Wednesday, January 11, 2006

"Vultures, vultures everywhere."

Credit Card companies are vultures and they are, I believe, in part, responsible for the financial crises low-income and/or young Americans find themselves in these days. Bear with me, I'm going to go on a well researched rant about companies like Citibank and MBNA, etc. In the efforts of full disclosure, I want to say that I don't have a credit card. I don't have a debit card. I don't have a checking account. I have a savings account and when I need to pay a bill, I get a bank check from a teller. I don't do automatic withdrawals and I don't like buying stuff on the internet. I don't like the idea of being in debt. I've had a couple of personal bad experiences with credit card companies and have vowed not to use them.

I apologize for the unreasonably long post, but please bear with me.

I've been thinking alot about this recently and I came across this article that started to piss me off. Here's a couple of highlights:
[people] born in the 1980s, [are] the leading edge of a generation that is shunning paper payments like no other before it.

So even if they aren't increasing their debt by buying with a credit card, consumers who use debit cards might wind up with less money to save than they would if they paid for things with cash.

The article also goes on to explain that this plastic spending trend is significantly reducing our national level of savings. This article explains that in November '05 Americans spent 0.2% more than they made, it was the seventh straight month of Americans spending more than they made and they expect that trend to maintain it's average over the entire year when all the data has been analyzed.

"You're seeing a situation where the consumers are spending every penny they possibly can and borrowing on top of that," said Joel Naroff, a Pennsylvania economic consultant...

And these credit card companies are offering people who can't afford a credit card credit cards, throwing them into debt and bankruptcy. It's not just anecdotal evidence that credit card companies will send pre-approved offers to anyone. My son, who is three years old got one a couple of weeks ago.

I was at Little Caeasers pizza last night buying a pizza and there was a human "lead box" for a credit card company there. He was offering a free pizza to any BYU student who would surrender to him all of their vital information for a credit card application. (And who knows who else they'd be selling this database of information to.) He'd taken out ads around campus and the lobby was literally chock full of 35 students hungry for a pizza willing to hand over all of their personal, vital information to this vulture. So, these starving students will get this card, spend on it, not be able to pay it back and then end up in Bankruptcy court. They'll end up declaring bankruptcy because they were hungry for a $5 pizza.

And sometimes, even if you can pay it back, they still come back to haunt you. When Elias and I made our first film, Missy, we spent about $5,000 of our own money on it. For about $500 of it I got two credit cards of $250 each so we could make the movie. I paid them both off and forgot about them. (bear in my mind, I was also 18 years old and shouldn't have been able to get $500 in credit in the first place.) A couple of years later, one of the companies sent me a $500 bill. The company I'd originally got the card from and paid the debt off to, "sold" the paid debt to another company and that company contended that I'd never paid them. I sent them copies of checks and everything, nothing would abate them. I was too young and naive to realize I could sue them for this gross mismanagement of data, so I just paid them. In any case though, these aren't problems people should be dealing with.

Were I to have declared bankruptcy, I'd still have that on my record. And with these new credit-card company written Bankruptcy laws on the books, I'd be boned if I had to do it now. I did some research about those and found this, this and this.

A couple of my favorite quotes?

Far from being either an effort to stem "Bankruptcy Abuse" or an effort at "Consumer Protection", the bill is in fact an attempt to rewrite bankruptcy laws to reduce the ability of those laws to protect consumers from predatory lending practices on the part of MBNA members, and to stiffen the capabilities of those corporations to collect from consumers already suffering from extreme financial hardships.

Consumer advocates say it is bad enough that the bill does nothing to protect consumers against predatory lenders and faux non-profits, but they also fear that the bill will actually push people into economic relationships with those types of agencies.

"In our opinion, it’s going to create a whole new industry based on taking advantage of the people who can least afford it..."

Here's a good transcript of Democracy Now! about the situation with Re. Jim McDermott.

Some highlights it reveals:

You know, the corporate media has sort of presented two views on this: One is that the bill is addressing massive fraud, a claim disproven by evidence from the Congressional Budget Office, the Government Accounting Office, the FDIC, the non-partisan American Bankruptcy Institute, numerous academic studies. The truth of the matter is that bankruptcies are up, because debt is up, dramatically. And in fact, in relation to debt, bankruptcy filings are down. And debt is up in large part because of the neglected health care crisis

Since 1989, the credit card companies have given over $43 million in campaign contributions.

Child support payments will go first to credit card companies in many cases, rather than to children. I mean, it's absolutely extreme. And there's a long laundry list of changes, and they are all to the disadvantage of consumers.

It is a done deal, but there's an election next year, and we want to remember who voted which way, and we want to keep up the pressure and the media attention. is a good place to see a number of other articles and references.

Predictably, my own representatives in the Senate, Orrin Hatch and Bob Bennett voted for it, as did my Congressman, Chris Cannon (who also took $2,000 from Jack Abramoff). An interesting sidenote about Chris Cannons press release is that he claims child support payments move up to priority one on the list of debts, but detractors of the bill claim that money goes first to the credit card companies, then to child support.

Looking to the passed text of the bill it's too confusing for me to tell who's right. This bit from "The Women's News" had this to say about it:

As wives and mothers, Entmacher said, women would suffer an additional burden if the bankruptcy bill became law because spouses who are seeking alimony or child support have the same priority as commercial creditors--without the legal staffs to pursue their claims.

And I found this bit from a non-partisan consumer reporting agency, Consumer Reports:
The payment of child support and alimony would be endangered. Today, child support is among the few obligations that cannot be wiped away in bankruptcy. By allowing more credit card and other debts to also survive the bankruptcy process, the bill puts banks in competition with parents trying to collect child support from former spouses who have declared bankruptcy. The bill’s provision that would require child support to be paid first when distributing the assets of chapter 7 debtors is virtually meaningless. About 95 percent of chapter 7 debtors have no assets to distribute in the bankruptcy proceeding.
The article itself is very informative about the bill in general as well. Highlights from the rest of the article:
The bill does not contain a single restriction on reckless or predatory lending by creditors. “While credit card companies urge Congress to erect new bankruptcy barriers for many families, their profits are soaring,” he said. A large body of evidence links the rise in consumer bankruptcies in the last twenty years directly to an increase in consumer debt.

Much of this lending boom was fueled by the extension of credit to vulnerable consumers, including young people, lower income Americans and minorities, and the elderly. Some lenders, such as those offering “predatory” mortgage loans, targeted these borrowers with often deceptive offers that had abusive terms.

“By making it harder for consumers to wipe away abusive loans in bankruptcy, this bill rewards the bottom feeders in the lending industry,” said Ed Mierzwinski, Consumer Programs Director of the U.S. Public Interest Research Group. “These are the firms bombarding college students with high interest credit card offers, or peddling predatory mortgage loans to older Americans, or marketing payday loans at triple digit interest rates to cash strapped members of the military.”
See, more evidence of that human lead box at Little Caesaers being a predatory asshole.

Here's the Wikipedia article about the bill. It's worth reading, too.

I don't know. I want to apologize for the length of this post, but I wanted to be thorough. I think theres a reason credit-card companies are bad and the politicians they have in their pockets (Republicans as well as Democrats) need to be held accountable for the vicious nature of their industry. We need to see this on the midterm slate of election issues and Democratic and Republican candidates alike need to work towards a reasonable Bankruptcy reform bill that addresses the need for protection of consumers from the predatory nature of the credit card companies, not the other way around.

I hope Pete Ashdown takes this to the mat as a key issue he can use to get the moral high ground over Orrin Hatch.

Loan-sharks like Citi-bank and MBNA truly are the vultures described by the pick-pocket in Casablanca. Or perhaps with this new bill, a more fitting description would be that of Shylock... Either way, they're picking our pockets when we can least afford it.


kerry said...

good to see a blog dealing with credit card issues. Credit cards are a necessity in Western Life. Sadly they can be one of our biggest liabilities. I have a site dealing with credit card debt solutions. You might like to take a look

Muddassar Shah said...

The rewards and points which person gets from using a credit card can be emerged together and that would the credit card consolidation.
PVC cards

Muddassar Shah said...
This comment has been removed by the author.
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