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Ellen Belcher is the Dayton Daily News opinion pages editor. She writes about state government, education, the environment, higher education and all things Dayton.
Martin Gottlieb is an editorial writer and columnist for the Dayton Daily News opinion pages. He focuses on the political process itself and does such national issues as war, the economy, taxes and Social Security, as well as a hodge-podge of local and state issues.Home > Blogs > A Matter of Opinion > Archives > 2009 > May > 06 > Entry
Editorial: Lenders beware; end to gouging is here
Sometimes people say that it doesn’t matter who’s president, that politicians are all the same.
On issues from torture to bailouts, there’s no question that Republicans are not calling the shots any more. Whether you think President Barack Obama and the Democrats are overreaching, or whether you believe that they’re making a course correction, there’s no disputing that it’s a different day.
Take the “Credit Cardholders’ Bill of Rights” that’s moving quickly through Congress. The president, who recently told bankers that he hasn’t forgotten what it was like to have credit card debt, is setting new expectations for lenders.
In a phrase, it’s, Cut out the gouging.
Democrats are proposing a bundle of ideas that would make it harder for banks to ding customers. Too many of the rules are stacked in their favor and work to the disadvantage of even good customers.
Among the changes being sought:
— Preventing card issuers from hiking interest rates “any time, for any reason” on existing balances. Instead, increases couldn’t be imposed unless a borrower is more than a month late, a promotional rate expired, the rate is a variable rate or the cardholder doesn’t follow through on an agreed-to payment plan.
— Allowing consumers to set their own fixed credit limit, so they don’t get in over their head.
— Preventing the practice of double-charging for interest on debt consumers have already paid on time.
— Outlawing lenders from charging a fee for payments made over the phone or online.
— Requiring that payments over the minimum be allocated to the balance with the higher interest rate rather than the lowest.
— Prohibiting credit card companies from using a consumer’s card history with one credit card company to justify a hike in interest on a different card.
— Restricting marketing to college students and others under age 21.
Reining in the credit card industry was the logical follow up to putting limits on subprime lenders, who peddle loans to people with bad credit histories, the poor and unsophisticated borrowers.
Predatory loans have trapped millions in debt, but those loans are not nearly as ubiquitous as credit cards with ridiculously costly or punitive provisions, often buried in the fine print.
The credit card industry — not unlike payday lenders who make two-week loans at exorbitant rates (until Ohio put a leash on them) — has sucked people into borrowing amounts that are impossible to pay back once interest, fees and penalties start mounting.
Credit cards are a fact of life, and an extremely handy one, when they’re used responsibly. Of course, consumers are obligated to control their worst instincts, but lenders also need to be checked so they don’t take advantage of undisciplined people.
As a society, we have all sorts of rules that protect people from their own bad habits; and these rules aren’t just about protecting consumers from themselves.
Credit card companies, for instance, sell their loans on a secondary market, just as lenders sell their mortgages. Now everyone knows the cost to the economies of the world of allowing lenders to make loans to people who had no business taking on so much debt.
Last year the Federal Reserve Board put new restrictions on credit card companies, but those rules won’t take effect quickly.
Moreover, with the restrictions in law, critics would have to go to more trouble to undo them. In effect, the Fed, too, was reading the handwriting on the wall that there was a new president coming into office and that experience was proving that banks couldn’t be trusted to always do the right thing.
Nobody is overreacting in insisting that credit card issuers are out of control.
Permalink | Comments (8) | Post your comment | Categories: Economy, Editorials, Ellen Belcher, National Politics, Predatory lending
Comments
By dhampton100
May 6, 2009 11:20 PM | Link to this
It is about time. For years the banks have been literally robbing their customers without restraint. For a bank to charge $38.00 for an insufficient fund check when it didn’t even require a person to do anything, computers automatically add the charge, is ridiculous. Banks send my money overseas at night and make more money with it, lend it to their friends to make more money, pay themselves huge salaries and pay their tellers pittance. Somebody needs to stop them in their tracks yesterday, if not sooner.By RAW
May 7, 2009 9:30 AM | Link to this
Overall, I have very little criticism to the proposed legislation. There is no doubt in my mind that credit lenders have taken advantage of their customers with undue rule changes, excessive fees, and predatory tactics. The only criticism that I would make is that once again, the government is rescuing the American people from their personal bad habits. This editorial touched on the subject briefly, but did not elaborate. We, as a society, have become accustomed to deficit spending and allowed these companies to effectively run our financial lives. As consumers, we need to understand that we cannot continue spending more than we make and expect the outcome to be anything other than bad. The federal government could take a lesson on this, as well. This is why I have suggested numerous times that personal finance should be taught in high school and college so that new generations understand that they are responsible for their own financial livelihoods, not the government. Nor, should they expect the government to rescue them every time they get into financial trouble.By april
May 7, 2009 10:01 AM | Link to this
read the contract before you sign it. pay on time. don’t write bad checks. don’t buy if you can’t afford. don’t we have to accept some responsibility.By april
May 7, 2009 10:06 AM | Link to this
how can the banks pay back our bailout money (who believes that)if the dems restrict how they make moneyBy You can bank on it
May 7, 2009 10:41 AM | Link to this
News flash for Dhampton….Don’t write checks if you can’t cover them, period. Then you won’t ever have to worry about being “robbed” by the bank. Common sense is not so common.By joe_mamma
May 7, 2009 10:48 AM | Link to this
Well I hope in the future I don’t see any editorials complaining about the following: Individuals with questionable credit histories can’t get credit cards. Individuals with questionable credit cannot get their credit limits raised. Overall credit card interest rates rise. Credit cards limiting payment methods.By dhampton100
May 7, 2009 11:55 AM | Link to this
For the record, I have not been the recipient of a “bad check charge” since 1975. I was merely offering an opinion. Yet I do not believe that just because someone is stupid it gives a predator the right to capitalize on them. What amazes me is that this is the same crowd, telling me not to write bad checks, that thought the guy who got killed while out buying sex was not responsible for his own demise. Go figure. Personal responsibility is not “selective” it applies in all aspects of life. Now, there your newsflash!By Jimmy
May 7, 2009 9:10 PM | Link to this
Soon there will not be any credit available for consumers at any cost. High risk borrowers receive higher interest rates because they are the ones most likely to default on a loan or credit card bill. Higher rates for some are necessary so creditors can cover their losses or the credit card companies and banks will need more TARP funds from the government. Really the money comes from the folks that pay their taxes and most likely already pay their credit card bills too. But don’t worry, BO will save us!