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The Federal Reserve Final Ruling on Credit Card Unfair or Deceptive Acts or Practices

Friday evening , February 13, 2009.

I hadn’t had the chance to read the 284 page final Fed ruling on credit card regulations, and I still haven’t completed my reading, so consider this a first installment.

But, I can squarely say that I’m shocked with the final results, they are so awful that I am tempted to start a genuine People’s Bank as the only way that we may ever get an honest treatment from a bank.

I truly think, after reading the proceedings to determine the regulation, that there is no way in hell that we the consumers are going to get a fair shake in Congress.

I don’t know, maybe I come with a new and clean eye, but the soft hand on the banking industry permeates throughout the discussions to create the bill. The effect of the bank lobbying through its enormous campaign funding totally engulfs representatives from both sides of the aisle —banks are way up there in contributions for campaigns, Joe Biden included.

Let me start with a minor point, but a sure tell sign of the misgivings I see. Why in God’s name are they giving banks 18 months to make the minor adjustments that the new regulations comprise, in light, that we the consumers are given at the most a 30 day notice to accept a bank’s one sided higher interest rates, higher penalty fees, higher whatever… change to the original contract?

But, I can squarely say that I’m shocked with the final results, they are so awful that I am tempted to start a genuine People’s Bank as the only way that we may ever get an honest treatment from a bank.

I will start before the beginning to bring a little light to some of the things that should’ve been in the discussion table, but were never mentioned.

How about regulating usury? You see a few years back states like Oklahoma could enforce a 6% limit to interest rate lending, others 8%, many others 10 and 12%, and one 36%. Maybe they weren’t perfect, but all states except South Dakota still do recognize that charging interest rates above a certain cap is a crime called usury.

I’m not a lawyer, but any sensible person with a little common sense recognizes that gouging high interest rates from an individual is hurtful, unfair, damaging… a crime —there needs to be an imposed limit on how much interest a lender can collect from his loan.

But, since 1978 national chartered banks have been able to work around state usury limits by establishing their main offices in South Dakota, which conveniently vanished usury from their laws that year. A couple of years later, banks put the final nails in the coffin through the passage of legislation that erased all mention of usury or interest rate limits. Check out this interesting article from PBS.

Did you know that 35% of all credit card holders are late to pay at least one monthly payment during a given year, and that the average penalty fee is $30.95? In 2007, credit card companies collected $18.1 billion in penalty fees, which accounted for approximately half of the industry’s $40.7 billion in profits.

I have to ask: with $18.1 billion at stake in penalty fees, do you think we have any chance of getting consumer favorable legislation?

Another good example of the baby hand slap on banks’ wrists is regulation for dual interest rate debts on a credit card, which has been modified to ban crediting payment in full to the low interest debt portion in favor of a prorated allocation of the payment, which still short changes the consumer. It’s obviously detrimental to the debtor —why would you elect to pay a higher price for the exact same service? And, that’s exactly what banks are doing by not allowing us to allocate our full monthly payments to the higher interest debt.

And what about the banks arguments? They end up something like this: “We’re going to lose so many gazillions by eliminating this unfair practice that we will be forced to raise interest rates…”

Give me a break!  In other words, banks feel it’s their God given right, and have the poker face, to expect consumers to fork out their gouging proceeds one way or the other.

Again, I’m very disappointed.
To be continued —after further reading.

Hi guest,

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