Letters

Letters 10-27-2014

Paging Doctor Dan: The doctor’s promise to repeal Obamacare reminds me of the frantic restaurant owner hurrying to install an exhaust fan after the kitchen burns down. He voted 51 times to replace the ACA law; a colossal waste of money and time. It’s here to stay and he has nothing to replace it.

Evolution Is Real Science: Breathtaking inanity. That was the term used by Judge John Jones III in his elegant evisceration of creationist arguments attempting to equate it to evolutionary theory in his landmark Kitzmiller vs. Dover Board of Education decision in 2005.

U.S. No Global Police: Steven Tuttle in the October 13 issue is correct: our military, under the leadership of the President (not the Congress) is charged with protecting the country, its citizens, and its borders. It is not charged with  performing military missions in other places in the world just because they have something we want (oil), or we don’t like their form of government, or we want to force them to live by the UN or our rules.

Graffiti: Art Or Vandalism?: I walk the [Grand Traverse] Commons frequently and sometimes I include the loop up to the cistern just to go and see how the art on the cistern has evolved. Granted there is the occasional gross image or word but generally there is a flurry of color.

NMEAC Snubbed: Northern Michigan Environmental Action Council (NMEAC) is the Grand Traverse region’s oldest grassroots environmental advocacy organization. Preserving the environment through citizen action and education is our mission.

Vote, Everyone: Election Day on November 4 is fast approaching, and now is the time to make a commitment to vote. You may be getting sick of the political ads on TV, but instead, be grateful that you live in a free country with open elections. Take the time to learn about the candidates by contacting your county parties and doing research.

Do Fluoride Research: Hydrofluorosilicic acid, H2SiF6, is a byproduct from the production of fertilizer. This liquid, not environmentally safe, is scrubbed from the chimney of the fertilizer plant, put into containers, and shipped. Now it is a ‘product’ added to the public drinking water.

Meet The Homeless: As someone who volunteers for a Traverse City organization that works with homeless people, I am appalled at what is happening at the meetings regarding the homeless shelter. The people fighting this shelter need to get to know some homeless families. They have the wrong idea about who the homeless are.

Home · Articles · News · Features · Enough is enough/ credit card...
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Enough is enough/ credit card reform

Anne Stanton - May 18th, 2009
Enough is Enough
By Anne Stanton 5/18/09

Carrie Jones of Traverse City is the proud owner of a nearly perfect credit score, having never been late on a credit card payment and almost always paying off the balance each month.
Yet she received a notice a few months ago from CitiBank that the interest rate on her credit card would zoom from 9.9 percent to 16 percent. She was given the choice to close the account—one she’s had for 12 years—keeping the lower interest rate until the balance was paid off. Or she could do nothing and keep the card at nearly double the interest. At first—in disbelief—she did nothing. But with the interest hike looming, she reluctantly closed the account. That action may temporarily ding her otherwise perfect credit score.
“What really ticked me off is this is the same bank that just got the multi-billion dollar bailout,” she said. “I’m going to cancel all my cards. I’m out of there. I’m probably lying, but that’s what I want to do.”
What could explain these higher rates?
Good customers like Jones, along with the bad ones, are all seeing rate hikes because the value of everyone’s portfolios have plummeted along with the stock market, said Peter Garuccio, spokesman for the American Bankers Association, which lobbies for banks that issue credit cards.
“Unfortunately, all of us are less credit-worthy because of what’s going on with the economy. As an individual, you’ve never been late perhaps, but, unfortunately, the economy affects us all.”
Now it appears that the credit card companies themselves are becoming less credit-worthy. As people lose their jobs, they may stop paying on their credit card bills. In the past, consumers were able to consolidate their credit card balances with equity loans, but lots of people have already taken that route. Also, their homes are no longer worth enough to get an equity loan. Warning stories of the credit card companies’ demise are starting to appear in the Wall Street Journal and New York Times.
“I think the next wave of problems is with the credit card industry as people get laid off,” said Traverse City bankruptcy attorney Wallace Tuttle. “You haven’t heard anything about them, probably because they have made such an outrageous amount from the interest rates. So they’ll be the next to come begging to the government.”
Ironically, said a Washington insider, a bill to reform credit card companies might be their salvation. The bill, the Credit Cardholders’ Bill of Rights, is expected to be signed into law this month.

PERFECT STORM
It has taken years for Congress to respond to the rising anger over credit card abuses and gotcha’ fees that add up to $15 billion each year. Congress did, however, listen to the credit companies in 2005 when they passed a law that made it more expensive and difficult to declare bankruptcy.
“With the facts they presented to Congress, people got sucked in. Now the credit card companies have done significant damage to the auto companies. Unsecured creditors are getting their money first, and that’s money that otherwise would go to secured creditors. It’s all interconnected,” Tuttle said.
U.S. Senator Carl Levin proposed a credit card reform bill in 2007, but it was stalled, in part, owing to political pressure from the six banks that dominate the credit card industry and contribute heavily to both parties.
“These banks give to Republicans, they give to Democrats. If the Taliban were in Congress, they’d give to them too. They’re sophisticated players. To get what you want, you have to give everyone a lot of money,” said Traverse City bankruptcy attorney Paul Bare.
Levin’s bill was incorporated into a bill introduced by Senator Christopher Dodd, in 2008, but it didn’t get out of Dodd’s own banking committee.
With still no reform, abuses and anger mounted. Finally, the Federal Reserve passed new rules in December of 2008. Thanks largely to Levin’s efforts, the rules banned retroactive interest rates (in which a company imposes a higher interest rate on the existing balance) except in the case where someone is more than 30 days late on their payment. The rules do not limit interest rates.
The Federal Reserve was pressured not to implement the new rules until July of 2010. The credit card companies said the changes were so dramatic and sweeping it would take that long to comply. Some banks, however, are voluntarily complying before that date (see sidebar for the best credit cards).

NO LIMITS
This year, Dodd, a Democrat, reintroduced the bill in committee and barely got it passed on a party line vote, 12-11. Meanwhile, the House just passed a companion bill on a 350-to-70 vote. The Senate was still trying to hammer out a compromise bill last week for a floor vote. Republicans are pushing for weaker measures. They are concerned the reforms might force credit card companies to charge good customers higher rates and to limit overall access to credit.
Credit card limits are entirely off the table in either the Senate or House bill. U.S. Senator Bernie Sanders, who is pushing for usury laws to limit rates, has said that generous contributions are one reason why.
“Over the last decade the financial sector has invested more than $5 billion in purchasing political influence in Washington. This includes funding some 3,000 lobbyists and huge amounts in campaign contributions. Do we have the courage to stand up to them? We have to try,” he said in a press release.
Once the credit card reform bill passes, credit card companies will have 12 months to implement the new rules (or July 2010, whichever comes first).

A PERSONAL DISASTER
All this comes too late for Pete Volas, who owns Eden Hill Greenhouse in Honor. He said that he and his wife rarely used a credit card. Their problem originated in 1999, when the couple decided to go on what turned out to be their last vacation. Their home was heated with a wood stove, so they decided to buy a $3,500 propane furnace a couple of weeks before they left.
“It was on-the-spot financing, no interest for 60 days. Since we were in a big rush, we went ahead and did that. I didn’t realize right away it was a credit card account. While we were gone, one of my three sons rolled our delivery van and totaled it. So we had to start a new set of payments on another van. That derailed our plans on refinancing the furnace through a local bank. We made minimum payments until my wife became ill and died in 2002. Meanwhile, our health insurance premiums went up to $900 a month.
“Because of a lot of things, a whole domino effect, I missed a payment and then they came back with double payments and all kinds of penalties. And I balked. So I didn’t make any payments, and then they were demanding and demanding. Then I sent in three big payments of post-dated checks to quiet them down. Then I couldn’t do any more.”
His account went to a collection agency, which sued Volas and got a default judgment for $4,000. Bottom line, he paid nearly $8,000 for a $3,500 furnace.
“They have just let these companies run amok. You get to the point where you maintain the interest level and they keep bleeding you and bleeding you and bleeding you. When they can all of a sudden rack up your interest rate—even without any reason—it makes it extremely difficult to keep up.”
Volas is optimistic about the future, despite the fact he can’t afford health insurance and is still paying back his wife’s doctor bills (Munson forgave a portion of the bills).
“My oldest son is with me, and thanks to him, I think we’ll turn the corner this spring. I’m 65 this year. I don’t care if it takes another 30 years, but I’m going to get this cotton-pickin’ debt paid down. I want to see my business flourish and for my son to carry on.”
He no longer owns a credit card.

THE CREDIT CARD SQUEEZE
As soon as a customer begins to start borrowing from Peter to pay Paul, the credit card companies take notice and crank up interest rates. Bare said he saw a Gap credit card with an interest rate of 44.378 percent.
If unemployment rates are any indication, defaults might be high. Unemployment in Northern Michigan ranges from a low of
10.3 percent in Leelanau County to 17 percent in Charlevoix County. The labor force
has dropped from 137,2000 in March of 2008 to 128,100 one year later—a loss of about 10,000 jobs.
The credit card companies hike up the interest rate, typically to 32 percent, to discourage the customer from taking on any more debt, but usually it has the effect of the credit card customer losing faith and giving up. They have three options: declaring bankruptcy, try to settle with a credit card company, or go to a financial counselor to work out a long-term plan.
Tim Smith (not his real name) has given up. His problem began 13 years ago when he and his wife bought an old home—a classic money pit—south of Traverse City. Over a period of 13 years, they acquired five cards and kept the interest rate down to 9 percent. Now they are up to 17 percent.
The interest rates went up at the same time Smith’s wife lost her painting job and his factory bonuses dried up. And the couple can’t sell their money-draining house. With the new higher rates, Smith realized that he would never be able to pay off his debt or even make his minimum payments of $600 per month.
He heard ads on the radio about “settling” his cards. That process involves ceasing payment on credit cards for several months, at which point the credit card company will impose penalties and late fees, and then potentially accept lump sum payment(s) usually equal to about half of what is owed. Sometimes the credit company will sue instead of settle.
Smith found a California company that will handle the settlement. It asked Smith to pay $473 monthly into an account for three years. The company will take a fee of $4,400 from the initial 10 payments, and then accumulate another $17,000 to settle with the credit card companies.

LEGAL BACKUP
Jackie Freeman, who owns Michigan Debt Settlement in Suttons Bay, said it’s better to work with a local company like her own. She has legal back-up in case a credit company sues. She also advises against giving a company physical control over your money. If the company folds, you have no recourse.
Freeman is increasingly working out deals where the credit card company will accept five payments over an agreed-upon period. Bank of America is now settling for 20 percent of what is owed. Discover Card is still extremely hard to settle with, she said.
A drawback of settling a debt is that the consumer has to pay income tax on the forgiven portion unless he proves that he was insolvent (a person’s debts exceed his assets.) Yet a large percentage of people are insolvent when they decide to settle. Also the client’s credit rating is damaged, although most are still able to obtain credit cards within a year of settling, Freeman said.
The other two options when hitting bottom are bankruptcy and working with a credit counseling company, such as Green Path Debt Solutions in Traverse City.
Trent Graham, a financial counselor at Green Path, said the firm can help draw up a budget and prioritize bills. It will also pay a person’s bills for a fee of about $33 per month and negotiate with the credit card companies. The credit card companies, however, need to see movement on the side of the client, such as canceling cable television or an unneeded phone landline.
“My work is rewarding. The biggest problem I see with people is they need to change their lifestyle when they lose a job. They can’t expect to live the same way on less income, and they have to stop using credit cards. That’s the biggest challenge.”
Bankruptcy attorney Wallace Tuttle said that even if you believe you have good credit, it’s important to get a free credit report to see if there are any inaccuracies, which are not uncommon.
“These companies use these credit reports to jack up your interest rate. It’s another excuse for credit card companies to rape and pillage. We just have to stop using them.”

For the most consumer-friendly credit cards, check out the SmartMoney online article by Kelli B. Grant titled the “4 Consumer-Friendly Credit Cards.” Her recommendations include Discover Motiva, Wells Fargo Platinum with a very low interest rate, Citi Forward for its rewards program, and Capital One Platinum Prestige for transferring a balance at a minimal fee and a promotional rate of zero percent for a lengthy period.

Here are the proposed changes under a pending Senate bill:

• Unless you’re 60 days late, a credit card company cannot raise your interest rates on an existing balance.

• Customers will have to opt in if they want to be able to go over their credit limits (currently, people go over without realizing it and get hit with an over-limit fee and penalty interest rates).

• Credit card companies will have to give 45 days notice before imposing an interest rate hike on future purchases.

• Credit card companies must mail the bill 21 days before it’s due and can’t change the periodic due date.

• If a payment is received at 5 p.m. on the due date, it must be credited to the account.

• If a creditor hikes up the interest rate on new purchases, based on risk of the cardholder, market conditions or other factors, it has to review that hike within six months and reduce the percentage if the risk goes back down.

• If the company imposes a penalty interest rate because of late payment, it must revert to the old interest rate if the bill’s paid on time six months in a row.

• There can be no interest charged on debt that’s paid on time. Right now, if you have a $5,000 balance, and pay $2,500, you’ll pay an interest on $5,000 in your next bill. With the new rule, the credit company can only charge interest on $2,500.

• Credit extended to anyone 21 or under will require a signature from a parent or guardian or proof that the person can independently pay the account. It also limits the prescreened offers and prevents an increase in credit limits without the parent’s permission.



 
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