The Survive and Thrive Boomer Guide

Credit card reform law ushers in new era of protection for consumers

President Obama signed a credit law on Friday that will help consumers battered by tough economic times by limiting fee increases and interest rate hikes.

The Credit Card Accountability, Responsibility, and Disclosure Act bans unfair rate increases, prevents unfair fees, requires plain language for disclosures, increases accountability, and institutes protections for students and young people.

The Federal Reserve has adopted similar protections but its provisions won’t become effective until mid-2010.

At the signing of the bill in the White House Rose Garden, President Obama recounted stories of hard-working people who had problems with credit card issuers, and a number of ways credit card companies take advantage of consumers. Obama described the new rules:

So we’re here to put a change to all that. With this bill, we’re putting in place some common-sense reforms designed to protect consumers like Janet. I want to be clear about this: Credit card companies provide a valuable service; we don’t begrudge them turning a profit. We just want to make sure that they do so while upholding basic standards of fairness, transparency, and accountability. Just as we demand credit card users to act responsibly, we demand that credit card companies act responsibly, too. And that’s not too much to ask.

And that's why, because of this new law, statements will be required to tell credit card holders how long it will take to pay off a balance and what it will cost in interest if they only make the minimum monthly payments. We also put a stop to retroactive rate hikes that appear on a bill suddenly with no rhyme or reason.

Every card company will have to post its credit card agreements online, and we'll monitor those agreements to see if new protections are needed. Consumers will have more time to understand their statements as well: Companies will have to mail them 21 days before payment is due, not 14. And this law ends the practice of shifting payment dates. This always used to bug me… suddenly it was due on the 19th when it had been the 31st.

Lastly, among many other provisions, there will be no more sudden charges – changes to terms and conditions. We require at least 45 days notice if the credit card company is going to change terms and conditions.

So we're not going to give people a free pass; we expect consumers to live within their means and pay what they owe. But we also expect financial institutions to act with the same sense of responsibility that the American people aspire to in their own lives.

See "A New Era for Credit Cards" on The White House Blog for a clip of President Obama’s remarks at the signing.

The bulk of the credit card requirements in the new law will go into effect in nine months, which will be February 2010.

The bill calls for phasing in credit card protections, with the earliest provision – giving consumers 45-day advance notice of significant changes in credit card terms – starting 90 days after enactment of the law, which is this fall.

Consumer groups warn consumers to be wary because banks and other credit card issuers may increase fees and interest rates before the law's new requirements take effect.

Copyright 2009, Rita R. Robison, Consumer Specialist

Badly need credit card reforms pass the Senate today

Credit card companies are raking in billions of dollars from consumers in raised interest rates and fees.

A bill passed by the Senate today, HR 627, would provide more disclosures and restrict how fees and interest rates could be changed after consumers have obtained credit cards.

Consumer Reports Money blog offers the following summary of the bill’s provisions in the post “Senate Passed Credit Card Reform: What’s in It for Consumers”:

• Interest rates can’t be raised during the first year of an account. Customers will be notified 45 days in advance of any change in interest rates.

• Bills can be paid online or over the phone without incurring a processing fee.

• Customers must be over 60 days late on payments before their interest rate can be raised on balances; if the rate is raised, it will go back to the lower rate if customers make the minimum payment on time for six months in a row.

• Overlimit fees can’t be charged unless cardholders are told that the purchase will put them over their limit and they authorize it to go through anyway.

• If your card has more than one interest rate on balances, then payments must be applied to the highest interest rate first.

• Gift cards can’t expire for five years, and issuers can’t charge dormancy fees for unused amounts left on the card.

• Credit card statements must be mailed out 21 days before they’re due.

• Individuals under 21 will need a co-signer on their cards unless they can prove that they have the means to make payments on their own.

• Credit card agreements will have to be posted on the internet.

The American Banking Association doesn’t like some parts of HR 627.

“The goal in the legislation should be to obtain the right balance: providing protections, while maintaining the important role of credit cards in providing loans to consumers and small businesses,” said the association in a statement on the bill. “Unfortunately, we believe the bill does not achieve that balance and will therefore cause an unnecessary decrease in credit availability.

“Most importantly, this bill fundamentally changes the entire business model of credit cards by restricting the ability to price credit for risk. What has been a short-term revolving unsecured loan will now become a medium-term unsecured loan, which is significantly more risky…"

Senator Christopher Dodd, D-Conn., said on his blog that consumers have the right not to be deceived, misled, or ripped off by unfair and arbitrary credit card industry practices that have become commonplace.

"Unfortunately, as the use of credit cards has soared, so too has the list of predatory practices, hidden fees and sudden interest rate hikes to which the industry has increasingly resorted – 'any time any reason' interest rate increases, 'double cycle billing' that charges interest on balances that the consumer has already paid, deceptive marketing to young people, and skyrocketing penalty interest rates, some as high as 32 percent.
 
"The industry has profited handsomely; between 2007 and 2008, credit card companies raised interest rates on nearly one out of every four accounts – 70 million cardholders in all who were charged $10 billion in extra interest.
 
"Put simply, this is an industry that has thrived in part on misleading its customers. Consumers should not have to live in fear that a clause buried in the fine print of their credit card contract might someday be their financial undoing."

In the next step, a compromise bill will be developed with the House, which passed a slightly different bill in April.

Then the compromise bill will go to President Obama for signature. The provisions could go into effect nine months after the president signs it.

Copyright 2009, Rita R. Robison, Consumer Specialist

Bank of America joins other banks in increasing interest rates

Millions of Bank of America customers are being notified that the interest rates on their credit cards are going up.

Citigroup, Chase, and America Express have already taken similar action.

These banks are penalizing customers who carry balances on their credit cards rather than paying them off monthly, a reversal of the usual policy in which banks prefer customers with balances.

The increases fees are being accessed regardless of a customer’s credit score or payment history, reports the article “Easter Surprise: Bank of America Raises Credit Card Interest Rates” on Consumer Affairs.com.

Customers with interest rates below 10 percent will see large increases beginning with June statements.

About four million of Bank of America’s 70 million credit card customers will be affected, the Consumer article estimates.

Meanwhile, Congress is debating new credit card restrictions, with bills moving through the House and Senate.

Although federal rules were adopted in December to restrict credit card interest rate increases, the regulations won’t be in place until June 2010.

It’s ironic that credit card issuers, who are being bailed out by taxpayer funds, are making it harder for consumers to borrow money in these tough economic times by assessing them billions of dollars in fees and penalties.

Copyright 2009, Rita R. Robison, Consumer Specialist

Credit card companies reducing card limits, dumping customers with balances

Credit card companies, some of the same banks that received huge amounts of federal bailout money, are reducing credit card limits and charging “over-the-limit” fees, while waiting weeks to notify customers.

The companies are able to take this action without prior notification because regulations were loosened during the George W. Bush administration.

Federal Reserve rules requiring lenders to give cardholders 45 days notice before reducing a credit line to the point that it would trigger penalties won't go into effect until July 2010.

Credit card companies are worried about their profits, a program on National Public Radio’s KCRW reported today. Delinquent payments are up substantially, and the companies want to get rid of customers who may not be able to make their payments.

The companies are interested in profits, not the retention of customers, said Kelli Grant, senior consumer reporter for Smart Money.com, a guest on the To the Point program. The companies want customers who pay off their balances every month.

Citibank, Wells Fargo Bank, Wachovia Bank, American Express, and Chase Bank are among the companies engaging in the practice, said Grant. American Express is offering $300 to people who pay off their card balances.

In addition to being charged fees or having your interest rate to up when your credit card limit is reduced, your credit score could also be lowered.

Another guest on the program, Robert D. Manning, Ph.D., finance professor at Rochester Institute of Technology and author of “Credit Card Nation: The Consequences of America’s Addiction to Credit,” suggested consumers could switch their funds to credit unions, which aren’t reducing credit limits without notification and don’t charge high overdraft and other fees.

For details on the KCRW program, listen to “The Credit Card Economy Comes Home to Roost.”

For additional information on credit limit reduction, see:

“How to Blow Your Credit Limit Without Spending” – Smart Money.com

“Your Credit Card Limit Can Be Reduced Below Your Current Balance” – The Consumerist

“City Group Master Card” – Complaints Board

“New Bank Credit Card Policies Could Send Your Credit Rating Spiraling” – Wallet Pop

“American Express Kept a (Very) Watchful Eye on Charges” – The New York Times.com

Copyright 2009, Rita R. Robison, Consumer Specialist

25 things coming back in 2009 are familiar to baby boomers

Ironing, mashed potatoes, recreational fishing and camping, and Amway are among the 25 things WalletPop.com, the AOL Money and Finance site, thinks will make a big comeback in 2009. Baby boomers will remember many of them, such as the meat product Spam, well.

The current state of the economy plays a big role in the list, which follows:

1. The Sharper Image
2. Amway
3. Three-piece suits for men
4. '9 to 5' as a musical on Broadway
5. Brown bag lunches
6. The Camaro
7. Cheap foods
8. Classic cocktails
9. Glass baby bottles
10. Music stars
11. Home hair coloring
12. Hungry Hungry Hippos and G.I. Joe
13. Ironing
14. Line drying clothes
15. Mashed potato variations
16. Non-profits
17. Paying with cash
18. Recreational fishing and camping
19. Who Wants to be a Millionaire?
20. Savings accounts
21. Sewing and DIY fashions
22. Spam, the meat product
23. Movie franchises
24. Thick shoes, fringe hairstyles, and Uggs
25. Lance Armstrong

See the article "Top 25 Comebacks in 2009" for details.

Copyright 2009, Rita R. Robison, Consumer Specialist

What President Obama and Congress need to do for American consumers

In my last post, I looked at what President Obama said in his Inaugural address about consumer issues and discussed the challenges he faces in corralling the country’s strong special interests.

Here’s what I think Obama, working with Congress, needs to accomplish for American consumers:

• Find a solution to the country’s massive financial problems.

• Help consumers who are facing foreclosure of their homes.

• Find effective ways to create jobs.

• Establish a health care system that works and provides coverage for all Americans.

• Curb the excesses of the pharmaceutical industry by putting a lid on their profits, investigating the harmful side effects of prescription drugs that are injuring and killing people, and fostering the use of less harmful alternative medicine techniques.

• Act quickly to halt the excessive fees and interest rates being charged by banks and credit card companies.

• Stop poor lending practices by banks and mortgage companies.

• Establish better regulation of financial services.

• Fund nonindustry-sponsored research on approaches for clean energy and implement programs based on the research.

• Reestablish the White House Special assistant for consumer affairs and/or create a federal consumer protection agency.

• Restore the budgets of federal regulatory agencies including the Federal Trade Commission, Consumer Product Safety Commission, Food and Drug Administration, and U.S. Department of Agriculture.

• Enhance the regulatory functions of these agencies so that our food, consumer products, and drugs are safe.

• Develop creative and effective ways for citizens to be involved in the decision-making of these agencies.

• Restore trust in the work of the federal government and its processes.

• Insist on transparency in all the work of the federal government including the regulatory agencies and White House staff.

• Ban the direct-to-consumer advertising of prescription drugs on television, in magazines, and on the Internet.

• Ban, establish a moratorium, or least require the labeling of genetically modified food.

• Require irradiated food to be labeled.

• Work with Congress to develop regulatory processes that will prevent the excesses under the George W. Bush administration that caused the collapse of the housing market and the stock market.

• Enhance environmental protections.

• Adequately fund programs for seniors including Social Security, Medicare, and Medicaid.

• Assist local and state governments in preparing for the needs of baby boomers as they age.

• Work to eliminate poverty and homelessness.

• End the wars in Iraq and Afghanistan so that money will be available for domestic programs.

• Support a congressional investigation of the crimes of the George W. Bush administration that will lead to the filing of charges against those who broke the law.

• Review recent telecommunication laws in terms of how they meet the needs of consumers.

• Figure out whether cell phones are safe to use and, if they’re found to be harmful, mandate that they be safe.

• Improve mass transportation throughout the nation.

• Work with local governments and the states to create compact, walkable communities so that Americans can walk to work and shopping areas.

I know this is a huge agenda, but American consumers are in need of drastic assistance after the gutting of consumer and environmental protections during the George W. Bush administrations.

Copyright 2009, Rita R. Robison, Consumer Specialist

Orman’s 2009 Action Plan book available free until Jan. 15

Oprah Winfrey is offering free copies of Suze Orman's latest book, “Suze Orman's 2009 Action Plan: Keeping Your Money Safe and Sound.”

The free book offer is a download from The Oprah Winfrey Show Web site.

The book is copyrighted. You can view and download the file, but you can’t copy the file or share or forward it to any other person. The free offer expires at 11:59 p.m. CT on Thursday, January 15.

I think Orman’s new book is fantastic. See my article "Orman's 2009 Action Plan Offers Great Tips for Baby Boomers."

Copyright 2009, Rita R. Robison, Consumer Specialist

Orman’s 2009 action plan offers great tips for baby boomers

When I was at the drug store, I couldn’t resist. I bought a copy of “Suze Orman’s 2009 Action Plan: Keeping Your Money Safe and Sound.”

Although the book offers many of the recommendations you see Orman make on her TV appearances, the book is a small, 209-page, easy to read guide with a question-and-answer format on what to do in these complex, stressful financial times.

She begins the book with a brief history on the financial crisis, saying it was caused by greed. I certainly agree with that.

Orman’s first recommendation is to pay off your credit cards. Then she recommends investment strategies, including her familiar warnings about not using your investments to pay off credit card debts or a mortgage.

Orman also repeats her familiar mantra about saving money. Make a budget and do it.

Her action plan also includes tips on what to do about your home, college costs, and a job loss.

I love Suze Orman. She emphasizes the basics of financial planning that I’ve written about for years. And she does it with passion and a great deal of caring about people.

Orman’s action plan book is one I recommend strongly.

Copyright 2009, Rita R. Robison, Consumer Specialist

Top 10 consumer stories of 2008

Here’s my take on the most important consumer stories of the year:

1. The sagging economy.
2. The collapse of the stock market, major banks, and businesses.
3. The end of the George W. Bush administration and its crippling of consumer, environmental, and energy regulations.
4. The rise in the cost of food.
5. The rise – and fall – of the cost of gas.
6. The high rate of home foreclosures.
7. The scandal of contaminated food and drugs from China.
8. The tightening of consumer credit.
9. The cost of the wars in Iraq and Afghanistan.
10. The continued lack of health care insurance for millions of Americans.

Let me know your opinions.

 Copyright 2008, Rita R. Robison, Consumer Specialist

Let’s create a smaller, more sustainable economy in U.S. and throughout the world

I received two e-mails today about the economy.

The Economy Policy Institute, a research organization, wrote to let me know that the Federal Reserve reported consumer debt fell for the first time ever in the third quarter of 2008.

To me, this is good news. Consumers need to cut their debt. More specifically, it would be helpful to their financial situation if they would pay off their credit cards.

Suze Orman must be thrilled about this report. Reducing credit card debt is one of her mantras. “You must get out of debt,” she says on television, her eyes flashing and her voice rising.

However, the institute wasn’t thrilled about the news. In response to the announcement, institute economist Josh Bivens said:

Today's announcement shows us that American households are pulling back on spending in the face of strong headwinds in the job market, and it highlights the reduced willingness of a still-stretched financial sector to extend credit. Neither tells us anything good about the kind of economic growth we can expect over the next year.

Another e-mail I received about the economy was Michelle Singletary’s newsletter on the collapse of shopping malls.

Singletary, describing herself as once being a “mall rat” who hunted for sales, said she isn’t terribly troubled by all the retail failures or store closings. “I'm a wee bit happy that the ‘mallworld’ is collapsing.”

She quotes from Washington Post reporter Hank Stuever’s article “A Pall on the Mall.” Stuever writes, although we’ve grown up with malls and felt everything you can feel in a mall, it’s hard to feel sorry for mallworld because it kept expanding, demanding more sales, until market forces intervened.

While it’s upsetting to hear announcements about companies closing and people losing their jobs, we do need to figure out a way to make the economy in America more sustainable. We can’t continue to focus on an economy and way of living that requires people to continue to keep filling up their homes with stuff.

Many people, myself included, have homes filled with consumer goods. It’s time to figure out a way people can make a livelihood without the emphasis on building more homes and stuffing them full of stuff.

Let’s figure out a way to create a smaller, more sustainable economy here and abroad. We can live more simply and use our country’s and the world’s resources more effectively.

Copyright 2008, Rita R. Robison, Consumer Specialist