Whitehouse criticizes 'abusive' practices by credit card industry
6:37 PM Thu, Dec 04, 2008 | Permalink
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U.S. Sheldon Whitehouse today called for greater oversight of the credit card industry to curb what he called abusive, anti-consumer practices. Whitehouse's comments came at a Senate Judiciary Committee field hearing this afternoon at the Rhode Island College campus in Providence. The main point of the hearing was legislation that Whitehouse has proposed that deals with credit card debt in federal bankruptcy proceedings. But the meeting also gave the nearly 100 people attending a chance to raise longstanding concerns about problems in the industry. "I hear about it all the time" from constituents, Whitehouse said. They tell him about extraordinarily high interest rates, high fees and other practices which he said are "abusive to consumers." The issue is important to many consumers. About 75 percent of all U.S. households have at least one credit card, he said, and 58 percent of those carry a balance. The issue is also timely. As of 2006, the average credit card balance was almost $8,500, Whitehouse said. "Today, with the economy in a free fall, that number is surely higher. And credit card companies kick consumers when they are down," he said. For example, a payment that is one day late results in an average penalty of $28, "even though the cost to the credit card company is negligible," he said. When credit card companies raise their interest rates on outstanding balances, debts can mount quickly, said John Chung, associate professor of law at Roger Williams University School of Law in Bristol, who was one of several experts who testified at the hearing. Chung said that without federal intervention, "I don't see an end" to the sorts of abusive credit-card industry practices that were raised at the hearing. Whitehouse said that credit-card industry practices "are unfair and unsustainable - and I believe these practices could lead to another financial collapse unless Congress acts." He called for greater legislative and regulatory oversight. 
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There is much talk about reducing consumers mortagage payments to stop foreclosures. However, many of these consumers have needed to start using what credit cards/credit they have to stay afloat. As soon as they do that, and their balances are high, credit card companies start raising their APRs to 25 % and above. This ensures that the consumer will either not be able to get out of this debt or it will drive the consumer into bankruptcy.
This has been done to me in the past. It is now happening again with Chase credit cards(formerly WaMu). Because I needed to use their credit for home and auto repairs which increased my balance, they are now raising my APR to 25.66% meaning I pay nearly $200 in interest each month without paying down the debt. At this point, I can still make the payments since I have a job. Many others are not so fortunate.
Addressing the foreclosure crisis by reducing mortage payments is great but it will not help much if nothing is done about these abusive credit card company practices. They will still be allowed to drive consumers into backruptcy unless a reasonable cap (such as 10%) is placed on APRs.
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I believe that many young people are getting into debt early on because of all the credit card application forms that come in the mail beginning when they are 18-20. I receive hundreds of applications every year and just end up shredding them. Is there a way to stop this barrage of unlimited credit that hits us on a daily basis? The debt that young people have to pay off just in terms of getting an education is enough without adding the additional debt that can pile up with additional credit card use.
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I believe that many young people are getting into debt early on because of all the credit card application forms that come in the mail beginning when they are 18-20. I receive hundreds of applications every year and just end up shredding them. Is there a way to stop this barrage of unlimited credit that hits us on a daily basis? The debt that young people have to pay off just in terms of getting an education is enough without adding the additional debt that can pile up with additional credit card use.
Report Abuse
I believe that many young people are getting into debt early on because of all the credit card application forms that come in the mail beginning when they are 18-20. I receive hundreds of applications every year and just end up shredding them. Is there a way to stop this barrage of unlimited credit that hits us on a daily basis? The debt that young people have to pay off just in terms of getting an education is enough without adding the additional debt that can pile up with additional credit card use.
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Is there any way to stop the barging of unlimited credits that's hits us daily.
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Shane
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It is really a great post. I have read the whole article, and I just want to say one thing that Is there any way to stop the barging of unlimited credits that's hits us daily....
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credit card deals
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