Posted By carrlaw on June 2, 2009
On May 22, 2009, President Obama signed a Bill into law that will help consumers. This bill’s enactment was in direct correlation to the “unfair or deceptive” practices of the credit card industry. Many of our clients have told stories regarding their credit cards and the enormous interest rate hikes. Their stories are similar. Most find out that their credit limits have been slashed without notice, which then quickly results in over the limit fees. Many, who were able to make the minimum payment and were trying to work out their debt and pay their balance over time, have been ambushed by credit card companies. With their credit card interest rates jumping to twenty to thirty plus percent, borrowers’ have seen their minimum payments double or even triple. This has put many borrowers, who have never been late and who have always been able to make the minimum payment, in default because they no longer make all their credit card obligations. The credit card industry is pushing and forcing many borrowers into bankruptcy. Many have no other alternative.
This Bill is an attempt to help consumer borrowers by limiting interest rate hikes on past purchases, requiring clearer disclosure of terms and eliminating many of the ”gotcha” practices that cost consumers millions in fees and interest. The Bill is the culmination of years of work, hearings, and studies into the nearly $1 trillion credit card industry. The provisions are the most sweeping changes to credit card industry practices in more than three decades — a period of exponential growth in credit card use, easy credit offers and growing American dependence on credit to pay basic living expenses. The Bill enactment comes as the Fed, led by Mr. Bernanke, recently placed restrictions on the credit industry. The release of the new rules by the Fed was largely due to this year’s financial upheaval, bank failures, bankruptcies, and stock market swings not seen since the Great Depression.
These changes have been brought about by the number of consumers that have called, complained, and begged for help to the Fed and the Local and Federal Governments. Most of us are burdened down by credit card debts, that we can no longer pay. The credit card companies offer little or no help. With sky-high interest rates, many of us have paid the principal amount several times over. For every $1.00 spent on credit cards, we have paid back the credit card companies, at least, $2.00 – $4.00. However, somehow we still owe them more.
The new law protects consumers from surprise charges and overhauls credit card regulations that the president blames in part for the economic downturn. “With this bill we’re putting in place some common sense reforms,” Obama said. “Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too.” However, the new credit card rules, which go into effect in nine months, prohibits companies from giving cards to people under 21 unless they can prove they have the means to pay the debt or a parent or guardian co-signs for the card. Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months. The bill requires a 45 days’ notice and an explanation before their interest rates increased.
We are a Nation at risk and we need help. The Nilson Report estimated that more than 700 million credit cards were in circulation in the United States. That’s more than two cards for every man, woman and child. We carry hefty balances. Many of us have had medical issues, loss of employment, emergencies, reduced wages, or we made some bad decisions. Now we are left with credit card debt. According to the Federal Reserve, the nation is some $2.5 trillion in debt, a figure that does not include home mortgages. Credit, the president said, has become “less of a lifeline and more of an anchor.”
However, many ask if this enough help to make a difference. The problem has all ready occurred. The Bill does not take for another 9 months. What will the credit card companies due in the meantime? We have seen many raise their rates before the legislation goes into effect. Many have been unable to get approved for new credit. Some conservatives have expressed reservations about the unintended consequences of the new law and it could result in a contraction of credit available, at a time when it is needed the most. In addition, this new Bill was NOT a homerun for the Consumer. Credit card companies killed two proposals to impose caps of 15 percent and 36 percent annual percentage rate (APR) on credit cards and other loans. An industry lobbyist told CBS News “that that’s because in many cases credit card issuers are already charging more than 36 percent — if you add up the charges for things like late payments, insufficient funds, annual fees and cash advances. The industry says they could not survive if they were limited to 36 percent APR.” Why did the Bill passed by the President do more for us, the average Joe or Jane? Sen. Dick Durbin, D-Ill., recently told a local Chicago radio station that in his opinion the banking industry “frankly owns the place.” In addition, Sen. Bernie Sanders, D-Vt., offered some evidence to back that up in a recent floor speech. He cited a recent report from the Consumer Education Foundation that said the financial services lobby spent $5.1 billion on campaign contributions and lobbying in past decade. He also notes that they have five lobbyists for every member of Congress.
Who is fighting for us? ……….. Nobody! While that is not completely accurate, however it is a David vs. Goliath situation. Any guess as to who is David? You and me. Some Senators and Representatives do care and are advocating for basic rights. However, they do not have the financial backing or support that they should have. When the economy was in high gear, did anyone care about the interest rates charged by the credit industry? NO. Many refinanced their debt by taking out second mortgages and home equity lines of credit. These instruments have better interest rates and are mostly likely tax deductible. Now that home values have fallen, like a meteor to the earth, the years of the credit industry abuse is apparent as a crater’s devastating mark. Only now that the economy is in shambles does the plight of the consumer get brought to the surface. Now remember, it is not only the consumer in dire straits, but mega companies and small businesses face similar woes. I applaud the steps of the Government to help the consumer, but who did they help first? It was the mega companies. The Government has given billions to these companies. These CEOs, CFOs, and upper management make a great living. I would love to be paid millions to run a company into the ground. Now I am not saying their jobs are easy or that I would have the intuition to see the economic implosion, but you and I need help. Would we have been better served to have a moratorium on interest charged for 2 years and our credit card balances knocked down by 10 to 20%? If this was the case, I know a lot of our clients would not have had to file for bankruptcy. Their minimum payments would have decreased and they would have been able to pay off their debts quickly? Instead of taking a huge loss, the credit card companies would have received a substantial amount of money.
While our law firm has a substantial amount of influence, we do not have near enough pull in legislative matters. Nor is the above the solution, it was just an idea. However, our firm provides an economic stimulus package, at least that what we tell our clients. Many feel ashamed or embarrassed by coming to talk with us and proceeding with bankruptcy. We respect our clients’ moral commitments, honor, personal pride, and uprightness. However, we are all entitled to a little mercy now and then. Multi-billion dollar companies are receiving money from the government; some are even filing for bankruptcy themselves (including GM). Has the government sent you a check recently? (not counting your tax refund). Whether it be Bankruptcy, Mortgage Modification, or Settling your Debt, we are offering to our clients a little economic stimulus package or bailout. We are taking advantage of federal laws and common business sense to help our clients financially. You are NOT alone! Your life does not have to be controlled by debt!
This Bill is a great step in the right direction, but what about the credit card debt staring us down right NOW? The damage has been done. With the economy getting worse and unemployment on the rise, many will never be able to pay back their credit card debt. Please, Please, Please, do NOT pull out your retirement money to pay off your debt. Do NOT use equity in your home to pay off credit card debt. First, find out your options. Your retirement money is just that, YOUR retirement. With fear of the demise of Social Security, you may need every last penny, unless you plan on working the rest of your life. There are better alternatives. Your family’s well being, comfort, and protection should always be first. Explore your options, for your family’s sake, before you make you make any major financial decisions. For most cases, we offer a FREE consultation.
Lawrence “D” Pew, Esq.
Carr & Pew, PLLC
www.carrlawaz.com
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