T Nation

The Robinhood Principle


#1

Yet another example of the current administration stealing from the rich (or just those who are financially responsible) and giving to the poor (those who are not financially responsible). I copied this from Yahoo Finance, don't know how to insert a link or I would have.

WASHINGTON: Every American with a credit card will see sweeping changes in the market, with limits on sudden hikes in interest rates that drive consumers deeper into debt. Even cardholders who pay off their balance each month may face new annual fees or lose out on lucrative rewards programs.

Congress wrapped up the legislation Wednesday and sent it to President Barack Obama, who plans to sign it on Friday. The bill will revolutionize the market by restricting when and how a card company can raise an individual's interest rate, who can receive a card and how much time people are given to pay their bill.

In general, the new rules, which go into effect in nine months, will protect debt-ridden consumers from many of the surprise charges common in the industry, such as over-the-limit fees and costs for paying a bill by phone.

'This cements a victory for every American consumer who has ever suffered at the hands of the credit card industry,' said Sen. Christopher Dodd, D-Conn., chairman of the Banking Committee.

But there will be losers too.

Banks, which oppose the legislation, will need to make up the cost somewhere, and cardholders who pay off their balance in full each month could see new annual fees and lucrative rewards programs canceled. Credit could become harder to come by too.

Some of the changes, including a requirement that cardholders receive 45 days notice before their rates are raised, are already on track to take effect in July 2010 under new regulations by the Federal Reserve. The legislation would put these changes into law and go farther in restricting when and how banks charge people and who could get a card.

For example, the bill would require people under 21 to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

The House passed the reform bill by a 361 to 64 vote on Wednesday. The Senate had voted, 90 to 5, for the measure on Tuesday.

Consumer advocates say it's up to the banks to decide what happens next.

Nick Bourke, manager of the Safe Credit Cards Project at the Pew Health Group, said companies already offering transparent pricing won't have to drastically change how they do business. Lenders could probably cover costs with small annual fees in the $15 to $20 range or increase upfront interest rates, he said.

'Nothing requires pricing to go up and benefits to go down,' Bourke said. 'The only thing that is required is that the price offered actually reflects the cost of using the card.'

Regardless of how banks respond to the bill, it's passage this week reflects both America's addiction to debt and easy credit's contribution to the economic downturn.

Last year, the Nilson Report estimated that more than 700 million credit cards were in circulation in the United States. That's more than two cards for every man, woman and child.

What's more is that many cardholders are carrying hefty balances. According to the Federal Reserve, the nation is some $2.5 trillion in debt, excluding home mortgages.

Lawmakers supporting the bill say legislation is necessary to stop a vicious cycle: A cardholder falls behind on one bill and watches helplessly as the rate spikes on their existing balance. Buried in interest fees and other charges, they spend less, which hurts local businesses.

Under the bill, a customer would have to be more than 60 days behind on a payment before seeing a rate increase on an existing balance. Even then, the lender would be required to restore the previous, lower rate if the cardholder pays the minimum balance on time for six months.

The practice of charging higher rates and fees to cardholders with risky credit was devised as a means to protect lenders against the risk of default while keeping costs low for consumers who paid their bill on time, said Edward Yingling, president and CEO of the American Bankers Association, which lobbied against the legislation.

Yingling says the new rules will limit the card companies' ability to price according to risk.

'Less credit will be available generally, which means some consumers and small businesses will not be able to obtain credit cards at all, particularly younger people and start-up small businesses,' Yingling said.

Dodd, who championed the bill, said this argument is absurd and 'a little like Chicken Little.'

Flooded with complaints by constituents who say they are victims of abusive practices by the card companies, the Senate fast-tracked Dodd's bill and only five senators voted against it.

Two of the opposing senators GOP Sen. John Thune and Democratic Sen. Tim Johnson were from South Dakota, where thousands of jobs depend on the industry. Thune estimated up to 5,000 workers in the state would lose their jobs as a result of the changes.

Included in the bill is an unrelated measure by Sen. Tom Coburn, R-Okla., that would allow people to bring loaded guns into national parks and wildlife refuges.

The House approved that provision separately on Wednesday by a 279 to 147 vote.

Evidently it is not longer appropriate to conduct your life responsibly, because you will just end up subsidizing those who CHOOSE not to.


#2

BUT! (And this should make many on this Forum VERY happy!)

Attached to the Bill was a provision that allows one to pack concealed Heat at the National Parks and Monuments! (You can never trust those Beret Wearing, Socialist Girl Scouts...!)

So...can we get a LITTLE love for the President?

Right...

Mufasa


#3

FYI: Robin Hood stole from the government, not the rich, and gave to the over taxed citizenry, not the poor.


#4

Really? It's been a long time since I read it.

OK, but I was directionally correct.


#5

This is Bullshit.

Another thing the article didn't mention, but is a very real possibility, is that as soon as you make a purchase with a credit card interest would start accumulating. Un-Freaking-Real!

I pay my card off every month in full. The bank makes money every time I swipe that card. I hope they try to make me pay an Annual Fee to basically make them money!

I love government intervention! Health Care is next Fellas!


#6

I'm the same way and this pisses me off also...


#7

The banks will always find a way to make their money, regardless of the laws. Basically, you will want to pay cash for everything at this point so you don't get your ass handed to you in interest.


#8

Really. The main villain's are the Sheriff of Nottingham and the King remember?


#9

The Banks are very competitive they have the (price) of services slashed, but the (cost) is where it has always been. So since the bank can not make any money with the fees they used to charge , now they have become very punitive with penalties ,Those penalties are paid by people with lesser credit, They are paying for the services of all the people with good ratings that can go get a card anywhere at a reduced rate

Some penalize their customers after sending statements late, Some lenders in the fine print have astronomical fees built in you take cash, and you can not pay that cash back before the whole card is paid off,

We will not mention contracts having more pages than many novels and, many requiring a law degree to understand.


#10

Hmmm...now this is an interesting proposition.

The lines were quite blurred between government and private citizen back then. Only the king was the government...and if you remember the king was away killing Muslims in the ME.

If you remember they all celebrated when the king came home and "restored order".


#11

Did you take out a CC without understanding the contract? Shame, shame.


#12

No I personally have no problem, but I have 2 kids just starting in life, and it pisses me off the way they have been screwed by CC companies. One took out cash on his card it was a total of about $300 dollars by the time he gets it paid back it will be over a $1000. My son is like I was. He has written a couple rubber checks. Not on purpose but rubber all the same I am talking les than $20 overdrawn, the banks has dinged him for over $300. Now this is how youâ??re Credit Card Company and banks offer $0 checking and 3% interest on a credit card so it is not the poor robbing the rich, it is the poor paying for the rich


#13

Eh, I sympathize with the troubles your son is having...but I guarantee you after paying these fees he will be more careful next time. These fees are supposed to be a disincentive for the exact thing your son did. So while you think that it is not fair -- which we might be able to argue as true -- it is not the poor paying for the rich. The rich still have to pay their bills too; however, if a rich person does not pay his bill you can bet he's paying a heck of a lot more because he most likely didn't overdraw on only $20.


#14

If the I overdraw my account it is covered by my credit card for a very minimal charge, if my son overdraws it is also covered by his credit card but it is no minimal charge and for example if he overdraws for $20 and he has ten two dollar charges and one twenty dollar charge they will take pay the $20 charge and ding him 10 overdraft fees. I think they should penalize him but charge him once to cover all the charges or do not cover them at all. The only reason they do this is because they can.

While I agree, my son will learn there are also poor people living from pay check to pay check that will never learn how to avoid these legal robberies.. Do some research and you will find free checking and low interest rates are paid for by punitive fees? These fees are not intended to be a disincentive they are essential to the bottom line of checking and credit accounts. I am guilty of using my credit card to rack up points. And when the bank makes it so it is no benefit, I will quit. That is the free market. If you do not need credit do not use it.


#15

Yes, it is called risk distribution. Your CC offers you a service because they find you to be a good risk -- i.e., you most likely will not need the service too often and if you do so much the better for them.

I have to ask though, if one is living pay-check to pay-check is it smart to use a CC when it is obvious that the interest rates will make one have even less money to spend next month? Does that not just create a horrible spiral that will require one to keep using it?

This could all be alleviated if banks were expected to only lend money they actually have. Practically none would have CCs.


#16

I do believe the correct perspective on Robin Hood was that he was stealing back the taxes the poor had paid and giving it back to the poor it had been taken from. All of the wealthy nobles, etc, were supported by patronage - the prince was basically bribing their cooperation with the money taken from the poor . . .

So the story line may be applicable to today - but you need to correctly identify the villains and the weaselly nobles . . .


#17

I'm going by the story. In the story, the Sheriff of Nottingham taxes the citizens of England into poverty. Robin Hood then steals from the Sheriff and returns the money to the people from which it came.


#18

I like you Pitbull, but I must disagree with your stance here;

Your son got what he signed up for, everyone knows the dangers of credit cards or should learn about the dangers before they sign, why should I have to subsidize your son's credit problems?

If I want to take out a personal loan that says "if I pay 1 second late I owe a billion dollars" I would imagine that you would take the stance of, "if he is that stupid to accept that offer and if he is too stupid to not pay on time.....oh well his problem." Am I right or wrong? (By no means am I calling your child stupid, just making a different comparison)


#19

Another policy that will come out of viewing people as "victims" of big corporations. I'm so tired of irresponsibile behaviors being classified as corporate oppression. Let the fuckers go down! I pay my cards on time, try not to carry balances etc.

It's not the companies fault, it's the card users fault.

Credit cards are for emergencies and to build credit. They are not a tool to spend shitloads of money you don't have, and if you use it as such, it's just as bad as taking a knife and slitting your own throught.

I'm sorry but These people are not Victims, they are just fiscally irresponsible!!


#20

Same song and dance as the subprime housing crisis. It's not my fault I took out a $300,000 home loan and only make $20,000 a year, poor lil ole me......Let's bail out every fucking bad decision someone makes; I would love to help a drunk driver fix his car after he hits a pole too, just send me the bill. You fucked a girl with herpes? he's a 5 spot to help pay for special shampoo.

Personal Responsibiliy has totally left planet earth.