Since this is credit card week at the DINKS, we wanted to share some of the major downsides of the consumer lending industry with you. To kick this off, we’re featuring a great interview on National Public Radio with Elizabeth Warren. Miss Warren is a professor at Harvard Law School who has written tons about bankruptcy and family finance. She’s a big opponent of many practices currently used by the credit card industry.
She was interviewed on NPR about a week ago. In the interview, she listed the following abusive tactics utilized by consumer credit companies:
1) Fraud: Many card companies commit outright fraudulent behavior. For example, they may lie when processing payments. So, if one sends money to pay off ones balance, some companies may illegally destroy the check or delay in crediting to your account.
2) Confusing Contract Language: Warren says that confusing wording in credit card contracts camouflages that fact that card companies reserve the right to charge whatever fees they want to.
3) Universal Default: Universal default is a practice which says that if you default on any of your financial obligations, the credit card company may raise your rate. The logic behind universal default is inherently abusive. If someone defaults on their other obligations (say a car or utility bill), then card companies take advantage of that to raise their rates. The reasoning is that people who default have credit problems and therefore will pay more to avoid further damage to their credit score.
4) Arbitrary Billing Dates: Many companies will change the due dates of payments at will. For example, one month the payment will be on the 15th, the next month the payment might be on the 3rd. The objective of doing this, according to Warren, is to harvest late fees.
Here is the link to the interview. Listen to it, you’ll want to cut up your cards afterwords.
Best,
James
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