New York Times To Congress: Fix Our Broken !@$% Banking System!

The New York Times published an editorial damning Congress’ unwillingness to protect consumers from a rising tide of unreasonable fees and penalties that have boosted the financial sector’s bottom line, while impoverishing millions of Americans.

The Times’ preferred solution to problems like universal default and the double-cycle billing is the Stop Unfair Practices in Credit Cards Act of 2007, S. 1395, a bill that has languished in the Senate Banking committee since its introduction in May by Senator Carl Levin (D-MI.) Neither Senator Levin, nor the bill’s four cosponsors are members of the Banking committee.

Senator Levin’s bill would be a boon to consumers if passed. Penalty interest rates would be capped at 7%, retroactive rate increases would be banned, along with double-cycle billing, and credit card companies would be prohibited from charging consumers for paying their bill.

The Times realizes that Levin’s bill is only a “good start,” and calls on Congress to “ban deceptive card offers outright, strengthen federal oversight and toughen truth-in-lending laws.” We agree that action is needed, but why not place the blame where blame is due?

Congress is capable of righting our ailing system, but so is the Administration. The Office of the Comptroller of the Currency is charged with ensuring the financial health of the nations banking system, and has broad regulatory powers that allow the Comptroller to influence billing procedures and interest rates. Instead, the Comptroller is a puppet of the banking system, putting the needs of financiers ahead of the needs of the people.

The Times is absolutely correct for highlighting the government’s failure to protect American consumers, but the blame should be evenly distributed.

Credit Card Buyer Beware [NYT]
S.1395 – Stop Unfair Practices in Credit Cards Act of 2007 [THOMAS]
Write Your Senator
(Photo: foxypar4)

Comments

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  1. gorckat says:

    Banking: Stop The Fees Unilaterally is a better title for the proposal.

  2. gorckat says:

    Also, won’t there have to be some kind of Consitutional reform since banks are based in states and follow state laws regarding interest rates? Or is that just a legacy of Congress staying out of states’ ways?

  3. B says:

    @gorckat: Actually, banks are already under all sorts of federal regulations, but those mostly deal with monitoring large transactions and making sure the banks don’t do business with countries like Cuba or Syria. Banks are also subject to privacy laws now, too, so adding new regulations wouldn’t be out of Congress’s powers.

  4. rickspeaks says:

    @gorckat:

    Surely the commerce clause could be used to get around the problem of State Rights. Congress uses it whenever they want to anyway (i.e. speed limits, etc…)

  5. jbelkin says:

    BofA is trying to charge me $39 because my payment was made on the due date but posted on the next day (even their next month’s agree I made the payment on the 3rd) and I made this payment in the branch!

    Apparently they can now just randomly reset the calendar and when they decalre end-of-day, it’s end-of-day.

  6. chimmike says:

    I don’t want government regulating banking any more. The more regulation there is, the more control gov’t will have, and the higher banking various fees will go.

    Spur more competition, and that will drive fees down.

    OR PEOPLE CAN STOP BEING SO FCKING LAZY AND SWITCH BANKS!

    Try WAMU! Anything!

    It’s not the government’s duty to protect lazy consumers…….that sort of thing is tantamount to impending further social assistance (more government involvement, which is BAD people).

  7. chimmike says:

    @jbelkin:

    and the way to solve this is: Join another bank. Or call BoA and threaten moving your money. They’ll fix it.

  8. tylerkaraszewski says:

    How do you guys choose the pictures for each post, anyway? I like the seagull, but I’m not sure how he’s related to the article.

  9. B says:

    @chimmike: I’m all for switching banks, but WaMu isn’t the best one to switch to. I’ve always found that the smaller the bank, the more reasonable the fees are, until they get bought out by a bigger bank, then suddenly you’re stuck with horrendous fees.

  10. rickspeaks says:

    @tylerkaraszewski:
    It’s because the Times is giving Congress “the bird”….

  11. swalve says:

    How about simply not patronizing banks that charge too much?

  12. rrapynot says:

    Use a local credit union. When I call I actually call the local branch and get one of the tellers. If you have a problem they fix it for you. None of this call center BS.

  13. DeeJayQueue says:

    Eventually you hit a wall and there’s a point with any service where you just can’t jump anymore. There are only so many cell phone companies, cable companies and banks out there. At some point you just have to accept that they’re ALL evil and they ALL do deceptive dumb anti-consumer shit.

  14. MalcoveMagnesia says:

    I despise banks just as much as anyone (and I lurrv my credit union; though I live 2000+ miles away from their branch, I’m on a first name basis with some of my C.U.’s employees)… but this is a great example of something the government shouldn’t be doing (increasing regulation). Customers can easily vote with their feet:

    Hate your bank? Move to a different one that’s less evil.

  15. vachaser says:

    My business is stuck in a semi-remote town with only one bank – BoA. We run quite a bit of money through there and it’s convenient to just walk down the street when we need to refill the register or make a deposit.

    Last month I started noticing that they charge now for making change. Huh? It’s $4, so it’s hardly worth driving to another bank as that will cost more in gas, but c’mon?

    $4 to make change. Wow.

    I’m glad I personally bank with a credit union, and so far they haven’t stooped that low.

  16. chimmike says:

    @rickspeaks:

    you really think the times is giving a democrat congress the bird? :curious:

  17. bohemian says:

    The problem is that even the small banks are starting to adopt some of the evil money sucking tactics the big banks have been using.

    Pretty soon you won’t be able to find a bank that doesn’t screw you blind. I think that is generally the industry goal.

    That is why they need to be regulated into behaving.

  18. whydidnt says:

    I think Consumerist’s post is a little deceptive. The article does not claim that the fees are “impoverishing millions of Americans”. It states this about the fees: “As a consequence many hard-working Americans who pay their bills are mired in debt”.

    Come on Consumerist – let’s try and keep the story straight, the NYT editorial and your interpretation of it are vastly different. Yes, the fees are expensive and it seems once they start, you can’t get out from underneath them. However, if history shows us anything is that the more things are regulated, the more expensive they get. Remember when the goverment regulated air fare? Lest you’re too young, flying was only for the rich and for businessmen. It was far too expensive for families to fly anywhere.

    The issues with credit card fees point to the value of sites such as the consumerist, where people should research the agreements they enter into and change to vendors that provide consumer friendly fees and rules. If enough of us actually had the gumption to do this, the bad guys would either go out of business or change their ways.

    Regarding the comments on state vs. Federal laws that pertain to fees and the governments right to regulate: My understanding is that is dependent on how the Financial Institution is chartered/incoporated – if it is federally charted –IE National in it’s name (or Federal in the case of CU’s) then Federal Banking regs trump the state. If is state affliated, then in must follow state regulations. Most credit card cos. are Federal Institutions as it makes it easier to offer consistent policies/pricing to a national group of consumers (plus it often allows for more of generous fees and rates).

  19. whydidnt says:

    @bohemian: That is a good point. I work in the Financial Services industry and can say for a fact that Federal Regulators have been pushing credit unions to increase “Fee Income” for the last several years. This is primarily because interest rate margins have been significantly squeezed over the last several years and without the fee income many smaller institutions would be out of business.

    Kind of a catch 22 if you ask me, but if I was running a small FI and the regulator told me to raise fees, you can bet I would.

  20. fredmertz says:

    How do you justify being in favor of legislating lower bank fees, but against natural fair market competition of allowing Wal-Mart to charter a bank, that would accomplish the same thing without false price ceilings?

  21. 7livesleft says:

    @rrapynot: That’s the best way to “stick it to the banks” without getting big brother involved.

    We’ve used our credit union for more than 20 years and have yet to be disappointed

  22. rickspeaks says:

    @chimmike:
    I think so, but I didn’t pick the image. I was using the alt tag for the image to figure it out for myself:
    “Times The Bird”

    I was just filling in the blanks.

    As for a Democratic Congress… While the Dems have the #’s, I think there is some discussion that can be made about the faults of the “checks and balance” system and who is *actually* controlling Congress.

    With that being said, that is probably saved for a different time as I don’t want to hijack this thread…

  23. Steel_Pelican says:

    I like the idea of using capitalism to fix this sort of problem, and normally I’m all for voting with our dollars before we get politicians involved.

    The problem is, there’s no place to go. The only way to take my business elsewhere is to store my money in my mattress, and not use credit.

    I’ve tried, but I can’t find a lender who doesn’t gouge me at every opportunity, or a bank that doesn’t screw me with arbitrary fees and penalties.

    Where is the credit card company that won’t deceive you with offers, or triple your interest rate at the drop of a hat? I’d love to take my business from WaMu, Chase, and Citi, and give it to them, but I don’t think that bank exists.

  24. mac-phisto says:

    @Steel_Pelican: if that bank exists, it is most likely a mutual savings bank. check in your area to see if one exists (they are most commonly called “mutual savings of X” or “savings bank of X” or “X savings bank”).

    to be honest though, you really should find out if you qualify for membership with a credit union. most people do. i have a fixed rate credit card with a credit union & that rate hasn’t changed in 10 years. a few months ago i forget about my payment & paid it online 3 days late, fully expecting a $30+ late fee. guess what – no late fee. my other credit union gives a full 10-day grace period on all loans before a late fee is charged.

  25. Lula Mae Broadway says:

    @whydidnt: “people should research the agreements they enter into and change to vendors that provide consumer friendly fees and rules”???

    Did you not notice the part of the editorial that stated: “The details are buried in deliberately arcane contracts that run 30 pages long and that even lawyers have trouble understanding.”

    And what kind of an agreement is it when the cards issuer can change the rate whenever they want for whatever reason they can drum up and even apply the change RETROACTIVELY? Even Tony Soprano doesn’t try to pull this%$#@.

    Your statement that “the more things are regulated, the more expensive they get” is the kind of bs blanket assertion I hate. Seems to me the less you regulate most things, the more vulnerable they become to greed-based abuses, see (China, food supply). If anything, it was the deregulation of the credit industry in the 80s that lead to the current consumer debt nightmare we have now.

  26. whydidnt says:

    @LULA MAE BROADWAY: So fill me in – what industries that have had increased or stringent government regulation have seen LOWER fees for consumers? Let’s see, Medicine? nope; Education? nope — please help me understand how my “general statement” is indeed untrue. There are examples of reduced regulation lowering costs to consumers — see airlines and long distance telephone for two obvious examples.

    If you are presented with a 30 page document for a credit card that you find confusing, then I suggest you simply refuse the card, and take your business elsewhere. I have owned numerous CC in my life time and NEVER been presented with a 30 page agreement – though each new regulation seems to add another page as the FI tries to comply. I also have NEVER had a rate increase retroactively. Every time a CC has notified me of a rate increase I was given the option to cancel the account and pay any remaining balance at the old rate. I assumed this was the law, but perhaps I just had good luck. But my experience is not as dramatically awful as reported in the editorial or even over-dramatized on this site.

    People — shop for your credit cards just like you do a good deal on gas!! Just because they send you a shiny brochure that promises you a card with a pretty picture on it doesn’t mean it’s the best card for your needs. Sheesh..

  27. mac-phisto says:

    @whydidnt: car dealers (in ct) have lower fees since increased regulation from the state dob. now, the late fee on any vehicle loan originated by a connecticut dealer can only be 5% of the monthly payment amount with a maximum of $10. before that, some of these loans were charging upwards of $30-$40 for a late fee.

    the state also required a more comprehensive disclosure of fees on the purchase agreement. now, if they charge you a ballyhoo fee, they better have an explanation of what the fee is for or they can lose their dealer license.

    i would say i mostly agree with your statement. regulation isn’t always the right answer & definitely shouldn’t be the first. but, it still has its place at times.