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Credit Card Rate Rises; More on Real Estate, Elizabeth Warren

Credit card rates are at new highs. We look at what’s up with banks and plastic — and more.

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 Interest rates in America are at stunning lows. Interest rates on American credit cards are suddenly at nine-year highs. 

Just when Americans are trying to get off “plastic” and out from under credit card debt. And just when new consumer protections have just come fully into effect. This hour, we ask why. 

Plus, we look at the near-collapse in American home sales, even as mortgage rates hit all-time lows.

And we look at the endgame maneuvering over who will head the new Consumer Protection Agency. 

-Tom Ashbrook

 

Guests:

Alexis Leondis, reporter for Bloomberg.

Nessa Feddis, vice president and senior counsel for the American Bankers Association, which represents the majority of credit card companies.

Ed Mierzwinski, U.S. PIRG, a consumer advocacy organization.

Diana Olick, real estate correspondent for CNBC.

Jake Tapper, senior White House correspondent for ABC News.

More:

Here’s the YouTube video supporting Elizabeth Warren that has gone viral:

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  • Joshua Hendrickson

    I don’t have a credit card. I have never had a credit card. I don’t want a credit card. Debit cards are good enough for me. The whole idea of credit is just repulsive. If our economy must be based on usury and debt, then I say let it collapse; it doesn’t have any moral stature at all.

    There has got to be a better way to organize society!

  • Zeno

    If the actions of the Credit Card companies were to be purveyed by any individual, in any state in the union, it is called “Loan Sharking” and is punishable under the law.

    Yet..even harsher abuses of usury on the borrower are committed under the shield of the Fed, and considered completely acceptable business practices.

  • jeffe

    I expect nothing but spin, spin, spin form Nessa Feddis.
    Bring back usury laws

  • http://www.addurbusiness.com/ Online Business Directory

    ya it’s sure that credit card is good but we can’t ignore debit card also.both of all keeps it’s own importance.

  • Ellen Dibble

    As I see it, a lot of unscrupulous banking practices have resulted in a lot of defaults on credit card loans (bankruptcies), and thus the banks balance their budgets and strive for some profits for their shareholders (you and me and pension-hopefuls of various sorts?) by claiming the profits where they are able to.
    Where is that? The people who still are earning money, who are still using credit cards. Where else?
    The hard-scrabble workers are “supporting” those declaring bankruptcy. It’s like a system of taxation: Those with income support those without.
    It’s better than rioting in the streets and a general free-for-all.
    Or do you want Bank Bailout II, another round of straight-out government redemption of the credit industry — by specifically taxes (unless the banks figure out how to raise their rates, as they have done).

  • Ellen Dibble

    I’ll just say that the growth/survival of my own personal business tracks the practices of credit card companies (for me, changing technologies have been making galloping demands on my resources; payments to me, large and small, come in hiccups, not in regular paychecks).
    When Obama et al talk about small business, they small but with regular employees. But at my micro level (and a brother of mine back in the early 1990s instructed me thus): “You stuff them full of cash, then you can buy your $4,000 printer.” In other words, you prepay. But the card had to be used; I forget why. Lots of things required cards. And there is usually a way to get a good rate. If there wasn’t, you’d be at the Soup Kitchen, watching TV for a living, doing whatever free entertainment the city offers. It’s very iffy right now credit-card-wise. If you can’t make the payment by the end of each month, you end up prepaying the entire year’s interest up front, even though you pay it off in say 6 weeks. Different bank to bank. Here’s one. You take out a $10,000 loan (I do, that is) with a prepayment of 3% and otherwise no interest for a year — 12 months. This loan is ON TOP of another loan at 4.99%, on account of which this particular credit card is never used; if it were used, I’d be paying 17% on that say $200 toner cartridge purchase until the entire underlying 4.99% loan was paid off. In fact a late payment of $15 would be charged at 17% until the underlying loan was paid off.
    Well, in January the $10,000 loan offered was a New Deal. I had it explained by a couple of folks from Bombay. The new loan, not the underlying loan at 4.99%, would bounce up to 17% after a year, but the underlying loan would stay at 4.99%. If I did not pay every penny of the $10,000, both the underlying loan and the remaining new loan would go to 17%. I calculated what I would be paying to pay the interest on the underlying loan as well as $1,000 a month.
    Then in July I got a notice in the mail. The Congress had passed a law such that my payments had to go to the higher rate loan first, so my interest was going down, but at the end of the 12 months, I would have the zero percent loan still outstanding, the loan which would bounce up to 17% if not paid off in full.
    Not to worry. They will loan me that same money at 3% upfront, zero percent for a year, but that same money is to pay off OTHER BANKS. HOWEVER, they can send me a check, and if I use it for their bank, nobody is the wiser.
    Oh, it’s complicated. I spend an hour a week figuring it all out.
    When I call India, I always say, I will pay this off right now (out of retirement funds or similar sources) if you don’t get real.

  • Dennis

    The first “reform” bill early in this administration allowed way too much time for banks to set new criteria for credit cards before the bill went into effect. To have been useful to comsumers it should have been retroactive. Bankers are very good at convincing us they need time to adapt to new regulation which for the most part is hogwash.

    In the time they were allowed to prepare the banks reset interest rates for their clients at 14, 15% or more even for credit worthy clients while the fed rate which has typically been used as a starting point was near 0%. If the interest rate remains tied to the fed funds rate, then those rates will sky-rocket even further when the economy does recover and basic rates increase accordingly.

    None of the reform bills so far do any real reforming. That is part due to the fact that the banking system in this country is so broken, so insulated, and so arrogant that reforming them will not work. They need to be restructured.

  • John

    Congress should restore the states’ rights to regulate usury like they could before the Supreme Court ruled against it.

  • Larry

    The interest rate is up to 30% because our corrupt congress didn’t do anything about it in the “Credit Card Reform” bill.

    It is up to 70% in Mexico which is the kind of failed state America is becoming.

  • Scott

    Obama has a real dilemma: If he appoints Warren he antagonizes the Money Power (who expect to get their way every time and usually do, and who will then spend millions to defeat him in 2012); but if he appoints a Geitner clone, then he looks weak and willing to sell out Main Street to Wall Street in order to get another term. What to do?

  • Ellen Dibble

    Senate Minority Leader Boehner (Republican, Cincinnati area) was on network news yesterday in a clip asking for the firing of Geithner and Summers.
    OMG, he is fishing for the part of the Democratic vote that has been advocating for that — a large portion of Obama’s vote.
    He didn’t propose any alternate people or positions. Just: please you who don’t like Obama’s choices at the Treasury, come on board with me.
    What sort of idiot do you take me for?

  • jeffe

    Obama will most likely appoint someone Geitner approves of.
    He does not have a history of backing up his rhetoric no matter how strongly worded, with actions. I have yet to see any evidence of this.

    Don’t use the cards, or just pay them off right away.

    I’m thinking of getting rid of mine or only use it for things such as online purchases and airline tickets.

  • Theresa

    The most damaging thing about credit cards is that they enable us to live on future earnings instead of living within our means. Instant gratification syndrome.

  • loninappleton

    The Elizabeth Warren rap video:

    Good to share with friends. Enjoy.

    http://www.youtube.com/watch?v=6W0vCgMRX0o

  • Larry

    The most damaging thing about credit cards is that they enable us to live on future earnings instead of living within our means. Instant gratification syndrome.
    Posted by Theresa

    You mean like food, gas, housing and medical bills?

  • Larry

    Congress should restore the states’ rights to regulate usury like they could before the Supreme Court ruled against it.
    Posted by John

    What ruling was that?

  • Nick

    I had to laugh when the first (female) guest stated that Banks needed to recoup their losses from the introduction of the new credit card law!

    My bank, Sovereign, has instituted a $12 fee for transfers between checking + savings accounts, in reaction to the law.

    It’s business as usual!

  • Dave B

    If this is all being done up front, then it is an improvement in that it allows us to properly compare rates ahead of time. Shouldn’t there be some sort of free-market competition driving these rates down to reasonable numbers? Certainly lenders should be allowed to make some money, but won’t some new lender step in and snap up lenders with a slightly lower rate and lower fees?

  • Larry

    Housing sales are collapsing because the prices are so inflated and the government is propping them up to keep the banks solvent. (to be sure they already off loaded much of the junk securities to the US taxpayer)

    Also, who can be sure they will have a job tomorrow in America? Just government workers and a few lucky treasury subsidized like Wall Street and the health insurance and phama sectors.

  • BHA

    The banks are no better than drug dealers preying on those who are down.

    You don’t carry a credit card balance if you have money (unless you are an idiot).

    If you don’t have money, you end up buying necessities on the card and the interest makes sure you can’t ever get off their Merry-Go-Round.

    Yes, there are those who use their CC to buy what they WANT but do not NEED and CANNOT AFFORD. I have no sympathy for them.

  • Larry

    Who is this yapping credit card shill?

    Cut up your credit cards people.

  • Margaret

    If it’s so hard for the banks to offer credit cards at a reasonable rate, why are they giving such huge lines of unsecured credit? My credit cards carry upwards of 20 THOUSAND dollars of credit that I haven’t asked for.

  • JP

    Credit Card companies make their 1 to 2 percent right off the top on every dollar charged in this country…

    … that’s a ton of money, even without the high interest rates.

    I would think they’d be falling over themselves to get consumers to use their cards, even if they didn’t charge a penny interest on balances.

  • Steve

    Use credit cards only when you must.

    Otherwise cash only.

    Those of us who can sholud starve the banks and credit card companies as much as we are able.

    Starve these criminals now.

  • http://tombarlow.net tom

    Credit Card companies have just hit vendors with a brand new fee: I sell art and use a credit card machine, last month Visa and Master card created a “Usage Protocol Bureau” that charged 79.00 for a yearly fee.

  • John

    Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. (439 U.S. 299)

  • Yar

    What about the 3 to 4 percent the banks charge for using a Debt card?
    Play monopoly, the banker always wins.

  • Steve Pinter

    What is all this? This is strange if for no other reason that these credit card companies are global businesses. Guest makes it seem like these poor companies are stuck in this one location.

    Would be interesting to know how Mastercard or visa charges Chinese customers, or Indian ones, or even some customers from emerging oil economies in the former Soviet Union.

    There’s no question that the global company has access to resources and strategies that are simply not available to the locally-based firm. To picture credit card cos as stuck here is nonsense.

  • JP

    By the way,

    I’ve got a “Great Rate” Visa card at 6.25% fixed APR from my credit union, University Federal Credit Union in Austin, Tx.

    Credit Unions are AWESOME, and I recommend everyone leave the big banks and opt for credit unions, if they have access to one.

  • Steve

    Opt out of the whole slavery sytem as much as you are able.

    This includes the corropt economy;
    the corrupt governmental officials that are shills for each the banking titans; AND

    we must take care of our families, friends and neighbors as the system crumbles.

  • Nick

    I went to make may online credit card payment on Sunday morning @ 8:30am, but was informed via pop-up window, that payments could be made between 10am – midnight.

    I returned to make my online payment @ 7:30pm, + suddently I was informed that my payment could not be made until Monday am, which meant my payment would be late.

    I don’t see how my bank is changing it’s behavior.

  • Les Wetmore

    It makes me sick that banks are loaning out money they don’t actually have and make huge profits on it. It undermines our economy by creating the illusion of wealth the is not real. Eventually this will destory the value of our money, that is not actually backed by anything real, and being created out of thin air through the strong money rules. I hope the banks start acting responible, but I don’t hold much hope for that.

  • Larry Weston

    Don’t forget, the CC companies charge vendors appx 4 percent to accept a card at checkout, much more to lesser volume vendors. Lots of businesses would be happy with that kind of margin alone.That needs to be added into your calculations.

  • Jeremy

    Big credit card companies don’t care about your business like your guest suggested and changing card companies hurts your overall score.
    “voting with your feet” does not help the overall problem that all credit card interest rates are too high.

  • jeffe

    Nessa Feddis is making me dizzy with her spin.
    Did I hear her say that the banks are losing money on credit cards?

    OK how does she explain this headline: Visa Quarterly Profit Jumps 73 Percent Amid Recession.

    http://www.huffingtonpost.com/2009/07/29/visa-quarterly-profit-jum_n_247500.html

    Or this one: MasterCard profit rises 31 percent

    http://www.reuters.com/article/idUSTRE6722BP20100803

    She is either lying or twisting the truth for her agenda.

  • Larry

    She is a corporate schill. Her “facts” are all backed up by her huge paycheck.

  • Zeno

    That was interesting…no mention of usury at all?

    Hey Nessa what is the rate on your CC? Vote with your feet from one loan shark to another…Ha!

  • John

    We should have demanded the same rates they charge credit card customers for the bailout money.

  • Nick

    I wish the whole hour had been spent discussing credit cards + consumers’ rights.

  • Ellen Dibble

    We’re switching to housing? I heard a report yesterday that rental rates are holding steady, and the vacancy rate is half what it was at the start of the recession.
    I care about this. I’ve tried to purchase a multi-unit house, and can’t get any help with this. Cities are interested in having anyone build one or buy one, at least not me. I’m not talking about luxury apartments, not talking about “affordable” (subsidized, non-property-tax paying), but regular multi-unit buildings.
    You would think this would be the next place for a building spree. Lots of people looking for lots of places to live. Jobs for property managers. People with money to buy buildings without a mortgage starting things out.
    When, oh when.

  • Ellen Dibble

    That was “cities AREN’T interested.”
    But they DO want upwardly mobile, young ambitious young people, which is what such housing firstly houses.

  • Nick

    If the general public cannot afford a new home, then the housing market will have to scale back.

    I don’t empathize w/real estate agents: boo-hoo!

  • Zeno

    The root of the housing crisis is in large part linked to the Credit Card companies. People were using their equity to pay for the usury trap of their CC’s. When the value dropped, they then could not pay off any of the loans or the CC’s

    True many got themselves into the trap because of greed, but it remains that predatory lending brought the whole system down.

  • Ellen Dibble

    Reasonable rentals in city centers would reduce our reliance on commuting, favor city planning for sustainability, and allow us more time to work.
    People complain that homeowners don’t mow their lawns. Get an apartment.
    First, build that housing.

  • Ellen Dibble

    Housing is TRULY an investment and an exercise in community if you buy an apartment building. Period.

  • BHA

    Investing in real estate is NOT the same as speculating in real estate.

    You buy a property expecting you can rent it for a profit and assuming, but NOT depending on, it will gain in value over a long period of time.

  • Nick

    In response to Ellen @ 11:49am:

    some house-owners might have stopped mowing + instead let their lawns become natural/over grown.

  • John

    Has the right started spreading rumors that Elizabeth Warren is a Muslim?

  • Larry

    Didn’t you hear? She’s a Muslim atheist who hates capitalism.

  • Ellen Dibble

    Nick, I once asked someone why they mowed their lawn. (I always viewed homes as something like museums; there might be curators who want the responsibility, but I’m not one of them.)
    Answer: Keep the snakes away.

  • Steve V

    Here is comes folks, Elizabeth Warren is not going to be appointed. Problems with a confirmation hearing? Give me a break. The reason neither party wants her in this position is simply because she speaks her mind and no-one will be able to “control” her. Both parties are playing a game on the public and they don’t want anyone to be in a position to tell us the unvarnished truth. Whoever else is appointed will be a clone of both parties and it will be business as usual.

  • Marisa

    The big problem are the credit bureaus,( Transunion Experian and Equifax) because for them is the same hit your credit score, if you pay late or if you pay on time and your balance is high, (they’d been reducing you limit in that way you are always high in your balance) they call that to be delinquent.That make your score goes down, and it lets them to raise the rate. I always have a good credit never pay late, but anyway they do that they’re pushing me to have a bad credit, and raise my apr, I’m not going to pay my debt in my life

  • Ed

    This show advocates “voting with your feet” when it comes to credit cards. This, however, can significantly hurt your FICO score and most people don’t realize it. Like many people, I applied for a few store credit cards in addition to the standard MasterCard, VISA and American Express cards. After voting with my feet and switching my MC and/or VISA cards from one bank to another over the past few years, I now have too many cards according to FICO even though I have canceled the cards from the previous banks.

    In some of the cases, the switch in cards was forced upon me. For instance, Bank of America took over the bank that issued my LL Bean VISA card. I had years of great credit history on this card. LL Bean quickly switched to Barclays bank. I reapplied with Barclays Bank and now use that card for most of my purchases. BoA issued me a card as well, even though I do not intend to use it. I have been told that voluntarily canceling credit cards also has a negative effect on the FICO score.

    Luckily, the rest of my great credit history so far is able to overcome the D+ rating I have on the section of the scoring relating to the number of credit cards held. However, I do feel hamstrung going forward as far as voting with my feet. Something should be done by the new consumer protection agency to prevent the FICO score being negatively affected when people switch cards for good reason.

  • Ellen Dibble

    I hope the new consumer protection agency addresses the way the rating agencies handle the sort of thing Ed points out. It’s just as much an ongoing learning experience to figure out what the rating agencies are doing as it to figure out what the banks are doing.
    The rating scores clearly have no relation to reality at least in several aspects. Right now they don’t report loans that I’ve been paying off for years. What is that all about? They were only born in 2009? But my score takes a steep dive depending apparently on whether they take my credit “pulse” on day 21 versus day 30. Not only do I have to walk with my feet to figure out the viable credit offerings, but I have to walk with my feet to steer the computers at Experian and Equifax. Actually, I ignore them. It’s important to be in a position to be able to do this.
    Banks with human-like heads functioning are happy enough to make paying loans for people like me, but plenty of banks act like robots, heads screwed on by a computer, and come up with weird answers sometimes. Case in point: the crash of November 2008.

  • jeffe

    The bottom line is that the credit card companies treat the customer with noting short of disdain and indifference. Nessa Feddis comes on the radio knowing that the corporations she represents are doing everything in their power to fight and undermine the new regulations. She is beyond contempt in my view.

    http://www.nytimes.com/2010/08/25/opinion/25wed2.html?ref=opinion

  • Grady Lee Howard

    Over 50 and worried about credit, medical costs and housing? Self-select to blow off steam in my new documentary at beretco.op@hotmail.com

    Scott (above) is correct about Obama threading the campaign financing needle in 2012 by not disappointing the big money. That is the tragedy that makes reform a shell game. Both parties are with the big money and against the people. They promised choices under capitalism, but real choices are absent. Both Larry Summers and Sarah Palin will skin us alive.

  • Mark S.

    The shill from the American Banksters Association revolted me so thoroughly that I felt like pulling over to vomit. Talking points, rationalizations, lies and obfuscation. Madame, I am thinking of another “P” word to describe what I think of you and your line of B.S., and it’s not “profit.” It has more to do with a profession other than banking that is probably as old and, at least in these times, more respectable. You and your industry are monsters for what you did to this country and its people, many of whom were gainfully employed before being thrown out of work by your actions and greed. Your industry is a parasite on the real economy, not a driver of it.

  • Mark S.

    By the way, I don’t just want Elizabeth Warren heading up the consumer protection bureau. I want Elizabeth Warren with a pitchfork, a cattle prod and a machine gun. I want her to be able to seriously kick @$$ and take names, maybe even precipitate a few perp walks. I want Elizabeth Warren with Star Chamber authority over the bastards who wrecked the economy and are now sucking the blood out of the very people they raped. I cannot find the words appropriate to convey the literal sense of hatred I feel for the dirtbags who were bailed out by my tax dollars and are back to strength as pin-striped Somali warlords. At least I have lost the ability to take the finger-wagging, tsk-tsking of self-righteous, “free-market” conservative think-tankers seriously. When their lips are moving, they’re lying, so check your wallet.

  • Mark

    Housing prices will continue to decline as long as the banks are allowed to sit on their shadow inventory.

    I look at a house I like. The price is right. But wait: there are ten vacant houses in the neighborhood. Are they foreclosed? When will they be sold? How much more will the price drop when they go on the market? I don’t know. Better to wait….

    I think we’re turning Japanese
    I think we’re turning Japanese
    I really think so…

    Solution: require any bank showing a profit to abide by the previous rules that required them to get the bad debts off their books. Only when the public knows the inventory is being cleared and the sales prices are real will they start to buy houses en masse again.

  • Rob

    Everyone, if you are so revolted by the credit card interest rates charged by banks, there is a simple solution. Do not use your credit cards. You can either use your debit cards or pay off credit cards every month when you do use them (e.g. like American Express). I do agree that there should be much more oversight over these companies, including legitimate usery laws (e.g. interest rates of over 30% meet this definition in my opinion), but there is not a natural right to cheap credit. Americans need to get over our addiction to cheap money. In addition, credit card debt is unsecured so the rates will always be higher.

  • John

    At this moment, this discussion has 180 entries and the other show on credit card companies has 60. Looks like the right has succeeded in stiring up the culture wars again to distract us from reforming the financial industry.

  • http://www.beccar.wordpress.com Eugenia Renskoff

    Hi, Tom, I am glad about one thing: I have no more credit cards. I went through mortgage fraud, predatory lending and foreclosure and lost my excellent 754 credit raring. As a result, I don’t have any more credit cards. Eugenia Renskoff

  • Joshua Hendrickson

    Regulation of business is necessary because people are no damned good. Those who are anti-regulation are so because they want to be able to behave badly, to steal and cheat. That this simple fact isn’t recognized by all is stupefying to me.

  • Tom

    Can Tom learn to control his own show. When the woman got on and monologued for 5 minutes I was praying he would step in and participate in his own program but instaed he handed the airways over to her. I had to end it – turned it off. You owe it to your listeners to do your job.

  • Mark S.

    Thank you, Joshua. Your post sums up the problem far more eloquwntly than I or anyone else on this thread. People are basically amoral bastards. Fact. Regulation is designed to contain their naturally bastardly impulses, which in the absence of regulation tend to run wild. That is my view of humanity, reinforced daily by the Republican Party and its associated tea-partying morons and spray-on tan handmaidens in Congress.

  • Mark S.

    BTW, Tom (the one right above my previous post, not the host), you are right on the money. I think one of the most offensive aspects of this sanctimonious, patently offensive guest was the way that Tom Ashbrook allowed here to lecture him and us about the “complicated” ways in which the banks **** us. Sometimes, a simple “shut the hell up” would be appropriate to challenge a fluid like of B.S., or at least asking the pontificator to stop and justify their lies without whiney “but … but …” inserts akin to a child trying to get a word in edgewise with a scolding parent.

    I found this guest to be one of the most infuriating liars and spinmeisters I have ever heard on this program. As far as I am concerned, the title of her position with the ABA rhymes with “floor” or “door.”

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