Zippidy Doo Da

I'm not stupid, I'm from Texas!

Thursday, August 14, 2008

Hi all, I just had a fine trip up to Toy town, but didn’t find much time to read the papers so no Chupacabra reports forthcoming.

I do want to mention some good news of the sort that I expect to see more as we commence our recovery from years of Republican misrule.

The NYT lead editorial on August sixth told of the Federal Reserve receiving 56,000 complaints about abusive credit card practices legalized by the Republican congress in the 2005 bankruptcy law.

Here’s a rundown on some of these by Adam Levitin at Credit Slips: (

“(1) Universal cross-default means that if you are declared in default (accurately or not and with notice or not) by any other creditor (another credit card, the cable company, the landlord, your uncle Jim), then that constitutes a default on your credit card and penalty interest rates can be applied, even if you have been making payments on time to the card issuer.

(2) Any-time, any-reason rate changes permit the card issuer to change the interest rate it charges you for any reason at any time. You opened up another credit card (to get the extra 10% off the initial purchase)? Well, your interest rate just went up 5%. Your issuer made a lot of lousy subprime mortgage loans to other people? Say howdy to a 10% APR increase. You’re wearing yellow today? Meet my little friend Mr. 32.99% APR. If your issuer feels "insecure" (all the other banks are so much prettier)—hey why not a 200% APR? Delaware doesn’t have usury limits, after all, so let's shoot the moon....

(3) Retroactive application of interest rates is exactly what it sounds like. At the time you borrowed your cardholder agreement provided that your APR was 7.99% above Prime. Now the issuer has unilaterally changed the rate to 20.99% above Prime, and applied that to the balance you accrued when the rate was 7.99% above Prime. You thought you had made a deal? Guess again…

(4) Two-cycle billing means that if you revolve a balance, interest accrues not just on the actual balance being revolved, but also on the balance from the previous billing cycle, even if it has already been paid off. To illustrate, in month one you charge $600 and pay it off in full at the end of the month. In month two, you charge $500 and pay off $400. Interest accrues as if on a balance of $700, even though you only owe $100.

(5) Unlimited overlimit fee applications means that if you go over-the-limit multiple times in a billing cycle, you will be charged multiple overlimit fees. So if your limit is $1000 and you go $10 over the limit on day 5, and another $20 over the limit on day 6 and another $25 over the limit on day 18, you will be charged 3 overlimit fees, whereas if you simply went $55 over-the-limit all at once, you would be charged on overlimit fee.

(6) Limits on overlimit. Your credit card may have a credit limit, but that doesn’t mean you can’t charge more than that limit. Whether you can or not is at the issuer’s discretion, but if the issuer allows you to exceed your credit limit, it will cost you in overlimit fees. The bill would allow consumers to elect to have their credit limit actually be a limit which they could not exceed.

(7) Pro Rata Allocation of Payments. Currently if you have balances accruing interest at different interest rates (e.g, a purchase balance and a cash advance balance), the card issuer can, pursuant to the cardholder agreement, apply the payments however it wants. Typically this means that payments are applied to lower interest rate balances first. The Cardholders’ Bill of Rights would require payments to be applied pro rata to balances (although issuers can always apply them to higher interest rate balances first).”

-The Times editorial was blowing kisses to author Congresswoman Carolyn Maloney, D-NY, for getting her worthy bill through the Financial Services Committee, but chances look slim for it to pass the House, much less be reconciled with Sen Chris Dodd’s bill and overcome a Bush veto.

Still, this should be a reminder that we need to elect robust Democratic majorities in November in order to effect the heavy lifting ahead of us cleaning out the elephant stables.


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