossible to assign a marketable value.
What the Fed did in December, however, was issue new rules that attempt to restore some balance and fairness to the credit card business at the user level, where credit card companies have used a wide variety of pretexts to extract extra payments from consumers.
One tactic relies on fine print in some credit card agreements allowing card companies to jack up interest rates on an account balance, even when the customer has never made a late payment and has kept her account current. That fine print includes “trigger” language permitting the imposition of higher rates if a consumer goes over the credit limit on a different credit card account issued by an entirely different company.
Credit card companies also can get more money out of consumers by the way they apportion payments on an account that has balances for both credit purchases and cash advances. Invariably, the companies apply payments so that they generate the highest possible fees and interest charges.
In announcing its new rules, the Fed said that consumers are being cheated. Card companies now will be required to allocate fairly payments on accounts and will be allowed to raise interest rates on existing balances only in limited circumstances. These rules, the Fed declared, “represent a significant step forward in consumer protection . . . ensuring fairness and making credit terms easier to understand.”
The rules, which were more than 18 months in the making, will be an improvement, but not for another 18 months. The Fed delayed implementation of the new rules after the credit card industry complained about the administrative problems the new rules create.
Consumers must hope that the incoming regulators designated by the Obama transition team will be more attuned to the problems of ordinary Americans than to the problems of the credit card industry.
Logicprevail,
RE: Your suggestion that America should refer to Obama as the U.S. first Bi-Racial President.
The reason that Obama and ALL other bi-racial children of any Black heritage is referred to as Black is because of the racially bias hearts of human beings.
Notice when a White female gives birth to a child that was produced due to a partner of Black heritage or in a situation where a White male has fathered a child due to impregnating a woman of Black heritage, White people almost always say, “he/she has a Black child and Blacks almost always say, “he/she has a bi-racial child?
There are racially bias Blacks who would out of prejudices call the child White, but it is extremely unusual.
The reason why such individuals of this type mixed heritage is considered Black is because this is how White Americans view them and treat them. In fact, it was the law in America for until recently. Until recently there was not even a box for other on documents concerning race. Even today there is no box for bi-racial individuals who has one White parent and one Black parent.
My suggestion is let’s just treat people as human beings regardless of their appearance or heritage, it truly shouldn’t matter.
A CENTRIST stated long ago that when she looks at Obama, the only thing that she could see was a Black man.
Frankly, it doesn’t appear that Obama cares what anyone sees him as, his race or character because he has worked and overcome all of that and, truly knows who he is according to who God states that he and everyone is who is in Christ. So you see, when one really believes that they are who God says that they are according to what we Christians believe according to what has been revealed to us in scripture, it truly doesn’t matter to us what anyone else say or think that we are.
My hope is that every human being comes into a state of such an existence and belief because that alone would solve most of societies ills. It appears that even most that I personally know who proclaim the Christian faith has not come to such maturity in Christ. I not long ago mistakenly thought that Obama was not a mature Christian, how wrong I was.
Lastly, do you really think that Obama is this country’s first “Bi-Racial” President? (Lol). How realistically naive you are.