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Valued Contributor
nyccc2
Posts: 1,195
Registered: ‎12-13-2007
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New Credit Card Laws!

I posted over in Credit News where it belongs, some great new laws, but this one especially sticks out;

 

Under the new rules, credit card lenders will be required to apply any payment above the minimum to the part of the balance with the highest interest rate.

 

I HATE when they say your payments all go to the low interest charges while the high-interest ones pile-up, that sucks (sucked!)

MyFico Scores (TU/Exp/Efx):

11/02/08 696 / 695/ 737- 5/4/08: 667 / 703 / 668 - 11/07 Low 500s All (Fako)
Regular Contributor
n2win
Posts: 144
Registered: ‎05-22-2008
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Re: New Credit Card Laws!

You know, after reading about the new law, and thinking about all the interest rate increases, etc, makes me wonder if the CCC were just doing all this, because they wouldn't be able to after the new regs took effect?

 

And if so, all the "reasons" customers were given were false.  Just sayin'. 

 

Hmmmm....

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Established Contributor
Watchmann
Posts: 985
Registered: ‎05-14-2008

Re: New Credit Card Laws!

[ Edited ]

These new laws will be seen as another screw up by the Feds.  What we have here are Federal price controls on credit cards.  Is that what we really want?  To have the Government dictating to the credit industry how much they can charge for a product?  I don't think so.

 

The Fed's new rules will regulate how card issuers price their products and how they can adjust those prices to changing credit conditions. The result, as with all price controls, is likely to be restricted consumer credit at the very moment that the federal government is desperately trying to keep credit markets liquid.  If the banks can't raise prices on the riskiest borrowers, they will either limit to whom they lend or raise rates on everyone -- or both.  So the low FICO people complaining about getting rate jacked will have their problem solved by the industry just cancelling their CL's, and the rest who use credit responsibly will be rewarded by higher interest rates to make up for the cancellation of the problem credit lines. 

 

Our friends in Congress, led by good old Barney Frank, have long wished to implement these sorts of controls.  Now they get their wish.  There were plenty of things that needed adjusting in the CC industry, but this sort of heavy handedness is NOT what was needed.  It is the old law of unintended consequences. It reminds me of the old line from National Lampoon's Vacation, "You think you hate it now, wait till you drive it".

Message Edited by Watchmann on 12-18-2008 11:50 AM
Regular Contributor
hyprble
Posts: 170
Registered: ‎11-05-2008
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Re: New Credit Card Laws!

I have concerns that the CCC are going to go insane jacking up rates like crazy - even more than now - and going through as many loopholes as possible to charge fees so they can get as much as they can before the laws are implemented...


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Valued Contributor
nyccc2
Posts: 1,195
Registered: ‎12-13-2007

Re: New Credit Card Laws!

I agree about Barney Frank and the (business as usual) cycle of blaming deregulation for the ills cause by prior regulation.  However I think either the credit industry or the reporting industry does have to come under some sort of control. Not in how much they can charge, but in terms of not being able to create a product/model that scams people.  I'd say one where CRAs and Credit Companies can rig a system that allows them to lower your score in order to raise the interest on money you ALREADY borrowed at a lower rate is one of them.  Having your rate tied into the rate they borrow at makes sense;  having it tied into a score they can manipulate is not.

 

And being able to keep your high-interest charges buried behind your low-interest ones is ludicrous; if I borrow $10k at 20% and 10% at 10%, as long as I pay the min I should be able to at LEAST have the rest go to the entire balance, not have the CC keep the high interest product untouchable.

 

I think it should be very 'simple';  your interest rate is determined by your credit risk at the time you borrow.  If your credit scores go down, any new money borrowed is at a higher rate (discouraging you from borrowing). If it goes up any new money is borrowed at the new rate (encouraging you to pay off faster as your credit goes up).

 

Maybe the *should* make getting credit harder and/or jack the rates up even higher on low scores.  the thing they shouldn't do is scare away people with good scores/credit and/or punish them since that is where there money is coming from.

 

Unfortunatly, if you watch even part of the congressional auto hearings, you'll see the execs begging to be allowed to lower credit-standards, so they can lend to the very people most likely not to pay back. They don't care if they do or not.

MyFico Scores (TU/Exp/Efx):

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Senior Contributor
FretlessMayhem
Posts: 3,279
Registered: ‎08-03-2007
0

Re: New Credit Card Laws!


Watchmann wrote:

These new laws will be seen as another screw up by the Feds.  What we have here are Federal price controls on credit cards.  Is that what we really want?  To have the Government dictating to the credit industry how much they can charge for a product?  I don't think so.

 

It reminds me of the old line from National Lampoon's Vacation, "You think you hate it now, wait till you drive it".


 

Couldn't have said it better myself. 

Here we go again...
Established Contributor
Pappy214
Posts: 794
Registered: ‎08-05-2008

Re: New Credit Card Laws!


nyccc2 wrote:

 

Unfortunatly, if you watch even part of the congressional auto hearings, you'll see the execs begging to be allowed to lower credit-standards, so they can lend to the very people most likely not to pay back. They don't care if they do or not.


 

My take on this is two fold... first, I think everyone deserves a chance at credit. No matter how poor or rich, and no matter what age/race/sex/religion etc... you are. Give everyone a freaking  chance! I am a super good credit risk, having learned from my parents mistakes, but I still can't get a good CC. Nobody will give me a chance, and in this economy it looks like I will never have a decent unsecured card. However, once you get the chance, if you blow it, then it should become more difficult your next time around. It isn't though, I have friends and family that have had BK's and they all have better credit cards than I do, and I have only had two PIF utility collections on my reports. WTF!!!!

 

I honestly would kill for a 5 digit Credit Limit like many of you have. I don't even have a 4 digit credit lmit... My two cards each have a $500 limit. Heck, if Citi or Chase hired me as an enforcer and gave me a good card, I'd make collections for them. The old fashioned way.

 

Second... the US Auto Industry begging for scraps is pathetic. They got themselves into this mess, and now we have to bail them out? Whose going to bail me out if I lose my job? Where is my government bailout? Honestly and this is no BS, I never again will buy an American car... why? Because this past summer I went to Ford and tried to buy a new Mustang, was denied... went to Chevy, looked at the Vette, was not even allowed to test drive it until they ran my credit, and when that came back they politely asked me to leave. I heard a BMW commercial on the radio, and they said come on in and try, I did and BMW approved me (granted at 25 percent interest) but I drove away in a CPO 5 series. So the US automakers can ki$$ my a$$.

 

Besides I owned a Ford Taurus and a Chevy Malibu before, and I have to tell you, once you own a BMW you won't want to go back.  

 

Ironically, I now get stupid e-mails and phone calls on my answering machine from Ford nearly 4 days a week begging me to come take a test drive.

____________________________________________________

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Valued Contributor
nyccc2
Posts: 1,195
Registered: ‎12-13-2007

Re: New Credit Card Laws!


Pappy214 wrote:

nyccc2 wrote:

 

Unfortunatly, if you watch even part of the congressional auto hearings, you'll see the execs begging to be allowed to lower credit-standards, so they can lend to the very people most likely not to pay back. They don't care if they do or not.


 

My take on this is two fold... first, I think everyone deserves a chance at credit. No matter how poor or rich, and no matter what age/race/sex/religion etc... you are. Give everyone a freaking  chance! I am a super good credit risk, having learned from my parents mistakes, but I still can't get a good CC. Nobody will give me a chance, and in this economy it looks like I will never have a decent unsecured card. However, once you get the chance, if you blow it, then it should become more difficult your next time around. It isn't though, I have friends and family that have had BK's and they all have better credit cards than I do, and I have only had two PIF utility collections on my reports. WTF!!!!

 

I honestly would kill for a 5 digit Credit Limit like many of you have. I don't even have a 4 digit credit lmit... My two cards each have a $500 limit. Heck, if Citi or Chase hired me as an enforcer and gave me a good card, I'd make collections for them. The old fashioned way.

 

.....


 

I'm not sure what you mean 'everyone should have a chance at credit' since everyone does.  Just that people with no credit history need to develop it and people with bad history need to rebuild it.  Believe me, I had bad credit for years, had no role models, no research, bad habits.  I took the last 2 years to clean up, and the last year to repair my credit score specifically.

 

My first card (a year ago) was $750.  My next was $2000.  My next $5000. My next $10000.  I used them all very wisely, set up autopayments on them AND Outlook reminders for the Statement and Due dates, always made sure I had $ in the bank, researched carefully which cards to apply for when.  They'll give you as much rope as you can handle but you have to let it out slowly.  I in no way deserved a $10k card last year this time or before that.

 

This concept 'No matter how poor or rich, and no matter what age/race/sex/religion etc... you are. Give everyone a freaking  chance!' is in large part the reason for the mess we are in, the public desire to blame corporate greed and predatory lending notwithstanding.  By the mid 1990s, Lenders who wanted to be *eligible* for 'Outstanding' Ratings had to prove that a specific % of loans were made to loan income borrowers, and more to the point to the lowest of income borrowers and in the lowest income neighborhoods.  I'm not talking about 1% (which still would have been a ridiculous caveat for a CREDIT rating) but 22%!  That's right; a lender, in order to get the excellent credit rating they deserved, had to prove that 1/4 of their outstanding loans were the riskiest ones. Makes sense? Fannie Mae also came under ridiclous pressure, put on them in large part by mortgate companies, to take on an unprecedented # of high-risk loans.

 

You can say what you want about 'irresponsible lending';  it works like a charm until an irresponsible borrower doesn't pay it back.

 

My first card was at 20% btw, down to about 10% or so.  I think it is totally valid to a) reduce lines for people with little or especially bad credit b) charge them much higher interest rates.

MyFico Scores (TU/Exp/Efx):

11/02/08 696 / 695/ 737- 5/4/08: 667 / 703 / 668 - 11/07 Low 500s All (Fako)
Established Contributor
Pappy214
Posts: 794
Registered: ‎08-05-2008

Re: New Credit Card Laws!

I did not say loan them money for a house, that is insane, especially since most of them probably were not handling their credit well to begin with. Here is the thing, I GD-guarantee that a home loan was not their first bite at the apple. They had cars, CC's etc., and these scumbanks took a chance at greed and lost.

 

 I think everyone needs a chance at a good credit card (which is why I posted in this forum not the home mortgage forum) My beef is some of us can't even get a break to start small. My two cards are "secured". I can't get an unsecured card. I have tried. I make close to six figures a year. I only have two bad CA's (utility bills missed during a move) both over 4 years old as of November, both Paid In Full, where is my love?

 

Why is it people with BK's get rewarded faster than those of us who are just starting? My mom has filed BK and within a year she had many of her old cards back and at higher limits than before the BK. Same with a few of my friends. My friend PJ filed last year, lost his house, foreclosed!!! Last week he got a Capital One card with a $5,000 limit. I make more than he does, so because he had a "longer history" he gets a nice fat reard, and I get nothing. Great logic. 

____________________________________________________

"Evacuate, in our moment of triumph? I think you overestimate their chances."
Valued Contributor
jmbfl
Posts: 1,185
Registered: ‎03-04-2008

Re: New Credit Card Laws!

[ Edited ]

The credit card companies, in conjunction with the government, perpetrated two great follys on the American people. The new legal changes are just a small step toward evening the balance a little bit:

 

1) Carved for themselves a huge legal work around so they would be exempted from state usury laws, allowing them to charge unconscionable interest rates. This has not been eliminated. What has been is the practice of RJ'ing cardholders and having the RJ apply to old balances. They now can only RJ new activity. Furthermore, payment must be applied toward the balance carrying the highest APR first. Nothing is stopping CCC's from charging usurious rates and they will continue to do so.

 

2) Creation of a contract which is basically a one sided deal - that is to say the cardholder agrees that the issuer is allowed to change any of the terms of the agreement at any time. Sure you can opt out - usually by closing the card. Now at least they won't be able to change the terms retroactively. This is a small, but very important point.

 

Yes, these changes will have an effect on the FICO have nots. However, I do believe that these changes will not effect the ability of those who want/need a credit card to obtain one. There will always be an issuer for everybody - as long as the issuer has the ability to finance their "inventory". (Your CC liability is an asset on their books.)

Message Edited by jmbfl on 12-18-2008 02:00 PM

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