PATON: Consumers flood Fed with credit card gripes

By James Paton, Rocky Mountain News (Contact)

Tuesday, July 22, 2008

Randy Kotel is appalled by all the credit card offers his three teenage sons receive in the mail.

"I'm waiting for my dog to get one," he says.

Vonda Wilhoit, a nurse who lives in Aurora, says the interest rate on her Bank of America card surged past 20 percent, even though she was paying on time.

"I don't mind paying interest but it should be calculated fairly, not raised on a whim," she says.

Don Feltner, frequently on the road in his RV, says Capital One made it nearly impossible to pay his bill on time. He says he received the bill only a few days before it was due. When he tried to pay over the phone - he doesn't like to make transactions online - he says the company tried to charge him a $10 fee.

Delbert Boyer believes interest rates are often "deceptive and excessive." Usually he frowns upon the government getting involved, but he says "this problem needs tough, immediate, smart intervention." Boyer worries about his 18-year-old granddaughter who is managing her debt but has a "pocket full" of cards."

The stories go on and on.

Kotel, Wilhoit, Feltner and Boyer are among scores of Coloradans and more than 30,000 people across the nation who have weighed in on a plan aimed at cracking down on unfair credit card practices. Many complain of their rates being boosted arbitrarily and cite abusive tactics that keep them deep in debt.

One Estes Park man says his "fixed 4.99 percent" card increased to 9.99 percent. "Slam the door on these vultures," he says.

The Federal Reserve Board in May proposed rules seeking to protect consumers from unexpected increases in interest rates on outstanding balances.

Other reforms include requiring companies to give people a "reasonable amount of time" to make their payments and preventing the banks from applying all those payments to low-interest debt first.

The changes "are intended to establish a new baseline for fairness in how credit card plans operate," Fed Chairman Ben Bernanke says in a statement on the Web site outlining the plan.

"Consumers relying on credit cards should be better able to predict how their decisions and actions will affect their costs. At present, this is not always the case," he says.

The Federal Reserve has been deluged with letters in recent months and could see an even bigger wave in the final days of the comment period, which closes Aug. 4. The board will review the feedback and could finalize the rules by the end of the year.

A December 2000 proposal related to real estate brokers attracted a record 45,000 comments, says Federal Reserve spokeswoman Susan Stawick. The credit card issue has so far drawn 31,000 responses, she says.

The credit card companies have objected to the package of proposals, arguing that they would hurt consumers, leading to higher costs and less competition while reducing access to credit. The industry says it must be able to charge interest rates that reflect the risks.

Some consumers also think the new proposals are not such a smart idea. Dean Boyd, a 35-year veteran of the financial sector who now works in real estate lending, says he has never paid a "penny of interest" and argues that education and discipline are key.

"Government intervention is not the way to solve this," the Broomfield resident says.

Still, Boyd is easily outnumbered by people who would welcome an aggressive effort. Many of the critics have identified issues the Federal Reserve doesn't specifically address this time.

Kotel, whose boys are now 18, 16 and 13, believes the credit card companies' efforts to sign up children are over the top. "Kids are naive," the Centennial resident says. "Young people can get sucked in at an early age and can't say no."

Linda Schaer says she and her husband saw the interest rate on a Chase credit card soar to 32 percent from 22 percent after they went over the limit for the first time. She says Chase refused to budge even though the couple had used the card for several years and have a mortgage and car loan through the company.

Schaer, an administrative assistant at a Denver church, says "credit card companies are out of control." She and her husband closed their account rather than deal with the higher interest rate and are paying off a roughly $10,000 balance at the prior rate.

Feltner had this to say: "Stop it guys! I believe that credit card fees are way out of line and only the government can stop it."

James Paton and David Milstead take turns writing Up and Down 17th Street.

• July 23, 2008

  8:23 a.m.

  Suggest removal

  gr8fuldude writes:

  More regulation is not the way to stop it. If you don't like paying high interest rates, do not run up a balance. Use a debit card. Pay cash, or (gasp!), save for the purchase until you can afford it.

  We should also be learning from this, the same way we should be learning from the housing debacle. If you spend more than you make, you will eventually suffer for it. Sometimes stupid hurts.

• July 23, 2008

  9:56 a.m.

  Suggest removal

  P_Denver writes:

  Even informed consumers get trapped in this. People who are never late or never miss a payment still see the rates go up because, simply, the credit card company can always find a legal way to raise them.

  I would love for one of the financial experts who troll these blogs (you know who you are) to explain why the government can't simply cap interest rates at, say, 15%. A change in the banking regulations would be required to raise it.

  A similar system seems to be working with cable vendors. Their rates are regulated. Utilities rates are regulated. Why not credit card rates -- at a more reasonable level? The current rates are truly usurious. 30%? Really?

  It may tighten credit, making it harder for deadbeats (and dogs) to get credit cards. So be it. Credit is a privilege, not a right.

  Get your financial ducks in a row and earn it.

• July 23, 2008

  12:59 p.m.

  Suggest removal

  junglegymco writes:

  I'm tired of the specious arguments banks try and use to combat any regulation that protects consumers from their unthetical lending practices. To argue that regulation would cause rates to increase is like saying we shouldn't make rape a crime because we'll fill up the jails. Good - raise the rates, just do it fairly and not have 127,312 loopholes that allow banks to change rates virtually overnight on unsuspecting consumers.

• July 23, 2008

  2:33 p.m.

  Suggest removal

  Marshdale writes:

  Personal responsibility is a must. However, credit agencies are vultures and need to be reigned in. They are destroying peoples lives. They are jacking up rates so high that people will never be able to pay them off. It is highway robbery and needs to be stopped. Really it is usury, which at one time was illegal. How these companies get around it is beyond me, but they do. Banking deregulation started with Carter. Reagan and Bush senior put it on steroids. It has been out of control ever since. If congress won't do something the people might. Which leads to another topic.
  Back in March of 2008 congress had a SUPER SECRET SESSION. These are rare and I believe have only happened 7 or 8 times in the last 150 years. The only person who asked about it or questioned it was Dennis Kucinich. He was told it was concerned with FISA, but other sources are saying it has to do with imposing Marshall Law by executive order in the event there is a banking collapse and ensueing kaos. In fact George Bush through his signing statements has the power to declare a state of permanent national emergency in which he can impose Marshall Law and remain president indeffinately. There are some who think he will use a banking collapse to declare this. We do not live in a free country any more folks. Look out!!

• July 23, 2008

  3:37 p.m.

  Suggest removal

  arby writes:

  First of all as was posted above. Don't use credit cards unless you can payoff the balance the next month. It's not easy anymore or safe to travel with a load of cash but you can load up your bank account and use your debit card.

  Why are all of these Aholes that get themselves in money trouble looking for the government to bail them out? If you need a bail out go see Mom and Dad. If he starts to take his belt off hit the door.

• July 23, 2008

  4:16 p.m.

  Suggest removal

  The_Punnisher writes:

  Can't do that, arby. Our SS ( Social Services )has determined DISCIPLINE to be a form of CHILD ABUSE.....

  And they behave like their N@ZI counterparts if they suspect it....

• July 23, 2008

  6:25 p.m.

  Suggest removal

  italiaboy9 writes:

  Oh boo hoo, I've worked for credit card companies since the early 90s for 10 years and all I can remember hearing is the slow payer crying that their interest rate went up. Or, why did you charge me a late fee when I was only 4 days LATE. Hence, the key word...LATE. Why did you raise my rate when all my other cards are maxed out?? Come on people, I am so sick of the whining. Americans have been living off their credit cards for years. If all of your cards are maxed out and you can hardly pay more than your minimum it's time to stop shopping. Banks have been using behavior scores (how you charge, where you charge, how you pay, how much you pay, etc) for as long as I can remember. If you dont manage your credit responsibly and wisely then you're going to get screwed. But, now everyone wants a bail out. Read you credit card agreements, understand them and if you have any doubts...ask about it. If you don't like your interest rate and you have good credit, you can call to get it reduced. If you have crappy credit, then deal with it and get it back in order.