How did consumer credit laws change for the worst?
Banks aggressively hand out credit cards to people secured against basically the ability to slander them on a credit file. They set their rates according to the risk of default. If you charge and don't pay there isn't much they can do besides hire collections agencies to annoy you.
Then recently it seems the law changed allowing them to stick you with these kinds of debt for life with no ability to get away from them (e.g. bankruptcy). Once in effect, the amount of credit these guys are willing to hand out now increases by orders of magnitude and they still charge the same rates pretending like they face the same risk. They don't. Their risk went down but their revenues go up (if anything). More profit.
What the fuck? How did politicians sell us out so fast?
April 26th, 2007 1:37am
Yes, that new bankruptcy law made 28% credit card debt a special debt that is almost impossible to discharge in a bankruptcy, along with student loans and obligations to the IRS.
How did it happen? Because Congress gets paid by those people and they know that you won't vote them out of office no matter what they do.
April 26th, 2007 2:05am
It's not just banks - there are a slew of finance provider cards. Department store credit cards supplement Visa and Mastercard as well as the older Amex and Diners'.
One of the more aggressive players is GE Money.
- by the looks that's Jeannie's evil step-uncle.
Fortunately so far in Australia we do not (yet)practice "universal default".
As so often mentioned on this board the best defence is to pay them off in reverse order of interest rate then cut them to pieces or pay the balance in full every time. Just boycott the buggers.
April 26th, 2007 4:20am
Here is a graphic from a NY Times article in 2004 on credit card rates:
42% was the highest interest rate in 2002.
The Bankruptcy Reform Act of 2005 made it much more difficult and expensive for people to file bankruptcy. Rules for chapter 7 for people (and not businesses) were made far stricter, and made it far easier for the people who you owe money to, to convert a chapter 7 petition into a chapter 13 petition. It is estimated that BRA2005 will increase the financial industry's profits a minimum of $5Billion per year due to less chapter 7 and more chapter 13 (if any). And it only cost them a few million dollars in lobbying.
Reform is one of those funny words. People hear/read it and think "oh, its going to make things better" without actually thinking. That's why it gets abused and tacked onto any bill that the repubs want to screw the public with. Sticking "reform" onto any proposal short circuits the thinking of people.
These financial lenders are the same ones who were pushing Option ARMs and sub-prime lending. The ones who legislators are offering to bail out because their loans are going tits up in a massive way. Bullshit. They knew the loans they were issuing were duds beforehand. Yet congress and individual states are gearing up to make 9-12 digit bailout packages, officially to help homeowners, but in reality bailing out the corrupt lenders. Let them die. Fuck them all.
April 26th, 2007 7:33am
To beat a dead horse some more...
We need consumer credit classes in high school. Granted, it's probably the furthest thing from their minds (I was trying to figure out how Beth S. could possibly be any hotter), but we need to make the attempt. Maybe it'll sink in.
Unfortunately, I think it comes down to people's innate intelligence level. Dumb people do dumb things, like get into serious debt and not consider the consequences.
First rule: Your lender is your friend, up until the moment they actually give you the money. Afterwards all they care about is when you're going to pay them back. Everything else is secondary.
"Hey, we're a friendly credit card company. Here's a free t-shirt for signing up for our card today!"
April 26th, 2007 9:31am
That's not the only scenario under which people get into debt (ie, tempted by swag). You don't have to be dumb to have a credit problem.
April 26th, 2007 9:35am
I note with interest >Cholesterol-lowering Lipitor costs $127 in the United States, $60 in Canada;<
We pay $A30 (the state chips in the rest from taxes) or maybe the box contains less. No matter, illness is another one reason for poverty and that linked story is illuminating in so many ways.
April 26th, 2007 10:05am
By saying "teach credit cards in school" you're implying there's some kind of balance to be struck. That's wrong.
There's simply no valid scenario where a sane person needs to spend all of their future income NOW.
Instead of a social contract protecting people who fall on "hard times", we prefer they become casualties of predatory lending. I can't imagine how this makes our society anything but poorer.
April 26th, 2007 10:12am
>> By saying "teach credit cards in school" you're implying there's some kind of balance to be struck. <<
The idea is to teach them responsible use of credit.
Running up $14,000 in debt with nothing tangible to show for it (as an ex-neighbor did) is the wrong way to use credit.
Using credit responsibly, so that when you really do need to borrow money (say, for buying a house, or for emergency medical needs), is the right way.
One of the goals of such a class would be acquiring skills in reading the fine print, and knowing what the terms mean.
April 26th, 2007 10:32am
I think that would just raise the bar on the complexity of financial arrangements offered to the general public.
Let's face it, the current situation requires most of the population to be able to recognise various note denominations if not actually capable of doing simple arithmetic. Compared with the Middle Ages, that's a real improvement.
Worth trying though - add it to the Home Economics course along with Gambling Odds, Votecount Analysis and Discounted Cash Flow Theory.
April 26th, 2007 10:47am
"42% was the highest interest rate in 2002."
April 26th, 2007 1:24pm
Did you vote Republican? What did you think they'd do?
April 26th, 2007 2:29pm
"There's simply no valid scenario where a sane person needs to spend all of their future income NOW.
See, that's the problem. People don't appreciate how buying on credit works and have no idea how to compute interest. If they were educated to realize the actual cost of things bought on credit, at least some of them wouldn't do it.
And 42% is utterly criminal, even assuming it's to balance out the chance of getting stiffed. They can almost get those odds at a damn CASINO.
April 26th, 2007 2:34pm
"Did you vote Republican?"
Is that addressed to me? No, of course not. Never have and probably never will. I also didn't vote for the Democrats, unlike you sorry bastards. You'll never change anything voting for two sides of the same weighted coin.
April 26th, 2007 3:07pm
State lottery tickets have 50% payback odds overall.
April 26th, 2007 3:09pm
I don't think it is necessarily for the worst.
The reason I think it may be for the better is if it can have a positive impact on credit competition.
The big guys can take it when John Doe Dumbass racks up $15k in credit card debt and files bankruptcy. Up and comers couldn't handle so much of that.
It would seem to me that even in higher risk cases, if interest rates are going so high there needs to be more competition (or possibly less collusion/corruption). Protecting the little guys from people racking up debts and dodging them with bankruptcy would be key to that.
There are people out there that have declared bankruptcy multiple times, racking up tens of thousands in credit debt beforehand. Slow learners or simple con men?
April 26th, 2007 3:43pm
"You'll never change anything voting for two sides of the same weighted coin."
You'll never change anything either.
April 26th, 2007 4:15pm
Oh I'm changing lots of stuff, but they are not things appropriate for discussion in a public forum.
April 26th, 2007 9:15pm
The reason they added credit card debt to the bill was that people were getting into credit card debt with no intention of paying it off.
The alternative would be responsible credit card companies, but we all know there's no chance of that. Responsiblility is the duty of the poor, not the rich.
April 27th, 2007 6:07am
>> The reason they added credit card debt to the bill was that people were getting into credit card debt with no intention of paying it off. <<
If you go see (or at least until they changed the law) a bankruptcy lawyer, one of the things they tell you to do is to go out and buy new appliances, new car, etc and run the debt up. Because once you file for chapter 7/13, your credit is screwed for at least 7 years, and you won't be able to get those items on credit.
April 27th, 2007 9:04am