What should be done about credit card industry? Free market or regulate?

[prolesunited]

Here's some interesting statistics on the credit card industry.

In 1995, customers paid on average $20 when they messed up. Fee revenues in the industry were just $8.3 billion. Last year, the industry reaped an all-time high of $24 billion in late fees, over-limit fees, activation fees, and annual fees.

Today, customers pay 134% more for their foibles (up to $45) than in 1994. Income from penalty fees was a whopping 33% of profits last year.
http://netscape.fool.com/news/commentary/2004/commentary04062903.htm?logvisit=y&npu=y&source=eptnetlnk308100&bounce=y&bounce2=y


In 2002, the credit card industry had its most profitable year in 13 years. Pretax return on assets, a key measure of profitability, averaged 4.2 percent in 2002, the highest level since 1988, according to R.K. Hammer Investment Bankers in Thousand Oaks, Calif.

Fee income accounted for 33 percent of profits in 2002, with 25 percent of those fees coming from penalty fees. You read that right. One-third of all credit card profits come from fees, most triggered by customer missteps.
http://www.bankrate.com/brm/news/cc/20030425a1.asp


What role do you think government should play in protecting consumers?

Should they step in a stop some of these abusive practices or is it strictly the consumers' responsibility?

What personal experiences have you had with these practices? Were you treated fairly?

[AP]

1. The credit card industry believes that it can get the federal government

to pass bankruptcy laws which make it harder to get rid of credit card debt. They also expect a big bailout if they fail.

They shouldn't be allowed to have taxpayers be the insurers of their risk.

[prolesunited]

7. That's an excellent point

They want the government to protect them as well as govern our relationship with them. It only would be fair if we were to receive certain protections as well.

I have nothing against companies making money, but at some point, we've allowed these companies to become loan sharks. What's the difference?

Don't pay, double the interest? Still don't pay, garnish your wages or take your house.

Part of the problem is the health care gap. More and more seniors are in debt because they are using the cards to pay for medicine and IIRC, about half of all bankruptcies are due to medical bills.

[Occulus]

2. I think we should kill it entirely.

CC's are FAR more damaging than any drug in the long term. It's the addiction that you and your family pays for for years, decades even, after the addiction itself is taken care of.

I really wish someone would come up with a national campaign to bankrupt the CC companies for all time. Maybe if everyong in the country refused to send in their next month's payments it would at least send a message.

After I get mine paid off, I'm never getting one again. Ever. Period.

[lanparty]

3. Regulate ...

We pay fines when we mess up, but the credit card company pays NOTHING when they do.

BTW, the worst offenders in the credit industry are the credit bureaus. They should be held financially liable for inaccurate information that affects peoples lives. They should be held DIRECTLY responsible for identity theft that they facilitate through woefully inadequete security.

Credit rating schemes by lenders should be made a matter of public record. They should not be able to penalize people for simply running credit checks.

[Bandit]

4. I think Usury Laws should be Re-instated

Christ said it was a crime to loan money with interest charged. At the very least it should be limited as to how much they can charge. It used to be ten percent until Nixon did away with the Usury Laws.

[amazona]

5. without regulation even the responsible customer is screwed

I have never paid a credit card bill late. But in the early 1980s, it was common practice for banks to "lose" credit card payments and then try to tack on extra fees/interest. More recently, I have had a credit card company try it again, even though it is illegal to do this.

In 20-plus years of being a credit card consumer, I have encountered many incorrect billing statements. On several occasions, I did have to report my problem to the feds to get it resolved. People who don't bother to complain or make use of federal oversight must pay hundreds, if not thousands, of dollars over the years in bogus charges.

If there is no regulation or oversight, no credit card company will have an economic incentive "to get it right" and mistakes will continue to multiply.

The ridiculous fees do need to be capped. They give the CC companies an incentive to cheat. We used to have a month to pay our CC bills. I recently got a CC statement where I only had 2 weeks! This is unacceptable. Even if I pay the same day I get the bill, if there is a flood or a storm that interferes with the mail, it has happened that the mail is delayed 3 weeks. So when we have a natural disaster that delays the mail (not too unusual around here) then the credit card company plans to take advantage and rob me at a time when I am most busy with more important matters? How low can you go. I returned that card to sender.

[htuttle]

6. Regulate -- it's become a defacto economic 'ID' for many things

It would be one thing if it were merely a credit instrument, but there are a lot of things you just can't do without a credit card nowdays.

You can't rent a car, for example. They won't even take debit cards for car rentals around here anymore -- you are required to have a credit card.

Another example: Have you tried paying cash for a plane ticket lately? It's a good way to meet a lot of guys named 'Smith' with matching shiny black shoes...

Given the credit card's current 'quasi official' ID status, I think the government has to regulate it.

[Trekologer]

8. College students are often targeted

Dumb college students who are enticed to sign up for credit cards in exchange for a stupid $5 t-shirt are one of the bigest targets by credit card companies. They don't know how credit works or what the concequences are of overspending.

Congratulations! You're now a college graduate. And you're stuck in $8000 of credit card debt and your credit raiting is in the crapper.

[prolesunited]

10. Yes, they are

Credit card companies take huge risks on them and we all pay the price. I'm sure they're betting that mommy and daddy will bail the kids out.

College students are prime targets for credit card companies, which set up tables on campus and entice students to sign up for new cards with promises of free T-shirts or other goodies. Unfortunately, many students eagerly apply for credit and use it unwisely.

Students double their credit card debt and triple the number of cards in their wallets between the time they arrive on campus and graduation, Nellie Mae found. Another scary finding: by the time college students reach their senior year, 31 percent carry a balance of $3,000 to $7,000.
http://www.cbsnews.com/stories/2003/09/02/earlyshow/contributors/raymartin/main571208.shtml

Some action was being contemplated, but given their lobby, how far will it ever go?

Now, Congress and several state legislatures are considering bills that would curb the marketing and issuing of cards to college students and force the card issuers to pump up educational efforts.

Colleges are outraged as well. More than 300 colleges and universities have banned credit card marketers from their campuses. Another 140 universities are set to give card marketers, their tables and their freebies the boot by the end of the year, according to United College Marketing Services in Oak Brook, Ill.
http://www.bankrate.com/brm/news/cc/19990621.asp?keyword=CREDITCARDS

[UdoKier]

9. I hate to defend CC companies, but...

There is no defense for their usurious rates or their sleazy marekting techniques. (Not to mention the practice of extending MORE credit to those who are already overextended...)

If you are hit with a fee for overlimit or late payment, you can call the CC Co. and they will ususally waive it for you if it's a "first offense" The fees are higher now because the cost of everything is higher now.

A lot of people are finding much better interest rates on their cards than they could ten years ago, and that's a good thing.

I really do think that interest rates should be limited to a maximum of 14.9 APR. 19 or 21% is criminal and usurious. Also, minimum payments should always be at least double what the monthly interest is so that the consumer can make some progress at bringing the balance down.

Credit cards are a form of voluntary indentured servitude. I oughtta know since I have my share of debt. All the consumer spending on the cards has undoubtedly bouyed the economy over the last decade, but on an individual level, if you can at all afford to live on a cash basis and keep one card strictly for emergencies and always paid off, you will be much better off.

Also, I people who invest money in CD's or other low-yield investments while having large balances on their cards with high interest are CRAZY. Cash out the "investments" (they will not yield as much as you are paying to service debt) and pay off the damn cards!