On March 7th, the Senate Homeland Security and Governmental Affairs’ investigative subcommittee heard from both sides of the growing debate on credit card practices. According to a report by AP reporter Marcy Gordon, the subcommittee took testimony from the executives of Chase Bank USA, Citigroup Inc. and Bank of America regarding what most see as confusing billing practices and unfair interest rate policies.
Sen. Carl Levin (Dem – Michigan), the subcommittee chairman, and Sen. Norm Coleman (Rep – Minnesota), the highest ranking Republican on the committee, were both highly critical of the outrageous fees and penalties imposed by the major credit card issuers as well as the complex language of credit card agreements.
An Ohio man’s tale of credit card misery was so compelling that Richard Srednicki, the CEO of Chase Card Services, actually apologized to the man, stating, “In this case, we simply blew it.” The man first used his Chase card in 2001 to pay for wedding related expenses. He charged $3,200 on the card, for which he incurred interest of $4,900, over-the-limit fees of $1,500 and late fees of $1,100. This is all despite having paid $6000 over the six year period. All told, if Chase had its way, it would have received $16,700 from the $3,200 of purchases! That’s about 27% annual rate of return! Most anyone with a credit card would doubt that this man’s case is an isolated incident.
Feeling the mounting pressure from a Congress now sympathetic to consumers, Citigroup, the nation’s largest credit card dispenser, pledged that it was eliminating the universal default provision in its credit agreement as well as other questionable rate hiking tactics. As the fine state of Missouri says, “Show me!”
When consulting people about the possibility of filing a Chapter 7 or Chapter 13, bankruptcy lawyers often hear, “I believe in paying my debts, but I just can’t pay down these credit cards.” The truth is that credit card companies brazenly set up the average working American for failure through shifty language in their credit card agreements that allow absolutely no room for error. One misstep, and the financial situation goes from bad to impossible.
That is a fact about which both Democrats and Republicans can agree.
Transcripts of the testimony can be found on the U.S. Senate Committee on Homeland Security and Governmental Affairs’ website.
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