Right Before the Holidays, This Credit Card Company Did the Right Thing For Customers

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It’s not every day you see a credit card company making a decision that benefits consumers.

Visa, one of the world’s largest credit card companies, has dropped its membership in the American Legislative Exchange Council (ALEC). This decision comes just one year after ALEC awarded its “Private Sector Member of the Year Award” to Paul Russinoff, Visa’s Vice President of State Relations.

What is ALEC? This will help get you started, and here’s all our past ALEC coverage. ALEC is an organization that brings corporations and elected officials together to vote — as equals — on corporate-friendly “model bills.” The model bills are then distributed to various state lawmakers who introduce them in state legislatures. ALEC develops about 1,000 bills a year, and approximately 20 percent become law.

Some of ALEC’s greatest hits: Arizona’s anti-immigration “papers please” law (SB 1070), Wisconsin’s union-busting 2011 budget, multiple so-called “right to work” laws, Pennsylvania and North Carolina’s voter suppression laws, and Florida’s controversial “Stand Your Ground” gun law.

Visa is one of 50 companies to publicly cut ties with ALEC in the last two years. However, a recent expose in The Guardian shows that ALEC has lost closer to 60 corporate members, losing a third of its projected income.

As more and more people find out about ALEC’s record of restricting voting rights, stomping on the rights of workers, creating barriers in the court system, blocking transparency, preempting local democracy, and privatizing our schools, the less desirable it is for both corporations and lawmakers to associate with them.

Photo by @phillipcantor on Twitter

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It’s Working Already: CFPB Gets $140 Million in Rebates for Capital One Customers

Today marked a big victory today for fairness, economic justice and the notion that rules are to be obeyed, even by big banks. In its first major enforcement action, the Consumer Financial Protection Board has given Capital One, a major credit card company, a $210 million fine for deceptive practices. Of that fine, $140 million is going to be rebated directly to customers.

That’s what holding financial institutions accountable looks like.

According to today’s enforcement action, Capital One was targeting and exploiting people with lower credit ratings, pushing them into credit card products through dishonest marketing or even enrolling them without their consent.

The financial industry isn’t going to do the right thing out of the goodness of its executives’ hearts. It takes rules, and enforcement of those rules, to keep it in check. Strong rules give corporations like Capital One the incentive to do better.

That’s exactly why the financial industry and its allies in Congress fought so hard to keep the CFPB from functioning—by passing bills to try and defund it and particularly by blocking the nomination of its director, Richard Cordray. Now Cordray, the former Attorney General of Ohio, is on the job, and the CFPB is already working on a number of issues, including making mortgages simpler and fairer and reining in payday lenders. (CNN did a great story on the CFPB’s staff this week.)

This is why we passed financial reform, over strong opposition from the banks it would affect. This is why the CFPB exists in the first place—and Cordray put other financial institutions on notice today.

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Bank of America Drops Overdraft Fees

No question it’s good news that Bank of America will no longer charge overdraft fees on debit card purchases, instead just declining the card if there isn’t enough money in the account.

But of course, they’re not doing it out of the goodness of their hearts.

As of July 1, the Federal Reserve will require that banks obtain a customer’s consent before they can charge them overdraft fees for A.T.M. transactions and debit purchases; many banks now automatically enroll customers.

In anticipation of the new Fed rule, some banks have begun marketing campaigns to encourage their customers to opt in to overdraft protection to keep the dollars flowing.

Several bills have been introduced in Congress that would go beyond the Fed’s rules on overdraft fees.
Bank of America, by deciding to scrap overdraft charges on debit card purchases instead, is hoping to bolster its reputation with consumers at a time when anger at banks for their role in the financial crisis remains high.

So noble of them: They charge every fee they can think of, they fight attempts to regulate them, then as soon as a new regulation actually gets passed, they’re so concerned about what their customers want that butter couldn’t melt in their mouths.

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Credit Cards on the Decline

A credit-card-debtor nation no more? That may be taking it a bit far, but:

Credit card usage is slowing. Revolving credit — largely made up of credit card debt — fell by nearly 20% in November, the largest drop on record, according to the Federal Reserve, reflecting less borrowing by consumers and banks’ tighter lending standards. Through October, the number of new credit card accounts was down 46% from the same period in 2008, according to Equifax.

Not having a credit card makes all sorts of things more difficult, from renting a car to developing a good credit score, but then again…

Tim McFarlin, a consumer bankruptcy attorney in Irvine, Calif., 34, stopped using credit cards eight years ago because he thought the industry’s business practices were unfair to consumers. “Any time there’s even a hint of a financial issue in the consumer’s life, the credit card company will raise the interest rate to the high 20s, or 30%,” he says. “They’ll do anything they can to make life as difficult as possible.”

Last year, Congress enacted legislation that will make it more difficult for credit card issuers to raise interest rates on existing balances and charge certain fees. But those rules don’t take effect until Feb. 22, and in anticipation of the change, credit card companies have aggressively raised interest rates and fees, even for borrowers who pay their bills on time. In addition, credit card companies have lowered credit limits for many customers.

As John Cole writes,

I sense a lot of people now run with the baseline perception that banks and credit card companies exist only to screw their customers.

I mean, they’re sure not in it out of altruism…

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Too Big to Fail — The Fallout

The Credit Card Act of 2009 has been touted as a successful bit of legislation that will force credit card companies to engage in more disclosure. Card companies will no longer be able to arbitrarily raise interest rates on customers who pay on time – just because they can. The bad news is that the banks are going to make up the losses in other ways.

From the WSJ:

Credit-card companies already have been racing to slip new fees and practices into customer contracts ahead of the law. Issuers are closing accounts, switching cards with fixed interest rates to variable rates and introducing cards that have an annual fee.

Christopher Moss, who regularly shops at sporting-goods chain Gander Mountain, recently was notified that he will be charged a $1 “processing fee” each time he receives a printed statement of his Gander credit-card account rather than an electronic one. The 50-year-old paralegal said he is prepared to cut up the credit card even though he likes the loyalty rewards that come with it.”It’s not like I can’t afford it, but it’s another little stick in the consumer’s eye,” Mr. Moss said.

Banks will be also be changing their practices, to make up for the fact that they now have to receive customer consent before charging overdraft fees.

Other banks are expected to eliminate free checking completely, raise fees on safe-deposit boxes and charge customers more for issuing a stop-payment on a check.

“There may be some areas of opportunity that banks really haven’t focused on because they had the engine of overdraft fees,” said Chris Gill, who specializes in the community-banking industry at SNL Financial in Charlottesville, Va.

The cost of accessing our money continues to rise. The Federal Reserve will be looking into regulating ATM fees. For those who want to stop paying ATM fees, a number of phone apps are now available to tell us where ATMs for our banks are, so that we can save the fees.

Arianna Huffington and other folks involved with the Huffpo blog, have launched a campaign called Move Your Money.

The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster. In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo — all of which took billions in taxpayer money — have cut lending to businesses by $100 billion.

Meanwhile, America’s Main Street community banks — the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of — are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

The folks at Move Your Money urge us to put our money in local banks and credit unions. They have a tool on their website to help you discover what your local banking options are. Investing in local banks keeps the money in our communities, where it can do the most good. It’s a simple, beautiful, concept. Your local bank is less likely to add all manner of new, egregious charges. They want your business – because unlike the giant corporate banks, they are not too big to fail.

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Shameless

The credit card industry is continuing its run at unseating the health insurance industry from its current title as “most shameless.”

The New York Times’ Haggler column:

Three years ago, the Haggler’s credit card bill seemed to stop showing up in the mail. Another month went by — no bill. The month after that, still nothing. Each month, the Haggler would call the issuer, Bank of America, and pay over the phone, then ask the same question: “Why did you stop sending me a bill?”
We’re still sending you a bill, came the company’s reply each time.

Guess what? The company was right. It just was sending the bill in a restyled envelope, with no trace of “Bank of America.” In other words, it looked like junk mail, and the Haggler kept throwing it away.
Now, the Haggler can’t prove it, but this seemed like a brilliant, low-cost way to pocket a fortune in late fees.

Digby:

The same thing happened to me. The plain brown envelope looked like it was one of those car dealership “checks” that were all the rage before the credit crisis hit. And because I didn’t realize the first month that I hadn’t gotten my bill, it created a black mark on my credit for a late payment which resulted in a cascade of raised rates on several cards.

It was clearly a sneaky trick. Yes, it’s my responsibility to know when my bills are due, but I had been in the habit of putting the bill into the “to pay” file and paying it on the following Monday. It didn’t occur to me that the bill would suddenly come in an envelope with no return address or label on it that didn’t look like a bill and so I tossed it into a junk pile and didn’t look at it right away.

And that’s what people are dealing with all the time as consumers, with their health insurance, their credit cards, their mortgages, their pensions — overwhelming complexity designed to trip them up and cost them money or deny them benefits to which they believed in good faith they were entitled. And its all perfectly legal — or at least there’s no visible accountability for it.

I recently heard of a few variations on this – in one case, a credit card company moved its payment due date up by just a couple of days. If you paid close attention to your bill, or paid early anyway, no problem. But if you had a routine where you paid the bill close to the due date, you’d get hit with a late fee.

They will never police themselves. They will always try to find every loophole in every law to wring a few more bucks out of their customers. The only thing for it is for Congress to legislate and legislate hard against them, then keep a watchful eye and plug up the loopholes as the companies find them.

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