Presidential elections are still two years off but I predict this kind of Congressional oversight is going to intensify as Democrats continue to gain control of committees. The situation is affecting just too many people adversely and is a viable issue of major concern for voters of every demographic and age. Oversight is long overdue and abuse is now plainly visible to anyone that has a credit card. And now, with 640 MILLION cards in circulation, pretty much everyone has experienced the abuse of credit card companies with their contemptible practices of hidden fees and usury rates. Even members of Congress.
Critics urge Congress to rein in credit card companies
Posted 1/25/2007 12:50 PM ET
WASHINGTON (Reuters) — Consumer advocates urged Congress on Thursday to limit the rates and fees that credit card companies can impose, saying the industry's heavy-handed tactics are piling on debt for many Americans.
"No industry in America is more deserving of oversight by Congress," Travis Plunkett, legislative director of the Consumer Federation of America, said in prepared testimony for a Senate Banking Committee hearing.
The panel, led by Democratic presidential hopeful Christopher Dodd of Connecticut, is looking at billing, marketing and disclosure practices in the U.S. industry.
Critics say some credit card issuers use practices that victimize lower income households with an unexpected rise in interest rates or extra fees because of a drop in their credit scores. Meanwhile, richer Americans are able to pay off charges each month and enjoy perks such as frequent flier miles.
For example, if a consumer is late in paying another credit card bill, home mortgage, utility bill or even a book club membership, some credit card issuers declare a "universal default" and trigger higher interest rates on their credit card.
Dodd put the credit card industry on notice.
"If you currently engage in any business practices that you would be ashamed to discuss before this committee, I would strongly encourage you to cease and desist that practice," Dodd told credit card executives at the hearing.
But Dodd also said that consumers must take more responsibility for understanding their credit card contracts.
In 2005, about 44% of credit card issuers surveyed by the non-profit group Consumer Action assessed universal default interest rates. Those issuers included Citigroup, Washington Mutual, HSBC Holdings and Wells Fargo, according to the group.
"Even consumers who always pay on time cannot avoid the price abuses," said Michael Donovan, an attorney at the National Consumer Law Center.
Donovan and Plunkett urged senators to protect consumers by limiting rates and fees charged by credit card issuers.
Credit card companies defended the industry.
Richard Vague, chief executive of Barclays Bank Delaware, a unit of Barclays, said it is not in his company's interest to issue credit cards to consumers who cannot pay back money they have borrowed.
"For that reason issuers strive to provide credit cards only to consumers who can handle the credit offered them," Vague said.
Capital One Financial, the fifth-largest issuer of credit cards with 30 million accounts, said it does not use the practice of universal default.
Capitol One General Counsel John Finneran told the panel the company has limited what circumstances can trigger higher rates. "There is only one circumstance in which a customer might be subject to default pricing — if they pay us more than three days late twice in a 12-month period," Finneran said.
JPMorgan Chase's Chase Bank USA acknowledged that some credit card disclosures are too complex for consumers to understand.
"Disclosure language should be simple, clear and focused on the most relevant terms and conditions consumers need to understand," Carter Franke, chief marketing officer at JPMorgan Chase, said in testimony.
Critics said many credit card issuers have lowered the monthly minimum payment amounts to about 2% from about 5% in the 1970s. This has encouraged consumers to accept more credit offered by the companies, resulting in lengthier periods to pay off the debt, they said.
Other questionable tactics involve applying penalty interest rates retroactively to prior purchases and lowering loan limits that trigger fees and higher rates.
Based on Federal Reserve figures, Plunkett estimated outstanding credit card debt amounted to $750 billion to $800 billion in November 2006. The industry has more than 640 million cards in circulation.
Copyright 2007 Reuters Limited.
Thursday, January 25, 2007
Millionaire in the making: Sherelle Derico Valuable Lessons to be Learned
What I love about this lady is that she has accomplished all that she has without CREDIT CARDS!! While she has sacrificed more (and therefore appreciates what she has) than may be required of the average person, she is demonstrating what is really the key to staying out of the quicksand of "bad" debt. She also understands what "bad" debt is and what "good" debt is as evidenced by her $460,000 in home equity and almost $140,000 in savings!
Millionaire in the making: Sherelle Derico
Single mother sacrifices, then savors, prosperous course for herself and her daughter.
By Christian Zappone, CNNMoney.com staff writer
January 25 2007: 9:48 AM EST
NEW YORK (CNNMoney.com) -- Sherelle Derico, 36, had a three-week-old daughter and no job when she and her husband split in 1996. But the challenges of the separation and single motherhood didn't deter her from seeking financial success.
"It was frightening. Most definitely," said Derico of the experience.
At the time of her divorce Derico, who held an accounting degree, was already considering earning a master's degree.
"As soon as the baby turned one I started on a Masters in Financial Management at the University of Maryland," she said.
The period brought changes not just in her educational and career goals but in her spending habits, too. Derico, who enjoys interior design, says she used to spend a lot of money on clothes and furniture. She used to travel more.
Today, she prefers to pay off debt and to save money down to the penny. When this journalist contacted Derico on her cell phone, one of the first things she asked is, "Can you call me back on my land line? I want to save on my minutes."
Derico's personal history helps explain her habits. After becoming a mother and getting divorced she returned to a former employer who hired her back - for a lower-paying job. Then 9/11 happened, and she got laid off.
"I found myself in lots of debt. That's when I started to save a lot of money," said Derico, who now works as senior consultant in project management for Booz Allen Hamilton in the Washington, D.C., area.
25 rules to grow rich by
Derico has paid off roughly $25,000 in student debt, personal loans, and credit cards debt she racked up in 10 years. She paid for her master's degree mostly in cash along with matching plans from her employers.
Also, five years ago she started receiving a small amount of child support which is now $700 a month.
As for her own money, Derico puts 20 percent of her income into her 401(k) and IRA.
She says she's adamant about paying into her savings like she would any other bill.
She has $95,000 in an account with TIAA-CREF. Her Booz Allen 401(k) account has $36,000. She keeps about $8,000 in her regular savings.
"My friends say I'm pretty obsessive [about my savings]," Derico says, pointing out that she 'loses it' if her savings fall below a certain amount.
Buying a home
Although Derico faced lean times, she has managed to set and keep financial goals - like homeownership.
But Derico's 1999 purchase of the four-bedroom, two-bath, 1,300 sq. foot Fairfax, Virginia, town home didn't come without sacrifice.
She was enrolled in her master's program at the time and had to ask for a refund on that semester's tuition in order to come up with the down payment for the house.
To scrimp for the rest of the payment, she says she didn't go to the grocery store for three months and instead ate only the food she had stockpiled in her pantry.
"The majority was canned food," she said. "Spam. Ramen noodles soup."
But her daughter Sharmon didn't mind. Sharmon, who was 4 years old at the time, wanted to be able to jump; living in an apartment with neighbors in the unit below meant she couldn't.
Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.
Not long after, she refinanced and brought the length of the mortgage down to 15 years.
More Millionaires in the Making
The value of the property has soared in Fairfax County's overheated real estate market. Similar homes in the area sell for $500,000-$600,000.
Derico has racked up $460,000 in equity in the town home.
She wants to pay off the mortgage in 10 years, which would mean she would own the home outright by 2009.
She points out that "any extra money goes towards [her] mortgage."
Although Derico still sacrifices today, she no longer has to buy ramen.
Money handling
Today her one indulgence is a new 2007 LS460 Lexus. She bought it after paying off her 1996 ES300 Lexus. She financed the new car through her credit union.
Derico has no credit cards and pays for everything in cash with the exception of her Lexus. If she can't use cash, she uses a debit card. She also uses coupons and savings cards when eating out and for groceries and toiletries.
She eats turkey sandwiches every day at work and never eats out during the week. Her entertainment/dining out budget is $100. For the month.
One trick that has helped Derico, who still confesses to a weakness for impulse buys, is to save money in her ING money market account. Once you contribute money to it, you can't touch it for two or three days, which she says prevents spur-of-the-moment purchases.
In terms of stretching dollars, "my friends try to figure out how I do so much on my little income. I've been called a penny-pincher, a thrift-saver, a cheapskate."
Derico says she learned little about financial management from her parents. Instead, her money education came from financial literacy lessons she took at her church.
She wants to pass those lessons on to her daughter.
Sharmon doesn't get a fixed allowance, but Sherelle makes sure she always has some money on hand. Sherelle expects her daughter to save at least 10 percent of the money. As an incentive, at the end of each month, Sherelle matches whatever Sharmon takes to the bank. Including change.
Sherelle then shows Sharmon what's going into her account every month and how much her money has grown.
"My friends say [Sharmon] knows a lot more about finances than they do now," Sherelle says, noting, "she understands credit cards aren't a good thing."
Sherelle does the same with the 529 education plan she opened up for her daughter last year, which so far has more than $3,000 in it.
And finally, Sherelle has Sharmon tithe 10 percent to the church, as Sherelle does when not contributing to the renovation of her grandmother's 30-year-old house.
Future plans
Since Derico is on track to be debt-free in five years, including her mortgage, her prospects of a comfortable retirement are substantially raised.
She says she would like to retire from her current profession one day and move back to her home state of Georgia to teach financial literacy in the schools there. She'd also consider working part time.
She toys with the idea of starting an interior design business if it didn't mean going back to school. Sharmon, now 11, would one day like to be a graphic designer.
With the financial lessons applied to her own life, Sherelle Derico says she doesn't understand people who don't pay attention to their money. "It's nothing you can ignore," she said.
She marvels at people who can't make their finances work while they're employed, because if they can't succeed now that they're making an income how will they survive when they're not working?
"You can finance everything else," said Derico. "But retirement is the one thing that can't be financed."
Millionaire in the making: Sherelle Derico
Single mother sacrifices, then savors, prosperous course for herself and her daughter.
By Christian Zappone, CNNMoney.com staff writer
January 25 2007: 9:48 AM EST
NEW YORK (CNNMoney.com) -- Sherelle Derico, 36, had a three-week-old daughter and no job when she and her husband split in 1996. But the challenges of the separation and single motherhood didn't deter her from seeking financial success.
"It was frightening. Most definitely," said Derico of the experience.
At the time of her divorce Derico, who held an accounting degree, was already considering earning a master's degree.
"As soon as the baby turned one I started on a Masters in Financial Management at the University of Maryland," she said.
The period brought changes not just in her educational and career goals but in her spending habits, too. Derico, who enjoys interior design, says she used to spend a lot of money on clothes and furniture. She used to travel more.
Today, she prefers to pay off debt and to save money down to the penny. When this journalist contacted Derico on her cell phone, one of the first things she asked is, "Can you call me back on my land line? I want to save on my minutes."
Derico's personal history helps explain her habits. After becoming a mother and getting divorced she returned to a former employer who hired her back - for a lower-paying job. Then 9/11 happened, and she got laid off.
"I found myself in lots of debt. That's when I started to save a lot of money," said Derico, who now works as senior consultant in project management for Booz Allen Hamilton in the Washington, D.C., area.
25 rules to grow rich by
Derico has paid off roughly $25,000 in student debt, personal loans, and credit cards debt she racked up in 10 years. She paid for her master's degree mostly in cash along with matching plans from her employers.
Also, five years ago she started receiving a small amount of child support which is now $700 a month.
As for her own money, Derico puts 20 percent of her income into her 401(k) and IRA.
She says she's adamant about paying into her savings like she would any other bill.
She has $95,000 in an account with TIAA-CREF. Her Booz Allen 401(k) account has $36,000. She keeps about $8,000 in her regular savings.
"My friends say I'm pretty obsessive [about my savings]," Derico says, pointing out that she 'loses it' if her savings fall below a certain amount.
Buying a home
Although Derico faced lean times, she has managed to set and keep financial goals - like homeownership.
But Derico's 1999 purchase of the four-bedroom, two-bath, 1,300 sq. foot Fairfax, Virginia, town home didn't come without sacrifice.
She was enrolled in her master's program at the time and had to ask for a refund on that semester's tuition in order to come up with the down payment for the house.
To scrimp for the rest of the payment, she says she didn't go to the grocery store for three months and instead ate only the food she had stockpiled in her pantry.
"The majority was canned food," she said. "Spam. Ramen noodles soup."
But her daughter Sharmon didn't mind. Sharmon, who was 4 years old at the time, wanted to be able to jump; living in an apartment with neighbors in the unit below meant she couldn't.
Derico succeeded in making the down payment and took out a 30-year mortgage on the $114,000 home.
Not long after, she refinanced and brought the length of the mortgage down to 15 years.
More Millionaires in the Making
The value of the property has soared in Fairfax County's overheated real estate market. Similar homes in the area sell for $500,000-$600,000.
Derico has racked up $460,000 in equity in the town home.
She wants to pay off the mortgage in 10 years, which would mean she would own the home outright by 2009.
She points out that "any extra money goes towards [her] mortgage."
Although Derico still sacrifices today, she no longer has to buy ramen.
Money handling
Today her one indulgence is a new 2007 LS460 Lexus. She bought it after paying off her 1996 ES300 Lexus. She financed the new car through her credit union.
Derico has no credit cards and pays for everything in cash with the exception of her Lexus. If she can't use cash, she uses a debit card. She also uses coupons and savings cards when eating out and for groceries and toiletries.
She eats turkey sandwiches every day at work and never eats out during the week. Her entertainment/dining out budget is $100. For the month.
One trick that has helped Derico, who still confesses to a weakness for impulse buys, is to save money in her ING money market account. Once you contribute money to it, you can't touch it for two or three days, which she says prevents spur-of-the-moment purchases.
In terms of stretching dollars, "my friends try to figure out how I do so much on my little income. I've been called a penny-pincher, a thrift-saver, a cheapskate."
Derico says she learned little about financial management from her parents. Instead, her money education came from financial literacy lessons she took at her church.
She wants to pass those lessons on to her daughter.
Sharmon doesn't get a fixed allowance, but Sherelle makes sure she always has some money on hand. Sherelle expects her daughter to save at least 10 percent of the money. As an incentive, at the end of each month, Sherelle matches whatever Sharmon takes to the bank. Including change.
Sherelle then shows Sharmon what's going into her account every month and how much her money has grown.
"My friends say [Sharmon] knows a lot more about finances than they do now," Sherelle says, noting, "she understands credit cards aren't a good thing."
Sherelle does the same with the 529 education plan she opened up for her daughter last year, which so far has more than $3,000 in it.
And finally, Sherelle has Sharmon tithe 10 percent to the church, as Sherelle does when not contributing to the renovation of her grandmother's 30-year-old house.
Future plans
Since Derico is on track to be debt-free in five years, including her mortgage, her prospects of a comfortable retirement are substantially raised.
She says she would like to retire from her current profession one day and move back to her home state of Georgia to teach financial literacy in the schools there. She'd also consider working part time.
She toys with the idea of starting an interior design business if it didn't mean going back to school. Sharmon, now 11, would one day like to be a graphic designer.
With the financial lessons applied to her own life, Sherelle Derico says she doesn't understand people who don't pay attention to their money. "It's nothing you can ignore," she said.
She marvels at people who can't make their finances work while they're employed, because if they can't succeed now that they're making an income how will they survive when they're not working?
"You can finance everything else," said Derico. "But retirement is the one thing that can't be financed."
Here is a lesson plan for teaching financial literacy from the previous post.
This is one of the courses from the previous post.
Money Math: Lessons for Life
is a teacher's guide for helping middle school math students learn how to manage their money, stay out of debt, and save for retirement. Lesson plans, reproducible activity pages, and teaching tips are included in the 86-page guide, which draws on real-life examples from personal finance. (Department of the Treasury)
Money Math: Lessons for Life
is a teacher's guide for helping middle school math students learn how to manage their money, stay out of debt, and save for retirement. Lesson plans, reproducible activity pages, and teaching tips are included in the 86-page guide, which draws on real-life examples from personal finance. (Department of the Treasury)
20% of 12 year olds have at least one credit card!
The most recent statistic that I have seen says that 20% of 12 year olds in this country have a credit card! Fifty percent of 18 year olds have at least one but more often have two.
This is a FREE site that teaches Financial Literacy and is provided by the Federal Government. It targets teenagers to them finance basics. Educators and others can obtain these materials free of charge and is a good resource.
The link is: http://www.free.ed.gov/
subjects.cfm?subject_id=189&res_feature_request=1
This is a FREE site that teaches Financial Literacy and is provided by the Federal Government. It targets teenagers to them finance basics. Educators and others can obtain these materials free of charge and is a good resource.
The link is: http://www.free.ed.gov/
subjects.cfm?subject_id=189&res_feature_request=1
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