Here is another interesting example of the continuing credit crunch caused by looming “progressive” federal legislation. In light of American Express laying of 7,000 employees I thought the posting of this article is timely.
-TS
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The US House and Senate aren’t expected to vote on credit card regulations until early next year. The Fed’s rules, currently being reviewed by the industry, could take effect around that same time. But lenders seem to be preparing for the worst-case scenario: an outright ban on some practices.
To get ahead of rules that would hamper their ability to reprice accounts, for example, many firms are jacking up interest rates. A survey of major issuers by consumer advocacy group Consumer Action found that 37% of firms have raised rates across the board, even for borrowers with relatively pristine credit records.
“In anticipation of a federal crackdown, credit card companies are scouring their portfolios and tightening credit,” says Tower Group’s Moroney.
Even consumers like Michael Polemeni, who miss only a single payment, can find themselves in the crosshairs of credit-card companies. The independent computer specialist relied heavily on his credit cards for child support payments and business expenses. He has recently sought out cash advance loans as well.
Polemeni generally made more than the minimum payment each month, carrying a $2,000-or-so balance. But in July he missed a payment, and Providian, owned by Washington Mutual, jacked up his rate from 9% to 30%. “I was shocked because I am a very good customer,” say Polemeni, who paid off the full balance immediately. WaMu didn’t return calls for comment.
Not everyone will be able to pay down their debts like Polemeni. And that leads to a vicious cycle: As credit-card companies raise rates, more consumers fall behind on their payments, which then hurts the issuers. Says Innovest’s Larkin: “We are going to see the banks massively hit.
Friday, 31. October 2008
I’m seriously considering cutting up my credit card. I’ve only got one with a small limit for emergencies, but I wonder if it’s really necessary to have around. What does Clint say?
Friday, 31. October 2008
That is just crazy that that everyone is being effected so heavily! I feel for Polemeni. That’s what happens when the economy drops, its really the guy next door who suffers. Often we become the guy next door. Say it ain’t so!