The credit card industry is imposing their will onto the American public using tactics that are illegal and unethical, and they are operating free of regulation with no fear of penalty or retribution. Their goal is to trap literally every adult American into perpetual debt.
The record number of complaints at Better Business Bureaus indicates that most people object to tactics used by issuers of credit cards, but most of us do not understand how and why the banks are able to operate as they do.
The answer is that we allow them to take advantage of us in the same manner that we have allowed mortgage lenders to fleece us. Their ability to impose their will upon us is spelled out in the agreements or contracts we sign to enroll in their services.
The credit card banks utilize Harvard attorneys to construct agreements laden in legalese, unable to be understood and interpreted by layman. In the fine print of credit card agreements is a “default clause.” It permits the banks to alter the terms and conditions of the agreements, at any time, for any reason.
Since the banks operate under no legal restrictions with regard to interest, late fees, over the limit fees, etc., they “trap us” by suddenly raising interest rates to outrageous levels, 28 to 32%, making it difficult for most people to make payments on time. When our payments are late, they levy ridiculously high late fees. The next step is to eliminate credit limits, which often triggers over-the-limit fees.
The goal is to get cardholders overextended with credit prior to initiating these strategies. To encourage overextension of credit, the banks use slick marketing campaigns offering frequent flyer miles, cash back bonuses, and zero percent interest rates.
According to Robert McKinley, founder of Cardweb.com and Ram Research, less than 16% of cardholders are presently able to make more than minimum payments, leaving 84% of cardholders in a position of perpetual debt.
Many people refuse to believe the credit card banks would jeopardize future profits by potentially bankrupting clients. But please understand - the banks will ultimately collect from clients. Where does government bailout money come from? Taxpayers. And what percentage of cardholders are taxpayers?
Also, if cardholders default, the banks have contracted with Credit Counseling Agencies to restore delinquencies and bring payments current.
These Agencies offer counseling and advise as to budgeting and money management. But more importantly, they set clients up on Debt Management or Debt Consolidation programs with lower, more reasonable interest rates that allow for more affordable payments schedules.
Please be aware - Credit Counseling Agencies, which typically operate under the guise of “non-profit,” are actually funded by the credit card banks and are therefore glorified collectors. Irrespective of their claims, Debt Management or Debt Consolidation programs destroy credit. These programs are analogous to bankruptcy in the minds of most lenders.
A former employee of a credit card bank recently made a confession further confirming the banker’s aspirations to keep us in slavery to them. She said they refer to cardholders who pay their balances in full each month as “deadbeats”? They are vicariously labeled as such since they are not profitable clients for the banks. According to her, the banks strive to convert “deadbeats” into “revolvers” - cardholders who keep revolving balances – referred to by the banks as the “sweet spot” in their client base.
Once sucked into the “debt trap,” there are few viable options for recovery. Debt Settlement destroys credit and invites litigation. Very few people have sufficient equity to pay off credit card debt with a home equity loan. And most people are unable to discharge credit card debt via Chapter 7 bankruptcy since most bankruptcy attorneys lead them to believe that they can only qualify for a Chapter 13 repayment program. According to paralegal and legal researcher, Jeffrey Smith, less than 90% of debtors successfully complete Chapter 13 bankruptcy payment schedules.
Elizabeth Warren, a Harvard law attorney who has researched the growing credit card problem, says most people “are embarrassment to the point of shame with respect to their inability to get their debt under control. Very few of them understand they were sucked into a system destined to destroy their financial efficacy.”
Is it futile to spend our time and energy fighting the system and expecting a kinder, gentler credit-card-issuing monster to emerge? The credit card industry is a 30 billion dollar industry and has been successful in defeating every legislative attempt to protect consumers. The federal government appears to be more interested in protecting the banks from regulation by state agencies and state consumer protection laws than protecting the public from the credit card monopoly. And it is destined to become increasingly difficult to conduct business without the use of credit cards as we move toward a cashless society.
Perhaps the solution is to locate remedies that allow us use of credit cards while insulating us from the shackles perpetrated by this powerful monopoly.
Doug Johnson is a talk radio show host, lecturer, and consumer advocate who has spent the past ten years researching potential outside-the-box remedies for the relief of debt and restoration of credit. He can be reached at (888) 449-4924.
