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InvisibleDoctorJ
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Money Changers: Get out of my temple!!!
    #1951180 - 09/25/03 03:25 PM (13 years, 2 months ago)

Plastic Money's Predatory Lenders

By Ralph Nader, July 03, 2003


What's the most self-destructive thing that consumers carry around in their pockets? It's those little pieces of plastic-credit cards-that are becoming the greatest menace to the financial health of low, moderate and middle income Americans

There was a time when the "plastic money" was considered a convenience for consumers and a boon to the small merchants who couldn't afford to establish elaborate credit programs to compete with the national chains. Today, the credit card industry has become a hungry monster that is devouring the hopes and dreams of low, moderate and middle income families across the nation.

Credit card companies are rapidly moving to the front of the pack of predatory lenders. They are targeting sub prime audiences, the working poor, college students and people with blemished credit histories.

This segment of the unsecured credit market is a rich lode of fees-over the limit charges, late payment fees, cash advance fees. Desperate for any kind of credit, lower income borrowers are willing to pay outlandish fees to establish an account. Deceptive offers of easy credit combined with the desperation of credit-starved consumers too often end up in foreclosures, bankruptcies and devastated families.

The "come on" is sometimes a promise of a relatively low interest rate on the outstanding balance each month. But, the "low rate" disappears quickly under the terms hidden in the fine print of the mandatory disclosures accompanying the credit card. A payment arriving a day late, or a charge that exceeds the credit limit by a few dollars can trigger a 300 percent increase in the interest charges. A 9.9 percent interest rate trumpeted prominently in the credit card advertisements can become overnight a costly 28 percent on outstanding balances. When card holders reach their borrowing limit, the companies frequently offer to increase the limit for an additional fee, all the while pushing the card holder deeper in debt with increasing fees and interest charges.

Dr. Robert Manning, author of Credit Card Nation, who monitors the credit card industry closely, says that the companies market the sub prime borrowers because they are more likely to keep high balances on their accounts month after month, often paying only the minimum finance charges. In contrast, the wealthier card holders pay off the balances each month and, as a result, pay the least in interest charges and fees.

In the back rooms of credit card companies, Professor Manning says these more affluent quick-paying card holders are referred to ironically as "dead beats." Manning notes that the largest increase in consumer credit card debt in recent years is among households with incomes of less than $10,000 according to the Survey of Consumer Finance conducted by the University of Michigan.

Some of the offers which fill mailboxes would make a common pick pocket thief blush. The First Premier Bank of Sioux Falls, South Dakota recently sent out a massive mailing, telling recipients that they had been pre approved for a 9.9 percent fixed rate gold Master Card. In the fine print of the disclosure form, the Bank revealed that the credit would be limited initially to $250. From that sum, the bank would deduct an annual fee of $48, a "program" fee of $95, account set up fee of $29, and a monthly participation fee of six dollars. After the bank pockets these fees, the holder of the pre-approved card would have $72 available for credit. Credit card solicitations continue to grow. From 1997 to 2001, the mailings rose 66.7 percent from 3.5 billion in 1997 to 5 billion in 2001. Credit card debt rose from $554 billion to $730 billion in the same period. Net revolving credit card debt climbed from $51 billion in 1980 to over $610 billion in 2002.

In addition to targeting the sub prime market, credit card companies have been zeroing in on college students and, in some cases, even high school seniors. Dr. Manning says college students are a lucrative market for the card companies because the students lack knowledge of personal finance and are largely free of consumer debt. Dr. Manning's research finds that three out of five college students had maxed out their credit cards during their freshman year. Three fourths of the students, according to Manning, were using their student loans to pay for their credit cards. The credit card industry has become increasingly concentrated. In 1977 the top 50 banks controlled more than 50 percent of the credit card market. Today, only ten banks control more than 80 percent of the market. These banks and their credit card affiliates wield heavy influence in the Congress, particularly in the House and Senate Committees with jurisdiction over the financial industry. And this is an industry which dumps generous bags of cash in the campaigns of key politicians in a position to block any attempt to provide consumers protections against the gouging by the credit card operatives.

MBNA, the nation's second largest credit card company, was the number one contributor to President Bush's 2000 campaign and inaugural festivities. Not only the President, but both Democratic and Republican members of Congress, particularly those on the Senate and House Banking and Judiciary Committees have shared in the campaign largesse of the credit card industry. A coalition of banks, automobile finance companies and credit card companies distributed $20 million in individual, PAC and soft money to members of Congress in the 2002 election cycle.

The aggressive tactics of the industry and the reach into the lower income market has created a few problems for the industry. Not the least of these is the fact that the deceptive practices and the gouging with high fees and unconscionable interest rates have destroyed many working families, forcing them into bankruptcy. The credit card operators now are fearful that protections in the bankruptcy courts may prevent them from collecting all their ill-gotten gains.

As a result, the banks and credit card companies are demanding that Congress change the bankruptcy laws, remove consumer protections and make certain that they will be able to collect every dime from the people they have pushed into bankruptcy. In effect, consumers would be placed in a virtual debtors prison and left with no chance to resume their lives as productive citizens. The bankruptcy courts would be converted into glorified debt collection agencies.

The House of Representatives-which has become an easy rubber stamp for the banks and other corporate interests-- has already agreed to the wipe out of bankruptcy protections. It is still in the Judiciary Committee in the Senate, but the heavy pressure is on to send this pro-bank, anti-consumer legislation to the President this session.

Congress should be concentrating its fire on the banks and credit card companies that have lured so many hard-pressed low income consumers into costly unmanageable credit card debt. Instead of going after the perpetrators of the credit abuses, Congress, led by the dictatorial Texas Representative, Tom Delay, wants to punish the victims. In this Congress, the only thing that talks is money-money that is given with greedy expectations of legislative booty.

This story ran on The Nader Page on 07/03/2003.


Source:

http://www.creditcardnation.com/media.html

A few interesting articles on this page, though most are editorial.

Some more interesting facts about the credit industry are available at http://www.debtsmart.com/pages/debt_stats.html


--------------------
peace, pot, and microdot!


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Offlineshakta
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Registered: 06/03/03
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Re: Money Changers: Get out of my temple!!! [Re: DoctorJ]
    #1951432 - 09/25/03 04:53 PM (13 years, 2 months ago)

I disagree with this completely. If you are to stupid to not kill yourself with credit card debt that is your problem, not the companies that are issueing the credit.


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OfflineRonoS
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Re: Money Changers: Get out of my temple!!! [Re: shakta]
    #1951630 - 09/25/03 05:52 PM (13 years, 2 months ago)

For once I agree with Shakta...although it is true that many people have no choice but to sink themselves in debt in order to get an all too important credit rating.


--------------------
"Life has never been weird enough for my liking"


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InvisibleDoctorJ
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Re: Money Changers: Get out of my temple!!! [Re: Rono]
    #1952234 - 09/25/03 09:18 PM (13 years, 2 months ago)

nobody thinks Usury laws are a good thing?

what about excessive late fees and other various charges?


--------------------
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InvisiblePsiloKitten
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Re: Money Changers: Get out of my temple!!! [Re: DoctorJ]
    #1952822 - 09/26/03 12:38 AM (13 years, 2 months ago)

I agree with this article, but then again, I think Nader is one of the few men in America with his head screwed on straight. I cant even count the number of friends who recieved their little school branded MBNA card during their freshman year and cant get any credit at all now.. just because they were young and did stupid things for less then 5 % of their life. Im not talking about people who ran up 10K bills.. but people who couldnt pay their 50 buck balance which turned into a 100 buck balance after late fees and so on and so forth.

I dont have a credit card. I never want one again. Ill finish saving in two years and buy my house out right. I pay cash for everything I buy, fuck a credit trail

And fuck the credit card companies and the legislators who let them rape the average american.


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InvisibleAutonomous
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Registered: 05/10/02
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Re: Money Changers: Get out of my temple!!! [Re: DoctorJ]
    #1952951 - 09/26/03 01:28 AM (13 years, 2 months ago)

What is your opinion of The Federal Reserve System, fractional reserve lending and the saddling of future taxpayers with mountains of debt from the excessive spending of the past and current U.S. government officials?


--------------------
"In religion and politics people's beliefs and convictions are in almost every case gotten at second-hand, and without examination."
-- Mark Twain


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Offlineshakta
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Registered: 06/03/03
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Re: Money Changers: Get out of my temple!!! [Re: DoctorJ]
    #1953979 - 09/26/03 12:16 PM (13 years, 2 months ago)

Quote:

DoctorJ said:
nobody thinks Usury laws are a good thing?

what about excessive late fees and other various charges?




Usury laws are just more government invasions in business. If you agree to the terms of a loan, you have to meet your end of the bargain, or have shitty credit if you don't. I got into a bit of a credit card bind a couple of years ago. I worked hard to pay them off, and now I through the apps away when the come in the mail. While I hate the way the companies do their business, I did agree to the terms when I started using the credit line.


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InvisibleDoctorJ
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Re: Money Changers: Get out of my temple!!! [Re: shakta]
    #1954299 - 09/26/03 02:27 PM (13 years, 2 months ago)

Shakta: Its nice that you take responsibility instead of declaring bankrupcy. I respect that.

I still think money lending is a bad business unless kept in check by regulation. Seriously, whats the difference between the Associates and the Mafia (the Associates might not break your legs, but they definitely have ways of making your life miserable)?

"Banking establishments are more dangerous than standing armies."
- Thomas Jefferson

Autonomous: I hope these two other Jefferson Quotes answer your question about what I think about the national debt:

"I, however, place economy among the first and most important of republican virtues, and public debt as the greatest of the dangers to be feared." The Writings of Thomas Jefferson

"I wish it were possible to obtain a single amendment to our constitution... I mean an additional article, taking from the federal government the power of borrowing." Jefferson again.


I also think that credit is a way to "pad the economy", so to speak. It creates the appearance that all is well, when in fact, average household debt has increased steadily from the 90's. Interest and bank fees have now become multi-billion dollar a year industries, giving banks more and more resources with which to screw people over.

Most lenders resided in states with no usury laws. (the home state of the lendee is inconsequential in the eyes of the law)


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