Credit Card Companies Fight Reform

I recently was advised by American Express, a company whose credit cards I pay in full each and every month, and with whom I have been a paying "member" since l981 that my credit card limit is being cut. I have become unworthy.

I took it personally until I realized I am but one of millions of cardholders who are being dropped or cut back worldwide as the card pushers experience a higher default rate and millions max out.

American Express, by the way, recently reorganized as a "bank holding company" to qualify for a government bailout. AMEX received several billion dollars from that TARP program that we were told was created to get lending going again. Hmm …

As the card companies began to experience the losses and uncertainties that their customers have long experienced, they began operating in a more predatory manner, jacking up fees and putting the collection pressure on.

In England, the government mandated that credit card companies give customers more time to pay -- extending payment due dates by a month. In this country, the companies want us to miss those due dates so they can tack on forever-escalating late charges and interest payments. These credit card costs have gone up even as interest rates -- the amount they pay for money -- goes down.

This has become a major political issue. Consumer’s Union reports, "President Obama is throwing his support behind major credit card reform, and the House just overwhelmingly passed its bill by a vote of 357-70!

"But the Senate is bitterly divided …The Senate may vote next week on its bill to curb these random rate hikes and fees. But the bank lobby is swarming Washington, claiming if they can't randomly hike your interest rate, consumers will suffer."

The credit card companies are squealing than any restrictions on them will hurt the economy, drive prices up and lead to financial Armageddon or worse.

Most cardholders know that they will be hurt more unless something changes. For many, credit cards have gone from a luxury to a necessity to a noose. Millions have become prisoners of debt, almost as if they are serfs and as if capitalism is going back in time to feudalism.

The average card rate is a whopping 14 percent. But that can climb easily to more than 30 percent.

The way these companies exploit customers is legendary and has been tolerated for too long as many media outlets report:

• US News: The advertised annual percentage rate on 15 Capital One cards increased from an average of 12.45 percent to 17.24 percent.
• MSNBC: Citibank and HSBC are now raising rates on millions of customers.
• NPR: American Express announced it is offering $300 payments to a limited number of cardholders who agree to close their accounts.
• The New Yorker: "These tactics are not going to improve the credit-card industry’s dismal reputation. They’re also not going to help an economy in recession, since reduced credit lines take away an important cushion for consumer spending, and higher interest rates and increased fees are likely to drive more people to default.
• Wall Street Journal: How are credit-card issuers reacting to consumers' attempts to live a more financially responsible lifestyle? They're threatening to cut their credit cards off if they don't spend enough.
• Bloomberg: About 45 percent of U.S. banks reduced credit limits for new or existing credit-card customers in the fourth quarter of 2008
• Miami Herald: Interest rates are rising, their credit limits are shrinking, new fees are cropping up, the time to pay their bills is decreasing -- or their cards have been cut off altogether.
• New Rules: Little attention has been given to the $48 billion in fees that credit card companies extracted from merchants last year. Largely invisible to the public, these fees, which amount to $427 per household, are ultimately passed on as higher prices to all consumers, whether they use plastic or not. These fees, known as interchange, are set by the credit card processors: Visa, MasterCard and American Express, which together control 93 percent of all card transactions in the United States.