First, I did some Internet searches, and some are for, while others are critical of this organization.  Personally, I am not in favor of everything that this organization’s leadership or members may believe in.  But, I don’t have the time to analyze or become embroiled in discourse about topics like immigration, who is, or should be the president, political parties, the left, right, or middle.

None of these things mentioned above are on my agenda, relative to the ChangeInTerms.com site.  Do I care about these issues?  Yes.  Do I have time to write posts and conduct research on all of these subjects (and their nuances) mentioned above?  No.

Relative to my employment, I also don’t feel inclined to speak out on all of these issues.  On the other hand, I have the right, the responsibility, and the passion for entrepreneurs to address matters that are affecting small businesses.  When credit is tight or unavailable, this impacts small businesses; when consumers are unemployed and spending is constrained, this impacts small businesses.

Not only do I feel passionate about entrepreneurs, I have been one, more than once.  This is why, along with a graduate education which I pursued in order to become academically qualified to teach, I am now an entrepreneurship professor.

Most small businesses, no matter how you slice it, are indeed very small: 0-1 employees.  They are often entrepreneurial bootstrappers.  Bootstrappers start businesses on kitchen tables and in basements and garages; about half of them by my estimates through formal academic research use personal credit cards as a source of capital.  This amounts to over 10 million businesses.

Oh, and that “0-1″ employees group, that number is around 21.7 million.  There are around 29.6 million businesses in the U.S.  So, you could say that over two thirds of all U.S. businesses are actually very small (perhaps a better choice of words would be “tiny”).  Yet, these are the everyday “Jills” and “Joes” who are vital to our economic recovery.

I want to help other people: students, current entrepreneurs, and would-be entrepreneurs.  It also happens that one of my official duties is to be “engaged” with the entrepreneurial community.  This includes conducting research (publishing), and trying to champion small businesses in every way that I can.

It’s my job.  I love it, but from a practical point of view in terms of expectations of my employer, I am supposed to teach, conduct research, serve, and be “engaged.”  If my discipline was political science, maybe I would be blogging on our system of government as a focus; but, my focus here is ending the abuses of credit card companies against small businesses and consumers.  Consumer spending does impact small businesses, employment, and the economy as a whole, as we have seen.

Relative to the Showdown or its organizers, this is the bottom line: I am against the undue influence that the banking and financial services industry tends to exercise over our Congress through its very powerful lobbyists.  Under the present system, we are where we are, today.  Small businesses are in jeopardy, the economy is a mess, people are hurting: “my people” (entrepreneurs) are hurting.

Banks are pushing people into defaults.  The ABA, American Banker’s Association, which obviously represents the interests of banks, is against the industry changing its ways, and I am for the industry changing its ways.  Banks are not working with consumers and small businesses to the extent that they could or should.

I am hurting, personally, because I am separated from my family by virtue of a “crashed” real estate market.  This occurred, essentially, because of a lending industry run amok and bankers’ irresponsibility and greed, with regulators asleep at the switch.  The “bail out” was misdirected, in my opinion.  We should have created loan programs (which would have broken even, instead of adding trillions to our national debt), targeting a recovery in the housing market and the restoration of consumer confidence, before things ever got so bad.

In my early years, I used to write lyrical poetry.  Lately, I’ve been playing a little tune in my head that goes something like this:

“I want to take my boy fishin’

But I find I’m just wishin’

He and I would bait the hooks

And cast our lines in babbling brooks

We’d really reel ‘em in”

We’d catch rainbow trout

Maybe bream, or

Perhaps a leafy branch or two

It wouldn’t matter, son

As long as I’m with you

Here in Western North Carolina, I find myself surrounded by some of the most beautiful terrain on the planet, including places where I could “take my boy fishing.”  But I can’t.  I’m lucky to do my job and get back home each week to take care of chores, pay bills, visit my family briefly, and return.

When I play that song in my head, it makes me want to cry.  If credit card issuers and the banks with which they are associated want to know why I’m going to keep coming, and coming, and coming, all they have to do is recognize that I am deeply motivated by that little tune.

I will continue to fight the greedy, unethical, and misguided policies that have been implemented by these institutions, because “I find I’m just wishing” that I could be with my family, and that we could live in peace.  (Chase just sent another change in terms on one of my wife’s accounts; that was a very bad idea, Chase: I told you to leave me, my wife, and my family the hell alone. READ MY TERMS.)

And, as I have outlined, I continue to fight because it’s also my job.

If you think things are just “hunky-dory” for small businesses and consumers, and the economy at large, well, I am happy for you.  You may be isolated from the pain that others are experiencing.

You can choose to support, or not, the “Showdown in Chicago” protest.  I support that protest, even if I do not agree with everything that others may have in mind in terms of a larger agenda (politics, health care, immigration, et cetera).

If you do support the protest, but are not in the Chicago area, the Americans for Fairness in Lending site has also provided a link for contacting elected officials in the post which states “AFFIL has endorsed the upcoming events in Chicago, and now we’re asking for you to support it too.”

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 9 comments | Add to del.icio.us
Post tags: "Bail Out", banks, change in terms, consumers, credit, credit cards, debt, economy, interest, small business

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In one sense, this story is already well known, at least by virtue of its observable impact.  We have seen it in neighborhoods across America: foreclosures, short-sales, and a devaluation of property values.  Speculators and house flippers were understandably giddy over profits that seemed at the time, easy and never-ending.  But this period of exuberance did end, badly.  Those of us who are concerned with credit card company abuses, are paying the price.  Taxpayers are paying the price.  Investors from around the world are paying the price.

In essence, the mortgage industry sold “instant gratification” to buyers.  Yes, buyers “signed the dotted line,” and certainly, many knew (or should have known, if they lied about matters such as their income and obligations on “stated income” loan applications — that’s why the slang, “liar’s loans,’ came into being), that they too, were taking a risk.

Everyone was gambling.  But in common, the core belief that drove this scenario was the notion that housing prices would continue to rise.  Refinancing, to take “cash out” of real estate investment gains (or otherwise leverage the cash from appreciation in property values), enabled people to buy even more.  They used that money for anything under the sun: vacations, home improvements, adult toys (and “toy haulers”).

We now know this was a fallacy.  Anyone who may be watching squirrels gathering nuts on the ground for the coming winter can use this as an analogy for what many people did not do.  There are many adages which capture this failing, but perhaps the one (which in history seems to repeat itself) that best captures the miscalculation is this one: “What goes up, must come down.”

The “House of Cards” production does a great job of explaining, how we who are fighting credit card company abuses got where we are today.  Banks bought bad investments.  They want to recoup their losses by dipping into other sources of cash.  First, it was the bail out money: your money, and that of your children and grandchildren.  Second, it is every dollar and quarter, dime, nickel and penny, from fees, interest rate increases, and payment increases that banks can impose on the backs of people who still take pride in trying to pay their bills and fulfilling their obligations.  (But for how long?  Most people who walk away and “leave their keys on the counter” have simply given up, knowing that they can never pay.)

Obviously, the lax regulation that allowed Wall Street to profit and party on what we now know are toxic assets (I’m not an accountant, but it seems to me that a so-called “toxic asset” is a bad debt!) enabled a complex scheme with many participants to arise.

Unfortunately, as banks squeeze those of us who are still standing, more and more “able bodied borrowers,” including small businesses which account for much of our economy, suffocate.  Layoffs and fear have led to the destruction of consumer confidence — so spending slows to a crawl.  Here we are.

I personally found that one of the most interesting interview questions that was posed to various participants in the CNBC piece had to do with “feeling guilty,” for having been a part of this debacle.  The body language told a different story than the words that were uttered, slowly and carefully, in several instances, consistently along the lines of “just part of the food chain.”  Well, I already know where I am in the food chain: near the bottom.  However, when these banks try to “eat” what’s left of the rest of us, I want to make sure that we at least leave a very bad taste in their mouth.

Just a Few More Notes

This present post is very difficult to write.  I am separated from my family by virtue of real estate.  I have a house that has not sold, even though it is well cared for and in a decent middle-class neighborhood.  I have debts that are primarily associated with a decision to go to graduate school, trying to help others by becoming academically qualified to teach.  Those who walk away from their own homes (or who are forced to leave by eviction); those who enabled this to happen (see the documentary for the entire “food chain”); and I, along with my wife and children, are entangled.

Credit card companies (i.e., the banks that run them), are dealing with issues such as losses and liquidity pressures.  Nevertheless, because the banks are equivalent to “Goliath,” and we could be likened to “David,” naturally, ChangeInTerms.com and its supporters are in a position such that if we don’t throw “sticks and stones” to defend ourselves in any way that we can, we will be destroyed.

Sadly, I could be sympathetic to the banks’ problems, if they weren’t so mean and uncaring about what happens to others.  The most typical response to consumers (some of whom are the entrepreneurs we desperately need to nourish for a recovery) when they call to “negotiate,” just as appears to be the case with distressed homeowners, is that banks don’t want to work things out.  Rather, they just want to take everything that they can get, forcibly, mercilessly, and immediately, no matter what the consequences may be for individuals — and when taken in the aggregate — for the economy and this nation’s citizenry as a whole.

This behavior on the part of banks is sure to lead us all down a path to further destruction, I predict, unless we “work things out.”  How do we do that (those of us who are on the receiving end of banks’ callous, greedy, untenable dispositions)?  That’s really quite simple.  Anyone who has survived a schoolyard bully knows that the only way to prevail, is to make him or her very afraid of you.  If you are a small person, then you may need to assemble an army and gang-up on that bully.

I actually have a post in draft mode on the subject of “somebody should do it.”  Here’s what it boils down to: all of us “little people” must band together (this is a tiny example, but I sometimes get frustrated: why have I written several times, trying to get someone to print-out a free protest T-shirt, and send me a picture for the site?  Scared; too busy; afraid to raise a “stink” in public — I can understand all of these, because they describe me, but I still fight).

The formula for returning to a period of economic stability is also fairly simple.  Banks are in the business of taking in deposits, and lending at a profit.  Profits are a function of “time and terms.”  If they wanted to do it, they could institute all kinds of creative workarounds, because that’s what ends up happening in settlements.  Why they don’t want to work with people until the situation becomes such that a settlement is for “pennies on the dollar” (with the losses being shifted to those who are still standing, financially), is hard to fathom.  I suppose it’s because enough people have not has yet boycotted media for running credit card companies’ ads; written to affinity partners; threatened the reelection prospects of representatives; or gone “viral,” like the Debtor’s Revolt video.

If you aren’t willing to combine forces and join the fight, then you can count on being fleeced, beaten, and terrorized by such a bully.  We have already seen that this bully’s greed is insatiable.  I guess you’ll get involved once you’ve “lost your backpack and lunch money,” one too many times.

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | One comment | Add to del.icio.us
Post tags: "Bail Out", banks, consumers, credit, credit cards, debt, economy, fees, interest, interest rate, regulation, small business

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“AB,” stands for Anonymous Banker, and AB’s site goes by that same name with the subhead, “An Insiders View Into the Banking Industry and Economic Crisis.”

In reading some of AB’s posts, written from the point of view of someone who has spent the bulk of his/her career working with small businesses, I find that he/she is just as disgusted and alarmed as I am about what is to come for our nation and our economy, if we don’t restore confidence.

And frankly, given that I am still stuck in a perfectly maintained home in a decent middle class neighborhood (that would have ordinarily sold in about 60 days, before the depression), I have a hard time mustering up much confidence these days that a life of misery for my family will not go on for many months to come; it’s already been two years.

As I have said several times before, in my opinion, this is because we bailed out big banks and their executives (with their perks, jets, and bonuses), instead of creating loan programs (that would have been break even) for distressed homeowners.  If we had simply addressed the problem that started this mess in the beginning — and it wasn’t even a big mystery to unravel like a health problem or an intermittent rattle coming from a car — real estate, I wouldn’t be here today, using the D-word.

This all started with bad news about real estate foreclosures.  Consumers were scared about what was happening in their neighborhoods, rightfully so.  Consumers lost confidence.  Then, we witnessed one of the biggest giveaways to corporate executives in history.  Outrage over AIG parties, trips and bonuses resulted in no substantive penalties or reforms.  Business “as usual” ruled the day.

The financial services industry greased the palms of Congress, and everybody (except the citizens at large who have to foot the bill), still had a really nice time.  Meanwhile, the cost of fuel for a day to run one of their jets or yachts is probably about the amount of money any of us serfs would need to “make our month,” or give us the wiggle room we need to negotiate the sale or purchase of a home.

After everyone lost confidence, consumers tightened their purse stings and stopped spending.  This led to trouble in the auto industry and another round of bailout disbursements.  The fact that one of our economy’s biggest industries (it’s not just the automakers, but all of the interdependent businesses: steel, glass, plastics, et cetera) was in trouble and would also need a bail out, further shook confidence in government’s ability to address fundamental issues and root causes.

Threats to the survival of  small businesses, accompanied by (i.e., resulting in even more) unemployment have followed.  AB states that he/she “[has] been a small business advocate for thirty years,” and further observed:

“Each day I encounter consumers and business owners that had been able to keep current on their revolving debt. But with each rate increase in the midst of declining revenues, brought about by this economic crisis CREATED BY THE BANKING INDUSTRY, more and more consumers and business owners are falling behind. The rate increases are a self-fulfilling prophesy. The banks say they need an increase in rates to help offset the increase in credit card losses. I say, the increase in rates is CAUSING a good portion of the credit card losses.”

A few months ago (July 22, 2009), someone attempted to post a comment, which I suppressed:

“Perhaps instead of buying a domain name, you should budget properly and pay your bills off in time.”

Not wanting to fire off in a knee-jerk reaction, here’s my answer:

I do pay my bills on time.  I always have.  This site is not about me, it’s about justice, fairness, efficiency of the banks for the benefit of a citizenry at large, small businesses and consumers in particular, and “the economy, stupid.”  If you want to “dis” me, while demonstrating a lack of understanding or caring about people or the issues that impact us all (and our children, their children, and so on): “budget properly” and get your own site.  Since ChangeInTerms.com is a pg-rated site, I can’t respond in more basic terms such as “‘expletive’ you, too!” (that you would more likely have the intellectual capacity to grasp).  But in “southern-speak,” I can say: “Bless Your Heart.”

A glimmer isn’t a recovery and there will be no recovery, without confidence.  There is not going to be any confidence as long as we are trapped, squeezed, and coming soon to a household and small business budget near you: taxed to death (and beyond the grave).  Small businesses and the economy — all of us — must have a properly functioning banking system, and we don’t.

Banks are making very bad decisions, causing defaults (this is especially tragic when account holders were making their payments, on time) when if they would instead work with people, they could get their money back (not to mention maintaining a loyal customer base instead of destroying their own brands).  They could prevent a frightening downward spiral and “self-fulfilling prophesy” from coming true.

The purpose of the banking system is to provide an exchange system for our currency and our economy.  It is failing in its fulfillment of that purpose.  AB knows it, I know it, and anyone with enough brains to buy a domain name and try to fight back before it’s too late knows it.  Bless Your Heart, too, if you don’t join the fight!

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 11 comments | Add to del.icio.us
Post tags: "Bail Out", banks, consumers, credit, debt, economy, penalties, small business

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I set out this morning trying to research “Mafia loan-sharking rates,” but my inquiry was frustrated a bit when I entered that term in search engines.  Many of the hits that were returned pertained to credit card companies and their rates, which clearly, people associate with Mafia rates.  But I wanted to know specifically about the Mafia rates.  Since I am not a criminal, I really wasn’t certain.

Among my findings, I came across a Google books preview of The Complete Idiot’s Guide to the Mafia.  In a section entitled, “Bringing in the Loan Sharks,” I found the following information:

“Mafia guys love loan sharking….Loan sharks make tremendous amounts of money….Most loan sharks charge customers anywhere from two to five points a week in interest on the unpaid balance of the loan.  For example, if a customer borrowed $1,000 on a Friday at five points a week, the following Friday a would pay a $50 ‘vig’ to keep the cash another week or pay it off with a $1050 payment….Small loans, say $100, are usually six payment affairs in which a customer makes weekly payments of $20 to satisfy a $100 loan.  Some loan sharks take $4 at the front end….His average rates are about 150 percent a year.”  (p. 138).

With regard to the “$4 at the front end” in passage above, that’s an interesting coincidence as it relates to balance transfer fees.  Most of the promotional balance transfer offers I see are typically three percent, no maximum; however, Bank of America’s are now four percent of the amount borrowed.  You will note that $4 on a $100 loan is four percent, so it appears that Bank of America’s up-front fee is possibly modeled after that of some loan sharks.

I also found another site, which provided a transcript of testimony from Michael DiLeonardo in the case, United States of America v. John A. Gotti, Jr., defendant (scroll down to the section, “Earning Money With the Mob”):

“Q. Why were you stronger with the Gambino family behind you?

A. I had a whole enterprise behind me, a whole army. It’s like having a license.

Q. What kind of money did you start to earn on the street?

A. I got $10,000 from Paulie Zac to go out and start shylocking, which I did.

Q. What do you mean by shylocking?

A. Well, I was able to go out and lend money out at an interest rate, a weekly interest rate.

Q. What kind of interest rate?

A. I charged up to 5 percent, from 3 to 5 percent at that time.

Q. And that’s 5 percent a week?

A. 5 percent weekly, yes.

Q. If someone pays that weekly percentage, does it do anything to affect the principal?

A. No, never.”

The aforementioned site also has a fabulous bibliography (developed over a long period of time by Thomas P. Hunt, who is evidently an excellent researcher and subject matter expert on Mafia activities).

As I discussed when I was in Washington, a question exists, at what point do we consider interest rates to be too high?

Even though I have to acknowledge that banks are not actually charging as much as the Mafia (with the exception of some up-front balance transfer fees, like those of B of A), thirty percent or more is certainly prohibitive to the average consumer: students, middle class Americans, people in your neighborhood (would you like your home’s value to drop even more, because a neighbor is in financial distress for any reason, not just a mortgage?).

Thirty percent is also high enough to destroy all hope of repayment on the part of most borrowers, so they default and pass on their debt to those of us who are still paying (I know, some holier than thou individuals exist, and will be simpletons in their “solution”: just “pay cash”).  If we want an economic recovery, these rates must come down so that entrepreneurs can get back to work, too (and part of their work is creating jobs).

Meanwhile, thirty percent is certainly a slap in the face of taxpayers, who have bailed out the banks (especially given a FED funds rate of one quarter of a percent; “The federal funds rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight”).

Now, with Chase, it “offered” some customers an “alternative“: If customers couldn’t stomach the increase in payments, then they could alleviate the pain of higher payments simply by switching to a rate that was (typically) double the previously promised promotional rate.  For example, a customer (aren’t they considered victims by the Mafia?) could agree to go from 3.99 percent to 7.99 percent (and the 7.99 percent was for a limited duration).

Of course, exactly what rate constitutes “loan-sharking” is a subject that deserves more discussion.  However, it’s not strictly about the interest rate.  Rather, we’re back to the notion of good faith versus bad faith, and intent.  Is it a loan, or is it a purposely set trap, designed to ensure a victim’s exploitation until death?  To my last point, I think that the Mafia and credit card companies use tactics that are exactly alike: “We’re gonna hurt you or your loved ones, and we’re gonna enjoy it.”

In keeping with the above, I’ve come up with a new slogan when you communicate with banks’ Congressional representatives:

CAP INTEREST RATES, NOT OUR KNEES

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | No comment | Add to del.icio.us
Post tags: banks, credit, debt, fees, interest, interest rate, Testimony

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Apparently, her video, “DEBTORS REVOLT BEGINS NOW!,” is drawing a lot of attention on the Internet.  According to Mr. Delaney, the video (released on September 8, 2009) had received “96,000 views as of Monday morning [September 14]“; in checking just now, the site reports 175,023 views (it was 151,204 yesterday, when I started composing this post!):

Click here to view the embedded video.

Not surprisingly, with that kind of trajectory in viewership, comments have also been robust.  Many are supportive, and many are not.  Since I have this blog as a platform, obviously, this post is my primary place for adding my own “comment.”

First of all, I personally have not taken the same approach in refusing to pay (actually, her refusal appears to be “unless she was offered a lower rate,” which was raised to 30 percent as of July).  I do think 30% is obscene (in the questioning period after my testimony before Congress I remarked along the lines of “how high did interest rates need to go before everyone agreed that it was legalized loan-sharking…40%, higher?”).

I do understand that such a refusal as has been pursued by Ms. Minch may appear to be the “biggest stick” that an individual borrower may have if he or she feels that it is impossible to negotiate any other way in the face of interest rate or minimum payment hikes.  I am not a lawyer, so I can’t really advise someone one way or another in taking such an approach.  However, I can say that generally, “it depends” (on the value of one’s assets, his or her credit rating or concern for that rating, and other circumstances).

Notwithstanding the above, relative to her premise — starting a revolution — I agree that fighting back is necessary.  (Respectfully, she claims that hers is “the proverbial first shot fired in an American debtors’ revolution,” but she is not the first — consumer advocates and others have been fighting this battle for years.)  Nevertheless, how or even if one chooses to fight back is matter of heated debate (judging by comments under her videos).

The ChangeInTerms.com site has predominantly featured Chase since I began actively blogging here, but as you will note, “the cause” is ending the abusive treatment of customers by the credit card industry at large, and I have long been against that abusiveness.  I think that fighting back is best approached using well researched information, along with technologies to disseminate anti-marketing messages (obviously, a viral video is one such technology, regardless of how one feels about the negotiation tactic that Ms. Minch has decided to employ).

In reading some of the negative comments, I found myself saddened.  Numerous remarks were personal attacks against this individual, accusing her of buying cosmetics, or whatever (the point was, according to the comments, that she borrowed money frivolously and she shouldn’t have done that — time to pay the price).

What made me sad was that it’s hard for me to stomach some of the negative comments underneath a video like this.  Many people seem to assume that anyone in debt has gotten in that position because they were frivolous, or stupid (“read your contract”).  These individuals who make such assumptions about “read your contract” completely ignore, however, other tenets under the law, especially “bad faith” versus “good faith.”

The contracts written by credit card companies are bad faith agreements, which seems to be alright with anyone who is able to “pay cash.”  What is interesting to me, is that many of these holier than though individuals passing judgment would “holler to high heaven,” if they were on the receiving end of a bad faith contract themselves.  What are other “bad faith” contract examples?

How about the nightmare stories concerning home improvements (when jobs go bad, or are not completed)?  Let those “paid cash for my home” buyers get into one of those bad faith deals, and they’d scream, too.  The mechanic “said” your transmission was rebuilt, but a minor repair was made, instead (because that was all that was really needed: again, “bad faith”).

I could go on and on…but if “screwing the other person over is fine, as long as you don’t do do it to me” is the mentality out there, what a merciless, horrible future, we face.  Our unsuspecting children will have it even worse, and eventually they will learn to lie, cheat, steal, and otherwise be “out to get the other person, before he or she gets me.”  What a vicious downward spiral.

I would venture to guess that 99% of the “read your contract” folks slept through the part about the necessity for good faith that underpins all contractual agreements in whatever business law class they may have taken (if they took one at all).  For that matter, the “rule of law” itself means nothing, to individuals or a citizenry at large in the situation under which laws apply, when the intent of parties is to willfully act in bad faith.

What really frustrates me, is questioning my own life in the face of such mean-spirited, presumptuous, holier than thou “don’t spend what you don’t have” remarks.  It’s not my video, but I (too) spent money “I did not have.”  I get the feeling that these critical individuals who are passing judgment, would not care that I did so going to graduate school, so that I could be academically qualified to teach.  I wanted to try to help people, and I have.  Thus, I question myself: “But at what cost?”

The comments from those who “do have” (apparently some have a whole lot — they even think that beyond credit cards, people should have no debt, not even a mortgage — must be fabulous, buying houses for cash) really hurt.  Some were laden with expletives and made me feel like anyone who is in debt, for any reason, is scorned.  They really are merciless, barbaric, Roman Emperor “thumbs down” callous; many are not even civil to one another.  If comments like that come to this blog, I do not want them.  We can all disagree, but I’m not interested in a brawl.

Did I make a mistake, going to graduate school?  Well, it was certainly a financial mistake.  Did I make a mistake, thinking I could make a difference by teaching?  I don’t think so.  Not every student is going to like every professor, or learn, but most seem to learn from what I provide in the classroom (or on my faculty site, et cetera).  Am I sorry I borrowed money to go to graduate school?  Absolutely, yes.

Could I have gone to graduate school without borrowing money?  I would have been too old to teach, if I waited and saved enough to “pay cash.”

Would I live my life differently, if I had it to do over again?  I would not change some things:

I’m far from perfect, and I’ve certainly made mistakes, but I’ve always done the best I could;

I pay my bills on time and meet my obligations;

I’m a good citizen: I pay my taxes, although I’m very concerned that government is spending “our money” on the wrong things at the wrong time, and at levels that are beyond all of our means (for example, see my previous article, “A low cost ‘2-3-4′ assumable step-loan program would have prevented much of what has ailed us and what will be ailing us for decades“);

I earn an honest living: I don’t wake up each morning trying to think of ways to screw people over (like many credit card companies do); instead, I try to help them;

I am a hard worker;

I take pride in maintaining my home and I take care of what I do have;

I was a very good student, in graduate school;

I have been completely faithful to my wife (I do tell “wife jokes” on occasion…but wives, including mine, tell “husband jokes,” too); I love my wife and my children;

I am a person of faith (but I do not believe that is my right to judge others in their faith, or any lack thereof);

I accept other people (and their individual and cultural perspectives — indeed, I love learning about these);

When I am gone I will leave what I hope will be pleasant “memories” for some whose paths in life have crossed my own;

My writings, art, and photographs (as forms of expression) may be seen as a contribution, by somebody.

Meanwhile, the other thing that really hurts is the selfishness and ignorance suggested by some comments under the aforementioned video.  When I say “ignorance,” I mean the inability to think (apparently) about the interconnectedness of it all, beyond individuals, consumers and what they buy using credit cards.

This is not strictly a consumer or consumption issue.  It’s a lot of interrelated concerns that are at stake here: “fairness,” whatever that is ultimately defined to be (in consideration of usury), being the biggest one.   Political processes and corruption (credit card industry lobbyists having more influence that “we the people” — millions upon millions of credit card holders) is also a major issue.  This is especially exacerbated with the media too afraid to engage in real journalism because of the threat of lost ad revenues, so they make these things a “last page” mention (or ignore them).  (I have not seen one hard hard-hitting story about the Congressional testimony delivered by Chase executives who used opt outs to describe the means by which customers were treated fairly, yet Chase turned right around and refused to provide an opt out with its infamous 5% — payment-jacking — change in terms.)

I am also referring to issues related to the economy, which is especially in need of nurturing small businesses (the vast majority of which are started by entrepreneurial “bootstrapping,” and may very likely entail using HELOCs, credit cards, and/or other non-traditional sources of capital).

Importantly, bootstrapping, including using credit cards to start businesses has been done successfully.  I would offer Google as a bootstrapping start-up example, a company that has gone on to generate wealth and employment for thousands.

Now, I am not saying that start-ups should use credit cards; rather, I am merely pointing out that they do use credit cards.  And they do so in very large numbers.  Sometimes it works, and sometimes it doesn’t, but entrepreneurs are typically passionate people who are driven to try (there are so many obstacles, they need to be).  Furthermore, without the successful efforts of some who do make it, civilization as we know it would not exist (if you’re reading this on a computer, thank many entrepreneurs who each played a part in bringing that computer to market).

And yes, I acknowledge that it would be nice to “save up” and “pay cash” to start a business (buy a house or a car, or go to graduate school).  Unfortunately, in many instances, it would be too late; i.e., with entrepreneurship, it can be the case that an opportunity or market that isn’t seized promptly, is lost permanently.

Despite this present post, or all of the ChangeInTerms.com site’s content, there apparently will always be comments by dismissive, naive, selfish individuals who either cannot or will not grasp the issues.  Have I make a mistake, fighting the abusive treatment of customers by credit card companies (again, I have asked myself)?  I’ve outlined who I am and what I believe in, and I don’t think so.

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 13 comments | Add to del.icio.us
Post tags: "Bail Out", consumers, credit, credit cards, debt, interest, interest rate, small business, Testimony

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Osama bin Laden: May you be a Chase account holder, at the mercy of its customer service representatives, forever. 

I thank “M” for a comment which included a link to a September 9, 2009 press release entitled, “Consumer Groups Call on Chase Bank to End Minimum Payment Hikes on Fixed Rate Credit Cards.”  Along with additional observations, the release included a copy of a letter that was sent to Chase Card Services CEO Gordon Smith, from the consumer groups (Consumers Union, National Consumer Law Center, USPIRG). 

For those of you who do not know, Consumers Union is the nonprofit publisher of Consumer Reports; the National Consumer Law Center is a leading advocacy organization “protecting vulnerable consumers and promoting marketplace justice”; and  USPIRG is a “federation of state Public Interest Research Groups (PIRGs).” 

Rather than quoting the aforementioned letter in its entirety, I’d like to use this present post to make some observations related to selected passages.  First, considering the source (all of these are premier consumer advocacy organizations), I would submit that the conclusion was certainly a rebuke to Mr. Smith’s leadership decisions while at the helm of Chase Card Services:

“By changing the terms of these promotional financial products Chase is significantly harming the economic stability of the families who make up its consumer base. We ask that Chase reconsider this devastating change in terms.”

The letter included two examples.  One was about a customer who used a promotional balance transfer to pay for his daughter’s college tuition.  And the other example was in connection with a small business owner, who “is having a hard time thinking about how he will pay more than twice as much to Chase each month and still turn over a profit to keep his business going” in light of a new monthly payment of $1200, which had previously been $475 per month.

In case it is not obvious, I have long been aggravated about Chase’s willingness to harm families, students, and small businesses with no apparent sense of restraint or remorse: no “opt out” (despite Chase’s portrayals before Congress in testimony that used opt outs to describe the means by which Chase treated customers fairly*).  The fact that it has pursued this course of action while at the same time defaming responsible account holders in the media is really sick and loathsome as well. 

Since most of my personal indebtedness is associated with my decision to return to graduate school at a significant cost, with what I thought was a worthy motive of becoming academically qualified to teach, trying to help people, I am able to easily empathize with students. 

Now, in my present role as an entrepreneurship professor, I feel duty-bound to speak out regarding the “devastating” consequences that have been imposed on Chase customers who used what was promised to be “fixed APR for the life of the balance” loans in connection with small businesses (many of whom are bootstrapping – sorry they’re not glamorous enough for the Chase corporate culture to appreciate, but these entrepreneurs are the lifeblood of our economy and must be nurtured).  (Do not even get me started, Chase, arguing that customers are voluntarily giving up those fixed rates — the choice is nothing more than another underhanded scheme devised to further enrich Chase executives: Door Number 1, 2, or 3.)

Meanwhile, in light of the above (what Chase has done under the authority of Mr. Smith and his executive team) I’d have to point out (again) that this is not an example of leadership.  The reason for my repetition is that this is a brand new semester, with a brand new Master of Entrepreneurship Degree Program cohort, and a course in New Venture Leadership at the undergraduate level to be taught.  (Thus, I have been thinking about the most important objectives that I have in delivering these courses, in keeping with the notion that I want to contribute to the development of individual students, but also to the cause at large of fostering and enabling entrepreneurship.) 

It’s interesting, first impressions are being formed with these students, and in an opening class session I asked them what leadership “is” (broadly, but also in the context of entrepreneurship).  Obviously, whatever leadership is defined to be in the latest bestselling book — usually a rehash of old concepts using new buzzwords — has long been used as a source from which many would derive their answers.  If you are reading this and waiting for a sound bite or my definition, sorry to disappoint, but I think we’re into a very broad subject (which some have studied their entire lives — and I ask my students to do this). 

I don’t mind framing the subject, however, so let’s start by establishing some dimensionality.  Whatever “floats your boat” with respect to terms that may be used, but I believe that there is “good” leadership as well as “bad” leadership.  To some extent, leaders are associated with their ability to amass followers.  With his charismatic public persona and brilliant use of oratory, Adolf Hitler amassed and subsequently perverted a substantial group of followers who committed unspeakable atrocities and acts of evil.  He almost led the entire world down a path to “unity,” by destroying anyone he did not deem fit to exist such that those who remained would be unified.  Hitler was a “bad” leader.  

(I insert today: Osama bin Laden was/is a “bad” leader.)  I think that the leadership at Chase, is “bad,” too; even if the methods of “bad” leaders differ, the lust for domination and callousness in wreaking “devastation” upon others is apparently the same. 

I think “good” leadership requires individuals who hold high ethical standards.  Frankly, there is a whole scholarly area interested in ethics, but I’d like to keep it simple and give some examples demonstrating ethical breeches on the part of Chase.  For one, back when Chase issued its first infamous change in terms notice, that notice stated: “Important: Your APRs will not be impacted by these changes.” 

I’m sorry, Chase, but adding a so-called service charge that “is a finance charge” (ibid, panel 2) does indeed impact APRs, and stating that it doesn’t is not ethical; frankly, since you are in the banking business and know full-well that such actions raise the APR, I am amazed that Chase would expose itself as being so plainly deceptive in its business practices.  I am even more amazed that Chase correspondence, sent to me from its own Executive Offices would be so absurdly and disingenuously written, in light of basic “financial facts of life” regarding the mathmatical result of adding finance charges on top of finance charges, acting as though this had no impact!

Bullying and coercion are not ethical (it is coercive to raise a payment so radically, “devastating” the household budgets of individuals — including students — and families as well as the operating budgets of small business owners).  Portraying one scenario before Congress (referring to opt outs) only to deny customers an opt out is not ethical (and other than the fact that Chase and the banking industry virtually “owns” Congress and the OCC, I think it’s tantamount to perjury).  Portraying responsible account holders who have met all of their obligations as laggards who were not paying enough, soon enough, before the media is not ethical either. 

Leadership also requires the ability to anticipate the long-term implications of actions that may be taken.  Clearly, attacking a group of “good” customers, alienating them forever, is short-sighted.  With an inkling of positive news in the economy lately, I have recently seen new American Express advertising geared to a small business audience; yet, the imagery of Kevin Johnson and the followers he has on his site, NewCreditRules.com, is what comes to mind first in connection with the AmEx brand.  (Now Kevin is running for office: GO KEVIN!) 

My kid brother contacted me the other day and informed me that Bank of America radically raised his rate to 27% (Bank of America has now taken over my prior mortgage company, and every time I talk with them they want me to speak with a loan officer about originating a new home loan, once I finally sell my present home).  How many times do I have to say it, incompetent bankers?  You’ve messed around with me, my wife (hence, my immediate family), my brother, friends, neighbors, and my colleagues, students, small business owners (therefore the economic well being of all of us), and the result is that

NOW I’M COMING AFTER YOU!  

In short, I think “good” and effective leadership requires at a minimum, an ability to refrain from “harming the economic stability” of not just customers, but of people in general.  Every soul is important.  Harming any person — especially in these difficult times — simply exacerbates an already troubled situation, and that’s what Chase has managed to do (I’ve lost count of the number of people impacted after another wave of change in terms notices — millions) with Gordon Smith at the helm of its Card Services Division.  

I have previously written about the irony of Gordon Smith lecturing at the Thunderbird School of Global Management.  While as he was speaking, minions back at Chase must have been very busy conjuring up and then distributing the first wave of change in terms notices.  The irony was associated with his topic: leadership. 

I certainly hope that in the future, the administration and faculty at Thunderbird would “consider the source” and recognize that their former guest speaker has overseen “devastating” attacks against consumers on the part of Chase Cards Services while he has served as its CEO (duly noted by some premier consumer advocacy organizations), and therefore he does not seem to be an appropriate choice for delivering a lecture on leadership (or marketing, or anything else that I can think of). 

I’m teaching an MBA class in strategy and marketing this semester as well.  I would not be rude to a guest speaker under any circumstances, but then again, I would not invite Mr. Smith to speak in my class (unless he wanted to apologize on behalf of Chase for “harming the economic stability” of every one of us — not just account holders).

The ultimate irony is that causing such harm to others, also harms Chase.  I’m afraid that’s not leadership either, Mr. Smith.  And, I don’t think I’m going to close this post by asking you to “reconsider” (using such a gentle approach, as did the authors of the letter written by consumer groups).  Rather, Chase’s “leadership” can either retract (further details of this demand can be found here – don’t you just love fine print!) its actions, or suffer all of the consequences that will come as a result of destroying its own brand by cultivating an outright rebellion.  Since what I just said is apparently beyond the intellectual or moral capacity of Chase to grasp, I’ll put it in terms that its executive team should be able to understand (as the tyrant and bully that it has been):

If Chase wants peace, it can issue a press release.

I’ll conclude with what I hope is perceived as a respectful remark in connection with the authors of the press release and letter that has been the subject of my discussion here: Chase is not just harming customers ”who make up its consumer base.”  As I have said many times before, when small businesses are harmed, when students are harmed, when individuals and families are harmed, when neighbors, co-workers, brothers and sisters are harmed, then we’re all harmed. 

It does really make me wonder, in light of such a damning letter from these advocacy organizations, would Thunderbird School of Global Management’s faculty sensibilities really support the actions of Chase Card Services? 

* I have previously acknowledged that “fairness” is evidently an outdated concept at Chase, concluding based on its actions that: “Everyone knows the life of our [Chase's] testimony is about the same as our ‘life of the balance loans’ — until we change our minds and change the terms.”

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | No comment | Add to del.icio.us
Post tags: advocacy, change in terms, consumers, credit, credit cards, customer service, debt, economy, interest, notices, small business, Testimony

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At the time, my wife and I thought that since everything was packed, and our ultimate destination was North Carolina, anyway, then we should go ahead and move it.  (Usually there is little or no moving allowance by the way; it’s Penske trucks — and a massive DIY packing project when we have moved — ever since I began my second career in academia.)

Over the phone (although we had seen the property on a house-hunting trip when we were under the impression that our home sale would close), we leased a 3-bedroom, 2-bath condo.  Our thinking was that we would live there (in the condo), and visit the house in Tennessee until it sold.

We keep an extremely clean and well maintained home (I was without a home, i.e., homeless, at one point in my adult life, so I am very obsessive-compulsive about taking care of what we do have), and our real estate agent expressed confidence in the property’s prospects for selling again soon (during the fall 2008).  The condo manager was kind, and even negotiated an “out” clause in our agreement, in the event that we did sell.

We left just enough things in the Tennessee home to get by: the guest bedroom bed, a scaled down but working kitchen, a few chairs, a small (old-style) TV (we don’t own one of those fancy, newfangled flat-screen TVs), some folding chairs and folding tables, and just a few pieces of furniture in the great room.  The kids’ rooms were emptied completely.  The washer and dryer were moved.  Most clothes, linens, and anything such as personal effects, photographs and memorabilia: they were packed and moved.

After my first week of new employee orientation, we all got in the car and headed back to Tennessee, from the condo in North Carolina.  When we arrived in the early hours of the morning (about 1:00 a.m. on a Saturday, having left on a Friday night), we found our door unlocked.  Yep, a real estate agent had shown the home and failed to lock the door properly.

I could fill up a whole new blog expressing my sentiments and experiences with real estate agents, if I only had the time (noting that blog is short for web log, which originally suggested an online diary).  I’ll skip that for now, because I want to simply point out why we came to the immediate conclusion that someone had to stay in Tennessee, to baby-sit the house.

This was because irresponsible, unprofessional, incompetent realtors (spell-check wants me to capitalize here, but I refuse to do so), don’t give a second thought about sellers’ properties (all they work for is commissions, those so-called buyer’s agents are not in a position to be either “free” or objective when they earn their living by taking their “cut” off the top of every transaction).  They act like your property is their property, to show (calling from a cell phone in your driveway), but they sure as heck don’t bother to extend any respect otherwise.

Since my job was in North Carolina, my wife and kids were the ones to stay with the house for sale.

“Should we bring stuff back?,” we wondered to ourselves.

“No, we’ll wait it out — the house will sell again, soon,” we said; our agent said.

In the meantime, my wife and kids lived as though they were “camping out,” inside of a suburban home.  People have suffered worse; I have suffered worse (as I said, I was once without a home for a period of time).  But, things were not working out as we expected.  I commuted.

My university office was in transition, because the College of Business building was being renovated.  I was advised not to unpack, there.  I had no intention of unpacking most of what had been moved to the condo, either.  Everywhere, most of what we had was either “nothingness” (in Tennessee) or packed and stacked.

As a teacher, I have always enjoyed bringing in exhibits to support what I may have to discuss on any given topic; these resources were packed.  As a researcher, my books and files: packed.  I was not getting “settled in” at work.

As the fall semester was winding up, we were debating where to spend Christmas.  We had signed with a new real estate listing agent (our third), and among the assurances given in the agreement was one that stated that the home would be secured after any showing.  We ended up spending Christmas day in North Carolina, but as can be learned from reading my How Chase Card Service Stole Christmas eBook, that day was destroyed.

The new spring 2009 semester soon began.  My dear cousin was diagnosed with pancreatic cancer; my wife was scheduled for major surgery in February.  Chase had threatened everything I had worked for, for years.  Chase jeopardized my family.  Chase cornered me, although I had done nothing wrong, and evidently, hundreds of thousands of other families and small businesses.

I have been fighting my own personal battles for a long time: to acquire a formal education as an adult learner at the undergraduate level (finally, at the age of 28, I earned that first degree); as an employee in various industries; as an entrepreneur (who has both failed and succeeded); as a husband and father; and in recent years as an academically employed individual.

It’s true.  I have incurred and carried a significant debt load.  However, my debts are primarily associated with my decision to return to graduate school, with the aspiration of becoming qualified to teach; my desire was and is to try to help and serve others.  I had been paying down my debts.  I had been meeting my obligations (I am still doing both, but I am referring to where I stood as I began the spring 2008 semester), and Chase, had decided to attack its most loyal customers.

The spring semester marched on:

My wife had surgery, and recovered (stranded for six weeks with food at arm’s reach on a folding table) in a near-empty house, primarily under the care of children;

Our third real estate agent resigned earlier than the contract specified (she did not have the professionalism to do so in person; she sent emails and subsequently an administrative assistant to have us sign off on the termination — good riddance!);

My dear cousin died;

Chase sent its letter stating that it had “incorrectly” included my account in its infamous “5% minimum payment; ’service charge’ that ‘is a finance charge’,” change in terms;

(But) by then, my personal financial matters became public information, as I felt the only way to fight was to be willing to talk to the media, and use this blog to communicate my disdain for the abusive practices of credit card companies at large against consumers and small businesses;

By May, our house was on the market without a real estate agent (during this period, we observed some of the most unethical treatment of all);

By June, I gave notice at the North Carolina condo — I was moving (almost) everything back to Tennessee.  If we had to look forward to an indefinite period, during which we were still trying to sell, at least my wife and kids could live like normal people in our home;

During the month of June and July, I moved.  A lot of hard physical labor has been involved (my wife has recovered but she is in no condition to be doing “heavy lifting”);

A few weeks ago, in mid-July, the ChangeInTerms.com site went down.  The host suggested that it may have been attacked because a “malicious” hacker file was found in one of the folders;

Concurrently, Chase has mercilessly attacked hundreds of thousands more account holders, hurting consumers, small businesses, and all those who might be considered collateral damage – employees, families;

My emails have piled up;

One of my emails, from someone who knows me and about my advocacy and concern for entrepreneurs, states: “Just as you feared…..Here’s a small, growing business about to be put out of business by Chase’s change in terms.  These folks did what a lot of us did – used Chase credit cards to finance their business”;

My home is now put back together, and habitable (as of several days ago);

Long overdue personal matters have been serviced (tires, dental exams, and the like);

I don’t know where I will be living this coming semester, but I think it will be in hotels (at least I can come home more often, not worrying about our personal things being left in North Carolina);

Here is where I stand, now:

I think I have managed to restore the site, with the exception of the missing posts and comments since June 22, 2009.  I am very disappointed with the hosting situation — that’s a long story.  To make it short, data centers are often attacked, or there can be other naturally occurring issues that arise.  That’s what backups are for, and the reason the site is up again at all is because it was restored from a backup, except for the missing data which for some mysterious reason simply is not in that database – I have looked (at the actual database).

Meanwhile, the company that does the hosting is engaged in a transition, and is moving its customer base to new servers held under a different company name.  I can’t predict the future relative to that transition and the consequences that may arise.

I do not want to complain.  However, it seems that I have no choice but to state a lament: I have said I do not want donations because it sends the wrong message (the long version is elsewhere on the site).  Yet, it remains the case that help is needed in support of this cause in other ways.

I am not a programmer.  I have a career and a lot of responsibilities (and also a very challenging personal situation with a home that has not sold in Tennessee, while at the same time my job is in North Carolina, as detailed above, perhaps ad nauseam).

I have received a number of emails expressing concern that the site was down altogether or not functioning properly.  These tell me that I am not alone in my concern over the issues between credit card companies and their abusive treatment of consumers and small businesses.

That being said, I have felt very much alone in the technology support arena, and it has been up to me to “fix” these problems.

I’ll do the best I can.

No reader should interpret the above to suggest that at some point, frustrated with technology, I would throw in the towel relative to the larger cause.  The site is a tool in the fight, but not the only one.  When you are on a journey and the vehicle breaks down, then you get out and continue on by other means.

You push.  You pull.  You walk.  Or you crawl.

I am on a journey, and I sometimes get to travel fast, and at other times progress is slow.  It can be the case that everything comes to a standstill, or we lose ground and go backwards.  If you are with me, against the abusive treatment of consumers and small businesses by credit card companies, then rest assured that I will continue fighting.

As long as we are right and the leaders of credit card companies are wrong, they will never win the race.  Faith is mightier than fear, and with the former you shall prevail over all obstacles.

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 6 comments | Add to del.icio.us
Post tags: advocacy, change in terms, consumers, credit, credit cards, debt, small business

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A representative from Chase Executive offices just called me about my email to Gordon Smith. Their position is that the statements made to Congress about Chase having an opt out program for those who do not agree with changes to their terms is outdated. They state that 2 changes have occurred since that testimony and therefore Carter Franke’s assurances do not carry forward to our claims as they were promised on a different type of account and different circumstances.

Of course, I find this twisted logic by Chase very interesting.  It does elicit a number of points that merit cross-examination.  Let’s start with a review of the testimony, the dates, the time-line, and the context.

In his capacity as Chase’s Chief Marketing Officer, Carter Franke provided testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs on January 25, 2007.  In that testimony, a discussion about “opt outs” was used to illustrate the means by which Chase worked with account holders and treated customers fairly.  With respect to context, preceding the remarks about opt outs, Franke stated:

“We appreciate our customers, and we believe our success is based on maintaining a good relationship with every one of them.”

I note that the word-choice “every” does not distinguish differences in account types.  Obviously, one of the aforementioned “2 changes” is that Chase has determined that it is not interested in maintaining a “good relationship” with 400,000 account holders who were meeting their obligations.  Rather, it has chosen to alienate those customers not only by virtue of changing “fixed APR Until the balance is paid in full” loan terms, it also decided to defame those customers through disseminating a negative portrayal of affected account holders in the media.

Franke also stated:

“Our objective is to establish long-term relationships with students so they will continue to do business with us all their lives.”

I mention this because as I have explained elsewhere, with some obvious exceptions such as my mortgage and a vehicle loan, my personal credit obligations are primarily associated with my decision to go to graduate school, so as to become academically qualified to teach.  I wanted to serve and help others.

As I gradually claw my way out of debt as a result of pursuing what I considered to be a long-term and worthy objective (as compared to “shopping” or some other frivolous behavior), I would observe that Chase has failed miserably in meeting its stated objective relative to maintaining a life-long relationship with me, speaking as a former student.  As an entrepreneurship professor, now, I am responsible for interweaving a message of ethical behavior in all of my courses (the Chase behavior certainly makes for a great “textbook case study“).  Further, you can “bet your sweet bippy!” that I also warn students about the dangers of using credit cards both as consumers, and as a source of capital for small businesses.

Franke also stated:

The importance of customer relationships is a key driver of many of our business decisions. For example, a missed payment on a non-Chase card does not result in an automatic re-pricing of any Chase account.

Obviously, this is another one of the “2 changes” mentioned in Cathy’s comment, above.  Clearly, customer relationships are no longer a “key driver” in Chase’s business decisions (if it ever was in the first place, recalling that well before the date of the testimony, a Chase supervisor expressed no interest whatsoever in maintaining a relationship with my wife, after Chase took an adverse action against her “for no reason”).  I also have not seen any evidence that Chase isn’t re-pricing cards based on any excuse it can conjure up (and further, according to some posts I have seen on the Internet, it is apparently pulling other “stunts” such as manipulating billing statement due dates so as to “help” people miss a payment).

Now, as for the “opt out” passage, Franke stated:

“We deal with them [customers] fairly and responsibly….we provide that customer with an “opt out” option.  This means that the customer may reject any change in terms, close their account, and pay off the balance under their existing terms.  We believe the vast majority of our customers feel they are being treated fairly.”

On March 7, 2007, Richard Srednicki (the former CEO of Chase Card Services until he was replaced by Gordon Smith), delivered very similar testimony before the U.S. Senate Permanent Subcommittee on Investigations.  About 10 months passed in 2007, and 11 months passed in 2008 before Chase imposed its change in terms to the contrary.

Hence, the life expectancy of Chase executives’ assurances appears to be under two years.  Regular readers of the ChangeInTerms.com site will also recall that coincidentally, Chase “desired” to be paid back in about two years (something it never bothered to tell customers when it was promoting its “life of the balance” loans).

In light of the new ”spin” in the Chase Executive Office’s position as noted in Cathy’s comment (also demonstrating that Chase has no moral compass), the statement that “We deal with them fairly and responsibly” reflects yet another change.  Accordingly, new testimony, if it was delivered honestly (apparently not among the list of needed leadership competencies to be a Chase executive), would state:

We previously claimed to deal with customers (but we meant only some account types) fairly and responsibly when we sat with a straight-faced and lied before Congress, but a key driver in our business decisions is now short-term profits for our executive perks and bonuses.  We also want to raise capital for buying the distressed assets of other banks (like Wa Mu) by accepting bail out money and squeezing customers.

That old “fairness” thing?  It’s really been discarded as a useless anchor holding us back at Chase — totally outdated.  No more opt outs.  We bully the customers and give them no choice in the matter whatsoever.  Everyone knows the life of our testimony is about the same as our “life of the balance loans” — until we change our minds and change the terms.

Would you like to know what else has also changed?  Carter Franke’s testimony also stated:

This is an extremely competitive industry, and customers have many attractive credit card offers to choose from.

Have you noticed that the industry is for all intents and purposes no longer competitive?  Rather, it is run more like a cartel (humm, gas prices in my area: $1.99, $1.99, $1.98; balance transfer fee: 3% no maximum, 3% no maximum, 4% no maximum — new for B of A)?

No, you really don’t have an “opt out” choice with Chase — “fairness” is dead.  And, you are really going to be pushed around, trapped like a surrounded victim in a circle of muggers.  Lacking any other “attractive credit card offers to choose from,” recently, you can now count on being assaulted by group of lying executives and their lobbyists who control an unfettered credit card industry where the “largest 12 issuers…control more than 88 percent of all outstanding credit card debt in America.”

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 15 comments | Add to del.icio.us
Post tags: "Bail Out", banks, change in terms, consumers, credit, credit cards, debt, economy, interest, small business, Testimony

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As we know, credit card companies are supposedly overseen by the OCC.  However, when complaining to the card issuer directly, the response that customers often receive is either condescension, laughter, or an answer that is strikingly similar to our current President’s campaign slogan, “YES WE CAN.”  This means that for all intents and purposes, credit card companies are not regulated by anyone. 

Thus, cardholders are regularly sent notices about changes that are too astounding to “believe in,” and find that they have no real recourse through any regulatory agency.  (I note that according to some stories I have observed, card company representatives seem to have no sense of fear whatsoever when a customer threatens to go to the OCC, and this threat may even invoke laughter — so much for the myth of oversight.)

This does not mean that no recourse whatsoever exists.  De-marketing is a very effective tool, even though it may take time.  And having no other choice, this has been my strategy in mounting a resistance to a Goliath such as Chase.  I would remind any reader that Chase “drew first blood.”  Chase finally pushed me way too hard, and crossed a line with its bullying of account holders that I simply refused to accept. I am now fighting for all account holders: 

If Chase wants peace, it can issue a press release.

Surrender terms include the demand that Chase must take back its egregious change in terms in its entirety, restoring every account holder to his or her previous condition – even the ones who “agreed at gunpoint” to give up their previously promised promotional rates; I also want an apology for defaming us (this isn’t all; read the linked post for more discussion).

With the above in mind, I find it interesting that according to a recently released report from a PEW Charitable Trust study entitled, “SAFE CREDIT CARD STANDARDS: Policy Recommendations for Protecting Credit Cardholders and Promoting a Functional Marketplace,” 100 percent of the credit cards it reviewed “allowed the issuer to apply payments in a manner which, according to the Federal Reserve, is likely to cause substantial monetary injury to consumers.”  The study’s assessment covered general purpose consumer credit cards from the largest 12 issuers (which control more than 88 percent of outstanding credit card debt in America), as of December, 2008. 

The purpose of the study (undertaken in partnership with the Sandler Foundation) was to “address growing concerns about abuses in the credit card industry.”  Accordingly, since the purpose of the ChangeInTerms.com site is to end the abusive treatment of account holders by credit card companies, I’m glad to see such a noteworthy organization take an interest in these abuses. 

Not that the PEW researchers contacted me, but I also feel vindicated in knowing that it too found “the overwhelming majority of credit cardholders are vulnerable to unfair and deceptive practices.”  For instance, “in a one-year period between 2007 and 2008, issuers used these powers to raise interest rates on nearly one quarter of cardholder accounts.”  These interest rate increases affected “approximately 70 million accounts” and generated “at least $10 billion in additional interest charges” for the banks from customers who were expecting to receive the deal the credit card companies promoted, which was altogether different.

The OCC appears to be impotent, and I expect this may be mostly because of what appears to be a very bank-friendly disposition on the part of Comptroller of the Currency Dugan.  He has stated that ”defining, prohibiting, or restricting particular product terms” is a “slippery slope” (see page 8 of the linked statement) that should be avoided.  He did go on to recommend opt outs, but “oops,” Chase did not provide one relative to its outrageously abusive change in terms issued in November, 2008 (which has been the subject of much discussion here).

In other words, regardless of an extraordinary range of ever-more egregious acts of abusiveness, let’s allow the banks to continue imposing “we can do as we damn well please terms” on account holders (and be smug about it — operating with impunity as they have been doing).   

The new FED rules against “unfair and deceptive” practices do not take affect soon enough (Chase wanted 18 months to comply with the new Regulation Z rules, but it thought its customers should only need 15 days to comply with its new rules).  Until then, banks like Chase seem intent on stepping-up the pace of these practices, effectively engaging in legalized loan-sharking, completely unfettered by any meaningful regulation. 

Banks’ recent behavior could be likened to a boxing match, when after the bell is rung they’re getting in a few more below-the-belt punches, mercilessly beating consumers (and small business owners).  No one seems to be talking about this, but even after the new rules kick in, enforcement will be necessary – it takes both laws and the enforcement of those laws for the rule of law to have any meaning.

In case you are wondering why I started this post with a discussion of the Consumer Product Safety Commission, it is because I have been intrigued with the notion of “product safety” relative to intangible products, like banking services and in particular, credit cards.  According to PEW, which made recommendations for a “safe credit card,” one key component is ”an opportunity to opt-out of any proposed change by closing the account and repaying it under the unaltered terms.” 

Since Chase’s change in terms does not include an opt out (despite testimony from its executives before Congress, which highlighted opt outs to illustrate the means by which Chase treated customers “fairly”), then we might also conclude that under PEW’s recommended product safety standards, Chase cards would obviously be deemed “unsafe.” 

As cardholders who have been defamed, injured, and otherwise “burned” by the Chase-branded product, we already know that using Chase products proved to be dangerous.  Therefore, to prevent any further “substantial injury,” I think Chase cards should be subjected to an immediate PRODUCT SAFETY RECALL. 

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 12 comments | Add to del.icio.us
Post tags: banks, change in terms, consumer credit, consumers, credit, credit cards, debt, interest, interest rate, notices, regulation, small business, Testimony

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The aforementioned Reuters report indicated a list of credit card industry representatives that may be involved, which was as follows: Discover Financial Services, Visa, Mastercard Incorporated, JPMorgan Chase and Co, Wells Fargo and Co, Citigroup Inc, American Express Co, Bank of America Corp, Capital One Financial.  If the banks do face any changes, I expect that they’ll whine that they need plenty of time to comply.  (Remember, Chase argued customers should only need 15 days to comply with its new rules, but it wanted 18 months to comply with new FED Regulation Z rules.) 

I note that an unnamed official was quoted to say the meeting is “basically just a part of our normal outreach to different groups to hear some of their concerns.”   A Capital One spokesperson said that “We have been invited to the White House.”  I’m also willing to bet that at the meeting these supposedly competitive company representatives will all get along with one another famously — they operate like a drug cartel, so I’m sure it will be one big happy family gathering.  Perhaps the White House chef will have some wine ordered in from the “old country” to serve with lunch (no fryer leg quarters with cream of mushroom soup for these invited guests).     

We already know that the theme on the part of the bankers will be the one we always hear: we have to manage risk.  But the reality is that what banks really mean (as evidenced by their actions) is that “if we can’t rate-jack and payment-jack account holders, and design card products with built in traps such that we can ‘have our way’ with customers [victims] any time we want,” we’re going to threaten that credit availability will suffer and costs will be higher.  And you know what?  I hope that when these banks later try to prove their point, it backfires on them and leads to a resurgence of community banks and credit unions.  Once gasoline prices double again (they will), we’ll all need to stay closer to home, anyway.

Somehow, in the minds of these bankers, they have grown accustomed to thinking that it’s “normal” and a valid “business model” to offer customers one set of terms, with the premeditated intent to change those terms into an altogether different proposition as soon as the account holder is “hooked.” 

In any other industry, this is called bait and switch, but with banks, they call it “managing risk.”  I do wonder how much risk all of those “clever MBAs and lawyers” working for these banks think is entailed in alienating a group of good-paying customers who have done nothing wrong? 

Of course, Chase has been the worst in recent times, using a blatantly coercive tactic to get customers to give up their previously promised promotional rates.  How does it help to manage risk, making payment terms so onerous (raising them to two-and-a-half times the previous rate) that customers can’t pay — literally pushing more and more American consumers into default?  These customers, already paid these banks once, by the way, with bail out money (so the banks want to double-dip). 

Well, I think it’s about time that our government did some “outreach” to “hear the concerns” that banks have created for consumers and small businesses, instead.   It’s ordinary working people, not banking executives, who are being massacred with an avalanche of change in terms notices by this group of thugs.  Hear some of mine (“Bob the Professor”):

1) Sooner or later, the bail out costs will come out of payroll deductions and increased fees and taxes on everything you buy: gasoline, cigarettes, car tags, property taxes, utilities, sales tax (have you noticed list of fees and taxes on your phone bill?). 

2) Your children and grandchildren are going to be footing the bill for this bail out debt, too. 

3) Talking about risk, I fear a new era of economic slavery (our ever-shrinking paychecks will be what’s left over after working for the government and the bankers most of the year). 

4) The problem that started this all in terms of consumer confidence and the tumble was the housing market (which has caused a year of separation/commuting in my family thus far); the bail out funds would have been less or perhaps not necessary at all if instead of bailing out banks, government had addressed the housing issue, first. 

5) Banks are knee-capping entrepreneurs – next to war or acts of terrorism, there is no greater risk to the possibility of an economic recovery, than that. 

Given that a significant portion of our so-called free press serves as nothing more than a mouth-piece for the financial services industry – as one of the most aggressive industries of all relative to advertising expenditures — I am also not surprised that reports about “invitations” to speak to Congress or the White House practically all include a “poor, poor, banks have to control risk” justification. 

Noting that Chase executives already lied about providing opt outs in testimony before Congress, I gather that there’s a good chance that they will not be held accountable by the media (or anyone else in our government) for whatever they say when they attend a meeting at the White House, either. 

Have you seen any significant coverage about these lies and misrepresentations with regard to the missing opt out despite the prior testimony in the major media?  Not me.  If I tune in to the national brand 24-hour news stations, it’s more likely that the story I’ll see 7 times in one hour is  ”a woman found an alligator in Florida.” 

Where’s the “Chase executives lied to Congress about opt outs” headline?

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 13 comments | Add to del.icio.us
Post tags: "Bail Out", banks, change in terms, consumers, credit, debt, fees, notices, regulation, small business, Testimony

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