Washington
What is up with the banks and the rest of the financial industry? The people running this system remind me of gangsters who manage to walk out of the courthouse with a suspended sentence and can’t wait to get back to their nefarious activities.
These malefactors of great wealth (thank you, Teddy) developed hideously destructive credit policies and took insane risks that hurt millions of American families and nearly wrecked the economy. Then they were bailed out with hundreds of billions of taxpayer dollars, money that came from the very people victimized by the industry’s outlandish practices.
Now the industry is fighting against creation of an agency that would protect taxpayers and ordinary consumers from a similarly devastating onslaught in the future. And at the same time they are scrambling to raise credit card interest rates and all manner of exploitive fees to build a brand new superstructure of questionable profits on the backs of the taxpayers who came to their rescue.
We’re reaching a whole new level of chutzpah here.
The Obama administration wants to create a Consumer Financial Protection Agency that would shield individuals and families from deceptive practices and outright fraud by banks and other businesses offering credit cards, mortgages, home loans and other forms of consumer finance.
Everything we’ve learned in this recession tells us we need such an agency. As Treasury Secretary Timothy Geithner described it, “This agency will have only one mission: to protect consumers.”
Protecting the consumer is, of course, anathema to the industry. So it’s preparing for war. The Times’s Edmund Andrews neatly summed up the matter when he wrote that “banks and mortgage lenders are placing top priority on killing” the president’s proposal.
The proposed agency developed from an idea offered some time ago by Elizabeth Warren, a Harvard Law School professor who currently chairs the Congressional Oversight Panel, which has been monitoring the financial industry bailouts. She is a strong contender to lead the proposed new agency.
Ms. Warren told a Congressional committee last month about the stark difference between the warm and fuzzy advertising approach used by lenders competing for consumer dollars and the treachery that is so often hidden in the fine print.
“Giant lenders compete for business by talking about nominal interest rates, free gifts and warm feelings,” she said, “but the fine print hides the things that really rake in the cash. Today’s business model is about making money through tricks and traps.”
It should be clear by now that it is often the goal of financial institutions to see that the consumer is not well informed. “In the early-1980s,” said Professor Warren, the average credit card contract was about a page long. “Today, it is more than 30 pages. ... I am a contract law professor, and I cannot make out some of the fine print.”
She added, “Study after study shows that credit products are designed in ways that obscure the meaning and trick customers.”
There is nothing free or fair about a market in which one side uses double talk and mumbo jumbo to obscure important information and deliberately dupe the other side into making decisions against its own interests.
When I think of the banking industry fighting to kill this proposed agency, it brings to mind the decades in which tobacco companies insisted that cigarettes were safe, and those days long ago when the auto companies fought against seat belts, and all the dopey arguments that were made against protecting the public from unsafe drugs and kitchen appliances that might burst into flames, and so on.
The Department of Housing and Urban Development has concluded that Americans spend approximately $55 billion each year on closing costs that they don’t fully understand. As Ms. Warren noted, “Mortgage lenders furnish reams of unreadable documents shortly before closing, often leaving people with no practical option but to take whatever terms the lender has filled in.”
The family home is the largest purchase most Americans ever make. Paying it off can take much of a lifetime. Everything about that contract should be crystal clear to the buyer.
I had a breakfast interview with Ms. Warren on a variety of subjects last week. On the day of the meeting, USA Today had a front-page article that began: “Even as regulators crack down on abusive mortgage and credit card practices, another type of lending threatens to mire consumers in a credit trap.”
The article detailed the ways in which banks are wringing huge profits from overdraft fees that often are sky high and in many cases are handled in ways that are exploitive, if not predatory.
The malefactors of great wealth view an informed consumer as Public Enemy No. 1. The last thing in the world that they want is a fair marketplace, which is why the Consumer Financial Protection Agency can’t come fast enough.
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Facing a credit card rate hike? Here’s how to talk it down
Process poses slight risk to credit score, but some experts say it’s still worth a try
By Becky Yerak
If your credit card company has hiked your rate and you can’t pay it off immediately, one option is to call the issuer and ask for a lower rate, particularly if you’ve been a longtime customer.
“Say, ‘I’ve been a customer for X amount of time, and I’m looking at competitive offers,’ ” said Bill Hardekopf, chief executive of LowCards.com, a credit card Web site. ” ‘I’d like you to roll it back to X rate.’ ”
Credit card companies don’t want to lose customers because “the acquisition cost is too high,” he said.
In 2006 the Tribune published a script in a story by Gregory Karp aimed at helping consumers negotiate a lower credit card rate. This reporter successfully used it to bring down the rate on a credit card to 9.99 percent from 24.99 percent.
It goes like this:
You: “Hi. Can you tell me what my current interest rate is?”
Operator: “Your interest rate is X percent.”
You: “Hmmm. I’d like you to lower my interest rate now, please.”
(Don’t say another word until the operator makes a move.)
Operator: “OK, I can lower it to X percent.”
You: “That’s not enough, but I’ll take that for now. Thanks. I’d like to tell your supervisor how helpful you’ve been. Could you pass me over?”
If you’re able to get the supervisor on the line, mention that the operator did indeed help you, but then repeat the script.
In a few months call back and repeat the process.
There is a potential pitfall, according to Bankrate.com: Your FICO score could be dinged if your credit issuer considers that an application for credit and pulls your credit report and score.
“There is a slight risk, but the risk is worth taking if they’re increasing your interest rates so high,” Hardekopf said. “If they’re going from, say, 10 percent to 17 percent, go for it.”
Other tips >>>
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Wikipedia:Usury (pronounced /ˈjuːʒəri/, comes from the Medieval Latin usuria, "interest" or "excessive interest", from the Latin usura "interest") originally meant the charging of interest on loans. This would have included charging a fee for the use of money, such as at a bureau de change. After countries legislated to limit the rate of interest on loans, usury came to mean the interest above the lawful rate. In common usage today, the word means the charging of unreasonable or relatively high rates of interest. As such, the term is largely derived from Abrahamic religious principles; Riba is the corresponding Islamic term. The primary focus in this article is on the Christian tradition.
The pivotal change in the English-speaking world seems to have come with the permission to charge interest on lent money: particularly the Act 'In restraint of usury' of Henry VIII in England in 1545 (see book references).
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The First Council of Nicaea in 325, forbade clergy from engaging in usury[1](canon 17). At the time "usury" meant simply interest of any kind, and the canon merely forbade the clergy to lend money on interest above one per cent per month. Later ecumenical councils applied this regulation to the laity.[2][1]
Lateran III decreed that persons who accepted interest on loans could receive neither the sacraments nor Christian burial.[3] Pope Clement V made the belief in the right to usury a heresy in 1311, and abolished all secular legislation which allowed it.[4] Pope Sixtus V condemned the practice of charging interest as "detestable to God and man, damned by the sacred canons and contrary to Christian charity."[4]
*It is not enough when a man can say, “Oh, I labor, I have my craft,” or “I have my trade.” That is not enough. But we must see whether it is good and profitable for the common good, and whether his neighbors may fare the better of it.
–John Calvin, Sermons on the Epistle to the Ephesians (sermon on Eph. 4:26-28)(1558)
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