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Too many factors in that which imply emotional direction.
Lets do it this way.
Jack asks me to loan him $100 dollars.
Jack states he will pay me back in full next week.
Jack comes back and says "sorry, no can do, I'm going to renegotiate the contract here and only pay you a part of the money back and on terms I decide".
Lets stop there for a sec.
Jack isn't in a position to renegotiate. Jack doesn't get to demand changes to the deal, he made a deal, jack should hold to the deal, he gave his word he would.
I tell Jack that he made a deal, but I am willing to allow his conditions, but he will pay a penalty for changing the conditions so I charge him a late penalty for such.
How much? Well, that becomes an issue. You see, Jack had no problems changing the conditions on me and expecting me to accept his conditions. So I am free to change the conditions on him based on his penalty of breaking the conditions on our original agreement.
So, I charge him money for breaking that deal and because he is taking much longer to pay me back than he originally agreed to, I will charge him a late penalty and now charge him interest over the time to pay me back.
This way, Jack can keep changing his position all he likes, but I am covered for his breaking his word to me. He doesn't cause me hardships because I now gain something rather than loose something in the process.
In your suggested deal, you make 5 dollars for loaning a 100 dollars to a guy who said he would pay you back in 1 week, but ended up taking 4 weeks total to do it. If you loaned money based on that practice, you would go out of business not to mention, if you were counting on that money to free up for other issues, you would be put in a bad position as well. Jack knows he broke his word and Jack should accept he must make up for this in an honest manner. Penalties are not "evil", they are simply consequences for failure to meet ones required responsibility.
Now I may cut him a break, I may not. Jack lost the say in that when he went into business with me and then broke his word. Many businesses will cut people deals on their delinquency, I have seen good customers who have fallen behind get these breaks many times. The business knows the customer has a good record and is willing to work with them because the customer is an asset.
On the other side, I have seen customers who are constantly delinquent and are actually a liability to the company. They cost them money and if they "worked" with them, the person would simply take advantage of that and continue to cost them money (seen that many times as well).
By assessing penalties and fines freely, the business if it is willing to continue accruing customers will apply them appropriately.
In the end, a business who loans money is not a charity, they are there to make money and we must view it in this manner or we hold a business to conditions that is unjust.
You could just as easily switch out the loan money scenario to any other type of business and when you do that, you start to see how it is unreasonable to expect a loan company to act in that manner.
I appreciate what you are saying, but there is a difference between maintaining profitability and being usurious. More than that, credit card companies simply aren't making good business sense by burdening their best customers with the entire burden of the unpaid debt. The credit card companies should undertake part of that burden because they agreed to the risk up front when they extended the credit. They have all the advantages in that they have access to complete and comprehensive histories on people applying for credit. They took the risk, but rather than take the loss, they pass it along to good customers. And those good customers do have a right to complain, because the kinds of rates and penalties couldn't have reasonably been expected. You signed up for a credit card at 9% interest, no annual fee, and a $25 late fee. Could you reasonably expect two years later that the bank would impose a $70 annual fee, late or overage fee of $55, and an interest rate in excess of 30%? Some increases, yes, but the degree of the increases actually doesn't match what credit card companies say they have lost. They aren't billing you to recoup losses, they are billing you excessively to anticipate losses, and that excessive billing is creating greater losses for them. That's not good business.
I appreciate what you are saying, but there is a difference between maintaining profitability and being usurious. More than that, credit card companies simply aren't making good business sense by burdening their best customers with the entire burden of the unpaid debt. The credit card companies should undertake part of that burden because they agreed to the risk up front when they extended the credit. They have all the advantages in that they have access to complete and comprehensive histories on people applying for credit. They took the risk, but rather than take the loss, they pass it along to good customers. And those good customers do have a right to complain, because the kinds of rates and penalties couldn't have reasonably been expected. You signed up for a credit card at 9% interest, no annual fee, and a $25 late fee. Could you reasonably expect two years later that the bank would impose a $70 annual fee, late or overage fee of $55, and an interest rate in excess of 30%? Some increases, yes, but the degree of the increases actually doesn't match what credit card companies say they have lost. They aren't billing you to recoup losses, they are billing you excessively to anticipate losses, and that excessive billing is creating greater losses for them. That's not good business.
I know what you are saying, but if we regulate them to the point of removing their ability to recover their expenses on poor credit holders, they will simply stop issuing credit but only to the absolutely pristine of ratings. This will kill the middle of the road people as well as new credit histories.
Also, credit histories are tricky. They have quite a bit of information, but regulation has hampered that as well.
You are to never close a credit card account even in good standing simply because it has an effect on your credit score. I'm not talking about income/debt ratios (though those may have an effect), but simply because they can no longer access the history of that closed account. This restriction leaves them in the dark, so they apply a default mark on your score to account for such be it a good standing or bad for that card. (we went from a 820 to a 760 once because I closed several random cards we had to which we hadn't used in years and I didn't want them open as a security risk because we were moving quite a bit at that time).
Also, I don't think they are anticipating losses, they know they will lose. That data is easily assessed as they have a history of their collection departments and a history of the occurrences of such activities to which they can within reason account for the losses.
I know some banks are silly with what they are doing, but like I said before, these businesses were operating this way anyway. The unethical practices won't change, they will simply find another loophole or push it past the legal realm hoping the card holder will be too timid to fight it.
The thing is, while some banks are being unreasonable with their changes, not all are doing such in massive increments. As I said, mine raised only 3% and while that does irritate me, I can understand their reasoning. For me though, I rarely pay interest so to be honest I never put much attention to it. I have never paid late on any bill in my life and while it is always a possibility I try to plan in such ways to be prepared for such so I never have to.
As I said, the excessive late fees, fines and penalties are more of a concern for those who have been lax with their management of such. There are the special cases, but having a wife who has worked in collections, I can tell you that if they are a good customer who has fell on hard times, the business more often than not works with the customer and this includes reduction or removal of fees and fines to accommodate them. This however is only afforded to good customers, those who have been paying late and have poor records are not shown such leniency. Most who consistently pay late have done so from the very first payment and are really problem customers from the start. They cost the business money and deserve the penalties given.
I understand for the need of "some" common sense regulation, but I prefer a more reactive approach to such. A set of guidelines rather than legislated policy. This way, those institutions who do abuse the situation can be handled in court on a case per case basis using the guidelines as a mechanism for evaluation. Putting in these across the board regulations will only result in bad outcomes for the consumer and the business and both need to be considered as both are dependent on each other.
The GOP method of operation is to protect corporate interest at all costs as they are a wholly own subsidiary of the lobbyists. All they care about is self-preservation and the corporate funds to get re-elected. They could care less about their constituents. They keep their constitutents busy fighting amongst themselves with the abortion rights and gay marriage issue. In the meantime, they are in bed with the credit card companies, pharmacuetical industry, private insurance companies, the professional war monger profiteers and the list goes on. The last people on the list are the people they're supposed to represent - the people who elected them. End of story.
Funny, I do not have a single credit card with rates higher then 6.9 and keep no balance on any card.
So now we are suppose to protect those who have crappy credit and high interest rate credit cards with high balances?
Maybe the dems can come up with a plan to show the losers how not to use credit cards for items they do not need or can afford.
Just like the mortgage meltdown caused by the dems forcing loans to people with bad FICO scores, now we want to reward people who have buried themselves into debt.
What is next? Want the ones who have low rates and zero balances to pay for those who spend more then they make?
Goodness people, we need to stop rewarding peoples mistakes.
Keep your balances low and have good FICO scores and you can get rates below 6.99 and in many cases there are some who are offering ZERO percent rates right now.
Funny, I do not have a single credit card with rates higher then 6.9 and keep no balance on any card.
So now we are suppose to protect those who have crappy credit and high interest rate credit cards with high balances?
Maybe the dems can come up with a plan to show the losers how not to use credit cards for items they do not need or can afford.
Just like the mortgage meltdown caused by the dems forcing loans to people with bad FICO scores, now we want to reward people who have buried themselves into debt.
What is next? Want the ones who have low rates and zero balances to pay for those who spend more then they make?
Goodness people, we need to stop rewarding peoples mistakes.
Keep your balances low and have good FICO scores and you can get rates below 6.99 and in many cases there are some who are offering ZERO percent rates right now.
Contrary to what you're saying, it's not just the people who have bad credit who are getting their interest rates hiked. People with good credit, people who have always paid their balance in full are being charged yearly fees now and/or have had their interest rate hiked.
You guys are not thinking straight. This bill was enacted in May with the freeze next year.
You do realize that gave the banks 6 months to jack the rates and fees and get people onto higher rate cards. The banks are pretty much done. The Repubs blocking this does no good.
That freeze should have happened in May when the bill passed..stop those banks right in their tracks. Look at who sponsored that bill and who is the big money behind it.
All this has done is make the masses sqawk and finger point. Meanwhile the banks have their rates right where they want them...I've seen as high as 69.99% if you're 1 day late.
Bailout baby Chase is at 29.99% if you're one day late.
Go ahead and get mad at the Republicans for blocking this freeze. It won't matter..the deed was done back in May.
Funny, I do not have a single credit card with rates higher then 6.9 and keep no balance on any card.
So now we are suppose to protect those who have crappy credit and high interest rate credit cards with high balances?
Maybe the dems can come up with a plan to show the losers how not to use credit cards for items they do not need or can afford.
Just like the mortgage meltdown caused by the dems forcing loans to people with bad FICO scores, now we want to reward people who have buried themselves into debt.
What is next? Want the ones who have low rates and zero balances to pay for those who spend more then they make?
Goodness people, we need to stop rewarding peoples mistakes.
Keep your balances low and have good FICO scores and you can get rates below 6.99 and in many cases there are some who are offering ZERO percent rates right now.
This goes to show you have absolutely no idea what your talking about as well as you have not followed up on whats been going on recently. This is not happening only to those with crappy credit. This is happening to those customers with excellent credit, never late and never go over there balance. someone like me, which is why it wasn't hard for me to pay off two of my cards and close them
Everyone seems to think they are jacking up rates for those with "bad credit".
It's across the board people..these banks have been doing this since May to get ready for this "freeze". You think they want to be frozen at 5% ?
No..they want to be frozen at 29.99% or 69.99%.
This article commented on that bill passed last May that gave banks until Feb 2010 to get their rates/fees "all fixed up".
snippet:
"Some experts estimate that bank fees will increase by as much as 50 percent as banks attempt to make up for lost revenue after the CARD act takes affect."
YES THIS HAPPENED
"The new law places restrictions on how much credit card companies can raise interest rates. That means lenders are raising rates now, while they can."
YES THIS HAPPENED
increased rates is not the only thing either minimum payments have tripled or worse for many.
That's a good thing because of compound interest...
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