Credit Card Woes and Foes

I wrote President Obama at the time he was pushing his credit card legislation through Congress that it needed to be tougher and start much sooner.

I outlined, in fairly good detail, what would/could occur if this needed legislation was too weak and if it were not put in place immediately.

Unfortunately, one of the President's aides probably did not deliver my insightful comments.

Who knew? I wrote in good faith.

The points I tried to bring to President Obama's attention were simple, really. A person does not need a Harvard MBA to see the writing on the wall (or what middle class America is, and has been, receiving in the mail).

As more and more people were losing their jobs, there were a growing number of credit card payments either late or being missed altogether. In order to prevent those losses from hitting the coveted bottom line, the ingenious executives at the credit card companies (hereinafter referred to as CCcos) decided that they should accelerate what they had started last year and raise interest rates and/or lower their credit limits for millions of their customers, without regard to the fact that many of these people have flawless credit.

Now, my credit is not perfect. I have gone over my credit limit with a couple cards after the interest gets added (yes, playing it too close to the line). Looking at my credit report I do have all green (pays within 30 days) displayed in those little boxes. And, yes, I do owe a lot. This is not, however, about me (though it may be that way depending on what the CCcos do), it is about the people being targeted to carry the burden if the CCcos lose money due to people who may default because of job loss or other financial hardship.

The biggest problem with the legislation that was passed is that it does not go into effect until next year. During that time the CCcos could possibly devastate the economy by lowering credit limits (in some cases below what a person currently owes) and/or jacking up interest rates.

Think about that for a moment, people.

The reason most commonly offered by a CCco for this action is that they are adjusting rates and limits as part of their “periodic reviews” that assess a person’s risk factors.

I would like for any CCco to explain how a person with virtually perfect credit is now a risk to them simply because they are perhaps carrying a higher balance.

Nancy Trejos at the Washington Post, and many others at this point, reported a few days ago what I warned President Obama would happen. Read hers here: http://www.washingtonpost.com/wp-dyn/content/article/2009/07/01/AR2009070103868.html.

As a note, from personal experience I did have one CCco hike my interest rate from 12% to over 30%. They did give me an option. Take the new rate or close the account and pay it off at the lower rate. Great choice! Closing the account hurts your credit score versus taking many times longer to pay off the balance due to higher minimum payments . I had to close it as I did not want (and could not afford at the time) higher monthly payments.

To be objective, this is NOT a new practice. CCcos have been doing this for years. What IS new are the types of their customers being targeted and the total number of people now being affected.

Mark my words, folks.

This is NOT good for the economic recovery we are all working toward.

It seems that middle class Main Street USA is being asked, well, forced really, to carry the ball one more time.

I hope that we all weather the storm.

Over for now,

Main Street One