Credit Card Law Changes July 2010

Consumers have finally won a battle that was long over due. Last May regulators began discussions on passing new banking rules that would stop some of what I consider criminal tactics, used in the daily business of the Credit Card industry. These in my opinion are the first real Pro Consumer rules to pass in my 27 years of existence.

The banks will argue that they are going to lose billions of dollars. They are estimating as much as 10 billion at this point. However their argument has one rather large hole. The banks have calculated this using the revenue generated from the unlawful practices they have been using on consumers for years. Fees that if banks were the mafia they would have been charged with racketeering and loan sharking. But because they have “lobbyist” they have been allowed to screw the consumer in excess. Below is a summary of the Final Rule on Unfair Credit Card Acts or Practices. The Office of Thrift Supervision is urging banks to adopt this practices as soon as policies and systems can be updated but I will not hold my breath.

I. Interest Rate Charges- Banks will be required to disclose the annual percentage rate ( APRs ) at account opening and prohibits them from raising rates unless expressly permitted. The bank is permitted to raise rates after a specified period if the increasing rate was disclosed at account open. The bank is also permitted to raise rates on new transactions after an account is open for a year and after providing a 45 day advanced notice. They may also increase your rate on existing balances if you ( the consumer ) is more than 30 days delinquent in paying the credit card bill.

II. Reasonable time to day - Prohibits banks from treating a payment as late unless the consumer has been provided a reasonable amount of time to make payment. The rule defines this as a minimum of 21 days.

III.  Payment Allocation - This will require banks to apply payment amounts in excess of the minimum payment using one of two specified methods: by allocating the excess payment to the highest interest balance, or proportionately to all balances. ( In my opinion a concession so the Banks can still work interest fees at least partial to their advantage. )

IV. Double-cycle billing - Prohibits banks from using a practice called double-cycle billing where interest charges are assessed using your average daily balance over two months. This means if your balance was $1000 in one month and you paid $500 your average daily balance would be calculated with $1500 instead of $500. This especially hurts people who pay off their balance because they will still pay finance charges even though they pay their balance in full every month.

V.  High-Fee sub-prime cards- Prohibits banks from charging fees for granting credit through a sub-prime card using the majority of the available credit during the first year after opening the account. More specifically, fees exceeding 25 percent of the available credit must be spread over no less than the first six months that the account is open, rather than charged in their entirety during the first billing cycle.

Link to Office of Thrift Supervision Press Release

   So, I am reading an article by the AP on finance.yahoo.com about the auto bailout passing the house but looking at heavy opposition from republicans in the senate. Now at this point the government has doled out so much money, what is another $ 14 Billion ? The government whats someone to oversee General Motors and Chrysler when they take the federal financing, and Ford Motor Corporation should they participate , although they still are stating they have enough cash to stay liquid at this point.

   Now up to this point I am following and it is more or less what we have come to expect. Business is run poorly, bad decisions made, business going under, fed bails business out, tax payer left holding proverbial bag. They would leave us to believe that if we allow these companies to take the natural course of other mismanaged companies ( bankruptcy ) that we would be left it some sort of apocalyptic ruin. I could be wrong as I am not a studied expert of economics and the auto industry but really ?! There are businesses making money , buying , merging and hiring. Why ? Because they are well run with healthy cash flows and strong balance sheets. Is the consumer going to benefit from the Big 3 being bailed out. I doubt this because, whatever stipulations the government tries to impose will still be mediocre when compared to the technology we possess. People are getting 40 year old pickup trucks to run off of firewood, how is it that my car a 2002, gets 17 mpg city ( and its japanese ) . Or Ford makes the the 24 mpg fuel economy on their new Ford Flex seem like a real gas sipper. It goes without saying you are not going to get 24 mpg as no one lives in a perfect lab test enviroment. Yet, intel can put 291 million transistors on its core 2 duo chip die that measures in at a minature 88 mm x 88 mm .

    The clintcher for me though was at the very end of this article it says there is a provision for a pay raise for federal judges. Not only is that obviously not related in any way to the auto bailout but does the government not thing it is in poor taste to give these guys a pay raise in a bill that is going to add an additional tax burden to the American people. I can tell you the cause of our economic woes, greed. Greed is the reason that we did not have the oversight and measures in place to prevent the financial meltdown. Greed is the reason gas mileage sucks. Greed is the reason the government continues to pass bills with large sums of wasted tax dollars. Hey, at least the stock market went up some.

~ Matt

   This should come as no surprise. I am hoping to find more specifics as he laid out some detail to the stimulus package he is looking to be on his desk when he takes office. It should come as no surprise that he feels things will be worse before programs begin to show a measurable positive affect. So business as usual then. This should be obvious being that jobs continue to be cut in bulk.

   Barack is looking at spending billions of dollars but giving states a use it or lose it ultimatim. Jon Corzine stated that states have a back log of unfunded projects that could take advantage of an infusion of cash from the feds. And if businesses or smart they will position themselves to take advantage of this influx of money when it becomes available. Heck, I am evening trying to come up with a way to take advantage of this infrastructure funding should the bill be passed next year.

~ Matt

   I use to shop at traditional grocery stores for the food, and general home goods. I know for meat, you usually can not beat a good butcher but I never took the time to find one. Then as money got tighter I started using a great place called Trader Joes. They were not the best in price for most your groceries but they do care many items cheaper than their larger Stop & Shop and Big Y counterparts.

   Now of course the economy has changed greatly. And I am sure you know groceries have increased dramatically. Unlike oil and gas, the prices of milk, bread, meats and most other groceries has not fallen. I feel this is because they are using the economy to keep inflated prices , though I suspect their underlying costs have decreased. This leads me to warehouse discounters. I never joined because of the membership fee and having to buy bulk. This of course means that you may get more at a lower cost per unit, you have to store it and use it before it expires.

   I have joined Costco and can tell you with the greatest certainty that I have recaptured my membership cost many times over. The membership starts at $50 a year. For this to be worthwhile to a family of four ( me ) you would have to save $4.17 per month. I would say we have to go twice a month so now we are talking $2.08 per trip. Very easy to do. They offer a discount on gas as well which was useful while prices were crazy. That is not to say everything is a deal and cheaper than buying it from a mainstream supermarket. But if you have kids and go through milk and Orange Juice like I do you will save your membership costs on those items alone. They sell a store brand organic store brand of milk in a case of three. When compared to other organic milk brands it ends up being roughly buy two get one. And for the orange juice most stores charge $3.00 plus per 64 ounces. Costco sells these items in a case of four for which I think ends up being about buy two get two.

   In summary if you have one of these stores close to you I think the membership costs will more than pay for the discounts you will receive. And I forgot to mention, they carry very good apples that last for weeks, making them an excellent purchase. So check out the costs and benefits to see if you can start saving real money on those items we buy most often.

~Matt

AT&T Massive Layoffs 12,000 to Lose Jobs

Apparently AT&T has announced that they may cut up to 12,000 jobs.Apparently this will lead to the first time they have had a total drop in employment since merging with Bellsouth. Then there is DuPont which manufactures industrial products and they are looking to cut up to 2,500 jobs. Deep breath, let us not forget starbucks who has closed 600 underperforming stores to date, and I am sure there are more to come. This is in addition to the thousands of jobs already cut and only a couple weeks after Citigroup announced their massive layoffs of 50,000 jobs.
I know I sound like a broken record, but people need to tighten budgets and get some emergency savings in place. I am sure many of those who get cut in this next wave of layoffs are thinking to themselves , ” I never thought it would happen to me. ” People, if you have a private sector job, it is considered “at will employment”. That means at your will to work there and at the employers will to continue to employ and pay your salary. We are in hard times and can not stumble along with the dangerous mentality of shutting out worst case scenerios.

This all of course leads to my final point that you must always be learning and reading. The more skills you obtain the more marketable you remain and or valuable to your current employer. You need to make the time to continue to grow yourself as a person and as an employee. Because if they need you its less likely you will be let go , than if you are just going along with the flow like everyone else. Stand out, make a difference , and show how much value you are adding to the business. This of course will not make you invincible but it may be enough for them to hold on to you through the tough times.

~Matt