Who is Elizabeth Warren? I didn't know until I stumbled on this interview. It's long but worth it. Deregulation, complicated "movable" contracts and lack of transparency has allowed credit card companies to profit off the backs of the American middle class.
Excerpts:
...Why are they so profitable? They're so profitable because they're no longer charged 9.9 percent; [now] they're charged 24.9 percent. And as long as they'll make minimum monthly payments, skipping one here, making one there ... that's the single most profitable customer in the credit card portfolio..."
"...What they're doing is, they've figured out the way to maximize profits for the credit card company. And the best way to maximize profits for the credit card company is lend to everyone at 9.9 percent. And as soon as you think you've got someone who won't be able to go somewhere else to borrow the money, change the price, and move that price way, way up, hit them with $29 late fees and $35 fees and $50 fees, and collect, collect, collect. That's how it is that credit card profits have been rising every year over the past 20 years at the very same time that bankruptcy losses and bad-debt defaults have also been rising.
"...That's why I lay this at Congress' feet. ... When the court said, "The language that you used effectively turned the credit card companies loose on interest rates and whatever it is they want to charge," Congress had no enthusiasm for stepping up to the plate and saying, "No, ... that's not what we meant. We never intended to deregulate the credit cards." Because Congress is stupid?
No, because it's credit card companies who make big political contributions; it's credit card companies who have been the number one givers in Washington. Not big oil, not big pharmaceutical -- big consumer financial services."
"...What the credit card industry wants is uniform deregulation, uniform protection from any state regulator that might move in and say, "What you're doing is an unconscionable contract, or a violation of our own usury laws, or our own consumer protection laws." The credit card companies are trying to maximize their profits. And in an era in which interest charges and fees are effectively deregulated around the country, the best way to maximize their profits is to change the interest rate after you've borrowed the money, to load on the maximum number of fees, and to write contracts in a way that will conceal rather than reveal how much this credit will really cost and what kinds of risks it runs."
"...I like my credit card. Don't take my credit card away from me. I just want ... some minimum regulation, just like the consumer product safety regulation, and that is the regulation that says you can't change the terms after I borrowed the money, and there are caps on what kind of fees can be imposed and what kind of interest can be imposed. They can be high, but they can't be that high.
And you've got to have right there on every credit card statement, "If you make the minimum monthly payment, here's how long it's going to take you to pay it off, and here's how much you'll pay in interest over that period of time." In other words, I believe in contracts, I believe in the freedom of both sides to come in and enter these contracts; but I think the consumer has a right to know what the terms of the contract are going to be, and I think the consumer has a right to have some minimal protection in the kind of contract that can be written."
"...Well, the history of usury starts at the Bible. There are multiple references going back to Deuteronomy about the evils of usury, about those who have money lending it at excessive rates to those who don't. It really just means a cap on what lenders can charge. It's sort of like consumer product safety [regulation]. Creditors and debtors ... can make their decisions within a range, but they can't go crazy; they can't go over the top. We've had usury laws in the United States since colonial times, but in the early 1990s, we just very quietly got rid of them."
The Canadian and Québec situation is slightly different than the USA one. However if one does not pay up her/his outstanding balance every month, one does incur heavy interest rates of up to 32%. The rate can not be changed without a 3 to 6 month warning to the consumer.
ReplyDeleteYou don't want the companies to do excessive profits? Pay promptly when you get your bill...and beware of those monthly minimums, after a while they don't even cover the accrued interests.
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