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Monday, February 22nd, 2010

New Consumer Credit Card Rules Take Effect

Good news for credit card holders—the final set of provisions under the Credit Card Act of 2009 take effect today, offering some important consumer protections.

For those who use credit cards responsibly, the new laws will provide more time to pay bills and less likelihood for fees, penalties and interest rate changes. For those struggling with credit cards or facing bankruptcy, the laws may prevent fees from adding up and provide a little breathing room.

Here's a look at some of the key provisions that are now in effect:

  • Expanded Statements: Your monthly card statement will have a few new features, including broken down fees and penalties and a chart showing how long it will take to pay off the charges making only the minimum payment (and how much it will cost). Your statement will also arrive at least 21 days before the due date, a full week earlier.
  • 45 Day Notices: Your credit card issuer must give advance warning of any changes to your account, particularly interest rate changes. This will give you more time to consider the changes, negotiate with the credit card company, or, if necessary, pay off the balance and close the account.
  • No Rate Increases for 1 Year: The new law prohibits "arbitrary" rate increases for the first year you hold an account. Lawmakers hope this will curb "universal defaults", in which one card issuer raises interest rates due to late payment on a card issued by a different bank. Some actions could still trigger a rate increase, such as being more than 60 days delinquent.
  • Over-Limit Opt-in: You will only be charged over-limit fees if you agree to it. While this may seem like a blessing, it also means more transactions may be declined.

While these changes went into effect, many cardholders have seen changes to their account over the past year, since the law was introduced. Credit card companies have been preparing for the law to go into effect, and in many cases have not been acting in consumers' best interest.

Many credit card companies have been raising interest rates and introducing new annual fess (which are permitted in the new law) in order to prepare for the revenue losses that could come under the Credit CARD Act.

For more information, visit the Federal Reserve's credit card site.

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Posted in Bankruptcy and Predatory Lending, Credit and Bankruptcy | No Comments »

Monday, June 15th, 2009

Consumer Credit Fairness Act = Hope for Low-Interest Loans?

As too many Americans know, loans with monstrous interest rates can lead to what seems like endless rounds of debt and bills.

And, in some cases, excessive interest rates can push struggling consumers to filing bankruptcy.

The “Consumer Credit Fairness Act,” a bill now before the Senate Judiciary Committee, would give consumers a little help for dealing with such costly loans.

Proposed Terms of the Consumer Credit Fairness Act

As it now stands, the proposed legislation would do two major things for Americans:

  • Limit creditors’ collection rights in bankruptcy: Lenders whose loans came with excessive interest rates (defined by the bill as 15 percent higher than the current yield on a 30-year U.S. Treasury bond) would come last on the list of creditors to be repaid in bankruptcy court.
  • Improve consumers’ chances of bargaining for lower rates: Because of the above change, consumers would likely be able to negotiate lower interest rates with their creditors instead of filing for bankruptcy.

How the Consumer Credit Fairness Act Could Help You

Imagine this scenario: you’ve got one or more loans with interest rates that are through the roof (credit cards, car loan, payday loan, overdraft loan, etc.).

Unless you can get your creditors to lower their interest rates, there’s no way you’ll be able to continue making payments and you’ll have to file for bankruptcy. So you call up your creditor:

  • YOU: Hello, I’d like you to lower my interest rates.
  • CREDITOR: Why should I do that? That means I’d collect less moola from you, a struggling consumer.
  • YOU: Well, you see, if you don’t lower my rates, I’ll file bankruptcy. And, thanks to the Consumer Credit Fairness Act, your loans will be the last on my repayment list. So you might not get any money at all.
  • CREDITOR: Hm. That doesn’t sound too good.
  • YOU: Exactly.
  • CREDITOR: All right. How does [insert lower rate here] sound?
  • YOU: Excellent.

While the above dramatization may illustrate a slightly simpler procedure than you’ll actually go through should this bill pass into law, it does show the essentials of how the legislation may likely work.

Opponents Predict Tighter Credit

Some have criticized the bill as being too generous to consumers, suggesting that, should it become law, it would limit creditors’ overall ability to lend money.

But supporters contradict this claim, insisting that the bill would more likely push lenders to rely more universally on types of loans with more reasonable interest rates.

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Tuesday, May 19th, 2009

Senate Bans Sudden Credit Card Interest Raises

Score one for the little guy. The U.S. Senate voted overwhelmingly, 90-5, to add regulations to the credit card industry, and the move could save consumers lots of money.

A few differences must be worked out with a similar bill passed in the House, but President Obama said he hopes to sign the law by Memorial Day, and it could take effect as early as this year.

Until the specifics come out, we know that, at the very least, this bill will:

  • Make it more difficult for credit card companies to suddenly raise the rates of all consumers
  • Make it more difficult for the credit card companies to issue fees and other charges to all consumers

This means that consumers struggling to keep up with their credit bills will get some breathing room in the form of lower rates and fewer charges. Consumers will also still have the ability to seek credit card debt relief through bankruptcy. From the Washington Post's coverage:

"This is landmark legislation that is going to make the credit card marketplace more transparent and more fair for millions of consumers," said Travis B. Plunkett, legislative director for the Consumer Federation of American. "In particular, it's going to prevent credit card companies from suddenly and unjustly increasing interest rates."

We'll keep you posted as more details about the final bill emerge.

Filing Bankruptcy and Credit Card Debt

Are you deep in credit card debt? Chapter 7 bankruptcy was designed to eliminate credit card debt. Talk to a bankruptcy lawyer to see if filing bankruptcy could help you.

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Posted in Credit and Bankruptcy | 1 Comment »

Thursday, May 7th, 2009

Consumer Credit Shrank Again in March

Recently released numbers from the Federal Reserve show that consumer credit in the United States contracted again in March.

According to a recent Bloomberg article, consumer credit fell by $1.11 billion in March, after an $8.1 billion plummet in February.

This figure isn’t jaw-dropping, but is significantly higher than the $4 billion drop predicted by many economists.

At a time when the jobless rate is higher than it’s been in 25 years,  a decrease of this magnitude isn’t entirely surprising, but March’s drop was the largest since records were first kept in 1943.

Here’s a quick summary of some of what the report found:

  • Both revolving and non-revolving debt went down by more than $5 billion in March.
  • Because most banks and lenders are expecting more delinquencies and financial losses this year, many are tightening lending standards, making loans harder to come by.
  • Car sales decreased 37 percent in March of 2009 compared to March of 2008; however, sales incentives were up about 30 percent to approximately $3,169 per vehicle.
  • Consumer spending was up at a rate of about 2.2 percent in the first quarter, a potentially promising figure, since it represents an increase over last year.

The (Potentially) Good News About the Economy

The results of the Federal Reserve’s stress tests for banks could improve consumer and investor confidence, according to some sources.

These tests, designed to determine how well suited many large banks are for difficult economic times, are expected to show which banks need to raise capital and which ones do not.

Preliminary figures show that several major banks, including JPMorgan Chase & Co., American Express Co., Goldman Sachs Group, Bank of New York Mellon Corp., MetLife Inc., Capital One Financial Corp. and State Street Corp. have been assessed as not needing to raise any more capital.

Some news outlets have speculated that some of these banks may try to repay TARP money lent by the federal government.

How You May Be Affected

Overall, if you’re looking to take out a loan or open a new credit card account, you may still find serious roadblocks in your way.

Banks are apparently still holding back on offering consumer loans.

This may not bring enough good news to all-- people are still in financial turmoil and filing bankruptcy.

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Posted in Bankruptcy and the Economy | 1 Comment »

Tuesday, August 12th, 2008

Consumer Credit Explodes in June, Further Proving Consumer Claims Unfounded

Last week, we at Total Bankruptcy expressed doubt about the reports from a consumer survey suggesting that consumers were cutting back on using credit cards recently.

Respondents in the Javelin Strategy & Research online survey reported buying goods from stores such as Target and Wal-Mart and not eating out at restaurants as much as they previously had.

37 percent reported that they were using their credit cards less.

But in the article, we looked at data from the Federal Reserve that amply demonstrated that while the amount of outstanding revolving credit had decreased in April, increases in May suggested that consumers were back to buying with credit.

Of course, trying to maintain their pre-recession standards of living might cause many individuals to turn to credit for staples, such as gas and groceries.

Now, the Federal Reserve numbers from June have been released, proving our skepticism to be founded.

As the Washington Post reports, consumer credit rose by a whopping $14.33 billion, with revolving credit accounting for $5.49 billion, or a 6.8 percent rate of increase.

In fact, the overall number is the fastest expansion of credit in seven months.

Perhaps asking consumers whether or not they're using credit to buy luxury items is misguided: instead, it would be interesting to see how many consumers used credit cards to buy gas, groceries, school supplies, and a host of other basic necessities.

The numbers suggest it's becoming more and more common as the economic downturn wears on.

P.S. Did you know that Chapter 7 bankruptcy was designed to eliminate credit card bills?

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Posted in Bankruptcy and the Economy, Credit and Bankruptcy | No Comments »

Thursday, May 8th, 2008

Consumer Credit Skyrockets in March

The tough outlook for the economy has made many consumers feel the ill effects and caused them to make many changes in their day-to-day life.

But according to new figures made available, via Bloomberg.com, many aren’t quite ready to give up the affluent lifestyles to which they have grown accustomed.

According to these statistics, U.S. consumer borrowing more than doubled what was forecast for the month of March.

Instead of the $6 billion that economists predicted for the month, consumer credit leapt to $15.3 billion.

Compare that to February, in which credit rose by $6.5 billion, and you’ll note the severity of the swerve upward.

It marks the last month in a quarter that saw consumer credit as a whole rise by $34 billion, the most since the first quarter of 2001, which was not coincidentally the last recession into which the U.S. entered.

Experts point to new, tightened lending standards for home-equity loans as one culprit—in addition to the general recession—that is causing consumers to turn to credit in credit cards and the like.

With home prices dropping and potential to drop many more percentage points in the upcoming months, perhaps this latest shock will force economists to adjust their predictions in the second quarter and beyond.

With all this debt, more people may be filing bankruptcy this year.

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Posted in Bankruptcy and the Economy, Credit and Bankruptcy, Mortgage Foreclosure | No Comments »

Monday, March 5th, 2007

Maxed Out Opens in Selected Theaters Across the Country

Some time ago, we wrote about the movie Maxed Out and how it had exposed the seedy underbelly of the consumer credit industry in the United States.

Since that time, various governmental agencies and committees have conducted hearings and issued reports affirming this basic principle:  Debt is a growing problem in the United States.  The practices of the consumer credit industry are, without question, a part of the problem.

Mainstream media outlets such as 20/20 and PBS NOW have recently produced shows on aspects of this problem, and Harvard Law Professor Elizabeth Warren, an expert on consumer debt, is becoming a familiar face.  Maxed Out helped turn that spotlight on the debt problem.

At long last, the movie is appearing in selected theaters across the country.  For a screening near you, check here:  Maxed Out Screening Dates and Locations

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