Ain't that America?

Just as Washington hands over the biggest bailout in history to Wall Street in what is ostensibly a way to free up credit markets, banks are looking for ways to collect more money from debt-submerged consumers. Along with adding climbing rates, inconspicuous charges, and adjusting credit-card terms, credit card companies like American Express are now penalizing customers based on where they shop and who holds their mortgage.

American Express spokeswoman told MSNBC that the company is reevaluating its exposure to risk. “We are looking at some other factors, too, in light of the economy. We are looking at consumers holding subprime mortgages (and) those living in areas where there has been a greater deterioration in home prices.”

The changes to credit-card terms include a major cut in credit limits, among other things, and mean that small businesses that rely on increased credit for operating costs will take a serious hit. But it’s the average consumer and family who needs to be keenly aware of shifting and nefarious credit card fees and rules.

As a glaring example of serious American ills and a country that believes spending is patriotic, credit-card debt increased more than 315 percent from 1989 to 2006. The nation has a collective debt of around $800 billion, which means that every man, woman and child is carrying a debt of around $2,900, with the average family holding about $10,000. In other words, the majority live on the edge, under water, and stuck in a revolving door of debt.

For banks that have gone deep in the hole as a result of the subprime crisis, industry analysts agree the easiest way to make money is to raise rates on existing card holders. In May of this year, Consumer Reports issued a warning to credit-card holders to watch for changing terms, including shorter grace periods and rates almost doubling even for cardholders who never had a late payment.

So what can you do about it? Scour your mail. Look for any changes in fees, rates, or credit limits. Hunt for hidden fees. And call and complain when you find them. And there might be recourse for some, thanks to the Credit Cardholders’ Bill of Rights. The bill would eliminate things like any-time, any-reason rate increases, due-date gimmicks, and retroactive interest rates without the opportunity to cancel the card.

The House passed the bill last month, which still needs approval from the Senate. Representatives Michele Bachmann and John Kline voted against the bill. Bachmann serves on the Financial Services committee and counts TCF Bank as her largest donor.

These new fees and charges, of course, are coming from companies like Citibank, which announced in October of last year that it would have a 60 percent drop in earnings due to the subprime fallout it helped ignite. Now the banks are shifting the burden on to consumers in an effort to protect themselves from further charge-offs in the future. And financial industry analysts agree that if you’re a bank that’s deep in the hole, the easiest way to make money is to raise rates on existing card holders.

Sounds like whacked-out conspiracy theory? Enter this personal tale of credit-card shenanigans: Back in February, I paid off my entire Citibank Visa balance in full through a balance-transfer on a zero-interest credit card from another issuer. I had been a Citibank customer for four years; I had autopay, so I never missed nor was late on a payment.

In March, I get a bill with a weird finance charge of $49. I call Citibank, explaining that I’d paid the bill in full before the end of the billing cycle and that the charge was a mistake. I had a zero-average daily balance for the entire billing cycle. How could there be a finance charge? The customer service agent, with a number like 084, said, “I have never seen anything like this before. [Me: Uh-huh. Riiiight.] It will be cleared immediately.” Done. Right? Nope. Not even close.

Continued: Click “Read more”The charge was never cleared. This month, I find that late-payment fees were tacked on to finance charges (for a zero balance), the interest rate skyrocketed, and now I owe something in the range of the $200 mark. Again, this is for nothing — for a zero balance. To make matters worse, my totally 100-percent clean credit score has now been tarnished because Citi says I was delinquent on payments. On top of that, I could be hit was cross-default charges and raised rates from my current credit card because of Citi’s practices.

So far I have spent about four hours on the phone with Citibank customer-service reps, managers, and supervisors trying to fix this problem. On Friday, a very nice manager told me everything would be cleared “as a courtesy” and my account would be current. I couldn’t even begin to fight the whole “as a courtesy” concept, considering Citi had done the screwing.

Yesterday when I called to make sure everything had been completed, I was told that my account was reviewed when it was “delinquent” and that it would have to go before a “review board” before my interest rate was dropped to 6.9 percent, what I signed on for originally. Currently, they have it inflated to 22.9 percent.

Now out of anger and frustration, I want to close the account and have nothing to do with Citi again. However that also would negatively affect my FICO score, again giving Citi the upper hand.

The American Bankers Association has continued to oppose any legislation that would protect consumers from such shady credit-card practices. Both of the proposed credit-card reforms, the Credit Card Holder Bill of Rights and the Credit Card Accountability, Responsibility and Disclosure, or CARD Act, would protect consumers from things like universal default charges and any-time, any-reason rate increases. And both have been opposed by Republicans and the credit card industry. (Only one Republican, Rep. Christopher Shays of Connecticut, supports the Credit Card Holder Bill of Rights.)

Comprised of credit-card companies, banks, and credit unions, the American Bankers Association is one of the most powerful lobbying groups on Capitol Hill. During the 2006 elections, and during the tail-end of the unregulated-lending heyday, ABA’s total contributions skyrocketed over previous election cycles, with Dems receiving $1.1 million in contributions and Republicans $1.9 million.

Sen. Chris Dodd (D-CT), who chairs the Banking, Housing, and Urban Affairs Committee, is the top Senate recipient for ABA contributions this election cycle, with $14,000 in total donations. Dodd is also the senator who introduced the CARD Bill, which the credit-card industry is fighting.

As for me, I’m still waiting on a call back from another manager. My fifth phone call in as many weeks.

As of late, consumer issues have been of little note in the election, despite the fact that credit-card delinquencies are skyrocketing, college costs are out of control, and credit-card debt has hit an all-time high of $800 billion.

Bob Sullivan at the Red Tape Chronicles blog has done a nice job of sorting where the candidates stand on consumer issues. While Hillary Clinton says there needs to be a “cap” of interest rates on credit cards of 30 percent (which hardly seems like a cap at all), she does call for a Financial Product Safety Commission to review all lending products. If such an agency were in place five years ago, for example, predatory lending would’ve never been the impetus for a virtual shutdown of the global economy.

Continued: Click “Read more”Both Clinton and Barack Obama have somewhat negligible plans to reduce the rising costs of student loans, and each has a number of plans for sorting out the mortgage mess, though some of it mirrors state laws that have reduced the current spate of predatory lending issues. Still, noticeably absent from both campaigns is a focus on the import of creating revamped consumer rights and a commission for strictly dealing with lending oversight.

Also noticeably absent? A consumer-rights plan from McCain. “The basic instinct of the senator is it’s not enough to go in after the fact and trumpet a lot of regulations,” McCain’s chief economic adviser, Doug Holtz-Eakin, told the Red Tape Chronicles.

Instead, as if the current economic crisis weren’t enough of a clarion call, McCain’s economic adviser says the senator is taking a wait-and-see approach: “Maybe by January 2009 we’ll have done the right thing with our regulatory agencies. If not, (McCain) will fix it.” And how? Why, through “fair and open” competition.

In other words, a plan no different than his voting record of handing rights over to the credit-card companies.

Related: McCain on housing crisis: Answer is–less regulation?
Charging back: Will credit cardholders get their due?