Credit cards: for some they are the paths to financial freedom, for others they are a necessity for daily purchases. During the recent economic crisis, many have sought out to find the cause. One common suspect is the credit card industry, which is comprised of more than six thousand card issuers (Clayton 209). This issue is debated in the two-part article “Should Congress Regulate Credit Card Rates and Fees?” “Yes” and “No.” Tamara Draut, Director of Economic Opportunity, Demos, argues yes, claiming the credit card companies’ ability to adjust terms and interest rates traps cardholders in everlasting debt. On the contrary, Kenneth J. Clayton, Managing Director of Card Policy for the American Bankers Association, argues no, stating that …show more content…
For example, Draut claims that the credit card companies’ large profits “are due in no small part to the lack of any real parameters guiding the consumer/issuer relationship” (209). However while it is true that credit card companies gross about thirty billion dollars each year, Draut provides no solid proof that these profits are directly related to a lack of regulations (206). With credit cards as popular as they are, it is possible that similar profits could still be achieved even without fluctuating interest rates and high penalty fees. Many people foolishly view credit cards as a form of supplemental income, making purchases on their cards without a predetermined plan to pay the balance. Even if they make the minimum payments on time each month, they will still end up paying significantly more in the end because they will have to pay interest on the card’s balance. Meanwhile, Clayton claims that most cardholders do not pay late fees on their cards (209). While it is certainly true that many cardholders do not pay late fees, stating that in fact the majority of cardholders do not is a bold claim and should have been supported by related research and statistics. If a financially responsible individual is forced to pay for a car repair or other emergency expense on their card and loses their job a week later, bills could quickly pile up and payments could be made …show more content…
Draut explains that in 2006, the credit card companies made over ten billion dollars in late fees, an accomplishment she attributes to the current lack of regulations on the credit card industry (209). However, she does not acknowledge the fact that the cardholders would not have to pay a single late fee providing their payments were made on time. As mentioned previously, Clayton says, “Most cardholders do not pay late fees associated with being late or over their credit limit,” claiming that owing such fees is solely in the hands of the cardholder (209). He also argues that “risk-based pricing allows individuals who manage their debt obligations well to get the best and lowest price for loans.” While it is true that paying a bill on time eliminates the issue of late fees and should be rewarded, Clayton fails to admit that fees can quickly get out of hand when a credit card company is allowed to change the terms of the agreement at will. By failing to acknowledge clearly valid points by their opposition, both writers damage their credibility and their arguments at the same
One year ago, on September 8, 2016 the Consumer Financial Protection Bureau(CFPB), the Los Angeles City Attorney and the Office of the Comptroller of the Currency (OCC) fined Wells Fargo Bank $185 million, alleging that more than 2 million bank accounts or credit cards were opened or applied for without customers' knowledge or permission between May 2011 and July 2015. This essay will discuss the Wells Fargo scandal by explaining how the event happened and describing how the organization approached handling a response to the crisis. This will be seen, firstly by describing the how the scandal happened, and what were the causes, secondly by discussing the reaction of the company in front of the situation, how they dealt with the crisis and then
CFPB activities on credit cards arise concerning, first, the CFPB CEO made them “more difficult to use.” Once an individual becomes a client of CFPB the alternative access to “hard cash” becomes fairly possible. As banks are already expensive for the customers of CFPB due to their profit margins, the other “illegal loan sources” become even more unreachable (Murray, 2017). So, certain monopolizing tendencies can be traced.
The first major point that Gretchen Morgenson makes in her article “The Debt Trap” is how lenders have found ways to make a bigger profit from borrowers in the recent years. Shes states that for example, “the rates that credit card companies charge borrowers rose from 17.7 percent in 2005, to 19.1 last year”. That difference added to billions of dollars charged annually. She stated that overall, these lenders increased “junk fees by fifty percent in recent years”. In the capitalistic society that we live in, these lending companies are doing everything they can to make as much of a profit as they can. If this means shoving Americans into the ground in the profit, they do not seem to feel bad about it one bit. This has created a problem with
The Dodd-Frank Wall Street Reform and Consumer Protection Act’s policies haven’t really been implemented to the extent that regulators would have liked. Although the legislation takes many steps in addressing systematic risks in the United States financial system and improving coordination among regulators, some critics believe that alternative options might have been more effective. The coming years will give us a better understanding of how well the Dodd-Frank Act addressed these concerns.
García, J. A. X. E., Zeldin, C., & Lardner, J. (2010). The Credit Card Industry Burdens Borrowers with Unfair Interest Rates and Hidden Fees. In J. Tardiff (Ed.), Current Controversies. Consumer Debt. Detroit: Greenhaven Press. (Reprinted from Gotcha!, Up To Our Eyeballs: How Shady Lenders and Failed Economic Policies Are Drowning Americans in Debt, pp. 37-53, 2008, New York, NY: The New Press) Retrieved from http://ic.galegroup.com.rproxy.iwcc.edu
Mortgage loans are a substantial form of revenue for the financial industry. Mortgage loans generate billions of dollars in the financial industry. It is no secret that companies have the ability to make a lot of money by offering a variety of mortgage loan products. The problem was not mortgage loans but that mortgage companies were using unethical behavior to get consumer mortgage loans approved. Unfortunately, the Countrywide Financial case was not an isolated case. Many top name mortgage companies have been guilty of unethical behavior. Just as the American housing market was starting to recover from its worst battering since the Great Depression, a new scandal, an epidemic of flawed or fraudulent mortgage documents, threatens to send not just the housing market but the entire economy back into a tailspin (Nation, 2010).
The "A Model of Christian Charity" sermon, delivered by John Winthrop, is an example of the deeply religious Puritans that settled in Boston. They felt they had a convent with God to live a righteous life, a life that put God commandments and the community first. The puritans were very concerned with proper behavior theirs and others. The settlers of Boston were pious Puritans who regularly reassessed the state of their souls. By living this righteous life, the Puritans believed the Massachusetts Bay Colony was the "City upon the Hill" and they would be the light of the world. John Winthrop stated in the closing statement of his sermon how deeply the Puritans walked with God.
Credit card debt is one of this nation’s leading internal problems. When credit was first introduced, and up until around the late 1970’s, the standards for getting a credit card were very high. The bar got lowered and lowered to where, eventually, an 18 year-old college student with almost no income and nothing to base a credit score on previously could obtain a credit card (much like myself). The national credit card debt for families residing in the United States alone is in the trillions (Maxed Out). The average American family has around $9,000 in debt, and pays around $1,3000 a year on interest payments (Maxed Out). Many people have the concern today that these interest rates and fees are skyrocketing; and many do not understand why. Most of these people have to try to avoid harassing collecting agents from different agencies, which takes an emotional and psychological toll on them. While a lot of the newly recognized “risky” people (those with a doubted ability to make sufficient payments) are actually older people who have been customers of certain companies for decades, the credit card companies are actually consciously targeting a different, much more vulnerable group of people: college students. James Scurlock produced a documentary called Maxed Out on this growing problem, in which Senator Jack Reed of (Democrat) of Rhode Island emphasizes the targeting of college students in the Consumer Credit Hearings of 2005
...: A Critique of the Global Credit Card Society." International Journal of Comparative Sociology 38:1 June 1997, 77-82.
We now live in a society where kids start their adult lives “in the red”, as their debt exceeds their income. (Draut, 2005) 60 years ago this wasn’t the case, as told by Studs Terkel in Hard Times-An Oral History of The Great Depression, “I had no idea how long $30 would last, but it sure would have to go a long way because I had nothing else. The semester fee was $22, so that left me $8 to go.” (Turkel, 1970) Imagine that! 60 years ago tuition was $22 dollars a semester! Furthermore, 45% of adults under 35 state they find themselves resorting to credit card use for basic living expenses like rent, groceries and utilities, (Draut, 2005) adding to their mounting debt. This use of credit puts them into an entirely different category of indebtedness: survival debt. (Draut, 2005) Imagine being forced to borrow to live! (Draut, 2005) If a car breaks down or someone gets sick, the only option available is using a credit card. (Draut,
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
In response to the emergence of credit card fraud in 1984, congress passed the Credit Card Fraud Act to give federal prosecutors a broad jurisdictional base to more effectively prosecute a variety of credit card frauds. This act broadened the definitions of credit card and debit instrument to any "access device," including an account number, increased the maximum penalties of incarceration and fines, and provided a substantial repeat-offender penalty (U.S. Department of Justice, 2013).
Credit cards are something that are almost needed in everyday life now, as most dont have the money available to purchase a car or house and so need credit, thus needing credit cards to help build that credit. Those cards are hard to handle, and receiving applications in the mail daily, and commercials appearing on television don’t seem to make the struggle of staying away any easier. This starts to spark an interest. So people begin to think, "I think I 'm responsible enough to get a credit card, I 'll only use it for emergencies." Then the application process begins and it may take a couple times to finally be approved for one. This only makes it worse, of course, because realizing how long a credit card wasn’t applicable to life, but now
Credit cards may be too convenient to some business owners who do not manage their
You have a choice of paying by cash, debit card, online account or credit card. If you do not have money in your bank or online accounts, then either you go without, or you use your credit card. But, what about the people who have money in their bank account and still use their credit card.