Rarely does that happen. It’s not cost effective.
They’d just as soon sell the account to a collection agency.
You act like they’d done something that was not part of the original credit agreement. Did you read the original credit agreement before you signed it?
Credit cards are signature loans… in return for granting certain liberties on your part, such as a collateral-free loan, you accede to some flexibility in terms that favor the bank.
Not only do we have a problem with people frivolously trying to dissolve financial contracts, we also have a problem with people frivolously entering them.
And really… the hyperbole about debtor’s prison… unnecessary, uninstructive, irrelevant. Unless you’re into hyperbole, of course.
Oops, missed this before. I largely agree with your analysis, but one nit: Chapter 11 is extremely rare for individuals. It happens, and it’s acutally growing now. It may even grow a bit as a result of this bill, but in fact I think it’s more likely to shrink. But even if it does grow it will grow from a tiny base.
Chapter 11 for individuals is a very expensive process and is best suited for people who a) are (or were, I guess) wealthy, b) have substantial asssets and in particular who have substantial assets which are seizable whether or not they are encumbered and c) can present a realistic plan to pay all or substantially all of their debts over the course of time and/or d) have large assets and enormously complicated situations (being hit with a large judgement after filing for divorce but before divorce is granted would be one example) which cause a liquidity squeeze or which require a court to opine on the relative ranking of creditors.
Unless you want to go into the details of the changes to the exclusivity period I think Chapter 11 is probably best left out of the discussion.
Does anyone? Did you read the ten pages of near-microscopic print in your credit card agreement before you used the card? I doubt it, but you *might * be that one guy in 100,000.
Moreover, your arguments assume that the average consumer is sophisticated enough to understand the credit card agreement even if they read it. That just ain’t so. The average consumer doesn’t think much beyond “Cool! A credit card! Now I can get that plasma TV!”
Maybe it doesn’t bother you for banks to take advantage of the unsophisticated, but I find this devil-take-the-hindmost approach to economics exploitative and appalling. I believe it will ultimately erode the middle class and leave us with only the “haves” and “have nots.”
Couldn’t Congress (if it were really looking out for the interests of the people it is supposed to represent) at least have included with this bill more plain-language, large-typeface disclosure requirements? Why did Congress resist every attempt to amend this bill to include consumer-friendly provisions? Do you really not see that this bill was entirely bought and paid for by the credit card industry, with that industry’s interests in mind?
Let’s put “flexibility” in plain language. The banks build hidden triggers into the contract which allow them (after the consumer has built up a debt balance) to jack up the interest rates to such an astronomical level that the consumer has no realistic hope of ever retiring the debt. This essentially renders the consumer a serf, who winds up devoting all of his/her economic energy to servicing credit card debt and enriching the banks (his feudal masters).
Moreover, the bank has an advantage we consumers do not. It can spend millions lobbying Congress and effectively change the terms of the deal by changing the law.
Both parties enter into the contract with a particular set of bankruptcy laws in place and the unspoken understanding that a certain percentage of consumers are going to get into financial trouble and avail themselves of the bankruptcy system. But having entered into a contract with that set of bankruptcy laws in place, now the credit card banks have used their political influence to effectively change the deal to their advantage by changing the law.
Amen. Why should Congress bail out credit card banks who extend loans to people who are bad credit risks? Seems to me the credit card banks are guilty of frivolously entering into these agreements as much as are the consumers who default.
The truth of your rhetorical “one guy in 100,000” figure is debatable, but yes, I am one such person. None of us in my family are what you’d call sophisticated, but for some reason my parents put more of a scare into me about debt, particularly variable interest rates, than bugbears like smoking pot. Thus I look at any loan application for symptoms of that devil, and if the language is too complex for me, I’ll either refuse the offer or have someone smarter read it for me. Thus, your appeal to ignorance doesn’t really work for me, sorry.
By the way… a plasma TV? I thought the problem was crushing medical bills? Can’t really discuss this if people keep switching the scare stories.
High marks for rhetoric, low marks for substance.
A complaint with most bills, regardless of who they favor.
One might consider that Chapter 7 reforms address a bankruptcy situation that was already grossly stacked in favor of consumers who could simply walk away from debt without even proving why they need to do so.
For every appeal you make to the image of the gluttonous credit company, I can make an appeal to the welfare of the low-level employees of that same company. I think it’s safe to say that for every 3 Chapter 7 bankruptcies declared, the company loses enough money to keep a lowly call-center employee on the payroll, possibly triggering yet another bankruptcy.
This rhetoric is patently false. Regardless of whether you consider lending practices to be predatory, it is dishonest to imply that they are violating their lending contracts with their customers. Second, forcing compliance of a binding financial agreement is not a bailout, it is a sound economic practice in a country driven by the expectation of easy consumer credit.
Anyway, appealing to the injustics of too-accessible to consumers is just bizarre considering that there are other consumer advocate groups who argue exactly the same thing, that credit is too hard for the poor and minorities to obtain. Exactly what do the consumers need? Easier access to credit, or restriction from the perils of borrowing? If I “simplify” the demands being made by consumer-advocate groups, essentially they are asking for easily accessible, unsecured credit. Said debt will be converted to, as you said, plasma TV’s, and subsequently ignored. This does not sound like a victory for anyone except for plasma TV manufacturers.
Correction: The following passage:
should be amended to read:
Sorry for the hasty mis-edit.
Show me where I said anything about medical bills (in either this thread or the other on the subject of the bankruptcy bill).
The problem from my perspective is that the credit card industry has taken the place of old-time loan sharks, tempting unsophisticated people into debt (and now debt peonage) with easy credit. Most consumers simply don’t think beyond geting some easy cash in hand to by the latest consumer bauble or gadget.
Where once loan sharking was illegal, now it is institutionalized and granted the blessings and protections of the Congress of the United States. It is scandalous that the representatives of the people have thus condoned the systematic abuse of the economically unsophisticated.
Really? Give it a try.
The credit card industry has been raking in record profits. You will be hard-pressed to argue that its low-level employees would have been in jeopardy without this bill. From the linked site:
Yes it is. The credit card companies extend credit knowing a certain number of consumers will go into default and file for bankruptcy. They plan for this and maintain their profitability in spite of it. Now they are using their power in Congress to change the rules in the middle of the game.
Actually, it’s even worse than a bailout, it’s a windfall. It would be a bailout if the credit card industry were in financial trouble. The opposite is true. See above.
How so? Isn’t that precisely the justification for usury statutes in states which have them? Do you regard usury statutes “bizarre?”
Luring the unsophisticated into debt peonage is a very old game. The combination of easy credit and exorbitant interest does the trick. We used to outlaw these practices with usury laws and loan sharking statutes. Now the “representatives of the people” have cynically embraced the scam to fill their campaign coffers.
NattoGuy, you and most other folks here have a cite in your own wastebasket. Every credit card offer the banks fling at you has the grim details. If you are one day late on a payment, even to other credit cards, you’ll go from your lovely low rate to one that would have been illegal under the now-obsolete usury laws. 19 for Me’s link to Frontline ought to answer most of your questions
I’d quote from my own wastebasket, but I shred that stuff, and there’s no mail delivery today.
I’m going to ask for a cite on that. The consumer groups I know of are not complaining about the unavailability of credit, but that predatory lending is the norm, especially in some areas.
A cap on interest rates would definitely keep people from qualifying for loans, but, if the current mortgage rates are 5.9%, and your credit is so bad that you can only qualify at 12.5%, maybe you shouldn’t be buying a house.
Right on cue, today’s mail brought a Platinum Visa® offer from Bank Of America®. Under “Authorizations, Terms, and Conditions,” they say, "The terms of your account, including the APR (or how the APR is calculated) are subject to change at any time."
Under “Fee and Rate Information,” they say, **"If at any time during any rolling consecutive twelve billing cycle period you fail to make two Minimum Payments on a timely basis or exceed your Credit Limit twice we may elect to increase your Purchase, Cash Advance and/or Balance Transfer APRs to the Penalty APRs. ** The chart above that shows that the basic APR for Purchases is 9.49%, and the Penalty APR is 29.49%.
(All the superfluous capitalized words are that way in the flyer from BOA.)
You’ll note that this particular account offer has a two-missed-payment trigger for the penalty APR. Several other accounts are not that merciful. It is, after all, a “Platinum” Visa. :dubious:
29.49 percent?
Sounds pretty usurious to me. Actually, it sounds like Highway Robbery With A Touch Of Violence For Good Measure.
Many years ago, my wife and I got a bit behind on a couple of credit cards. Mistakes happened, but we learned fast and dug our way out with the help of a Credit Counseling service. At that time, the cards were capped at 19% - I think it edged up to 21% toward the end.
If the cap was at 29.49% then, I might well be still trying to pay the cards off 15 years later.
We both treat credit cards like loaded guns now, and we have tried to instill that sense of danger to our daughters, but it’s real easy to get behind on payments, despite the best of intentions toward debt, especially when you are young.
I’m sorry, I have to go with spoke- and the others on this topic. I haven’t researched the topic as others have, but I did see that Frontline special, and it’s very clear that 29.49% is a deep and terrible trap.
Fritz, yours is an all-too-common story. Young people tend to be in a precarious position, often finding themselves in low-paying, entry-level jobs, and saddled with student loans. And despite a lack of funds they feel the pressure to acquire the nice things their friends have-- the most fashionable clothes, the latest electronic gadgetry.
In that situation, a credit card is like a siren’s song. It lures young consumers in by giving them instant gratification. Want that Blackberry? That plasma TV? Those great shoes? Just sign right here and you can have them today! Simple as pie!
Of course, the hidden rock in this metaphor is usurious interest. (See AskNott’s post.) Just as insidious as the high interest rate itself is the fact that the interest is compounded! That is, you pay interest on accrued interest. That causes debt to pile up at a greatly accelerated rate.
Some young people have been taught by their parents to avoid this trap, and a few are sharp enough to figure it out on their own, but I’d say most only learn by hard experience.
Credit card banks understand the psychology very well.
As a result, credit card debt is a silent epidemic in this country. “Silent” because people just don’t talk about it. No one wants to admit that they’ve fallen into the trap. They see their friends with nice things and great cars and they don’t want to admit their own financial difficulties (never knowing that many of their friends are also up to their eyeballs in debt).
In my profession, I have a bit of a window into what’s happening out there. It’s not pretty. The real effects of this bankruptcy bill may be felt by a large segment of the population very soon. Woe unto the supporters of this legislation when that day comes.
In our case, it wasn’t the clothes, electronics, or pretty baubles - it was the brake job, the busted windshield, the tank of gas the day before payday, the emergency dental bill, etc. Stuff that must be paid right now.
Stuff that should be covered by a savings account - emergency funds, that we had two months ago, dammit, but thanks to a run of things falling off the family car or what have you, are now gone.
I can well see where an illness or injury, not covered by insurance, would put a lot of people in that trap in a hurry.
I didn’t mean to be presumptuous regarding your particular case Fritz. I’ve heard stories similar to yours, too, where the credit card user has no cash on hand and treats the credit card as a ready cash reserve. It’s easy to think at the time, “Oh, I’ll pay the card off with my next paycheck.” But then another unexpected expense arises, and that paycheck is spoken for. And on it goes with the same end result - spiraling debt.
One thing I left out from the BOA Platinum Visa offer: Cash Advances, which seem so wonderfully convenient at the time, carry a 21.49% APR. As you know, they send you blank Visa checks with your bill every month. I shred 'em, but many people use them to pay the plumber or the mechanic.
This stuff used to be done by tough-guy loan sharks, backed up by leg-breakers, and it was illegal. Now, it’s legal to loan-shark, and it’s done by America’s most respectable corporations. On the plus side, the new reality may have forced some thugs into lawful lines of work. :dubious: