Legalized Loan Sharking: The Sleeper Issue of 2008
ThereÃ¢â‚¬â„¢s a sure way that a presidential candidate could get the attention of even the most politically apathetic citizen this year: vow to outlaw outrageous interest rates legally being charged to American consumers by credit card and student loan corporations. These rates are causing real and enduring pain to hard-working Americans and their families who find themselves behind the eight-ball.
IÃ¢â‚¬â„¢m not much different from a lot of people. Not long ago, I had a credit rating of 755, all my bills were paid on time, and I had no credit card balances outstanding. Then suddenly, I found myself out of work for over 6 months at the age of 39, with two kids in tow (ages 9 and 11). While interviewing for Ã¢â‚¬Å“career positionsÃ¢â‚¬Â, I even tried a stint at Starbucks to tide us over. In my interview, they assured me IÃ¢â‚¬â„¢d be able to get forty hours per week as a Ã¢â‚¬Å“baristaÃ¢â‚¬Â (woo-hoo!). But, during my illustrious five-week career, they never gave me more than 10 hours a week (at $7.25 an hour). I was told by fellow employees that my experience was par for the course. As my childcare bill was always bigger than my paycheck, I had to quit. (But I can still make a killer venti decaf cinnamon soy latte.)
The only full-time job offer I received after a diligent search was for a commission-only career position that at least showed promise. I had no option but to take it. While trying to build my business, put food on the table and keep a roof over our heads, I soon had to start using my credit cards, and rapidly maxed-out my $5,500 in available credit.
Before long, having no base salary as a safety net, my bills got paid later and later. Surreal as it seemed, I found myself negotiating payment arrangements with my utility and phone companies, as the disconnect notices arrived in the mail. My stress level went through the roof, and my hair quite literally began falling out.
Fast-forward three years, and that $5,500 turned into $14,000+ in debt. My student loans, which were approximately $42,000 when all of this started, ballooned to $69,000 from late fees and penalties, after I ran out of hardship deferments (and interest kept accruing, even in deferment).
Trying to figure out how I could have gotten into this situation, I examined my credit card statements more closely. Taking for granted the low interest rates I qualified for before all of this happened, I had never expected what I now saw.
To my utter astonishment, I discovered that I was being charged between 22% and 29.5% on all of my balances. This included one card, Care Credit (owned by G.E. Money Bank - hey, why stop at war profiteering?), which is intended to help people stretch out payments for dental and other medical care. The Old Navy card I opened to buy school clothes for the kids was (quelle surprise!) also parented by G.E. Money Bank. Both cards (and others) were charging me nearly 30% interest. For childrenÃ¢â‚¬â„¢s school clothes and family dental care!
IsnÃ¢â‚¬â„¢t there a term for near-30% interest on loans? Something like, Ã¢â‚¬Å“loan sharkingÃ¢â‚¬Â? Ã¢â‚¬Å“UsuryÃ¢â‚¬Â??? Does the mafia even charge this much?
It got worse for me from there. When I was able to make the minimum payments, I noticed that my balances kept hitting the ceiling of my credit limit, as soon as IÃ¢â‚¬â„¢d get them a little bit below it, costing me a $35 Ã¢â‚¬Å“over limit feeÃ¢â‚¬Â, in addition to any $35 Ã¢â‚¬Å“late feesÃ¢â‚¬Â I might incur. ThatÃ¢â‚¬â„¢s every month I was late, and/or over the limit. Which was a lot of months. And interest was compounding on those junk fees, as well as on my balance. I started to wonder, how was I supposed to pay this off?
Conservatives want to deny or ignore the fact that the working poor are using credit cards to provide for necessities - not merely niceties - for their families. A 2005 survey targeting low- to middle-income wage earners entitled Ã¢â‚¬Å“The Plastic Safety NetÃ¢â‚¬Â (http://www.demos.org/pub654.cfm) found that these families resort to credit cards to cover their lack of health insurance, retirement funds, and unemployment coverage, not their Aspen ski trips.
Republicans will never understand this because most of them havenÃ¢â‚¬â„¢t had the humiliating experience of rummaging through their car, purse, and pockets to scrape together $1.70 to buy their child a slice of pizza. That kind of poor is simply beyond the scope of their experience, and therefore, their comprehension. But we can hope to expect better from our Democratic candidates, who fancy themselves advocates of the people.
As if things werenÃ¢â‚¬â„¢t already hard enough, the credit card companies got a big gift from the Congress via the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. (FYI, Biden voted for it; Edwards, Obama, and Kucinich voted against it. Polling data must not have been out in time for Hillary to take a stand.) DonÃ¢â‚¬â„¢t let the title fool you: itÃ¢â‚¬â„¢s another one of those Orwellian Ã¢â‚¬Å“black is white and up is downÃ¢â‚¬Â gifts bestowed upon us by BushCo. It gave the credit card companies permission to double your payments in order to change the time required to pay off your balances to 10 years, instead of 20, if you made minimum payments. Trouble is that many people were already hard-pressed to make minimum payments before they doubled.
Another gift to corporate finance woven into that Ã¢â‚¬Å“Consumer ProtectionÃ¢â‚¬Â Act was the newly-granted right of these companies to raise rates to usurious heights, and add draconian late and over-limit fees. Horrified yet? Wait Ã¢â‚¬â€ thereÃ¢â‚¬â„¢s more. If you happen to fall behind on one card, the rates for ALL of your cards can now be bumped up to these stratospheric levels! I kid you not, this even happens to people who are NOT in dire straits, and donÃ¢â‚¬â„¢t have bad credit, but simply forget about a payment and get caught in these nets!
In an appreciative nod to their contributors at the banks and credit card companies, Republican legislators also tightened bankruptcy laws. So now, youÃ¢â‚¬â„¢re really out of luck if you fall on seriously hard times. Oh - and donÃ¢â‚¬â„¢t forget that most people who get in this deep do so because of the expenses associated with a catastrophic illness, a divorce, underemployment, or unemployment.
That, I realized, was how my $5,500 had turned to $14,000+, and how my student loans grew from $42,000 to $69,000 faster than MickeyÃ¢â‚¬â„¢s broom multiplied in Ã¢â‚¬Å“FantasiaÃ¢â‚¬Â Ã¢â‚¬Â¦ all because of a few years of reversal of fortune.
After 3 Ã‚Â½ years, I finally garnered enough experience to obtain a position with a base salary, plus commission, etc. Now, my bills are being paid on time again (and IÃ¢â‚¬â„¢ve noticed my hair growing back in). But IÃ¢â‚¬â„¢ve still got these balances from hell, and you donÃ¢â‚¬â„¢t even want to know my credit score.
There are too many people living this same nightmareÃ¢â‚¬Â¦ and worse.
If a candidate wants to know how to be carried to victory on a groundswell of popular outrage in 2008, hereÃ¢â‚¬â„¢s their answer. This issue will resonate with a lot of angry voters looking for their government to give them some protection from corporate pillaging. ItÃ¢â‚¬â„¢s the sleeper issue of the decade.
John Edwards, anti-poverty poster child, are you listening? YouÃ¢â‚¬â„¢re whispering about it this, but you need to start shouting. Senator Obama, this issue is a sure enough thing that even you could take a position on it! Hillary? Oh, never mind.
This unconscionable legislation has its foot on the neck of increasing numbers of the middle class, and stomps on their fingers as they dangle precipitously from the ledge of financial security, only to slip off and fall into the ranks of the Ã¢â‚¬Å“working poorÃ¢â‚¬Â.
I found a foothold, and pulled myself up on the ledge again Ã¢â‚¬â€ scrapes, bruises and all.
Millions of others wonÃ¢â‚¬â„¢t be so lucky.