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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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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Chase wants to give BIG rewards to holders of this card unlike their egregious loan-shark-like actions implemented against the peons who were upholding their side of the agreement by diligently paying off their credit cards. Playing reverse Robin Hood, no doubt….squeezing the the little guy to make credit card life better for the affluent.

Excerpt: Quote from Joan Bassett, marketing director for Chase Sapphire “We’re giving cardmembers more value and positioning Chase well for the long term,” said Ms. Bassett. “What we’re seeing in our data is consumers are looking to get more out of their reward programs, looking to redeem them and expected to be rewarded more for their loyalty.”

Change-in-terms for the Wealthy

Chase – Targets high-income consumers in multimedia effort

“NEW YORK JPMorgan Chase is kicking off a national ad campaign in support of its new credit card, Chase Sapphire, a service for upscale consumers that rewards users for spending.

In a bid to reach shoppers with deep pockets, Chase Card Services is investing an estimated $30 million in measured media to introduce Chase Sapphire, ….. Sapphire is being marketed to consumers in the upper 15 percent of all U.S. households, with incomes of $120,000 or more.”

This effort is a little different than the change in terms we all experienced with Chase. Since Chase continues to empty our pockets, it stands to reason as our pockets get emptier, Chase would go hunting for deeper pockets. Recently I’ve been reading complaints posted by people whose Chase Reward cards have also had a sudden change in terms – regular folks who will no longer receive the rewards they signed up for and have been enjoying for years. When asked for an explanation, Chase continues to recite the “it’s the economy, it’s market forces, it’s because we can” mantra they used with us…ad infinitum, ad nauseum…

Apparently the “economy, market, and because we can” are motivation for this new breathtakingly expensive marketing gambit. Amazing, isn’t it? The exact same market conditions which cause one group of long-term, reliable customers to be cruelly punished is the reason a huge carrot is to be offered to another group of customers that does not yet exist.

Chase Long Term Positioning Plan : A bird in the hand is worth nothing, while hypothetical birds in the bush are worth, well….a speculativeTHIRTY MILLION DOLLAR AD CAMPAIGN!!!

Watch for the $30,000,000 Sapphire ad campaign – coming to a television channel near you! There must be a untold thousands of affluent customers who have had their heads buried in the sand this past year and either don’t know and/or don’t care that Chase has been treating millions of their customers like dirt. Rich, deep pocketed consumers, who are just dying to hop on Chase’s Sapphire Band Wagon.

Chase will treat wealthy Sapphire card holders right and will never change the terms on them, right?

If you believe that, I have a bridge I want to sell you…..

A Chase Promise made is a Promise you can count on (Chase breaking).

© pdurant for ChangeinTerms.com, 2009. | Permalink | 18 comments | Add to del.icio.us
Post tags: change in terms, complaints, consumers, credit, credit cards, economy, interest, interest rate

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“The changes will require card issuers to reprogram computers, retrain call-center employees, verify the legality of the new policies and rework marketing strategies.”

Now, as for the difficulty in gearing up to abide by the new FED rules, I thought I might take a few moments to compose an analysis of the “not going to be easy” gripe (also from Garuccio of the ABA); I admit “just a touch” of sarcasm may follow.

Reprogramming computers: They probably have a lot to do.  After all, creating a system that: automatically generates a late fee with split-second precision (“Oops, it’s 5 o’clock p.m. plus 1/100th of a second: you’re LATE — gotcha!”); sends a letter informing the customer of a new usurious rate; reports a late payment notice to credit bureaus (triggering universal default and therefore notifying other members of the cartel — credit card industry — to also impose new sky-high rates); and, places a flag on the call-center operator’s computer screen (“we got ‘em, whack ‘em, rub it in, gloat”), has taken a while for the credit card issuers to create.  We can’t expect to dismantle a system like this easily — so many interlocking pieces.

Retrain call-center employees: Well, since a piece of my doctoral program was devoted to training and development, I think I can handle this one.  First of all, even though my academic studies involved human adult learners and learning organizations, I would mention training dogs to get us off on the right foot, and keep it simple.  Commands such as “roll over, sit, speak” are usually followed with a reward.

With human beings, we generally recognize intrinsic rewards, and extrinsic rewards.  The former are often associated with a sense of personal satisfaction (internal to the person), while the latter are typically associated with some type of observable (external) reward, typically recognition, praise, or monetary compensation.  People tend to be motivated by a combination of both.

Quoting from a “Post From An Anonymous Chase Manhattan Bank Employee” (as seen on Chase-Sucks.com), here is what appears to be an explanation of the current reward system at Chase:

The reason the bankers at Chase are so pushy, and recommend specific things are because we make what are called “Personal Value Credits” or PVC’s. That is our commission.  We open a checking account: 5 PVCs, we sell a Debit Rewards card: 7 PVCs.  Credit cards: 17.5 PVCs.  Loans and investments pay the most.  Loans are 0.7 PVCs for every $1000, so a $100,000 loan = 70PVCs.   This is why customer service is horrible… there is a tremendous amount of pressure for each banker to make at least 1150 PVCs. That is 100% payout….Chase Bank will do anything, at any cost to acquire their business… Ethical or unethical.  It isn’t the banker’s fault.  We have our jobs threatened unless we push the products they say, when they say.  If we don’t food is taken off of our tables, and we can’t earn commission.

By the way, the opposite of a reward is punishment.  Obviously, if your whole culture is devoted to abusing customers and creating a system of servitude for account holders and employees alike, it will take some time to fix this.  I would suggest replacing the executives with people who have leadership competencies (which include ethics).

Verify the legality of the new policies: Yeah, it will be a real hardship, and time consuming, to implement policies once banks are no longer able to answer any and every customer complaint with a quip such as, “It’s all perfectly legal, and we can do anything we want to you, any time we want, any way we want [as long as we give you 45 days notice that you are going to be bludgeoned -- we used to be able to "have our way with you" with only 15 days notice...tears of sorrow].”  I would suggest replacing the executives with people who have leadership competencies (which include ethics).

Rework marketing strategies: Many people think of marketing as promotion, sales, or advertising.  However, marketing starts with the identification of basic needs and wants (desires) of customers.  Since prior to entering academia I spent much of my career in marketing and service oriented roles, let me shorten the new product development cycle for the banks, dramatically.  Here’s what we want:

• A price we can depend on;
• A product performance that lives up to the promises that are made;
• A customer service experience that is based on we (banks) “want ya!” and your business, as compared to we “gotcha!” and you can take it, and take it, and take it (abuses, that is, especially with no “opt out,” like the one Chase executives described in testimony before Congress, and then failed to provide);
• “Fixed APR Until the balance is paid in full” loans that we pay back without a surprise later on like the one Chase imposed (with no “opt out”) because it “desired” repayment in two years, or “on demand,” or at double the originally promoted interest rate;
• Fees based on whether we, as consumers, actually did something wrong (as compared to banks trying to “make us late” by changing due dates, shredding payments, delaying the posting of payments, or blaming us instead of the postal service when we tried in good faith to send a payment on time);
• Treatment that does not include defaming us in the media;
• A monthly payment amount that we can budget for, depend on, and live with (instead of being subjected to a coercive payment-jacking scheme such as raising the minimum payment by a factor of two-and-one-half times the previously imposed minimum payment, which is what Chase did when it changed the minimum from 2% of the balance to 5% of the balance);
• We want to be able to mutually agree to terms, and any subsequent changes in terms instead of banks being able to use “any time, any reason, or no reason” clauses as a catch-all phrase which serves as a license to engage in loan-sharking and extortion;
• We want to have the ability to settle disputes fairly, noting that a forced arbitration trap exists wherein cases are almost never decided in favor of consumers (you can sue us, and we should be able to do the same to you);
• No “over-the-limit” fees for transactions that you, credit card issuers, approve or deny in the first place;
• Credit lines that are dependable (no lowering of these credit lines with no notice, just to then turn around impose an over-the-limit fee);
• To be treated fairly and ethically;
• Credit card products that are safe to use;
• A reasonable penalty system.  For example, if someone has paid on time for several years, and then happens to be two or three days late (or an hour late), have a little respect and do not rate-jack that person;
• To not loathe you (as most of us presently who have been mistreated and abused do);

On second thought, relative to shortening the product development cycle, I guess the list of consumer “needs and wants” above may take some time to address, given that they are the antithesis of the credit card industry’s current business model.  Organizational cultures have arisen over a period of decades that will be extremely difficult to change.  But, I do have a solution to this apparent conundrum:

I would suggest replacing the executives with people who have leadership competencies (which include ethics).

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 14 comments | Add to del.icio.us
Post tags: banks, consumers, credit, credit cards, customer service, fees, interest, interest rate, Testimony

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NY Times:

President Obama threw his support on Thursday behind legislation that would keep banks from imposing higher fees and interest rates on credit card users, and said terms must be “written in plain language and be in plain sight.”

“The days of any-time, any-reason rate hikes and late-fee traps have to end,” the president said at the White House after meeting with top executives from the nation’s largest credit card companies, a session Mr. Obama called “constructive.”

“No more fine print, no more confusing terms and conditions,” the president said, following up on campaign pledges to try to curtail high fees and rates and chop away at the thickets of fine print in credit card statements.

Washington Post:

The message that bank executives are braced to receive from the president is that he believes the marketplace is unfairly stacked against the consumer, with credit card companies holding all the cards and able to change the terms of their customers’ agreements at any time without any penalty.

In the same article, our dear friend from Chase (who has been defaming those of us who were “aimed at” relative to Chase’s now infamous 5% minimum payment, new service fee “that is a finance charge” notice), Ms. Stephanie Jacobson, seems to have changed her tune:

As they prepared for today’s meeting, credit card executives and their representatives sounded conciliatory.

“We look forward to meeting with administration officials on Thursday and hope to have a constructive dialog on several key issues including consumer spending and credit demand as well as best practices in the credit card industry and progress on regulatory reform,” said Chase spokeswoman Stephanie Jacobson.

Reuters:

Senior White House aide Valerie Jarrett said Obama, who is trying to rescue the U.S. economy from recession and fight the financial crisis on a variety of fronts, hopes to see “new rules of the road” for the credit card industry.

Bloomberg:

Industry leaders sought the White House meeting as they confront an outpouring of anger from cardholders and Congress. The executives are likely to hear from Obama about “some of the deceptive practices that we’ve seen,” White House spokesman Robert Gibbs said.

The administration would require card companies to apply excess payments to balances with the highest interest rates, and to periodically tell customers how long it would take them to pay off their balances if they make minimum payments.

CBS News:

While President Obama met today with executives from the leading credit card companies, two senators called on the Federal Reserve to immediately implement an emergency freeze on interest rates tied to existing balances on credit cards.

Another CBS story:

“I trust that those in the industry who want to act responsibly will engage with us in a constructive fashion, and that we’re going to get this done in short order,” Mr. Obama said, delivering a pointed message to leading executives of credit-card issuing companies seated at his side.

A couple of months ago we were lucky if abusive and deceptive credit practices made the 13th page of a small local paper.  The times have changed.  A “change in terms” notice is now coming “right back at ya!” bankers (especially you, Chase).

On another note, e-mail the journalists in the above stories.  Let them know that this issue is important to you.  We must capitalize on the momentum of this issue.

© RegulateNow for ChangeinTerms.com, 2009. | Permalink | 5 comments | Add to del.icio.us
Post tags: banks, change in terms, credit, credit cards, economy, fees, interest, interest rate

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“Lawmakers say they’re under increasing pressure from constituents to respond to rising interest rates and abrupt changes to consumers’ accounts.  Senator Robert Menendez, a New Jersey Democrat, cited complaints to his office in an April 20 letter to the U.S. Treasury and urged the department to consider restrictions on any bank receiving government support under the Troubled Assets Relief Program.”

The credit card companies have had their way for too long.  Contact your Representative, or Senator.  Let them know that the Fed Rules that are going into effect next year are not enough.  Changes in terms for “any reason,” at the sole discretion of the credit card companies, leaves no choice for the consumer, and we must demand action.

The time to act is now.  Representative Steny Hoyer has stated that he believes a vote on the bill will come next week.  The Obama administration is set to meet with executives of the credit card industry tomorrow.  We can, and we must end these abusive practices.

© RegulateNow for ChangeinTerms.com, 2009. | Permalink | 5 comments | Add to del.icio.us
Post tags: complaints, consumers, credit, interest, interest rate

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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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Unfortunately, the form does not provide a means for linking, or text effects such as italics, but that’s a very minor point; passing these protections is vital, so please visit the site and submit your own comments, today.  The text below is what I submitted (feel free to copy and paste into the aforementioned form, if you wish):

In recent weeks, several of the major banks and credit card companies raised interest rates and fees yet again. The media reported Capital One hiked interest rates to 17.9 percent from 12.9 percent. Citibank raised their rates an average of 3 percent.

Over at Chase, customers had a “choice” of paying a $120-a-year fee (which was actually a “finance charge” that changed a previously promised promotional rate) and a coercive higher minimum payment (5% of the balance), or paying a higher interest rate.

Worse, given that Chase executives previously testified before Congress about playing “fairly” by providing “opt outs,” guess what was missing?  If you guessed that the “opt out” was no where to be found in Chase’s change in terms notice, then you are correct — there was no “opt out.”  Doesn’t Congress take testimony seriously enough to hold these executives accountable for misleading our elected representatives with what can only be taken as an outright lie by the 400,000 account holders who received Chase’s notice of such onerous new terms (obviously designed to force customers into other choices, such as doubling their interest rates)?

I don’t understand why interest rates for consumers are so high, when the interest rate banks charge each other for overnight loans is as low as 0 percent.

As a responsible credit card consumer, I shouldn’t be subjected to unexpected interest rate increases and fees, which only drive up my costs during these tough economic times. The Federal Reserve Board recently agreed to new credit card reforms which would curb many of these abuses, but those rules will not go into effect until July 2010.  Further, Chase wanted 18 months to comply with these new rules, yet it argued that customers should only need 15 days to comply with its new rules.  Why not protect consumers from these one-sided and completely unfair credit card issuers RIGHT NOW!

The bills being considered would go even further than the rules to help consumers, such as limiting the duration of penalty fees which can sap consumers’ wallets, and curbing aggressive credit card marketing to teenagers without an ability to pay. The bills would:

– Prevent my card company from changing the rules of the game midstream. Companies shouldn’t be allowed to arbitrarily hike the interest rate on my existing balance or new transactions if I make my payments on time just because of an “anytime/any reason” clause in the contract. The deal I signed up for should be the deal I get.

– Require card companies apply my payments fairly across my different balances, not just to the lowest-interest balance. That’s just common sense.

– Control the size and duration of penalty interest rates. Companies shouldn’t be able to keep me at usurious interest rates forever only for one late payment or another minor infraction.

– End abrupt reductions in my credit limit, which negatively affects my credit score through no fault of my own.

–  Provide an adequate amount of time to pay my bill on time by requiring my bill be sent out no later than 21 days from the due date.

– Prevent fees just to pay my bill online or on the phone.

– End aggressive marketing of credit cards to young people who need a chance to establish themselves without a heavy debt burden.

Let’s not forget that small businesses frequently use credit cards.  According to a Federal Reserve Report (2007, showing 2003 data), almost half (46.7%) of small firms used personal credit cards!

ChangeInTerms.com has published a “Credit Cards and Small Business Usage Report,” which provides additional information about the impact of credit card company abuses on entrepreneurs.  Given that an economic recovery will not be possible without a healthy entrepreneurial environment, it is extremely important that you support these needed reforms. 

Indeed, while they are generally long-overdue, under our present circumstances it is vital that you act to stop the next meltdown that the banking industry’s reckless “strong-arm” tactics with consumers and small business owners will actually create, this time over “plastic.”  Don’t let those who have exhibited a clear pattern of failed leadership relative to the banking industry’s numerous misjudgments, unethical behavior, and greed, lead us all down a path of financial destruction in yet another context. 

If these banking industry executives were honest and competent in the first place, we would not all be where we are today, in a crisis that spiraled out of control at a tremendous cost, which will be shouldered for generations.  Please stop listening to their spin, lies and rhetoric, and listen to US (ordinary consumers and entrepreneurs on “main street”) for a change.

© Dr Robert Lahm for ChangeinTerms.com, 2009. | Permalink | 5 comments | Add to del.icio.us
Post tags: advocacy, banks, change in terms, consumers, credit, credit cards, debt, fees, interest, interest rate, small business, Testimony

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Yesterday I received a letter from Chase announcing that they are rescinding the $10/month service fee/finance charge AND in a separate mailing, my new statement which showed a $30 credit for the monthly finance charges billed in January, February, and March. I thought it was interesting that the statement and “we’re guilty of dirty dealing, it’s affecting our reputation adversely (who knew??) and now we want to make it all better” letter arrived on the same day. Evidently Chase had to think about it a while before deciding I was one of the 184,000 customers to whom the finance charge would be refunded.

My payment remains at 5% of the outstanding balance OR (lucky me….) I still have the opportunity to agree to raise my interest rate to 7.99% until January, 2011 and revert to 2% of the outstanding balance payments. This is the fourth month of making payments at the 5% level and it is becoming more painful each month, even as the total payment goes down. By the 21st of this month, I will have paid Chase $3,835.00 for four monthly payments – instead of the approximately $1,588 my payments would have totaled in that same four months had Chase not unilaterally changed the deal we made over three years ago. That’s $2,247.00 in additional outgo carved out of the household and business budgets that was totally unanticipated.

We are determined not to give in to Chase’s manipulative, coercive actions but it is getting harder and harder to do so. I know the law moves slowly and will likely not provide any relief before our outstanding balance is paid in full, but hopefully the lawsuits will eventually prove effective. May the famous quote, “The wheels of justice grind slowly but exceedingly fine….” prove true and Chase gets it just “reward” for the undeserved punishment it has been unmercifully heaping upon its most reliable customers.

© pdurant for ChangeinTerms.com, 2009. | Permalink | 16 comments | Add to del.icio.us
Post tags: credit, interest, interest rate

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