Monday, December 29, 2008

Credit Card Reform Update

On December 18th, Congress passed a reform proposal to take effect July 2010 that puts to rest all the abusive contractual terms that allow credit card companies to blindside cardholders with excessive charges. The reform includes:
  1. Eliminating double-cycle billing.
  2. Eliminating confusing due dates.
  3. Eliminating Universal Default.
  4. Stopping the charging of over limit fees from temporary holding amounts (i.e. car rentals)
  5. Requiring higher interest rate amounts be paid down first.
  6. Simpler credit card terms.
  7. Clearer disclosure in advertising
  8. Banning "fee harvesting" from cardholders with lower credit scores.
  9. Disclosing foreign transaction fees in solicitations, before the account is opened.

Sounds great doesn't it? I bet your congressman wants you to know they are doing this for you, and are going to make sure you are taken care of in terms of consumer credit. Well, don't break out the bubbly stuff yet. In the meantime, responsible customers who never make a late payment are getting significant rate hikes. Also, your Senators and House Representatives are milking this for a couple years to garner favor with voters until legislation comes down the pike to either overturn this or make it unenforceable. Two years is a long time. If you bet against this actually becoming reality, the odds would be in your favor. Just taking a closer look at the list and asking what it would look like in reality makes you wonder how real it really is, some of these would require an entire new oversight agency just to monitor and enforce.

Thursday, December 18, 2008

New Rule Against "Unfair Practices"

There is a new rule against "unfair practices" at the Office of Thrift Supervision. It will be interesting to see if this actually makes any difference, or is even enforced. Chances are it will only mean that cardholders will be given an "express" reason for the increase in their interest rate that they would not have been given a reason for today. This isn't even supposed to take effect until 2010 and there is plenty of time to undo this with new legislation. Could it be a smoke screen by regulators to make Congress look like they are trying to protect the consumer?

The New Term "Rate Jacking"

Citibank, and other creditcard issuers, are starting a new practice, raising interest rates on customers who pay their bills on time for no good reason.

Banks are hurting, and they need to raise money these days. Why are they hurting? Because they push loans on people who can't afford them, then when the loan goes into default they think they'll start collecting tons of fees and interest. However, it is backfiring on them now. People aren't able to pay anymore at all, and the banks are losing for a change. Many people are now in total meltdown, losing their jobs, their homes, and everything. So the creditcard doesn't get paid at all from the people who were the "sweet spot" for the industry. To make up for this, Citibank has decided to punish its good customers by making them pay for the defaults. So much for taking responsibility for their own actions. This is referred to as "rate jacking".

Good thing you don't use credit cards anymore, eh? Pretty soon they'll figure out how to get more money from those who pay their accounts off every month. Don't be so arrogant to think you can outsmart them.

Monday, December 01, 2008

It Seems It Will Never End

The bailout total just keeps growing. If this keeps up, the Dollar will eventually be thrown into hyperinflation. Look at what is happening in Iceland this month. Watch the video on that web page featuring Glenn Beck. Here is how things are adding up so far:

$29 billion for Bear Stearns
$143.8 billion for AIG (thus far, it keeps growing)
$100 billion for Fannie Mae
$100 billion for Freddie Mac
$700 billion for Wall Street, including Bank of America (Merrill Lynch), Citigroup, JP Morgan (WaMu), Wells Fargo (Wachovia), Morgan Stanley, Goldman Sachs, and a lot more . On top of $45 billion for Citibank, comes a guarantee of $306 billion in bad loans.$800 billion to buy mortgages issued or backed by Fannie Mae, Freddie Mac, Ginnie Mae and Federal Home Loan Banks.
$200 billion for the auto industry
$200 billion to buy securities tied to student loans, car-loans, credit card debt and small business loans.
$8 billion for IndyMac
$700 billion to $1 trillion stimulus package (from January)
$50 billion for money market funds
$138 billion for Lehman Bros. (post bankruptcy) through JP Morgan
$620 billion for general currency swaps from the Fed

“The numbers change so fast, it is hard to even add them up. Rough total: $3,651,800,000,000 .00 ($3.6 Trillion)

To put that into perspective, the Federal Debt was $5.7 Trillion when President Bush took office. In September 2008, it was up to $10 Trillion. Now in the space of a few months, we have increased it 36%. In September, it was 70% of the GDP, the highest percentage since 1955. The trend is on a steep incline. This is an indication that hyperinflation is not far away. This is a good time to be out of debt, and have as much savings as possible. Realize that Gold is a store of value. When hyperinflation hits, holding gold may be the best way to hedge against that inflation.