Credit Sharks

Here’s another one of those things that Congress needs to address, but won’t: the practices of the consumer lending industry. There once was a time when going to a loan shark was considered to be a really stupid thing to do, but compared to what the “legitimate” credit industry is getting away with, that’s no longer the case.

The most recent article sparking my ire comes from MSN Money where the practice of banks raising your interest rates for money already borrowed at a supposedly agreed to rate. Why? Among the items listed is having too much available credit. Uh…excuse me? Not only is having too much debt bad, but having too much available (not used) credit is bad, too? What about my socks? If I wear argyle will my rates increase then as well?

Frankly, it’s all gotten out of hand. The banks can change the terms of the agreement at any time. Yes, you can opt-out of accepting the changes, but you then lose the use of your card (at best), or have to pay the entire balance due. At least the loan sharks would threaten you a couple of times before breaking your kneecaps.

And these lenders are the nice guys. The Auto Loan / Payday Loan people? They don’t even stand up under casual scrutiny.

Congress needs to (but won’t) pass laws that once again protect the people. I think credit cards should have fixed-rate interest, with mandated periods (once every six-to-twelve months) where consumers can refinance, without penalty, to take advantage of lower interest rates. Based on the kind of money banks earn, I’m not inclined to give their cries of poverty a lot of credence. That could change. I’m not saying that they don’t have a right to make some profit. It’s just that they shouldn’t be able to change the conditions of a loan on a whim with no reasonable recourse for the consumer.

Worse comes to worse, the government might have to re-regulate the industry — but that’s part of a larger topic I’ll address in the future.

In the mean time, I keep all my credit cards paid-up. If I don’t carry the debt, I don’t have to worry about these credit shenannigans (much). Still, there was once a time that I did. It wasn’t fun ridding myself of that monkey, but with a relatively friendly credit climate during my climbing-out-of-debt period, it wasn’t as bad as it could have been. If it was like it is now? I’m not sure I’d have managed all of the climb. Woe be to the person who has a finanacially bad year — it may turn into many, many more through no other fault than having any amount of credit card debt.