Journey Through the Maze: Unscrupulous Credit Practices Under Examination

"Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding.

He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February.

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said."

The somewhat unscrupulous credit practices employed by most banking institutions is certainly no news to most American consumers. As I wrote in a post last August, if you are an average working class American the odds are that either you or someone you know is either quietly drowning in debt and/or is maxed out. Sadly, that's become the state of many middle-class Americans. Equally unfortunate are the often experienced feelings of shame, guilt, and failure and hopelessness that accompanies this financial situation. There is a stereotype that most middle-class persons that find themselves deeply in debt brought the situation on themselves by irresponsible behavior. However, more and more persons that tried to play by all the rules to achieve the American dream are finding that dream buried beneath a mountain of debt.

While everyone acknowledges that banks are in business to make money, it now it seems that their motto is to make money by any means necessary.

Enough is Enough! People need to know that they can get out of debt and live debt free. It is not easy and will not be without some pain, sacrifice and patience. Living debt free requires a major change in mind-set and an understanding of the system that is designed to promote indebtedness.

Pamela Lyn

Panel slams banks over credit practices on Yahoo! News
By MARCY GORDON, AP Business Writer
read the entire article at: http://news.yahoo.com/s/ap/20070307/ap_on_go_co/congress_credit_cards_6

Summary:

An Ohio man whose $3,200 credit card debt mushroomed to $10,700 with interest and fees told his story Wednesday to senators who denounced the industry for confusing billing practices and shifting interest rates.

Executives of three major banks defended their credit card practices as responsible and responsive to consumers' needs in testimony at the hearing of the Senate Homeland Security and Governmental Affairs' investigative subcommittee.

Those from Citigroup Inc. and Chase Bank USA said their companies were eliminating some practices --- including the one that hit Wesley Wannemacher of Lima, Ohio, with over-limit fees on his Chase card account 47 times although he went over his credit limit only three times.

The interest charges and fees on Wannemacher's account more than tripled his debt despite his having made payments averaging $1,000 a year over six years, noted Sen. Carl Levin D-Mich., the subcommittee's chairman. He said an investigation by the panel found that "sky-high interest charges and fees are not uncommon in the credit card industry.

While the Wannemacher account happened to be at Chase, penalty interest rates and fees are also employed by Bank of America, Citigroup and other major credit card issuers."

Richard Srednicki, the chief executive officer of Chase Card Services, apologized to Wannemacher in his testimony. "In this case, we simply blew it," he said. Srednicki said the company has decided it no longer will charge over-the-credit-limit fees to customers who have been in a chronic over-limit position for 90 days.

Wannemacher used a new Chase card in 2001 and 2002 to pay for expenses mostly related to his wedding. He had $3,200 in purchases, interest charges of $4,900, 47 over-limit charges totaling $1,500, late fees of $1,100, for total charges of $10,700 as of February. He paid $6,300, leaving a $4,400 balance --- which Chase agreed to waive after he contacted the subcommittee staff.

"Debt seems to invoke a feeling of hopelessness unlike any other problem I've encountered," Wannemacher testified at the hearing. "When a debtor calls you on the phone and you make a minimum payment, you know that you've made no real progress and that in a month, they will be calling again."

While the credit card practices in question are legal, Levin is threatening possible legislation to outlaw them as a spur to the banking industry for voluntary changes.

Senate Banking Committee Chairman Christopher Dodd and other Democratic senators challenged credit card executives at a hearing in January over rising late fees and other penalties and marketing practices they portrayed as predatory.

Citigroup, the nation's largest financial institution, announced last week that it was eliminating the practice of so-called universal default --- raising interest rates for card customers because of their failure to pay other creditors on time.