When will they figure it out? Wells Fargo and Chase have announced they plan to kick consumers while they are down again. Credit card rates are being increased, 3 percentage points by Wells following a similar increase by Chase, in the worst economic climate since the 1930s.
A Wells Fargo spokesman said that the bank waited to announce the increase in hopes that the business environment would improve. When business costs and consumer credit challenges continued to rise, the bank chose to jack up its rates.
The Consumer Confidence Index is down to 53.1 for September 2009 a decline from 54.5 in August. While it has been lower in the past twelve months, the index is measured against a score of 100, which represents an average of the period 1967 through 1985. This measure of consumer sentiment peaked at 140 in 2000 and remained near or above 100 until Fall of 2007. Many business planners consider the Consumer Confidence Index to be a more reliable measure than the often quoted Consumer Price Index.
Look back to April 2005. The economic good times were rolling in 2005. The banks spent millions of dollars lobbying for a change in the bankruptcy code they hoped would make it more difficult for consumers to file bankruptcy.
It looked stupid to me. Banks were making lots of money from consumer purchases. Even though some credit card balances were discharged in bankruptcy proceedings, the credit card branches of most banks showed record profits. For some banks, profits from credit card business was carrying less profitable commercial lending divisions.
What did the banks get for their successful lobbying efforts? The summer of 2005, just before the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 went into effect, saw record levels of consumer bankruptcy.
But consumer bankruptcy filings are approaching a record level again and the banks can look at their own actions for a reason. Banks and credit unions drag their feet on loan modifications and lobby against legislation that would benefit consumers. They now increase interest rates in an attempt to squeeze every last dime from beleaguered consumers who are struggling to keep their heads above water. The money lenders are killing the golden goose for Christmas diner. When will they ever learn?
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