Now, thanks to Pier One and Chase Bank, I've decided to write something about the abusive credit card industry.
Credit card companies are largely unregulated and, thanks to some states' dismal laws, are able to charge interest rates equivalent to loan sharks - we're talking 25%-40% interest rates. I wouldn't doubt there are higher rates being charged (especially with fees tacked on).
Credit card companies are notorious for giving people more credit than they can afford - meanwhile handing them terms that will bury them in bottomless sea of debt should they become even momentarily late with their payments. In the process, credit card companies are systematically destroying the credit of millions of Americans - most of whom can least afford it. Charging anyone 25%-40% is dooming them to failure and, therefore, is predatory.
How is this possible?
Summed up by the PBS Frontline :
If you've ever looked at the return address on your statement, you may notice your credit card issuer is located in a state such as South Dakota or Delaware. That's because these are the states that have either weak or no "usury laws" meaning there is no cap on the interest rate that is charged. (View this map that shows the states where the top ten credit card issuers are located.) The federal government once had national usury laws that set a cap on the amount of interest that could be charged on a loan. But after the Great Depression, it repealed them and some states put no new usury laws in place. That's why Citibank, the issuer of Mastercard, moved to South Dakota, which has no cap on interest rates. (For more on the South Dakota story and how the credit card industry took off in the 1980s, read The Ascendancy of the Credit Card Industry)It is time to end this predatory behaviour that is destroying too many lives.
If a borrower is so risky that the bank claims they need 25%-40% interest rates to compensate, then the bank should not be lending money to that borrower. 25%-40% interest rates will surely doom the borrower - and this is the heart of predatory lending.
I call upon our Representatives in the State and Federal government to do something about this. Protect and help consumers. Here are some ideas of what the government should do:
- Encourage competition in the credit card industry. Offer favorable lending terms to banks that agree to interest rate limits.
- End loan sharking. Stop charging the poor rates that will doom them.
- Don't allow credit card companies to make predatory loans. Force lenders to establish that borrowers can pay off reasonable penalty rates, otherwise don't allow them to make those loans.
- Lend money directly to consumer. Why should banks and institutions be the only ones to get fair borrowing terms.
- Increase credit card companies' disclosure obligations. Make it mandatory for a credit card company to let customers know how long it will take to pay off their credit card if they pay the minimum balance.
- End "Universal Default" - the raising of a borrower's interest rates when they default or have too much debt with different lender.
If our government is serious about ending predatory lending, then they should not ignore the credit card industry.
What's Pier One Got to Do With It?
Pier One & Chase bank "congratulated" me by "upgrading" my account to Platinum level and issued me a new Pier One store card. However, after a call to the credit card's Customer Service, I learned that Pier One and Chase were deceptively issuing me a Mastercard. There was no Mastercard logo on the card nor mention of Mastercard anywhere, including in the agreement, nor did I ever apply for a full-blown credit card. This was supposed to be a "store" card. Plus, the new card's agreement obligated me to spend at least $1000 over the next 12 months at Pier One - something I'm not likely to do - thereby violating my "agreement" and harming my credit rating. The Customer Service supervisor said they felt consumers would appreciate the upgrade. I didn't and closed my account.