I was up getting dressed this AM and heard a report by Ali Velshi, CNN’s senior business correspondent, about the latest “bend over” practices by credit companies.
Some of these sharks are bumping the interest rates of customers up to 30% — even if they never miss a payment, never are late sending in a payment — simply because their credit score dips a few points.
What’s wrong with this? Your credit score can take a hit for simply opening a new card account with a retailer (Velshi cited a department store card as an example). It can also take a hit if your credit is checked by vendors too frequently in a short period.
This practice is so egregious that CNN reported that both Citicorp and Chase have announced that they will cease doing this; Congress is looking into the matter since it’s clear most credit card companies refuse to police themselves as they rape customers with otherwise good credit history. (AP):
Sen. Carl Levin, D-Mich., chairman of a Senate Homeland Security and Governmental Affairs subcommittee, is holding out the club of possible legislation to spur voluntary changes.It’s pretty clear that the banking industry is roiling over sub-prime follies and want the responsible consumers out there to pick up the tab. It will be interesting to see what position Joe Biden, presidential candidate and a senator from Delaware and home to most of the credit card industry, will come down on all of this. He voted for the damn bankruptcy bill.“Working people are being squeezed,” Levin told reporters Monday. In a call for “good, strong legislation” to be enacted next year, Levin said that “these abuses need to be remedied. … We have some real momentum for reform.”
On Tuesday, Levin’s subcommittee, which has been investigating the industry, will look at how credit-card issuers raise consumers’ rates — to as high as 30 percent — when their so-called FICO credit scores decline even if they’ve paid credit card bills regularly and promptly. In many cases, consumers have little notice of the increased rate, which are automatically triggered by declines in FICO scores for reasons left unexplained, the subcommittee found.
…Ken Clayton, managing director of card policy for the American Bankers Association, which represents the banking industry, said: “Costs for nearly every product can change, be it because consumer’s risk profiles change or because underlying costs change. Credit cards are no different.”
47 Responses to “Credit card company practices hit new low”
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Credit Scores: yet another scam produced by the financial services industry to fuck over consumers.
That seems, um, excessive. Rape? Really? I did not expect that from this blog.
My favorite practice currently is “allowing” someone to go over their credit limit and tacking on a bunch of extra fees when that happens. I called my company when they did this to me. Their weak excuse that it was to prevent “embarrasment” on my behalf didn’t really fly since it was a card I used for online shopping (Amazon.com has yet to make me feel inadequate) and intentionally kept a low limit on it as a simple safeguard to prevent some hacker from getting my # and charging up $10K in charges.
Just a PSA: call your card companies and make sure they don’t have that “feature” on your credit card.
No doubt the interest rate drops back to its previous level when the customer’s redit rating improves, right? Right?
The fact they call people who pay their monthly credit card bill on-time and in full “deadbeats” is all anyone needs to know about that industry’s mentality.
“We noticed you received a wage increase and your credit rating has greatly improved since a year ago. Since you can now afford to pay higher interests, we’ve bumped your interest rates up slightly…”
- A credit card CEO’s wet dream
And such an event - your credit card interest rate going up precipitously, perhaps through no fault of your own - seems like exactly the sort of thing that would inspire someone to, say, refinance the house.
Replacing uncollateralized debt with collateralized debt is exactly what we’re supposed to avoid, but hey. People do it so they can keep their heads above water, sometimes. It was never ALL about buying McMansions that folks couldn’t afford.
Aren’t these the same banks that were heavily invested in subprime mortgages? I don’t want to get all conspiracy-theory-ish, but it would be interesting to know just how much the banks that NUDGE people toward subprime (indirectly) are the same ones that profited so richly from it.
Pam, this was an excellent post, but the use of “rape” to describe the companies’ actions makes me a little uncomfortable. Their actions are egregious and probably criminal; they aren’t sexual assault.
Any sense who the customers are for these credit cards? Who is that goes for credit on such bad terms?
My favorite practice currently is “allowing” someone to go over their credit limit and tacking on a bunch of extra fees when that happens.
My favorite is the dropping of credit limits to levels lower than the current balance, and then tacking on the same extra fees.
lawrence: It’s not something people are aware of when they sign up. People don’t read the fine print of the credit agreements when they sign up and probably wouldn’t have a good understanding of what it means. But when you have credit card companies flooding your inbox with preapproval letters and you need a credit card — you might just go for the one with the nicest promotion, or the lowest APR, or whatever gimmick is most appealing to you.
A good high school math class has a section on how interest works. A great high school math class would have a section about figuring out what a credit card offer means.
Now that I’ve got a shredder, I’m going to take every unsolicited credit card offer I get. shred it, and mail the shreds back in the postpaid envelope. Let them dispose of their own garbage.
NO. Fuck wielding this as a threat, and start actually legislating it. You do not represent credit card companies, you represent the people getting fucked over by these crooks. It’s time you actually start representing US instead of just pretending that you’re going to. They’ve shown, time and again, that they’re not capable of implementing their own system of ethical behavior, so it’s time to start helping them along.
DO IT NOW.
I hate how credit scores are used against people for so many things now. Not just credit cards, but even the ability to rent an apartment. Even worse is if a person doesn’t have credit. My husband, being a very responsible, budget conscience person, had no debt when we decided to buy a house. His lack of credit made it impossible for us to get a mortgage in both our names so I had to get one on my own. And now we are having to go thru the process, and pay fees, so get his name added to the deed and loan.
Practices like raising interest rates without notice (or good reason) make people not want to have a credit card. Yet, it can be very difficult to live without one.
Yep. I can confirm this. My husband and I just sat down with our three credit cards and discovered to our horror that all three have skyrocketed their interest rate in the last little bit - two to 30% and the remaining one to 25% (how nice). We’re busting into an old 401(k) to clear the balances. We had been paying them down over time, but financially it makes no sense to pay those interest rates. By our figuring, if we start putting the money we save in interest directly into the current 401(k), we’ll have made up the difference in principal in less than two years (employer matching) - plus, we’ll be debt-free.
Simply repealing the egregious bankruptcy bill would be a big step in the right direction. A lot of people are going to take a serious beating when Big Shitpile finally implodes and they find they can’t declare bankruptcy.
Thank your congress critter for allowing such practices - safely in the pockets of Big Business!
Not to mention that this will hurt victims of identity theft even more. Someone steals your identity and trashes your credit score? Now you’ve got a 30% APR on top of it. Lovely.
I deliberately left my credit cards alone until I got my mortgage, then cancelled two of them. Have never had a problem with banks getting miffed at my paying off in full monthly, but then I usually don’t carry much (and am trying to change my charging habits so it all goes on ONE card so I can get rid of the other “loose end” card.) Usually use the bank card instead because it keeps my personal accounting simpler….yeah, am lazy!
Blackbloc:
I discovered, to my great disgust, that once I paid off one of my credit cards, one of the others upped my minimum payment.
Nice. I can’t wait until I get rid of the fucking things.
Tapetum,
When you make an early withdrawl from a 401k you have to pay income tax on the money, probably at 25% or more. You will be saving little to nothing, and raiding your retirement fund.
It would be far wiser to try roll over your balance to a 0% card or lower interest card.
Biden didn’t just vote for it, Pam. He voted *against* half the progressive amendments offered by Democrats to restore some sanity into the bill. I linked to it in a previous post and here it is again.
On the credit card front, has anyone else noticed that it’s kind of tough to find the interest rate you’re being charged, when you look at your bills online? My paper copy lists it pretty clearly but for both my credit cards I have to download a copy of my actual paper bill or search through multiple pages on the websites to see an interest rate. That disturbs me.
As for credit card companies generally, they’ll fuck you over. I did a balance transfer from one card to another after being offered a 0% APR deal online with no fees for one year. The company not only charged me a $200 fee anyway, because the fine print of my contract states they can charge me a cash transaction fee as a percentage of the overall amount of the transaction *for any reason* but only gave me 0% APR for four months instead of a year - again, different from what was in the online offer. So when I complained their response was basically, tough.
I’ve basically learned the hard way to never accept an online balance transfer. Always call and always have a paper offer to work from.
Any sense who the customers are for these credit cards? Who is that goes for credit on such bad terms?
A lot of times, people went for credit on completely different terms and then had the terms changed through one of those fine-print enclosures they put in your bill to “alert” you.
If you already have the card and they then jack your rate up because your credit score changes, what recourse do you have, other than canceling the card and trying to find a company that will give you one at a better rate (until they do the exact same thing, of course)? My husband just had Visa increase his interest rate and he’s had that card for 15 years — is he supposed to give up that long-lived line of credit (which influences your credit score in and of itself)?
Did they rate jack him or was it part of a generalized increase? Does he carry a balance, if he doesn’t carry a balance it doesn’t matter what the interest rate is, if he does carry a balance, find a card to BT it to. In light of Deep6’s experience, get the new card, and do the BT either online or on the phone, and whichever way you do it, make SURE that the terms are satisfactory to you. If the online doesn’t say specifically fee is X, rate is Y, do it on the phone and specifically ask, is the fee X, is the rate Y. Make sure you understand and are satisfied with the terms at the time of the transaction.
If the regular customer service doesn’t give him any satisfaction, tell him to ask for retention, and ask them what they will do for him. If he’s talking about canceling the card, I guess he isn’t carrying a balance that he can’t pay whenever he wants, so he should be in a good position.
And there’s no need to cancel the card, just throw it in a drawer. If he does cancel it, though, it doesn’t age off for years, a closed account in good standing stays on for I think 7 years.
Wait, let me get this straight. Your credit score drops when it gets checked too often, because that’s often a sign that you’re overextending yourself applying for credit. The credit card company will raise your rates when your score drops. The only way they know your score drops is to routinely check your credit score.
So, all they have to do is check your score a few times, watch the numbers drop as a direct result of their activity, and then raise your rate based on the score drop. Nice.
car: AFAIK, your credit score is only affected by score checks that *you* initiate (e.g. by applying for a new line of credit). If your bank checks your score on its own initiative, that shouldn’t change your score.
I am so glad I don’t have any credit cards. But what that means to the leeches in the credit card industry is that I’m not a good profit source, so the fact I don’t carry debt is used against me.
The system. It’s fucked.
Molly Ivins was being too kind when she said that bankers’ hearts were the size of carraway seeds.
They’re parasites.
Levin is on this side but Stabenow (the fat cow) is on the other side. She voted in favor of the bankruptcy act that stopped people from being able to declare bankruptcy to escape the traps carefully laid by the credit card companies.
But the fat cow seems to be on the wrong end of a lot of legislation… Her husband or is it boy friend, is a lawyer for credit companies I heard… She’s a true ‘Clinton democrat’… Always getting her picture with Hillary…
I don’t trust either one of them.
I’m being pursued by a collection agency for a debt I already paid off to a previous collection agency. The debt is $2000 and the initial credit charges were something like $500, probably more like $300. I honestly don’t know what to do about this since we literally do not have the money to make any payments on this debt and I don’t have any documentation from the previous collection agency that I’d already paid.
I give up, nobody can get ahead when they keep changing the rules. We get a little more than $12,000 a year and pay $6600 a year in housing costs and another $3000 a year to keep our car so he can get to work every day. How the hell are we ever going to get anywhere if we can’t get our creditors to recognize the debts we’ve already paid off?
“and I don’t have any documentation from the previous collection agency that I’d already paid.”
GH,
If you don’t have a cancelled check from paying the other collection agency, maybe your bank has a copy. I bank with Bank of America, and they have electronic copies of every check I write.
Most credit cards give some sort of incentive (e.g., airline miles, cash back). The best incentive I’ve come across is my card with www.wamu.com. They give you your updated FICO score every month. Not only is this a heads up for identity theft, but it’s a good way to gauge your credit worthiness on any given month.
The fine print in many credit card contracts often says “We can raise your interest rate whenever we feel like it, and we don’t have to have any reason at all other than that we want to charge you more money.”
To me, credit cards don’t seem to be worth the risk; I have a debit card and use that. (Disclaimer: I’m unemployed and supported by my parents - who do have credit cards - so my personal experience is somewhat unusual and limited.)
Though I find credit card companies and banks to be predatory in their credit card practices, using a debit card does not help in cases of merchant fraud. Learned that the hard way when I was just out of college when an online merchant overcharged me and the issuing bank had to be dragged kicking and screaming to even bother to look into it.
In contrast, the rare instances where that happened on a credit card purchase, the credit card company almost immediately got on the merchant’s case and waived my responsibility for the charges so long as I reported it promptly upon knowing about the merchant fraud.
YMMV, however, as the last time merchant fraud was an issue in my case was several years ago.
I didn’t have a checking account with my bank, I had to go to a grocery store and buy money orders. All my bank is going to show is two debit charges from that time period paid to a Winn Dixie. I can’t even get those records because I no longer live in the same state as the bank and can’t come in person to request all my prior statements. I really do have no proof that this debt has been paid. The previous collection agency, I don’t know, pocketed the money and never reported the payment? I do know that they ignored both a verbal request for confirmation documentation made when I called them to confirm the balance and an enclosed written request for the same.
What happens if I pay them off this time (assuming I can find the money)? It comes back in five more years as a $4000 debt?
Godless Heathen:
1. Contact the collection agency to whom payment is made. They may provide proof of payment. (Unlikely, I know. Many are as bent as corkscrews and the possibility exists that they kept your money and then sold the supposedly unpaid debt at a discount to another credit agency.) However, it is necessary that you at least try. Do everything by registered letter, so if they evade you that will stand as evidence in your favour if the matter ever goes to court.
2. I hope that you live in the same town as a law school. They often have free clinics with lawyer-supervised students handling files just like this. Please also look into legal aid clinics.
3. You may also want to try a complaint to whichever state agency oversees the credit agency to whom you paid the funds.
4. You will want to look into what tracking services the issuer of the money order has to see who actually cashed the damn thing.
5. (And here I’m telling you something you already learned, sorry) NEVER pay money in satisfaction of a debt without proof of payment and acknowledgment of either clearance of the debt or the new balance as of the date of payment.
6. Diarize every phone call, complete with times, name(s) of person contacted, write down what was said immediately, and then confirm in writing by registered letter.
Many of these agencies range from indifferent and incompetent to complete scum. Try every avenue and hope that you get lucky. Good hunting.
And remember, kids, that those same banks demand that you frequently check your credit as to prevent identity theft and other frauds.>>>Contact the collection agency to whom payment is made. They may provide proof of payment. (Unlikely, I know. Many are as bent as corkscrews and the possibility exists that they kept your money and then sold the supposedly unpaid debt at a discount to another credit agency.) >>>
This just happened to me. A debt I paid off many years ago suddenly reappeared. It didnt show up when I bought my house in 2005. Unfortunately, I don’t have the paperwork - it was lost in the move. The new company says all they have to provide is a letter stating I owe the money, and telling me where it originated. And get this, they are now claiming I owe three times what I originally owed. What’s more - I lived in the last place for ten years, and had the same phone number for 12 and no one *ever* contacted me about the debt.
I told them to go pound sand. I’m sure that my credit will take a ding on it, but hell, my mortgage is a 30 year fixed rate, and the one credit card I now have carries no balance - which by the way, that bank used as an excuse to up my interest rate. “You dont carry a balance, so we’ll charge you more if you do - and if you don’t start carrying a balance, we’ll close your account for you since you obviously don’t need it.”
Argh.
A debt I paid off many years ago suddenly reappeared.
Yep. A collections agency has been calling me for 6 months about a $500 debt I paid 15 years ago to Bank of America but, because it was 15 years ago, I don’t still have the canceled check. Their robot calls at least three times a week, but they’re not getting a dime because they have no proof that I even owe the money.
Atrios had a post a few months ago about a collections agency that’s basically engaging in open fraud by claiming that ancient debt still exists, and I found several of the numbers that call me on there, so I know it’s from them and is bogus. Unfortunately, that doesn’t stop them from calling.
My husband used to work in this utterly godless industry and here is his advice. When your credit card company sends you a statement saying they are changing your terms, especially if you are carrying a balance, respond within the alloted time in writing in exactly the way the notice says to and say you don’t agree to the change, and if they won’t let you keep your current terms, to close the account. If you rolled to a lower rate product, you can just keep paying it off, but they can’t change the rate on you. Other than carrying no debt, your best bet for staying safe if is to make sure you read the first agreement carefully before you sign up and then not let them change it on you.
I work for a merchant group, online at UnfairCreditCardFees.com, and believe me, it’s a thrill anytime one of these hearings come up. This is Levin’s second of the year, Chris Dodd held some good ones also earlier this year, and this summer
Consumers aren’t the only ones with a grievance against the industry. The biggest issue is the interchange fee, which was originally a cost-based transaction fee, but in recent years has turned into a way for banks to inflate their profits even more. Transaction costs go down, the interchange fee goes up. Interesting!
Conyers has also held some good hearings this year, and he’s touched on the interchange issue. I hope that issue is folded into any legislation that happens on this front. It would be too bad if one issue was solved, but the other left unresolved.
I was shocked when I heard this. These credit card issuers really need to notify you if they plan to pull your credit.
Universal credit default is borderline predatory, and really needs to be re-evaluated.
They need to re-evaluate this universal default rule. It’s clearly borderline predatory.
And why is it that credit card issuers raise the APR of borrowers who look like they won’t pay?
If they didn’t have the money at the lower APR, they sure as hell won’t have it when their payments get bumped higher.
For those of you having problems with collection agencies demanding on debts already paid and living in the United States, here’s something to know. If the debt is more than 7 years old, tell them to go bleep themselves. It cannot affect your credit report/score if the debt is more than 7 years old.
If your state’s statute of limitations on debt is more than 7 years, you can still be sued over it by the collections agency. But, if they’re on shaky ground anyhow (especially the stories of the collection agencies trying to collect on already-paid debt–this is a growing scam problem in the US), chances are very, very good it is never going to happen.
Hmm. The links I’m finding are all shady, but anyhow:
http://www.creditinfocenter.com/debt/settle_debts.shtml
for example.
Basically, if the debt is more than 7 years old and a collection agency tries to report it to the credit bureaus, you can have it removed. For credit reports/credit scores, it’s a straight seven years from “gaining” the bad debt.
There’s a growing industry of even-more shady collection agencies in the US. A couple of years back, it was that they started buying debt right at the 7 year point and harassing/scaring people who didn’t know that the debt should “expire” from the credit report at that point. They also tried to disguise what was going on from the credit bureaus–reporting this old debt as “new” debt since they were a new collector. You may need a bit of documentation but the credit report bureaus will remove reports done in this manner.
Based on your stories now it seems like they’ve gotten even shadier–harassing people over paid debt. Gather what documentation you can and tell them to go bleep themselves. If they report it, have it removed. Check your state’s limitations on suits over consumer debt. If you’re still within it, at least they’re going to have to provide a lot more documentation on the debt if you go to court and if they’re as shady as they seem, they probably won’t want to go to that length.
This is where we come back to a complaint that I have made before, here amongst other places: most police law and law enforcement agencies are pathetically understaffed and underqualified to address financial crimes matters… and even less interested. Corrupt shakedowns like this are often crimes, but not seen as “real” crimes by many dinosaurs in blue.
We in the US have rights under the Fair Debt Collection Practices Act including, IIRC, the right to tell a collector to cease calling. The Federal Trade Commission website www.ftc.gov would be a good place to start researching the issue for those who need more information.
Here’s an article from Bankrate.com about the statute of limitations. Next time the collections people call, I can really tell them to eff off since California’s limit is 4 years and they’re going after me for something from 1989.