Credit Card Companies Step-up Their Rip-Off of Americans

Joining me in sending this message to Legislators:

Americans are struggling financially, and as times get tougher we often have to rely on our credit cards to get us through. Yet the banks and credit card companies — many of which have received billions in taxpayer bailout money — continue their abusive practices, hitting customers who make their payments on time with sudden interest rate hikes and new fees. I urge you to put in place credit card reforms right now (S. 392, S. 235, S. 414 and HR 627) to prevent these abuses. In this economy, consumers can’t wait until mid-2010 for the Federal Reserve Board to implement rules that will help curb these abuses.

In recent weeks, several of the major banks and credit card companies raised interest rates and fees yet again. The media reported Capital One hiked interest rates to 17.9 percent from 12.9 percent. Citibank raised their rates an average of 3 percent. While over at Chase, customers had a “choice” of paying a $120-a-year fee and a higher minimum payment, or paying a higher interest rate. I don’t understand why interest rates for consumers are so high, when the interest rate banks charge each other for overnight loans is as low as 0 percent.

As a responsible credit card consumer, I shouldn’t be subjected to unexpected interest rate increases and fees, which only drive up my costs during these tough economic times. The Federal Reserve Board recently agreed to important new credit card reforms which would curb many of these abuses, but those rules will not go into effect until July 2010.

I can’t wait until 2010 to get real help. I urge you to pass and implement legislation now that will reform credit card tactics so my family and I can get some real financial relief. These measures include:

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— Preventing my card company from changing the rules of the game midstream. Companies shouldn’t be allowed to arbitrarily hike the interest rate on my existing balance. A deal should be a deal.
— Requiring card companies apply my payments fairly across my different balances, not just to the lowest-interest balance. That’s just common sense.
— Controlling the size and duration of penalty interest rates. Companies shouldn’t be able to keep me at usurious interest rates forever only for one late payment or another minor infraction.
— Ending abrupt reductions in my credit limit, which negatively affects my credit score through no fault of my own.
— Providing an adequate amount of time to pay my bill on time by requiring my bill be sent out no later than 21 days from the due date.
— Preventing fees just to pay my bill online or on the phone.
— Ending aggressive marketing of credit cards to young people who need a chance to establish themselves without a heavy debt burden.

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As you work to help our nation’s businesses recover from this economic recession, I urge you to also help American families fairly pay down their debt and stabilize their personal economic situation. Please pass credit card reforms now. Families can’t afford to wait another year-and-a-half for an economic rescue.

Stop credit card companies from ripping-off Americans.

21 Responses to "Credit Card Companies Step-up Their Rip-Off of Americans"

  1. gazelle1929  March 2, 2009 at 8:04 am

    Beyond that, even, I use credit cards both in self defense and as an offensive weapon. Merchants add on a fixed percentage to cover the costs of accepting credit cards. You and I and everyone else pays this fixed percentage, but there are a couple of things you can do about it.

    I charge almost everything I buy onto one or two credit cards, then pay off the balance every month. Each credit card pays me back as a cash rebate a floating percent of what I charge. I just recently deposited to my savings account two checks totaling over $500, representing about five months of purchases. Where’s this money coming from? See first paragraph.

    I also use the credit card as a bargaining tool on major purchases. It costs me exactly nothing to offer cash for large purchases in exchange for a negotiated reduction in the price of the item. My spouse recently purchased a $600 chair and we got four percent off for giving them a check. That’s $24 kept in my pocket, which beats hollow the 1 percent “kickback” from the credit card company.

  2. zerealbigboss  March 2, 2009 at 10:27 am

    There are invariably always good ways with anything, and level-headed use of a credit card, as apparently you do, makes it a positive instrument. In order to keep a grip on the market where credit cards are not liked, in many countries (Western Europe, New Zealand) banks issue debet cards; with these one pays as with a credit card, but the amount is at the moment of payment written off from the bank account and transferred immediately to the seller’s account. In such case one can only spend what one actually has.

  3. pstern  March 1, 2009 at 8:29 pm

    Not totally true, zereal.

    You can use credit cards intelligently by paying off the balances of your purchases every month. Then it’s a convenience [you don't have to carry a lot of cash] and you are not charged interest, fees and/or penalties.

  4. Bluesman2007  March 2, 2009 at 8:07 pm

    “The contract you entered into has everything to do with it.”

    The “contract” which you so slavishly refer to would, in court, be deemed a contract of adhesion. You’re not on par with the banks as far as negotiating that contract. That means, either you sign it and accept the terms (even if they’re written in such tiny print that no one but Superman can read them or you get no credit card. Disagree with the terms and conditions? Tough buns. No credit card.

    They are contracts of adhesion much the same as those parking lot “contracts” you get when you park your car. That “contract” says they’re not responsible for any damages to your car. That’s not true. They are. Those contracts can NOT be used to bargain away your legal rights.

    Businesses do try though. LOL. They try really hard. They try to limit their warranty liabilities all the time but they can NOT bargain away common law and statutory rights.

    Right now the banks are punishing consumers for the BANKS’ misdeads and not for consumer abuse and they should be called to task for it.

    Right now the banks are STILL hoarding money given to them by the stimulus bill. I’m against the stimulus in principal because it rewards bad behavious. Period.

    Personally, I think the stimulus should have gone to the people – i.e. trickle UP and not down. Decades of experience and countless economists have tabbed trickle down economics as voodoo economics and for damned good reasons.

    If the PEOPLE have the money,they spend it. THAT will stimulate the economy.

    In these tight times people have slowed discretionary spending to a bare minimum and THAT is what’s holding back any recovery. I don’t think banks other other financial institutions rewarding CEOs billions in bonuses is going to fix anything. Since when do reward CEOs for failed practices? Am I the only here who thinks this is utterly and completely bassackwards?

    If MY business fails, should I be rewarded or should I be forced to do a better job? you tell me!

  5. woody188  February 26, 2009 at 6:00 pm

    I have not had this issue but I have a high beacon score. In fact, Chase just raised my credit limit again to over $25,000. I can’t imagine being that much in debt on a credit card but that’s what my limit supposedly is set to now.

  6. gazelle1929  February 26, 2009 at 9:35 pm

    What would happen if every credit card company in the US closed its’ doors? What keeps them from saying, “Your credit line is now zero. No more credit. Pay what you owe according to your existing terms and conditions, then you can use your credit card to scrape the ice off your windshield, because that’s all it’s going to be good for.” Of course if that happens most people aren’t going to have gas to put in their cars, so ice buildup ceases to be a problem.

    These people are in business to make money, not to provide a piggy bank for customers to drain down to the last farthing and then default on the payments. But that’s what’s happening. We can all bitch and complain about whose fault it is, but at this point fault is irrelevant. We have to deal with the situation as it is.

    And the situation is that the percentage of people behind in repayment of credit obligations appears to be at an all-time high, at least in the memory of anyone now alive.

    Citicorp, symbol C on the NYSE, dropped from a high of almost 60 18 months ago down to close at less than 2.50 today. A paper loss of around 95 percent. And other banks have similar miserable track records. Again, it is not the time to scream about whose fault it was, it’s time to damned well do something about it. Otherwise, millions of you will have no credit available at all.

    And the only way banks make money is to charge interest and to charge for the services they provide; I am always amused when people bitch about having to pay a buck or two to withdraw money from an ATM. “It’s MY money! Why the hell should I have to pay the bank to get at it?” The answer is, you don’t HAVE to, but you are addicted to the convenience of being able to drive your gas guzzler up to the machine and let it idle while you look for your PIN. Those damned machines are expensive. The networks to provide secure communication between the ATM and your bank are expensive. The bank pays interest for the cash sitting in the ATM waiting for you to draw it out. The bank pays someone (usually at least two someones these days) to drive out to the ATM and fill it up so you can conveniently get at your money.

    But the bitching now is about interest rates and fees charged in connection with credit card banking.

    Let me address a few of the specific items Mr. Stern identified as angering him:

    “Companies shouldn’t be allowed to arbitrarily hike the interest rate on my existing balance.”

    Well, the truth is that they don’t do that. When you get the credit card you enter into a binding contract with the bank, one in which the rules are fully and fairly set out. Among these rules is wording about how much interest the bank can charge under varying circumstances. Late payment, for example, allows the bank to hike the interest rate. Who agreed to that stipulation? You did. It’s right there in writing. If you didn’t read the fine print it’s your problem, not the bank’s.

    And why does the bank hike the interest rate? Primarily because their risk factors just went way the hell up when you made a late payment. Their statistical analysis tells them what the risks are across the board, and when you didn’t pay on time you put yourself into a new position on the board. Don’t blame the bank because you made a late payment. They didn’t prevent your making a payment on time.

    But let’s say that the bank decides to change the rules in the contract. The contract says they can do this. They advise the customer in advance that the rules are changing and give the customer two options: accept the rule change or notify the bank that you do not accept the rule change. If you don’t accept the bank refuses to extend you further credit and requires you to pay your current obligation under the preexisting rules.

    There is not one thing unfair about any of this.

    Mr. Stern wants the following rule in place:

    “Requir(e) card companies (to) apply my payments fairly across my different balances, not just to the lowest-interest balance. That’s just common sense.”

    I’m assuming this refers to cases where a customer has two or more types of credit outstanding, usually credit card purchases and cash advances, which almost always have different interest rates. Again, it’s the banks’ rules, and you agreed to the rules. Common sense has nothing to do with it. If you don’t like the bank’s rules don’t play in the game.

    Another on Mr. Stern’s laundry list:

    “Control . . . the size and duration of penalty interest rates. Companies shouldn’t be able to keep me at usurious interest rates forever only for one late payment or another minor infraction.”

    Why not? Fair has nothing to do with it. The contract you entered into has everything to do with it.

    Mr. Stern asks that his Congressional delegation “(s)top credit card companies from ripping-off(sic) Americans.”

    Better would be to ask people to stop entering into crappy contracts with banks. I am unaware of any case on record where a bank has put a gun to a customer’s head and said, “Take my credit, please.”

  7. griff  February 26, 2009 at 11:58 pm

    I would agree with most of your position. You are right about the credit card agreement, but I would say that if everyone actually read those and actually understood them, there wouldn’t be many credit cards being issued.

    I pay all my bills online and use Quicken for my finances, so my statements go unopened into the shredder. Any change of the agreement I receive by e-mail. I received one once and promptly transferred my balance to another card and cancelled that one. I could have opted-out and paid the balance at the original rate, as you correctly pointed out. I wasn’t late or anything, but their yearly review of my credit report showed high balances, so that was apparently enough to warrant tripling my rate. I had high balances because I had just built my house and was using credit cards between dispersements, and was never late nor had I missed a payment on anything. That is predatory.

    Another time, just last year, I was a few hours late paying another card. They had recently switched from a fixed payment date to a 30 day billing cycle and I logged on the day before it was normally due to see that it was due that day. Since I didn’t pay it before nine am, they of course felt the need to triple my rate on a five year old account that was never late and I always paid more than the minimum. That is predatory.

    I don’t know of many other businesses outside of banking that treats their customers in such a way. All of a sudden I’m a couple of hours late and I’m a huge risk? And supposing I was having trouble making payments, how is it helpful when you triple their payment? It may be their contractual right, but it doesn’t make much business sense, nor does it make it right.

    Banks make money in all kinds of ways. For instance, your money doesn’t just sit there in the vault waiting for you to come and get it. They take your money and loan it out and gain interest income from it. That’s how they can offer free checking or what not.

    I would partially agree with your assessment of ATM fees, but they are a convenience for the banks as well. They need less tellers and officers to service their customers. So ATM’s save them money in other areas. But come on, four dollars to make a twenty dollar withdrawal at the local pub?

    And something that really bothers me is mortgages, especially in the light of the subprime fiasco. Consider this. My mortgage payment this year is $1004, with principal and interest being 758 of those dollars. Of those 758 dollars, currently 160 dollars goes on the principal, and I have always paid an extra fifty to one hundred dollars extra principal since I took the loan in 2004, doubling the amount of principal that would be paid down if I made minimum payments.

    With that kind of up-front interest amortization schedule, very little of the principal gets paid down in the first ten years. When I took the loan my house was valued at 200,000.00. Now it’s worth about 170,000.00, of which I’m on the hook at this point for about 188,000.00. But I also locked in at 6% and have no problem paying my mortgage.

    If amortization schedules were a little more balanced in regards to the interest and principal allocation, maybe the drop in housing prices wouldn’t have had such a devestating effect, particularly for people that have owned for quite a while but only made the minimum payments. The disparity between value and loan balance might not have been so great and refinancing might have been a valid alternative.

    I know you’ll probably argue that the banks are taking a huge risk in loaning you such large sums of money, but I would believe that the majority of people caught in this trap would be more than happy to be able to pay their mortgage and remain in their homes, and hopefully learn something in the process.

  8. pstern  February 26, 2009 at 8:18 pm

    Gazelle, you’re right. I signed a contract with several credit card companies. I agreed to abide to certain rules if the company agreed to others.

    The company can do whatever it wants with any new/additional balances, but it can NOT charge the new rates and fees on the older existing balances and promos.

    But that is exactly what they are trying to do now.

    We also signed agreements with banks. How do you justify a bank charging you 50 cents per withdrawal of your own money when you did NOT sign a contract in agreement? Bank of America is trying to do this in places like NM. Are they providing you with a special service to remove some of your money? Or are we being punished for taking our money out?

    Apparently, you are of the belief as did the Bush administration that it is “capitalism” above all else.

    I wonder why it is that our wealthy corporate sectors agree to “capitalism” and “hands-off” government and deregulation when times are good, but then immediately whine for government “bail-outs” when they have acted stupidly and have lost money. Then they want government interference in the form of hand-outs.

    I guess that’s okay with you also?

    Whatever happened with business working with the community in good AND bad times. Why do credit card companies have to abuse customers further in these bad times? To make more money after they made a fortune for years but now they are in trouble so they will do whatever it takes?

    They are getting government assistance! They don’t have to do this.

    I assume responsibility for my debts and continue to pay them off; however, businesses are NOT doing that.

    They are being subsidized by government.

    There needs to be a different perspective. We have to be more receptive to working together during bad times and good.

    Banks and credit card companies are adding insult to injury with some of their current actions. We need to work together to rebuild our community — NOT just always take from each other.

  9. almandine  March 2, 2009 at 9:19 pm

    You know Pete… I think your idea of “capitalism” is askance.

  10. Colloquor  February 26, 2009 at 11:09 pm

    My wife and I have held a Capital One Mastercard since 1990, and we’ve never carried a balance, and have a credit limit of $15K on the card. Our FICO score is 835. We received “the letter” from Capital One on Monday, February 23. Capital One raised our interest rate from 9.9% to 17.9% effective April 17. If one should default, the default rate will be 29.4%.

    Granted, we view ourselves as careful and mindful stewards of credit, and take pride in our excellent credit. We feel we’ve been good customers for Capital One. But, I suppose if one looks at it from Capital One’s perspective, we’re only a liability, as they don’t make any money on us, other than what the merchant pays them on our transactions – quite significant each month I might add.

    But, this angers me beyond belief. We’ll let the card sit idle for a month or so, and then cancel the account. We don’t need this hassle, nor does anyone else who’ve been excellent stewards of their credit. Although the higher interest rate won’t affect us, as we pay off the amount upon receipt of each monthly bill, it’s simply the principle of their actions. It seems that in the USA, we punish the good and responsible people, and reward those who aren’t responsible. This “ain’t” our fathers’ or grandfathers’ country anymore.

    As the Mastercard is (was) the only credit card we carry, we sought out a small bank in Arkansas that specializes in issuing Visa and Mastercard accounts to those with only excellent FICO scores at a very low interest rate.

    Goodbye Capital One… “What’s in my wallet?” Not a Capital One card any more!

  11. griff  February 26, 2009 at 11:45 pm

    That’s what we have going on right now. Privatization of profits and socialization of the losses. Everyone pays.

  12. gazelle1929  February 27, 2009 at 12:16 pm

    Griff:

    The ATM in the pub charges $4 for a $20 withdrawal because the owner of the pub is getting at least half and probably 3/4ths of the fee. But it’s not like there’s no warning. I have been faced with that dilemma when I wanted to put gas into my Gazelle (29 Mercedes) at places (usually somewhere beyond yonder) that do not accept credit cards. They point to the ATM and I point the nose of the car up the road to another vendor or to a bank ATM. You don’t have to pay the $4, you have to want to pay for the “convenience.”

    As to the mortgage, the reason they charge the interest up front is because that’s the way mortgage interest and amortization works. In the first month of a $200,000 mortgage at 6 percent per year, the interest is $1,000; even if you don’t pay anything your balance due has gone up by that $1,000 in interest that accrued (became due) on your note. The bank uses a program to compute how much principal you have to pay in addition to knock off the mortgage in 15, 20, 30 years, whatever. They can’t apply more of your $1,200 payment to principal because the mortgage requires payments be made first to interest.

    But nothing precludes you from prepaying part or all of the principal which you are doing. I’ll point out to you, though, if you can net more than 6 percent by investing those extra payments somewhere else, it’s to your advantage to do so.

    No, I won’t argue that the banks are taking a huge risk by lending you large sums of money PROVIDED they have examined the risk factor properly and have determined that the risk is below a certain underwriting threshold. A whole bunch of years ago I worked in a bank and the lending officer pointed out to me that the business of banks is to rent out capital, not to buy and sell used cars or used properties. He told me that banks almost always lose money on a repo or a foreclosure and that they go to great lengths not to do that.

    What has happened, though, is that mortgage lenders have discounted risk and made loans to people they knew or reasonably should have known to be bad risks, based on the assumption that the market would keep going up and up. If anyone notices a relationship between the current state of affairs and the state of affairs with stocks in the five years preceding October 1929, they’d be correct. And the root of the problem is greed, both on the part of the lenders and the borrowers.

  13. griff  February 27, 2009 at 5:22 pm

    And that’s the gist of my argument – that the banks call the shots and we have to deal with it. There’s no reason why they can’t adjust amortization schedules, perhaps based on your risk factor. Maybe riskier borrowers should pay more interest up front as opposed to “well-qualified” buyers.

    I’ll agree that it is greed on both sides of the equation, but responsible borrowers are being shafted for the aggressive and foolish lending practices of the last few years.

    Where can I net 6% these days? Besides I prefer to pay down debt as quickly as possible. And why do customers borrow from banks at a much higher rate than a savings account gains? I think that the bank should borrow from it’s customers (savings accounts) at the same rate they stick us with. Perhaps there would be more savings, and hence more capital, available.

  14. gazelle1929  February 27, 2009 at 8:20 pm

    “There’s no reason why they can’t adjust amortization schedules….”

    You weren’t listening, Griff. They can’t adjust the amortization schedules because then it wouldn’t be a 15, 20, or 30 year loan. What I described is the way simple interest works. And that’s what a mortgage loan is, an example of simple interest.

    “And why do customers borrow from banks at a much higher rate than a savings account gains? ”

    See what I said up above. Banks rent out money. But they don’t have money unless people deposit it into the bank. The difference between what a bank pays in interest on the deposits they take in and what it charges as an interest rate on the money they loan out is their gross profit margin, out of which a bank must pay all its expenses: salaries, postage, computer, etc., etc., as well as putting aside reserves required for bad debts.

    “Where can I net 6% these days?”

    Let me introduce you to an old friend of mine, Mr. Madoff. Oh, sorry, he seems to have made off with all the money. Never mind.

  15. griff  February 28, 2009 at 10:06 am

    HaHa. I’ll stick to gold and silver, thanks.

    I think you miss the point of my argument. I think it’s outrageous that with most 30 year mortgages you end up paying more interest that you do the borrowed amount, mainly because of the pay-the-interest-first model. Just even things up a little.

  16. lyn  February 27, 2009 at 12:35 pm

    I am one of the (400,000) people who received a “change in terms” notice from Chase, referred to above, that informed me that they were no longer going to honor the agreement to furnish a “life of the balance” low fixed interest loan, in spite of the fact that I (and the others) had held up my end of the bargain without fail. What is at issue here is whether these banks can act like feudal lords, making and breaking agreements without consequences because they want more money, while if a customer were to do the same, s/he would be financially punished with default rates, penalties, bad credit reports etc.

    The situation is analogous to the bailouts in that the bank makes bad business decisions, and then uses the leverage it has been given by bad laws and a bad economic system, to extort more money from borrowers because they are relatively defenseless, and from the taxpayers, under the threat to bring down the whole economic system (or so we hear from our elected representatives.) I am using the term extortion in the legal, not metaphorical sense, as defined by the ‘lectric law library online dictionary:

    EXTORTION – The use, or the express or implicit threat of the use, of violence or other criminal means to cause harm to person, reputation, or property as a means to obtain property from someone else with his consent. USC 18

    The Hobbs Act defines “extortion” as “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” 18 U.S.C. S 1951(b)(2).

    ***

    Below is a letter I sent to the CEO of Chase, which lays out this issue, offered here for the consideration of the thoughtful readers of this blog. The first few paragraphs deal with the business of closing my account, and the substantive questions are covered in the following paragraphs.

    I was fortunate that my credit union was able to help me escape, because part of the new terms Chase imposed were monthly payments two-and-a half times larger than before, well beyond what I was told the loan would require in monthly payments, and thus way beyond what my budget could sustain. In the future, I will only use Credit Unions, which are non-profit, member-owned organizations, and I urge others to do likewise. While you used to have to work for a certain employer, or in a certain profession to join one, there are now many community credit unions that only require that one live or work in a certain geographical area. Check it out! Energetic people might even consider the public service of founding one, if one isn’t available in your area.

    My letter:

    February 22, 2009

    Mr. Jamie Dimon
    Chief Executive Officer
    JP Morgan Chase
    270 Park Avenue
    New York, NY 10017-2070

    RE: Closure of Chase MasterCard account xxxx-xxxx-xxxx-xxx

    Dear Mr. Dimon,

    Consider this letter a demand for the immediate hard closure of the above-referenced account, and that it be reported as closed at my request. A check in the amount of $13,542.13 was mailed to Chase on my behalf by the xxxxxxxxxx Credit Union on 2/18/09 to pay the outstanding balance per the current statement. I requested that amount be sent for the sake of convenience, however this letter is also to inform you that I dispute the amount.

    Included in that amount, per my statement of 2/8/09, is a $10 dollar special finance charge reflecting a “change in terms” unilaterally, and I assert illegally, imposed by Chase. It was removed from my checking account at the xxxxxxxxxx Credit Union on 1/28/09, abusing the authorization I had previously given Chase to automatically deduct my minimum monthly payment and I consider it a theft. I have never authorized this charge, and in fact it was deducted in a separate instance, as the due date for my loan installment was 2/2/09, when that installment was withdrawn. I have already revoked permission for automatic payments. Please order that a refund of that charge, and any interest purportedly accrued to it, be sent to me.

    My credit union assured me that their check issued on 2/18 has more than enough time to reach you and be credited by the due date of my next payment, 3/5/09, so be informed that if it should mysteriously not be credited by that date, I refuse to pay any penalties, finance charges, transaction fees or whatever else you choose to call them.

    I am directing this letter to you personally, rather than to your customer service department because:

    1) You are the CEO and ultimately responsible for Chase’s unconscionable conduct.
    2) In response to a question, posed by Rep. Shelley Moore Capito during Congressional testimony, as to why customers who had not missed payments were seeing increased rates, you said you’d personally deal with such customers.
    3) Chase spokespersons have publicly disparaged the hundreds of thousands of customers, including me, affected by Chase’s “change in terms” as “less than one percent” that were “carrying large balances” and “not making progress in paying them down”. These are lies and calculated misrepresentations designed to fool policy makers and the press and must be challenged.
    4) You, Mr. Dimon, have been quoted in the press as fearing a wave of credit card defaults as a result of the present economic crisis, for which, I might add, JP Morgan Chase bears significant culpability due to its creation and sale of intrinsically unsustainable OTC derivatives. I am asserting that the conduct of Chase with respect to myself and card holders “similarly situated” (to borrow from the language used in the eight class action lawsuits already filed on our behalf) was designed to cause default as a means to coercively exit agreements to lend at rates Chase decided were now insufficiently profitable.

    I’ll begin with the third point. The statements of Chase spokespersons would lead a person unconnected to the issue to conclude that our performance as borrowers had been in some way deficient, (“not making progress”) when the opposite is in fact true: we have impeccably met or exceeded the terms required of us. Had we not, our locked rate “life of the balance” loans would have been unlocked due to the default provisions of the agreement. This is the only “progress” that has any legal relevance.

    The other aspect of these, no doubt carefully crafted, public statements is a propaganda initiative designed to inappropriately join our situation to a pre-existing, widely covered policy debate. That is, the problem of borrowers who only make minimum payments on their accounts, which due to the usurious level of interest, results in them paying many times the original cost of their purchases, and taking decades to do so. Thus Chase’s decision to suddenly increase our minimum payments by two-and-one-half times is spun as somehow “helping” us get out of debt. In fact it has caused many of us serious financial harm by forcing us to liquidate assets suddenly, thereby accruing penalties, negative tax consequences, booking of heretofore-unrealized losses, or forgoing future expected gains.

    The interest rates we were promised, between 2.99 and 4.99 percent, were advantageous to us, and several points below what was being offered at the time for various consumer loans, including HELOCs, as well as not requiring, as your promotional material pointed out, papers to sign, fees, points, appraisals or liens. All that was required was a one-time balance transfer fee that was added to the principal amount of the loan. Nothing was mentioned, by the way, of the assessment in the future of an arbitrary $10/month “finance charge/transaction fee” that accrued interest at a higher rate. Your spokespersons of course have not provided a satisfactory explanation of how this charge helps us “make progress” and they can’t, because it doesn’t.

    Now for the question of the “accusation” that customers such as I were “carrying large balances” for a long time. Though this claim is contractually meaningless, as we were within our rights under the agreement to carry any balance that did not exceed our credit limit for an unspecified amount of time, it is important to evaluate that statement so Congress, the press and the public may judge how truthful Chase has been; I intend to distribute publicly a version of this letter, redacted for security. To demonstrate, I will use my account history, which I can document, though I am aware of dozens of people whose account histories would be equally illustrative.

    My account was opened in 1995, in response to an unsolicited offer from Chase informing me that due to my good credit, an account had been pre-approved for me. Over the years, Chase increased my credit limit several times without prompting from me. In June 2005, when I received the first offer for a fixed rate “life of the balance” loan, my credit line was $21, 100 and my balance ZERO. I borrowed $20,000 at the offered rate of 4.99%.

    In August of 2008, my balance was less than $4500 and my credit limit $25, 500. I received another Chase offer to borrow at the rate of 3.99% for the life of the balance. I borrowed $10, 500.

    Chase’s “change in terms” was sent to me and other customers in November, just three months later. Obviously, the reason for the change in terms was not because Chase considered my balance “too large” or “too long.” In fact, I had evidently not borrowed enough, as I was sent another offer in September 2008, which I fortunately passed up.

    I do so hope no one at Chase will send me a letter stating that they never received any objection from me to the new terms, and gosh, why didn’t I call to negotiate some arrangement. If a man with a gun breaks in through my bedroom window, I have to assume that he has no intention of leaving until he gets what he came for, something I wouldn’t willingly give. What would negotiation be in such a case, “Take whatever you want just please, please don’t kill me”? The “change in terms” offered less room for negotiation than that.

    Chase informed me that my minimum payment would be increased to 5% of the balance from the current 2%, that my account would be charged an additional $10 dollars per month whether I used it or not, and if I wanted avoid these terms I could pay my balance in full in the next statement and close my account. Period. Apparently I had quickly gone from “most valued customer” to persona non grata for reasons unknown to me.

    This brings me to the fourth point, what actually was “wrong” with your “most valued customers: we had made payments on time, without fail and we hadn’t exceeded our credit limits, leaving Chase with no legal justification for jacking our rates. I suspect that the accounts of customers with fixed low-rate loans were subjected to quantitative analysis based on our credit reports in order to profile customers who, while keeping up with their payments currently, would no longer be able to do so if compelled to pay more than double the present amount, were unlikely to have the ability to pay the balance in full on demand, and who would, nevertheless, make every attempt to meet your demands rather have their excellent credit ratings knee-capped.

    I hope that Congressional investigators and court proceedings will attempt to prove or disprove this assertion. As you are aware, the credit rating is no longer only a determinant of whether and under what terms a person may borrow; it is now being scrutinized by insurers, potential employers and landlords as well. The fine credit reputation established by this group of customers as a result of a lifetime of meeting financial commitments is a valuable asset.

    My suspicion is based on the fact that I have learned that not all customers with life of the balance loans received change in terms notices, and customers who did call Chase to try to negotiate were pressured to relinquish their fixed rates and accept a doubling of their APRs, in order to maintain a 2% minimum payment and avoid the $10/month additional finance charge.

    Yes, Mr. Dimon, I am accusing your organization of extortion. Though eight civil class action suits have already been filed, and at least two more are being prepared against Chase for violations of the Truth in Lending Act and other statutes governing unfair business practices, I believe that a criminal prosecution for racketeering may be warranted.

    I must tell you that until recently, I had no cause to be dissatisfied with the treatment I received from Chase, though I’ve since learned many others have. However, this conduct is so unethical, such a breach of trust, that I will under no circumstances do business with your bank again. But that’s not all. Your actions have created a movement of people determined to change some terms of our own, and we won’t rest until Chase, and your entire industry faces our terms: DEAL FAIRLY OR BE SHUT DOWN.

    Most sincerely,

    Lyn XXXX
    XXXXXXXXX St,
    XXXXXXX, NY XXXXX

    Cc:
    Senate Banking Committee
    Senate Subcommittee on Permanent Investigations
    House Committee on Financial Services
    Giskan, Solotaroff, Anderson and Stewart, LLP
    The Braun Law Group
    Wexler Wallace, LLP
    http://www.ChangeInTerms.com

  17. almandine  March 2, 2009 at 9:25 pm

    EXTORTION: a government program by which your money can be taken by anyone with whom you do business… most assuredly that same govt and its banking syndicate.

  18. pstern  February 27, 2009 at 1:15 pm

    Good for you, lyn, I agree with you. I think it’s outrageous that banks have become so feudal. People really need to speak up!

  19. incog99  February 28, 2009 at 6:56 pm

    Bravo Lyn, I wish I had the time to pursue the matter as you have. Last summer I got a phone call, out of the blue, from Chase. My account with a balance of about 12k was in good standing and I was overpaying the amount due by a large margin every month. Then, the lady on the other end began,

    “We have reason to believe you have done credit card fraud and may need to put this on your credit report.” Huh? Well she went on to say this is because I was issued two cards and failed to use them back on 2005. Huh? So I said you must take that off my report immediately. She said it was MY responsibility to check my credit reports and that she had said “MAY” have changed my FICO score. I was truely bewildered and furious at the same time. I told her Chase had just lost a long standing customer.

    I sent the entire balance in and paid off the account without closing the account since for some odd reason this will lower this FICO nazi tracking device.

    The answer to this issue is to simply stop doing buisness with these banks. I have successfully paid off all of my cards in 2008 and will never carry a balance again because I do not like the game they are playing. I suggest everyone else to the same. Maybe then the banks will go under like they should without taxpayer money.

    I have a small business so I use cards for the float but they are only for convenience. This is why, in the industry, I will be called a “deadbeat”, a term for those who pay their balances in full every month.

    The dirty little secret is that the bank prefers customers who go over limit and pay late, that is where the money is made. If you have a chance view the DVD documentary “Maxed Out”. The economist in that documentary predicts the mess we are in now and it was made in 2006. This is required viewing for anyone carrying a balance on their “credit cards”. It’s time to fight back and the way to do that is to pay them off and stop using the cards.

    “What’s in your wallet? A timebomb!

    incog99

  20. pstern  March 1, 2009 at 3:04 pm

    I agree with Griff. The key term is “greed”. It goes to the question of “How much profit is enough?” But the answer obviously has been and is that its endless.

  21. zerealbigboss  March 1, 2009 at 8:54 pm

    Only fools use credit cards; sane people pay cash so as not to spend more than they earn. For good examples look at Europe, Australia etc., but basically any country apart from the US is examplary in this.

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