Debtor Nation

By Susan J. Douglas, In These Times. Posted February 26, 2005.

As the president and his corporate patrons seek to turn the management of Americans' retirements – a.k.a., our "golden years" – over to those highly trustworthy, humanitarian types on Wall Street, we should look at another model of how corporate America helps people manage their finances – the credit card companies – to get a glimpse of where we are headed.

Here are some of my recent favorite credit card gambits: The amount of time my credit card company gives me to turn around and pay the bill has shrunk to about two and a half weeks – otherwise, I'm late. The late fee I pay even if the check arrives one day late has, within two years, gone from about $20 to about $40. They have begun posting a payment due date that is a Sunday – when, of course, they don't do business – and if the check arrives Monday, you are docked the late fee plus all the interest. The interest rates, given what the rest of us get paid on our savings accounts and CDs, would make Shylock blush and certainly revive the word "usurious." Dare to miss a payment, and the company may raise your interest rate up to an outrageous 25 percent. And let's not forget that the financial institutions that issue credit cards are major Washington lobbyists and, thus, virtually unregulated.

All of this and more was recently exposed in "The Secret History of the Credit Card," produced by Frontline and The New York Times. Here are some underreported doozies from the show: Through a policy called "universal default," if you are late with a payment to someone else – say your mortgage company – your credit card company can raise your interest rates automatically because they feel you have become a riskier client. How do they know if you've been late on a car payment? They can now monitor, on a daily basis, your financial transactions and your credit rating.

Always, always, they are trolling for and sticking it to the most financially vulnerable; just as in Bush's budget, those in the most financially precarious positions are the ones made to pay the most. Millions of people already in financial hot water are solicited to accept yet more credit cards. The companies also set the minimum monthly payments so low that consumers could easily be in debt for the rest of their lives.

According to Frontline, since there is no federal government regulation of late payment fees, "the amount of revenue the companies generate from fees ... has doubled" in the last 10 years. Some predict that late fees will go to $50 within the year. The companies can also change your interest rate at will – they just have to give you 15 days' notice. And why are so many of these card companies, like Citibank or Bank USA, based in places like South Dakota or Delaware? Because these states (unlike some others) have no caps on interest rates.

Approximately 10 companies control nearly all credit card accounts, and they have their own individual and collective lobbyists working the Hill daily to make sure there is no investigation into the industry. One thing they also want to ensure is their continued ability to violate your privacy by sharing your financial information with telemarketers or other third parties, even if you object. According to U.S. PIRG, they have also been lobbying hard to change the bankruptcy laws so that it would be harder to qualify for Chapter 7 "fresh start" bankruptcy; instead, people would have to go into a Chapter 13 "5-year repayment plan" program, which, not surprisingly, would include unpaid credit cards. Both Sens. Christopher Dodd (D-Conn.) and John Kerry (D-Mass.) have proposed legislation that would require greater disclosure about what it really costs to carry this debt and that would prohibit the arbitrary increasing of interest rates. Given who controls Congress, don't hold your breath.

In part because of these shenanigans, the Kiplinger newsletter reports, "the rate at which people file for bankruptcy has increased 40 percent over the past 10 years and now totals 8.6 out of every 1,000 Americans." Older Americans, Kiplinger predicts, will lead the way. Burdened by taking care of children and aging parents in middle age, and then confronted by escalating health and medical bills while on a fixed – or, if Bush has his way, declining – income in old age, it will be senior citizens whose bankruptcy rates will soar.

The Bush version of Social Security will be just like this. It will further impoverish the poor, the working classes and women and be filled with hidden scams that benefit the financial institutions at our expense. Given that most Americans hate their credit card companies – the industry has a very high complaint rate – opponents of Bush's efforts to privatize Social Security might do well to use the industry as a predictor of what is to come.

Just imagine – the same financial interests that gouge you now, have indecipherable rules in their microscopic agreements, enjoy no regulation and can do whatever they want to screw the average American will soon control our retirements. Priceless.

Susan J. Douglas is regular a contributor to In These Times.

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