An End to Rate-jacking is Cause for Celebration!

CRN is Holding a Contest!

It’s our way of celebrating the fact that in February of this year, the Credit Card Accountability Responsibility and Disclosure (CARD) Act will prohibit credit card companies from rate jacking consumers. This means that their pernicious practice of increasing interest rates on consumers’ existing account balances, for virtually any reason, will end. But before going into the contest details, I want to quickly outline why CRN believes that the end to rate jacking merits a contest.

There are many reasons why so many consumers struggle with crushing debt;  cut in work hours, job loss, medical issues, and other difficult events are just some of the more common. But rate jacking (also known as universal default) is another reason, and when consumers are rate jacked, they become the victims of greedy creditors searching for higher profits under the guise of risk management.

One of the effects of rate jacking is that it increases the cost of purchases consumers have already made and budgeted for. It also increases their monthly minimum payments, making it almost impossible, for many consumers to keep current. Some of these consumers end up having to pursue credit counseling, debt settlement, or bankruptcy to deal with their debts. Case in point, over the last several years, more than half of all the consumers CRN consulted with had had their interest rates increased.

Adding insult to injury, when a consumer is rate-jacked by one creditor, the consumer’s other creditors usually follow suit. Often, when this occurs, consumers who would have been able to get out of debt by applying a simple debt rollup strategy, lose that option.

During the months leading up to implementation of the CARD Act, the media has spilled a lot of  ink on this topic. I have also written about and spoken against rate-jacking more times than I can count. So, the end of rate jacking is a GREAT REASON TO CELEBRATE!

Contest Details:

Submit your personal rate jacking story to CRN no later than 1/31/10. You can submit it via the comment section of this blog post (see below), by email (michael@consumerrecoverynetwork.com) or send it by regular mail:

CRN
217 Cedar St. #281
Sandpoint ID 83864

There is no limit on the length of your story. The only criteria are:

1. You must describe having been “jacked” by one or more of your creditors and the effects that it had on you.
2. Your entry should indicate if you have resolved the problems that resulted from the rate jacking. If you have , please explain.
3. You must include your name (first name is sufficient), a valid email address and your daytime phone number (when submitting your story via the comment section of this blog, this information will not be made public). You may be contacted by me or another CRN debt specialist for additional details about your experience.

The winner will receive a FULL CRN Membership at absolutely NO COST! This includes the CRN “Settle Down” educational series, full service debt negotiation services, and unlimited one-on-one assistance and support from an assigned CRN specialist for a period of 2 years. Depending on the winner’s financial circumstances, and the results of program implementation, the prize value may be worth thousands of dollars. (prize is transferrable; see below)

CRN staff will read all entries and choose 6 semi-finalists. Then, a panel of CRN specialists, personal finance writers and well-known consumer advocates will choose a winner from those 6. The contest winner will be notified by phone and email, and will have 90 days to claim their prize. Their story will be published here on 2/15/2010.

What a unique opportunity to tell your story & win a great prize that can help turn your finances around!

Michael Bovee, CRN President

NOTE: CRN reserves the right to publish any contest submissions, but will never publish your name. CRN understands that some consumers who enter CRN’s contest may have already resolved the financial problems that were the consequence of their having been rate jacked. For example, they may have been forced to file bankruptcy. Therefore, if one of these consumers is chosen as the winner of CRN’s contest, that individual can transfer their prize to a friend, family member or co-worker who can benefit from a CRN membership. Who doesn’t know someone who could use help getting out of debt? Especially in this economy!

How’s that working for ya Mr. Banker?

I have long held the position: If banks cannot be profitable by lending money at no higher than 15% interest, they should be considered too incompetent to be a bank.

Currently the cost of money for the banks is next to nothing, but they loan it out charging consumers as much as 30%. That is quite a spread!

The argument I hear for high interest rates is often one of risk. The banks use available data from resources like your credit report which may (or may not) suggest that your behavior reflects a higher risk of default. This risk data is then used, by applying some twisted logic, as justification for increasing your interest rates. Let’s see… some arbitrary or even actual data shows an account holder is at higher risk for not being able to make one of their payments and so the bank’s solution is to increase your rates making your payment higher than those at a lower risk. Gee, that’ll assure timely payment! How’s that working for ya Mr. Banker?

Judging from the increase in bankruptcies, delinquencies and charge offs… Not so much!

Obviously, the current job market is adding to the payment pressure consumers are under, but even those who are employed are often just one interest rate increase away from the edge of a financial cliff. I speak to them daily.

This Bloomberg article from yesterday: A CLUE, shows that some in a position to affect change, via the proposed legislation, actually get it.  It doesn’t take a crystal ball to see that a cap on interest rates will provide for a future where consumers can actually afford to borrow, spend, and successfully pay back their debt, thereby assisting in an economic recovery. There are lawmakers who possess, or are willing to borrow from their constituents, the backbone needed to support a return to sound lending principles.

Yes, I understand that we are approaching an election cycle and perhaps there is a desire by politicians to look good at home, but this legislation has never been more relevant than it is today.

Let’s hope it gets the traction it needs this time!

Hopeful of Reducing High Interest Rates Results in Lining Scammers Pockets

FTC Sues Three Companies Marketing Bogus Credit Card Rate Reduction Programs to Consumers

The FTC announced this week that it had filed lawsuits against three companies: Economic Relief Technologies LLC, Dynamic Financial Group (U.S.A.) Inc., and JPM Accelerated Services, http://www.ftc.gov/opa/2009/12/robocall.shtm. The lawsuits, which were filed in Florida, Georgia and Ilinois, allege that the companies have been marketing worthless credit card interest rate reduction programs to consumers via automated phone calls, also known as ‘robo” calls. According to the FTC, not only have the companies failed to deliver on their promises, but their calls have violated the federal Telemarketing the Do Not Call Rules.

Telemarketers working for the three companies told consumers who were interested in the program that the program would allow them to save thousands of dollars in interest within a short period of time and would make it possible for them to pay off their debts faster. Consumers were also told that to achieve these benefits they would have to pay as much as $1,495 up-front, but were promised that if they did not save a “guaranteed” amount — usually $2,500 — they could get their up-front payment back. Few consumers ever received a refund however.

Consumers who want to learn more about their rights and responsibilities regarding pre-recorded telemarketing calls, should read the following two FTC alerts: New Rules for Robocalls and Reining in Robocalls, which can be found at http://ftc.gov/bcp/edu/pubs/consumer/alerts/alt162.shtm and http://ftc.gov/bcp/edu/pubs/business/alerts/alt161.shtm.

Consumers should know that they have just as much likelihood (if not more) of successfully reducing their interest rates with their creditors on their own rather than by paying someone to attempt to do it for them. If you try it on your own and you hit a brick wall, do not get discouraged. Try again a week or so later and you may have success.

One little tip for those consumers whose high interest rate credit cards may force them to make a payment late: Missing a payment by as a little as a week or two will often give your account a different status that will qualify you for interest rate and minimum payment reductions that were curiously unavailable to you prior to your late payment. However, I must stress that this strategy for getting such reductions is only appropriate for someone who was already unlikely to be able to meet the minimum payment requirement.