New CARD Act a little unfair

[laz98]

i'd have to disagree.  if most people were responsible about their finances, i don't think the economy would be quite as bad as it is.

i understand that things happen sometimes.  the two main baddies on my report are from my own unemployment.  that doesn't mean i shouldn't take responsibility for that happening.  i should have been more responsible with my money to begin with, & saved some, just in case something idiotic like this happened.  i shouldn't have spent my money as if it was always going to be there.  but i didn't, so i have to deal with the consequences, no matter how much they suck.  and so should everyone else.

personally, i don't think the new regulations are going to work quite as well as we all hope they will, but it's just a wait-and-see game now.  hopefully i'll be wrong.

p.s.  love your example about sneezing.  i laughed so hard i almost dropped my laptop.

[Watchmann]

the armofbarlow wrote:

I'd say that the amount of people that don't think of paying their bills on time as important is insignificant. Of course it's important, but what must be understood is that sometimes (oftentimes for some people), things just don't work like that.

For example, I moved a couple of years ago and ended up changing jobs shortly after I did. I had money to pay rent, other bills, and for food. The money to cover my credit cards just wasn't there...

...for about two days. 

During my week of training I made no money, so my payments had to slide. As a result I ended up paying over $200 in late fees, plus all my rates went up to ~23%. One of them, thinking about it now, went up to 33%. 

My fault? Yes. In the same way that putting spikes on someones desk and seeing them impale their face while subsequently sneezing is their fault. You shouldn't have sneezed. I don't care about your allergies. No, that's not a bag of ragweed in my pocket.

The game has been rigged in the CCC's favor for decades and it's about time there was some REAL oversight on this issue. The entirety of the banking industry and all of its regulations need to be blown up, but that will never happen. This is about as close as we're gonna get. 

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You make a nice argument to which I would reply, so what?  You can't be expected to be cut slack because you don't have the money.  The deal is they give you credit and you agree to at least pay a portion of it back according to a mutually agreed upon set of terms.  It's a legally binding contract.  You wouldn't be too happy if your employer said, "Sorry I can't pay you on payday, I'll pay you next week instead".  The conclusion when you couldn't pay your bills was you were overextended, you borrowed too much money.  Life will throw you plenty of curves and sometimes you just have to defer payment, but there really is no excuse to start out life already missing payments and expect not to be penalized.  That's how we got into this pickle to begin with; creditors were too free with money and many people got overextended.  That's what they are trying to reign in.

Message Edited by Watchmann on 02-17-2010 11:46 PM

[Anonymous]

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@laz98 wrote:

i'd have to disagree.  if most people were responsible about their finances, i don't think the economy would be quite as bad as it is.

personally, i don't think the new regulations are going to work quite as well as we all hope they will, but it's just a wait-and-see game now.  hopefully i'll be wrong.

p.s.  love your example about sneezing.  i laughed so hard i almost dropped my laptop.

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On the other hand, banks have been actively pursuing people they know for a fact don't have the means to pay to begin with. That's all subprime lending is (or, hopefully, was). It's a crapshoot, hoping that the mounds of fees and interest from people that don't know better (and trust me, there are people that just don't KNOW) will amount to more than they have to shell out. I was one of those people that ended up handing Capital One and Washington Mutual hundreds upon hundreds of dollars in late fees, 30% APR's on $500 balances held for two years, a few more hundred in over limit fees... it was some serious crap, all my fault, but you have to understand something... until it bit them in the backside I, and others like me, were the bread and butter for most lenders. They were HAPPY to let me screw up endlessly.

My point being, don't play in the fire if you don't want to ruin your best suit and burn to a crispy death in the process.

I also don't think the regulations will do anything whatsoever. Rewards cards will start to dissipate, secured cards will become outrageous, and somehow banks will still post massive profits.

[Anonymous]

I have just a couple of observations on the new Credit Card act and I will confess, I make them seeing how things have evolved over the 62 years I have been on this earth.

The Act itself will absolutely not make a bit of difference to anyone who pays their bills. I am sorry to say this but we have fostered in this country a group of people who think that the Government is the end all solution to things. That is a terrible misconcerption.

We continue to vote for people and scream we want more for ourselves as the Govt continually borrows money it can never repay. Not one of us could run a personal household doing that and we expect a Govt to run an entire country that way?

We have seen money thrown at people who frankly dont have the capacity to pay it back. We see threads on here where people get credit cards and the first thing they want is a CLI. They scream for more Credit, as that is their plan for maintaining a decent credit history.

Luckily, I have  been blessed to know many people in the credit/banking business and quite frankly, they LOVE the new Credit Card Act as it gives them legislative cover to NOT make loans where before if they didn't someone was whining, claiming they were being redlined, it was predjudice, yada, yada, yada. Now all they have to say is, "we are just following your guidelines for responsible lending". YES, bankers are loving it.

People come on and complain about losing their homes and yes, that is tragic. Here's a dirty little fact though that they don't want you to know. 91% of all homes foreclosed are houses purchased with less then 3% down payment , have been refinanced to draw equity out at least once OR a combination of both. When we bought our first home (and we have bought 5 of them and paid them all off) you did not buy a house without at least a 20% down payment. We have never taken equity out of our house to buy new 'things" and yes, thats why it is mostly done.

Maintaining good credit , living with a budget and within your means is difficult. I KNOW. Especially when we are bombarded daily with images that new cars, bigger homes , more 'toys" are what define us as people. I am pleased I am not of that generation that feels what you have says anything about you.

To me it is all about personal responsibility and I have no doubt that the vast majority of posters on here exercise that. Some of the information shared is a valuable resourse and we are lucky we can gather here to see it. Like all forums though, we have peopole on here who live for the "drama de jour' and we all know that.

We will all get through this, some better then others. Like I say, we are indeed lucky that FICO allows us arena to learn and trade stories and the Moderators give their time to keep the board running. Having owned and ran a couple of forums I know it can be a thankless job so we certainly owe them a lot.

Best of luck to everyone in their credit quests this year. My goals are simple. Not to apply for credit (None since Feb 2001) and keep paying my bills. Anything other then that is just a bonus. I was going to write about the new BANKAMERICARD sent me when my other BOA expired. They even doubled my CL but decided not to, as I know some have hard feeling towrds BOA.

[Anonymous]

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@Anonymous wrote:
I personally find this new set of laws to be unfair in the aspect that it will discontinue the use of credit card issuance to people below 21.  While it's true that people under 21 can still apply but will have to go through a lot of extra hassle and will even need a co-signer to get one.  I find this to be discriminating.  I'm 18 years old and my score from TU is 756 and 718 with EQ.  I am responsible with my credit and I don't see why I have to be punished just because a lot of my peers are ignorant or are downright stupid when it comes to using credit. I thought I was going to take it slow to develop my credit but seeing the deadline being Feb 22, I can't.  So I ended up applying for two AmExes today (Platinum, and Clear) which I would've waited at least 6 months to a year to do.  While I was instantly approved for both, I know this will definitely hurt my credit score once the inquiries show up on my report.  I surely do agree with the part where card issuers aren't allowed to go to college campuses and give out free stuff to bribe students into getting credit cards I really don't like how they want to shut out under 21s altogether.  Instead of increasing age limits and lowering standards on everything the government is practically increasing the degradation rate of this society.  They should just work on educating people instead.  Without me researching and reading for countless hours i'm sure I wouldn't have achieve the scores I have now at only 18 and a half.

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Hi...I'm going to break down your various points in order to reply in an orderly fashion:

1.  "....the aspect that it will discontinue the use of credit card issuance to people below 21."

As you stated in your post, 18-20 year olds will not be excluded, they will merely have to prove income in all applications....none can be based upon a FICO score alone.

2.  "I find this to be discriminating."

It is kind of humorous how "discriminating" has become a bad word somehow.  There is proper and improper discrimination.  For example, there is the phrase of "discriminating taste" which is not inherently wrong.  Also, discrimination is what FICO is all about.  It absolutely discriminates, because that is what risk is, categories of risk.  Thus lenders must discriminate and choose the class or category of risk they wish to lend to, and then price their product accordingly.  While there is improper discrimination...I think we should all think about the reality that in many, many instances, discrimination is not a bad thing...quite the contrary.  We all discriminate on our preferences, taste, price, etc.  Discrimination really is what choice and free will are all about.

3.  "I am responsible with my credit.... the scores I have now at only 18 and a half."

While I applaud you for your great start....there is no way at 18 that you can have good credit.  Your score, while it shows a relatively high number, must be balanced (discriminated) based upon many other factors, such as age of history and accounts (that you actually had, not AU), your income/employment, etc.  Credit is short for credibillity.  And like trust, credibility can only be built on time and performance.  Thus 6 months of history means that all of your lenders are "betting" that you are going to pay timely.  They do not have enough information to actually know that your history can factually predict this.

4.  "I am responsible with my credit and I don't see why I have to be punished just because a lot of my peers are ignorant."

For the same reason you cannot legally drink....and your auto insurance rates are much higher....and that you won't get high level executive positions at this time.  You are guilty by association....you are in a category or demographic that statistically shows that your probability of having or creating financial crisis is high....your probability of an auto accident is high and you don't have the experience and knowledge to be hired as a CEO of a fortune 500 company, YET.  Lenders, insurers, etc. don't try to get to know you personally....they know your demographic.  Then they get to know you personally with their "experience" over time....meaning you have to get your foot in the door somewhere and prove over time your dedication and willingness to pay timely, drive responsibily, etc.  With this time test, you will gain both increased credibility and you will realize the benefits.  But for now...there is no way for anyone to know what you may or may not do in the next 12 to 24 months except to speculate based upon the averages of your demographic (male 18-24).

5.  "Instead of increasing age limits and lowering standards on everything... They should just work on educating people instead."

Government is not actually responsible for educating people.  They are responsible for reasonable regulation of commerce in order.  And as we have all ready discussed, there isn't any improper discrimination going on.   There are safeguards to make sure that only responsible 18 year olds who are gainfully employed (like yourself) are allowed to gain credit and loans, because of the high rate of defaults in that demographic.  Like yourself, those who are responsible will seek out this site and type of information, educate themselves, act accordingly (responsible) and take the necessary steps to build a solid credit profile.

6.  "I was instantly approved for both, I know this will definitely hurt my credit score."

Anything you do at this point will help and hurt.  New credit only hurts because you have not yet proven (with time and history), what you will do with this new credit.  In a year, the inquiries won't affect FICO and you will have 12 months of history.  In 10 years these accounts will be a benefit.  Credit is not short term....it is a process and age/history/track record are the primary components.  So while you see a possible decrease short term in a score, you have gained the benefit of new credit in exchange.  In all things, there are opportunity costs, which is just a part of life.

COMMENT:  I wish to applaud you on your great start.  I hope you will do great things in your life and that you will not suffer some of the hard knox many of us have...that you are able to use the benefit of our collective successes and failures to your benefit and advantage.  This site is a great tool, as you stated.  Don't get discouraged, just keep up the good work and remember, it is like a savings account....it grows slowly and the harder you work and contribute to it....the faster it will grow...but only to a limit.  Let time do its job and you will soon enough be rewarded.  Too much credit too soon is never a good thing.  Mid to high 700's and 18 years old is never going to be equal to the same thing as equal scores to somebody with a longer credit profile.  Score is not equal....it is a tool that must be used with discrimination based upon the person by person specifics.  FICO alone is a poor judge of credit...as our markets have learned the hard way.

IMO IME

Message Edited by txjohn on 02-18-2010 05:23 AM

[heatherbee]

I know this new legislation may seem unfair, but there is a reason why it was created in the first place.   Nobody just sat around thinking how happy they were with credit practices and thought, "well it's not broken, so let's fix it!"  Enough people had to default in order to get this change pushed through.  Now it's just protective measures to prevent something like this from happening again.  From your point of view, this is what the military calls MASS PUNISHMENT.  I am in Iraq right now, and someone in the battalion stole something that was small and worth $60, but the importance and principles behind it is what caused over 1,000 people to be punished for it, all because of the actions of one (maybe two or more) people's actions.  And to me, it doesn't make sense to say that credit card companies can't go to campuses and try to find new customers, but they can send out offers in the mail to those same students.  So instead, it is the young adult's responsibility to earn an income and show proof that they are responsible enough to have credit cards.  And I don't see it any more of a hassle to send in prove of income because you are 18 or 19, when people in their 20s, 30s, 40s, etc have to do the same thing if they want a certain card or a certain limit.  If I were to lend someone money, no matter what their age, it only makes sense to know that the person can pay it back.  That's all banks are doing now.  Unfortunately, many people 18-21 don't earn a high income to justify a credit card, but of course that doesn't mean all of them.  That's why you send in proof!  And this is NOT increasing the degradation of this society.  It is called being more responsible.  Think of how many 18-21 year olds are being done a favor because they can't get a credit card to max out, default on, and wise up years later only to regret getting the card in the first place.

[newstart2010]

Is the new law discriminating?  Heck yeah it is!  When did that become a bad word?  Discrimination is not always a bad thing, and I think the people who find this to be unfair do not see it through the same eyes that they will when they are 30.  CCCs don't want to see that you are on an allowance, or getting money under the table.  That is not responsible to them.  They do not want to see that you have had credit for a whole semester on your student loans.  That is not long enough.  They are trying to minimize risks in a time when most of the banks backing these cards are getting hammered for taking govt handouts to fix all the previous responsibility our society has passed the blame on. 

I think giving credit to kids under 21 is ridiculous.  Heck, I think credit should be withheld till 30.  But that is just me.  Its the old "If only I knew then what I know now" when I look back on how we spent our student loans, and how we handled our credit cards in college.  They were throwing them at us on campus, along with a free t shirt and frisbee, and meal tickets to the cafeteria.  Of course we took the credit, and we were stupid with it.

It is not the CCCs job to teach kids how to use credit responsibly.  Its not the govts job either.  Its the parents' job, and in the last 3 decades the parents have really sucked at it!  If anything comes of this whole financial breakdown of our country I hope its a healthier respect for credit, income, and the way people handle their finances.  And if it takes CCCs restricting their cards to people over 21 to build some freakin responsibility around here, then I am all for it.  

[BungalowMo]

Well said, Johntx!! 

I think all young people upset about this new law should read that post...then come back and read it again.  The points you made hit the nail on the head every time.

[Anonymous]

Rock on txjohn.  Perfectly stated.

just wanted to reply quickly to the post about the spikes on the desk.  No, it's not your fault for sneezing or having allergies.. It would be your fault for asking someone to put those spikes on your desk voluntarily.

[hyprble]

I agree that personal finance should be taught in grammar/high school.

When I was in college about 10 years ago, they passed credit card applications out like candy and we all applied!  Free t-shirt?  We're poor and hungry and all we have to do is fill out this form for a Snickers bar?  No problem!  I must have opened 6-7 cards one day.  Then I decided I didn't need them and closed a bunch (which I didn't know was bad for my credit and will affect my AAoA now as they drop off).  I will say, after a year or so of always PIF I started to get insane credit limits.  One card raised mine to 10k.  At the time I got that, I worked part time on campus for $5.15 an hour.  Back then, credit was extended TOO easily.

I can understand why a fiscally responsible 18 year old would be annoyed at how difficult it is to get credit with the new laws.  I also think the way credit card companies took risks on youth by giving them 5k credit lines when they clearly would not be able to pay it back in a month or even a year was predatory.  Sure, no one is forcing the kids to max out cards at gunpoint just like no one is shoving Big Macs down your throat to make you fat, but giving such unsecured high credit limits to people who don't have the means to pay them back?!

Education is needed in the first place to avoid the traps of credit and what it can mean for your future (getting loans, etc)