Credit card quicksand
Posted on | June 18, 2008 | add a comment
Speed and convenience built into our payments-transaction and credit-issuing systems make Internet-enabled data theft and financial scams child’s play. But the cyber criminals’ profits are mere crumbs compared to the hundreds of billions in high interest rates and onerous penalty fees the banking industry has legally harvested from consumers over the past decade.
I’ve been absorbed the past few weeks collaborating on a Page 1 cover story with USA TODAY’s ace banking beat reporter, Kathy Chu. Our investigation found that during the housing bubble banks raised credit card limits to compete with home equity loans, often targeting subprime borrowers. Banks then set in place a matrix of tripwires to get consumers to pay rates as high as 30% and cough up billions in penalty fees (a record $18.1 billion in 2007.)
The credit bureaus profited, as well, selling credit reports by the truck load, thus enabling banks to target subprime borrowers with deceptive promotions; and create a tool called “universal default,” that enables them to boost your credit card interest rate if you pay you cable TV bill late.
Small wonder banking trojans are spiking. There appears to be little incentive for banks and credit bureaus to slow down their security-flawed–but still highly lucrative system–until the public demands it.
Of the three banking reform bills pending in Congress, Sen. Bob Menendez’s proposed Credit Card Reform Act is the most proactive on behalf of consumers. Among other things, Sen. Menendez is calling for a ban on universal default and deceptive credit card offers. You can see a summary of Menendez’s pro-consumer bill here.
You can be sure the banking industry has targeted Menendez’s measure for gutting, if they can’t outright kill it. If you want to weigh in, contact the consumer groups backing Sen. Menendez’s bill. They include: the Center for Responsible Lending; the Service Employees International Union; Demos; the U.S. Public Interest Research Group ; the Consumer Federation of America; the National Consumer Law Center; Consumer Action; Consumers Union; the National Association of Consumer Advocates; and the National Council of La Raza.