Debtor Nation

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Thu, 24 Feb 2005 13:14:14 -0800 (PST)

Debtor Nation

 

 

http://www.inthesetimes.com/site/main/article/1962/

 

 

Debtor Nation

By Susan J. Douglas

 

 

 

As the president and his corporate patrons seek to turn the management

of Americans' retirements—a.k.a., our " golden years " —over to those

highly trustworthy, humanitarian types on Wall Street, we should look

at another model of how corporate America helps people manage their

finances—the credit card companies—to get a glimpse of where we are

headed.

 

Here are some of my recent favorite credit card gambits: The amount of

time my credit card company gives me to turn around and pay the bill

has shrunk to about two and a half weeks—otherwise, I'm late. The late

fee I pay even if the check arrives one day late has, within two

years, gone from about $20 to about $40. They have begun posting a

payment due date that is a Sunday—when, of course, they don't do

business—and if the check arrives Monday, you are docked the late fee

plus all the interest. The interest rates, given what the rest of us

get paid on our savings accounts and CDs, would make Shylock blush and

certainly revive the word " usurious. " Dare to miss a payment, and the

company may raise your interest rate up to an outrageous 25 percent.

And let's not forget that the financial institutions that issue credit

cards are major Washington lobbyists and, thus, virtually unregulated.

 

All of this and more was recently exposed in " The Secret History of

the Credit Card, " produced by " Frontline " and the New York Times. Here

are some underreported doozies from the show: Through a policy called

" universal default, " if you are late with a payment to someone

else—say your mortgage company—your credit card company can raise your

interest rates automatically because they feel you have become a

riskier client. How do they know if you've been late on a car payment?

They can now monitor, on a daily basis, your financial transactions

and your credit rating.

 

Always, always, they are trolling for and sticking it to the most

financially vulnerable; just as in Bush's budget, those in the most

financially precarious positions are the ones made to pay the most.

Millions of people already in financial hot water are solicited to

accept yet more credit cards. The companies also set the minimum

monthly payments so low that consumers could easily be in debt for the

rest of their lives.

 

According to " Frontline, " since there is no federal government

regulation of late payment fees, " the amount of revenue the companies

generate from fees … has doubled " in the last 10 years. Some predict

that late fees will go to $50 within the year. The companies can also

change your interest rate at will—they just have to give you 15 days'

notice. And why are so many of these card companies, like Citibank or

Bank USA, based in places like South Dakota or Delaware? Because these

states (unlike some others) have no caps on interest rates.

 

Approximately 10 companies control nearly all credit card accounts,

and they have their own individual and collective lobbyists working

the Hill daily to make sure there is no investigation into the

industry. One thing they also want to ensure is their continued

ability to violate your privacy by sharing your financial information

with telemarketers or other third parties, even if you object.

According to U.S. PIRG, they have also been lobbying hard to change

the bankruptcy laws so that it would be harder to qualify for Chapter

7 " fresh start " bankruptcy; instead, people would have to go into a

Chapter 13 " 5-year repayment plan " program, which, not surprisingly,

would include unpaid credit cards. Both Sen. Christopher Dodd

(D-Conn.) and John Kerry have proposed legislation that would require

greater disclosure about what it really costs to carry this debt and

that would prohibit the arbitrary increasing of interest rates. Given

who controls Congress, don't hold your breath.

 

In part because of these shenanigans, the Kiplinger newsletter

reports, " the rate at which people file for bankruptcy has increased

40 percent over the past 10 years and now totals 8.6 out of every

1,000 Americans. " Older Americans, Kiplinger predicts, will lead the

way. Burdened by taking care of children and aging parents in middle

age, and then confronted by escalating health and medical bills while

on a fixed—or, if Bush has his way, declining—income in old age, it

will be senior citizens whose bankruptcy rates will soar.

 

The Bush version of Social Security will be just like this. It will

further impoverish the poor, the working classes and women and be

filled with hidden scams that benefit the financial institutions at

our expense. Given that most Americans hate their credit card

companies—the industry has a very high complaint rate—opponents of

Bush's efforts to privatize Social Security might do well to use the

industry as a predictor of what is to come.

 

Just imagine—the same financial interests that gouge you now, have

indecipherable rules in their microscopic agreements, enjoy no

regulation and can do whatever they want to screw the average American

will soon control our retirements. Priceless.