Why reap what you sew when you can just pass the buck on to consumers? Consequences are for suckers!

http://www.npr.org/templates/story/story.php?storyId=92103263 (sorry, no transcript)

Basically, some companies are tracking your purchases, and if your habits match those of a potential credit risk, they'll up your rates-- even if you've never made a late payment and have good credit.

An example given is buying retreads instead of new tires. Apparently tightening your belt means you're about to default.

I'm a bit astounded that there isn't a law against this. This thread can be a general discussion of how astoundingly crooked this business is.

7/1/2008 11:35:40 PM

NPR? WHAT LIBERAL MUMBO JUMBO!!!

7/1/2008 11:44:29 PM

Why would this be illegal? Credit card companies are private entities, just like Enron and the mortgage companies. Why would you want to interfere with capitalism? It just works!

7/1/2008 11:58:44 PM

What we need is even less government regulation...

7/1/2008 11:58:47 PM

doesn't sound like a bad idea

7/2/2008 12:01:00 AM

And I have every right to switch companies when I found out they do shit like this. I get plenty of credit card offers in the mail every day with pretty damned good interest rates. I aint tied to anybody. Give it up for free-market competition, baby!

7/2/2008 12:15:26 AM

I wasn't really thinking about the merits of gov't regulation when I was making this thread, but sure-- why not.

This is a perfect example of why consumer protections are needed.




[Edited on July 2, 2008 at 12:21 AM. Reason : .]

7/2/2008 12:16:44 AM

I would argue that it's more a matter of the public being informed when these kinds of things are being done. Let the public show that such behavior is intolerable by boycotting such credit card companies.

7/2/2008 12:19:07 AM

Once we develop truly AI computers, they would pretty much be able to determine at your birth whether or not you can have a good credit card, get insurance, or go to college. You should just get use to statistics pwning your life.

7/2/2008 12:20:17 AM

I'd say that the bigger threat would be idiots who buy extravagant shit on credit and then pay the minumum payment on it for years, of course credit card companies make much more money on idiots than on fiscally responsible people.

When shit like this happens I would expect the fiscally responsible to go ahead and switch credit card companies because they should carry very little balance on their cards.

7/2/2008 12:20:30 AM

Quote :

"I would argue that it's more a matter of the public being informed when these kinds of things are being done."

Generally speaking, sure. But credit card companies have proven to be extremely clever when it comes to deceiving consumers. To force them to disclose things like rates and such would be *gasp!* regulation.

I think it's clear by looking at the world today that a company selling Y has the advantage over a solitary consumer who is responsible for purchasing Y, X, Z, A, B, and C.

7/2/2008 12:26:16 AM

my problem w/ creditors is that often the hidden fees and penalties are hidden in pages and pages of documentation as well as the lack of informing of customers of change in rates.

If my credit card company did this shit i'd tell them to shove their card up their ass and i'd go elsewhere. Consumers shouldn't have to have a law degree and spend 2 hours reading through all the fucking fine print. IMHO they add all the fluff into the documentation b.c they know they will be able to dupe the average consumer who won't read everything. even after reading you are not likely to remember every little detail.

7/2/2008 12:34:12 AM

Any time there is a change in rate or terms of agreement I am notified by my creditors. Yes, the details of the terms are pages of crap but they make key figures and concepts in large font and bold. Its easy to scan a statement or offer and see the different rates, fees, and conditions. Its all a matter of understanding how credit works and understanding the common terms (IMHO, a full year of Personal Finance should be mandatory for a high school diploma).

7/2/2008 1:05:35 AM

Well, OK -- I get the "caveat emptor" style arguments here. But seriously, this isn't fair dealing and it sounds more-or-less like a breach of contract tort. A credit card isn't just some arbitrary implement of capitalism, it's a contractual relationship and I think it's fair to say that companies can't just up your rate with no good reason. And I think it's also fair to expect the courts to uphold the "good reason" part of it.

Of course this is sleazy dealing on the part of the credit companies who know most consumers affected by this won't be able to afford an attorney to fight them. I'm sure some guy will eventually pony up a class action suit but by then the companies will have pocketed millions. Their MBAs have done the math already, I'm sure.

As should be obvious, making the practice illegal isn't feasible. How would you word such a law? Even if you did, it'd just be a tort and we'd back to the current situation which is, poor people who can't afford attorneys ...

[Edited on July 2, 2008 at 2:19 AM. Reason : foo]

7/2/2008 2:19:15 AM

I think it's unfair to say that companies can't just up your rate with no good reason

7/2/2008 11:44:06 AM

I don't see what's wrong with companies increasing your rates for any reason they want to as long as they tell you exactly why they did it.

7/2/2008 12:50:22 PM

so where are the comments about racism in this thread?

7/2/2008 12:55:33 PM

so someone can buy something on credit with the idea that their rate is one thing, and then make all their payments on time and then the credit card company says "oh yeah, we have a hunch you'll default, so we're raising the rate". THAT seems ok?

7/2/2008 12:55:56 PM

i don't think people should buy re-treads for safety issues...but in general, this is pretty fucked up...another example of a financial institution fucking up and making the good customers pay...the credit card companies issue too many approved cards to people who dont have good credit...the cards get outstanding balances, the credit card companies lose money...they dont think they can collect from the people with shitty credit, so they try and recoup their losses from the legit customers since they know they have the ability to pay

7/2/2008 1:01:36 PM

^^yes. they're the ones being nice enough to give you credit to buy your big screen tv's that you don't need anyway, so why shouldn't they be allowed to up your rates?

[Edited on July 2, 2008 at 1:03 PM. Reason : .]

7/2/2008 1:03:23 PM

how can anyone bitch about a deal that you willingly enter - they have to provide the terms to everyone - if you don't read and understand them then it's your own fault - not all credit card companies are doing this - go to the ones that don't....

7/2/2008 1:06:09 PM

^^you're making it sound like they're doing people a favor. they're making money off of this deal already. it is in their best interest to obscure the truth from their customers.

^most reasonably assume that if you make your payments and generally don't fuck up, your rates won't increase. and once someone has a debt with a credit card, it isn't quite as easy to move to another card

[Edited on July 2, 2008 at 1:09 PM. Reason : .]

7/2/2008 1:07:29 PM

i think its shady, but i'm sure there is some fine print about how rates might raise...i'm sure they have covered their backs with fine print legal mumbo jumbo...they definitely have lawyers coming up with all the verbage

7/2/2008 1:15:46 PM

Quote :

"...and once someone has a debt with a credit card, it isn't quite as easy to move to another card"

i get 0% balance transfer offers all the time? most credit cards allow you to transfer the balance upon obtaining the new card

7/2/2008 1:17:39 PM

you could just not carry a balance on the damn things, then the rate doesnt matter

7/2/2008 1:21:46 PM

it's shady. i'd just move to someone else in protest and let them know that's why.

7/2/2008 1:24:07 PM

Quote :

"^^you're making it sound like they're doing people a favor. they're making money off of this deal already. it is in their best interest to obscure the truth from their customers."

they are doing people a favor, though. they're allowing you to get the fancy toys that you want now without having to pay full price up front in exchange for (hopefully) manageable monthly payments with a bit extra tacked on for their trouble. if you don't like the arrangement then get another card or just don't use one altogether.

7/2/2008 1:27:19 PM

you make it seem like everyone who uses a credit card is an irresponsible person who buys things they can't afford. and it's hard to drop a card if you already have a balance on that card.

7/2/2008 1:39:02 PM

yeah, credit card companies don't allow balance transfers, or they charge you out the ass for it....



its already been said, but the ability to transfer balances with no penalty and often a period of no interest is a major tactic for getting people to switch companies. do you even have a credit card? if so, you need to investigate more. if you don't mind slowly fucking your credit, you can avoid paying debts for a long time with repeated balance transfers

7/2/2008 1:48:02 PM

i actually wasn't aware of that. but i don't generally carry a balance on my card anyway.

7/2/2008 1:50:21 PM

So many of you are talking out of your ass and have no clue what this thread is talking about.

The issue here is CC companies raising rates (sometimes double or more) after the consumer already has a balance on the card. Say you had a card with a $3,000 limit and were carrying a $2,300 balance.

The company gets some "information" that your "risk factor" has increased and your rate doubles without warning. This can be any reason at all and you do not have an oppertunity to dispute it.

Many people do not have enough money laying around to pay off their credit cards on a whim, so they get stuck paying the butt rape interest rate until they can pay the card off or transfer the debt to a new one.

The other trick is slashing the credit limit to the account balance so that the cardholder gets stuck with an overlimit fee on the next statement. This is also commonly done with no notice.

You are right that people can avoid these situations by not carrying card balances but many american families do carry credit card balances. The banks are taking advantage of the situation by substantially changing the terms without notice or sufficient disclosure that it would happen.

7/2/2008 3:32:52 PM

They need to raise rates for consumers with a higher risk of default. That's just smart business.

7/2/2008 4:05:46 PM

Which increases the likelyhood of default.......which is what they wanted anyway.

If the customer had a high risk of default they should not be leaving the account open. (assuming they do not want a default) They should close the account and leave the terms the same so that it gets paid down.

The truth is they want the default and late payments. They collect more in fees.

7/2/2008 4:27:24 PM

Right, some of the consumers will have to pay late fees which will more than make up for the consumers that never pay. The credit company has to sell off this debt for pennies on the dollar.

7/2/2008 4:29:58 PM

Here's the problem with the argument that this tactic (while certainly shady) is somehow retroactively altering the terms of the agreement - you signed up for a variable rate when you got the card.

Read the fine print they put in your bill sometime - anytime the Fed jumps the prime rate, they'll up your rate. Anytime they bloody well feel like it, they'll up your rate. Choosing to do so because of econometric models rather than what's going on with the Fed isn't exactly some wild new phenomenon - they raise your rates all the time after you sign up.

And for people bitching about the lack of disclosure - actually read your bill. Printed very clearly on each bill you get from your credit card is your current APR - something you may actually want to pay attention to, given that it's costing you money.

So again - read the fine print before you sign. And if you don't like it, stop using that card. It's not exactly a difficult situation, here.

7/2/2008 10:05:37 PM

wait.. what other business doesn't raise its rates when it wants to?

7/2/2008 10:18:22 PM

The ones that honor their contracts.

7/2/2008 10:39:52 PM

Read the contract, though. CC companies pretty much spell out that they can raise rates whenever they feel like it.

In other words, they're dick contracts. But the terms are in the contract.

7/2/2008 10:44:40 PM

Quote :

" The company gets some "information" that your "risk factor" has increased and your rate doubles without warning. This can be any reason at all and you do not have an oppertunity to dispute it."

Ok, I seriously doubt they are raising the rates without warning; most likely, in the bill for January they will include a statement that your APR is increasing from 12% to 24%. However, if you fail to read that, the 12% increase in your APR on your $2300 balance should only amount to about $23 a month, which should not be enough to bust most people.

7/2/2008 11:43:06 PM

I'm not entirely sure that they can lower your credit limit to a value below your current balance. That would seem to be outright illegal, or, at the very least, it should be. Hehe, that'd be an easy way to make a shit ton of money fast.

7/3/2008 1:03:31 AM