Monday, November 28, 2005



For as long as I've known Helen-- very long-- she's been getting upset about little things that could ruin peoples' lives. Of all my friends at college she was most eager to come with me to get arrested at the first big draft card burning. Today she was upset about the unregulated hand of credit card companies reaching into our wallets. She sent this in a little while ago:

A couple of nights ago, on CBS News, I saw a little segment about credit cards that got my blood boiling. Aha! A piece for DWT for sure!!

An older woman was seated at a desk with piles of papers all over it. She runs her own small business and she uses credit cardits to pay her bills. She views herself as an impeccably responsible business woman. She has always paid her bills on time; she has never been late with a payment. She always pays at least the minimum amount. Suddenly out of the blue, the interest rate on one of her cards skyrocketed, up to 28%! When she contacted the company about this, she was informed that because she was now borrowing more than the bank felt comfortable with, she is now a considered a high risk customer. Voila! They raised her interest rate significantly. Apparently, banks now have their own rules about how much debt you take on that are not related to the loan limit on your account. Apparently, banks now have their own guidelines, likely laid out in actuarial tables and charts, which they have not shared with us. Or have they? Maybe this data is buried in the tiny, tiny print on those pages we receive occasionally about our credit card accounts. The woman in the story is pursuing this matter legally, but at this point, she is required to pay this exhorbitant interest rate. (I wonder what the numbers would look like if you owe say $5,000 and were paying 7% and now you are paying 28%? It would not be pretty.) 

Wow. You could wind up in a real bind financially. Imagine having your family's financial picture, which is dependent on certain rules, suddenly shift because the rules have changed. You now need to pay out a lot more money every month to cover your debt. This would certainly tighten many people's budgets. What if it put you over the brink?

Too bad. Probably, if you are middle class, you can no longer claim bankruptcy. Because of the new law recently passed by the Republican Congress, with too many Democrats voting for it, I might add. This horrendous law was passed due to tremendous pressure from lobbyists for the credit card companies, who courtesy of indicted GOP Crime chief Tom DeLay and his K Street Project allowed the lobbyists to participate in the actual drafting of the law's provisions. How surprising and shocking.

I remember some other news segments I've seen that are related to this matter. If you are late with a credit card payment, even just one, you could be headed for BIG financial trouble. The interest rates could go up on ALL of your credit card accounts. I also saw a news segment about someone losing his homeowner's insurance because of one late credit card payment.

Usury laws vary among the states. What is interesting is banks have separate rules-- they can ignore state usury limits! Isn't that interesting?  

So what will happen to all of the people who find they are now borrowing more than they should according to the banks, even though the banks have been happy to loan the high amounts to them? We will have a lot of folks living in tremendous debt and working only to chip away at paying it off. A debtor class!! Another low for America a la BushCo.

My brilliant cousin Rachel, a professor in San Diego, sent me this article, "Burying College Grads in Debt," which describes college graduates as joining the ranks of the new debtor class. The average student borrower now graduates with $27, 600 in debt-- three and a half times more debt than ten years ago. According to the Department of Education, 39% of these borrowers have unmanageable levels of debt. In addition, young people's average credit card debt is $4, 000. This adds up to a lot of debt! How awful to be young and starting out and having so much debt. This is an unfair burden and morally reprehensible. And Republican-controlled Congress is chomping at the bit to cut even more student aid to finance even more tax cuts for multimillionaires and corporations.


At 9:53 AM, Blogger KenInNY said...

Well said, Helen. The whole credit-card business is so obviously stacked in favor of the credit-card companies that it's almost impossible even to know what the rules are.

And speaking of usury laws, where are our friends the Bible-thumping Christians when 28% interest rates are being thrown around? Didn't Jesus have a thing or two to say about this sort of thing?



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