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Calendars, Credit Cards, and Consumer Education

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Over the past week, the CFPB web team has been reading through the feedback we’ve gotten via Twitter, YouTube, and email for Open for Suggestions. Yesterday, we posted several new videos.

A number of suggestions concern financial education. Policy analyst Alejandra Lopez-Fernandini recorded a response video earlier today:

One suggestion came from a consumer who was concerned about unpredictable changes in credit card agreements. Senior policy analyst Marla Blow responds to the concerns below:

Finally, we received a Tweet about Elizabeth Warren’s calendar, which has been one of the most popular pages on our site so far. Stephanie Gorski, acting lead of our privacy and records team, talks about CFPB’s transparency efforts:

We have received hundreds of suggestions via Twitter, YouTube, and web. Keep them coming!

  • Lisette

    I think that the credit card industry should only make 6 points over the fed rate or the 2 year note for instance. This 19%, 21% that is recalculated daily is really rediculous and most of use credit cards. Its really abusive that they make such a high margin on the credit cards. they would need less staff to do the collections because the payments would be more manageable to the consumer. I am not saying they should not make a profit. They should, but not an obscene amount either. Everything needs balance.

    • hornbill

      The practice you cite is called “usury” and was illegal throughout much of history until the plutarchs took over in 1980 and deregulated everything. I think credit cards should be illegal. I’ve gone 60 years without one and never noticed the absence.

      • GNero

        Not everyone can go 60 years without needing to access credit for one reason or another. Those of us that live within our means, but live paycheck to paycheck sometimes have unexpected expenses that we may not have the cash on hand to pay for such as car repair, home repair, a major appliance that goes on the fritz. It is comforting to have credit available in case it is needed. Unsecured credit is riskier for the lender which is why the cost is so high, but there does come a point when the interest and fees become unreasonable. That is when we need regulators to step in.

        • hornbill

          I doubt you know anyone with less income or assets than me, but I have lived very comfortably precisely by living within my means as I remember my solidly middle-class parents doing before credit cards existed. History shows that obligating yourself beyond your income or your savings leads to disaster. Borrowing, especially at high interest, only increases your expenses exponentially. In other words, if your income is stuck below your expenses, lower your expenses. Borrowed money is an expense, not income.

    • ShaneAlgarin

      Lost/stolen cards are too easy for a thief to use. Cardholders should have the option of cards that can only be used with PINS. And if we want an ATM card with no visa/MC logo, we should have that option too. My bank said no. These are protections only a thief would protest.

    • Datapay

      I agree with the fed rate at 0% there is no reason for a credit card rate being 21%.

    • Tothepoint

      To Lisette and hornbill who replied to Lisette.

      A little history lession.

      Small dollar rates were set back in 1920. Those rates were anywhere from 24% to 36%. It was recognized back then that you couldn’t get a legitimate business to get into lending if they could make a reasonable return on their investment.

      Too many people assume that the margin between cost of funds (what it takes for the lender to borrow the money from a bank, the Federal Reserve, etc…) and the rate charge is all profit. Wrong.

      From that spread you have to pay your operating expenses (office, supplies, people, health care, etc…).

      A 36% $500 dollar installment loan paid back over six months earns a grand total of $53.79 in interest or $8.97 a month. If you assume a $25 loan processing fee, the your average monthly cost is $13.13.

      Analysis of business loan costs (including the Federal Reserve) have shown that it cost on average roughly $20 a month to manage a loan (servicing). The cost to close a loan can run from $50 to $150.

      Who pays for the people to work in a loan office? Who pays for the operational expenses to run the office? The loan company’s margin does.

      When you really get down to it, it is the amount of dollars earned on the loan that pays the bills and covers the losses. Interest Rate figures and APR figures don’t pay the costs. Dollars earned do.

      So if you go in a place a price control in that is below the cost, you end up with one of three results:

      1. Tax payer subsidized loans (entitlement program)
      2. Illegal lending that breaks peoples arms if they don’t pay
      3. No credit options

      Now the calculated APR on that loan comes to 43.63%. So if a lender charges a rate that covers there operational expenses and earns them a “reasonable rate” of return, say 12%, on their investment, is that usury?

      Lets not forgot that usury is not defined by an interest rate. It is defined as unreasonable and excessive.

  • hornbill

    I’d like to see legislation requiring that the advertised price or the lowest price marked on the shelf be the price at checkout.

    I’d also like to see legislation banning so-called “built-in obsolescence,” that is, using a substandard small part or other hidden means to insure that a product becomes unusable far in advance of its normal lifespan. This scam includes packaging condiments and other thick semi-liquid substances in containers from which they can’t be completely extracted.

  • Evie

    I recently pulled my credit score from Equifax who uses CSC in this part of the Country. I have been jeaopardized for obtaining a new mortgage (2 years old) in my credit score lowering my score. This was the direct result of losing my house during Hurricane Ike. I would like some provision from the Credit Bureau and Credit scoring companies that protects those of us effected by a natural disaster when Insurance companies are slo to repay claims as well as not being penalized for having to secure a new mortgage because my house was destroyed during the disaster. I also think it would be a good practice for the consumer to be able to contact the Credit Score company as they apparently aren’t directly associated with the Credit Bureaus when one tries to reach them. I have also put a note in my file that my credit card balances were high due to having to use them during Ike and during that time all the credit card companies raised their rates just prior to the President announcing no increase, therefore, on some of these cards they are as high as 29%. This is unreasonable fr anyone to be able to pay down these balances with a Senior income. Can your agency help with this dilemma of Credit Bureaus and the Credit Scoring agencies not taking into consideration the effect of a natural disaster?

  • Datapay

    Credit Card Companies only hold a file of purchase open for 1 year or less.If you are late on payments or if you have a credit card misused or stolen.The credit card companies can not tell you anything about your account if it is over one year old. The filing system of any institution should be held open for two years.Credit Cards should be like a personal medical file. If you pay your credit card balances on time every month the credit card companies consider you a dead beat. Credit card companies live on late fees they do not live on interest fees paid of the card. The credit card companies except all types of merchants.I have studied credit card transition for 12 years.I have seen a $100 charge go to $350 charge in 12 months , with my son, who was in Desert Storm fighting for our country.I think the credit card companies are way out of hand on late fees.Charging convenience fees when paying by phone (another Profit Center) and any other profit center for credit card companies.

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