Full Version: Easy Money and Universal Default
I approach this topic with a mixture of humor and disgust.
Do you remember when former Today Show host and major league catcher Joe Garagiola used to hawk The Associates as “nice people with money”? It seems that that day, if it ever existed, is long gone.
I don’t think more than a couple of days pass that I don’t get an unsolicited credit card offer from the many companies that offer them. I’ll be damned, it’s wearing out my shredder. This week I have received three credit card offers. They offer nice perks, like 0% interest on balance transfers through 2008. Some offer low interest rates. These are applied to average daily balance, rather than unpaid the balance once used.
The nasty little kicker in this game is called “universal default.” Universal default means, for example, that if someone defaults on a Master Card, the default interest rate may be applied to a Visa, Discover, etc., even if the other cards are paid on time.
Two of the three companies I received mail from this week take advantage of universal default – one charge in excess of 30. One company did not practice universal default.
Questions for Debate
1. Should Congress pass laws forbidding the practice of “universal default”?
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Do you remember when former Today Show host and major league catcher Joe Garagiola used to hawk The Associates as “nice people with money”? It seems that that day, if it ever existed, is long gone.
I don’t think more than a couple of days pass that I don’t get an unsolicited credit card offer from the many companies that offer them. I’ll be damned, it’s wearing out my shredder. This week I have received three credit card offers. They offer nice perks, like 0% interest on balance transfers through 2008. Some offer low interest rates. These are applied to average daily balance, rather than unpaid the balance once used.
The nasty little kicker in this game is called “universal default.” Universal default means, for example, that if someone defaults on a Master Card, the default interest rate may be applied to a Visa, Discover, etc., even if the other cards are paid on time.
Two of the three companies I received mail from this week take advantage of universal default – one charge in excess of 30. One company did not practice universal default.
Questions for Debate
1. Should Congress pass laws forbidding the practice of “universal default”?
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Questions for Debate
1. Should Congress pass laws forbidding the practice of “universal default”?
No, but they should pass laws that automatically enable consumers to apply "universal some other creditor screwed me so I can screw you". Or forbid universal default. Good for the goose, good for the gander.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%) 99% Credit card companies, 1% consumer. The business dealings between Joe Consumer and Creditor X are none of Creditor Y's business. If Joe is paying Creditor Y, then Creditor Y has no cause for complaint. Consumers get 1% because most aren't aware of the provisions in their agreements. It would be higher based on the "well, you shoulda read the agreement" reasoning, but credit card agreements are closely read by marginally more people than read "user agreements" for software. One would almost think there's a conspiracy out there to bury consumers under legalese elephant excrement.
Also, the fault lies with individual states, which can and do regulate the provision of credit in their state. Universal default and the proliferation of "payday loan" places should both be examined. The states should also outlaw the absolute arbitration clauses. Arbitration first, sure, that's reasonable.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Yes. The Bankruptcy Bill should be revisited. Pendulum swung too far. Bankruptcy laws were way too liberal, now they are too restrictive.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Who isn't for better education? Of course it should be provided. It should be provided by those who are concerned with this, i.e. consumer groups, ASAP. PSAs, ads in newspapers, etc. Forcing the credit card companies to provide the "education", whether by paying for it or by inclusion in their mailings or anything like that is wrong, just like Truth.Org (Big Tobacco funded anti-smoking campaign) is wrong.
1. Should Congress pass laws forbidding the practice of “universal default”?
No, but they should pass laws that automatically enable consumers to apply "universal some other creditor screwed me so I can screw you". Or forbid universal default. Good for the goose, good for the gander.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%) 99% Credit card companies, 1% consumer. The business dealings between Joe Consumer and Creditor X are none of Creditor Y's business. If Joe is paying Creditor Y, then Creditor Y has no cause for complaint. Consumers get 1% because most aren't aware of the provisions in their agreements. It would be higher based on the "well, you shoulda read the agreement" reasoning, but credit card agreements are closely read by marginally more people than read "user agreements" for software. One would almost think there's a conspiracy out there to bury consumers under legalese elephant excrement.
Also, the fault lies with individual states, which can and do regulate the provision of credit in their state. Universal default and the proliferation of "payday loan" places should both be examined. The states should also outlaw the absolute arbitration clauses. Arbitration first, sure, that's reasonable.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Yes. The Bankruptcy Bill should be revisited. Pendulum swung too far. Bankruptcy laws were way too liberal, now they are too restrictive.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Who isn't for better education? Of course it should be provided. It should be provided by those who are concerned with this, i.e. consumer groups, ASAP. PSAs, ads in newspapers, etc. Forcing the credit card companies to provide the "education", whether by paying for it or by inclusion in their mailings or anything like that is wrong, just like Truth.Org (Big Tobacco funded anti-smoking campaign) is wrong.
1. Should Congress pass laws forbidding the practice of “universal default”?
No, its our choice and responsibility to have an idea of the policy of your open credit lines. If heaven forbid you default on one, close the line of credit and transfer the debt to a new credit card that offers a 0% APR for a specific amount of time.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
I would go for 75% credit companies to 25% to consumers. The Credit companies actually put an effort into the contracts to make them intimidating. In my opinion it establishes intent to hide clauses that a consumer would not agree to if he had any idea what they are agreeing to. I give 25% to consumers since I don't think they would read them anyways if they were written in Laymans.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
In theory the lower losses for credit companies means the could lower the rates for people with good credit. I don't think they got the memo.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
A while back we had a topic suggesting we do it at least in high school if not earlier. I completely agree. Everyone will most likely and should know how to properly deal with their finances. This should include consumer debt (secured and non-secured), different mortgages like fixed rate, variable, & interest only, saving for retirement & collage, and forming a budget.
No, its our choice and responsibility to have an idea of the policy of your open credit lines. If heaven forbid you default on one, close the line of credit and transfer the debt to a new credit card that offers a 0% APR for a specific amount of time.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
I would go for 75% credit companies to 25% to consumers. The Credit companies actually put an effort into the contracts to make them intimidating. In my opinion it establishes intent to hide clauses that a consumer would not agree to if he had any idea what they are agreeing to. I give 25% to consumers since I don't think they would read them anyways if they were written in Laymans.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
In theory the lower losses for credit companies means the could lower the rates for people with good credit. I don't think they got the memo.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
A while back we had a topic suggesting we do it at least in high school if not earlier. I completely agree. Everyone will most likely and should know how to properly deal with their finances. This should include consumer debt (secured and non-secured), different mortgages like fixed rate, variable, & interest only, saving for retirement & collage, and forming a budget.
1. Should Congress pass laws forbidding the practice of “universal default”?
Congress ought to debate this issue and get the word out that yet another scheme has been hatched. As for passing any laws, that might not be necessary once people understand how the CC system works.
Then again, a fool and money get parted quickly. You can't fix stupid, as the comedian says.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
100% CC company, as that's how they write the contract. And you'd think the CC issuers were in cahoots with each other. Imagine that.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Sure, and a host of other things passed by the Republican government. However, if one is employed and has a steady income, and can afford to put something aside for repayment of at least some of the debt, I'm okay with that. If one is unemployed and has zero income, then repayment becomes impossible, as does living without the kindness of others. Or I suppose you could rob a bank to get into a form of restrictive welfare.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
The education should start as early as possible, be done as honestly as can be, and definitely before a kid gets the first job, even if it's a paper route. Educated consumers will kill the scams. Ralph Nadar should be the czar of consumer education. It'll keep him busy and out of national elections.
Proposed Golden Ruler: If you have any Gold, the Ruler will want it.
Congress ought to debate this issue and get the word out that yet another scheme has been hatched. As for passing any laws, that might not be necessary once people understand how the CC system works.
Then again, a fool and money get parted quickly. You can't fix stupid, as the comedian says.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
100% CC company, as that's how they write the contract. And you'd think the CC issuers were in cahoots with each other. Imagine that.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Sure, and a host of other things passed by the Republican government. However, if one is employed and has a steady income, and can afford to put something aside for repayment of at least some of the debt, I'm okay with that. If one is unemployed and has zero income, then repayment becomes impossible, as does living without the kindness of others. Or I suppose you could rob a bank to get into a form of restrictive welfare.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
The education should start as early as possible, be done as honestly as can be, and definitely before a kid gets the first job, even if it's a paper route. Educated consumers will kill the scams. Ralph Nadar should be the czar of consumer education. It'll keep him busy and out of national elections.
Proposed Golden Ruler: If you have any Gold, the Ruler will want it.
1. Should Congress pass laws forbidding the practice of “universal default”?
I agree with much of what you said on this thread Bikerdad – unusual, but it does happen.
I’m not a big fan of states’ rights . This is one area where the federal government needs to get more involved. State governments can be just as oppressive and allow oppressive measures as much as the feds.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
This seems to be the consensus. Credit card companies have a variety of traps set for unsuspecting customers.
I was going to put this in an update of my introduction, but it might fit here.
In 1998 I owed almost $46,000 in credit card bills. I went to a group called Consumer Credit Counseling Service. I had nine open accounts. They got the interest rates lowered to 6% on six accounts and 0% on another. Only two accounts refused to lower the interest rates - Sears (I haven't been in a Sears store since and will never buy anything from them again) and oddly enough, a Master Card through the teacher's credit union refused to lower the rates.
Today I am debt free except for current bills. It's a good feeling. With restrictions of the new bankruptcy law and scams like universal default, I wonder how much cooperations organizations, like Consumer Credit Counseling Service, will get from the credit card companies.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Yes. I don't understand why some members of the Democratic Party went along with this monstrous bill.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
This would be a classic case of the fox and the hen house.
I had not even thought of having credit card companies provide education. This should be part of public school curriculum, especially when students begin approaching their eighteenth birthday. Making copies of credit card contracts and going over them line-by-line would be good real-time education.
QUOTE(Bikerdad)
Also, the fault lies with individual states, which can and do regulate the provision of credit in their state. Universal default and the proliferation of "payday loan" places should both be examined. The states should also outlaw the absolute arbitration clauses. Arbitration first, sure, that's reasonable.
I agree with much of what you said on this thread Bikerdad – unusual, but it does happen.
I’m not a big fan of states’ rights . This is one area where the federal government needs to get more involved. State governments can be just as oppressive and allow oppressive measures as much as the feds.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
QUOTE(ArthurMusician)
100% CC company, as that's how they write the contract. And you'd think the CC issuers were in cahoots with each other. Imagine that.
This seems to be the consensus. Credit card companies have a variety of traps set for unsuspecting customers.
I was going to put this in an update of my introduction, but it might fit here.
In 1998 I owed almost $46,000 in credit card bills. I went to a group called Consumer Credit Counseling Service. I had nine open accounts. They got the interest rates lowered to 6% on six accounts and 0% on another. Only two accounts refused to lower the interest rates - Sears (I haven't been in a Sears store since and will never buy anything from them again) and oddly enough, a Master Card through the teacher's credit union refused to lower the rates.
Today I am debt free except for current bills. It's a good feeling. With restrictions of the new bankruptcy law and scams like universal default, I wonder how much cooperations organizations, like Consumer Credit Counseling Service, will get from the credit card companies.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
Yes. I don't understand why some members of the Democratic Party went along with this monstrous bill.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
QUOTE(Bikerdad)
Forcing the credit card companies to provide the "education", whether by paying for it or by inclusion in their mailings or anything like that is wrong, just like Truth.Org (Big Tobacco funded anti-smoking campaign) is wrong.
This would be a classic case of the fox and the hen house.
I had not even thought of having credit card companies provide education. This should be part of public school curriculum, especially when students begin approaching their eighteenth birthday. Making copies of credit card contracts and going over them line-by-line would be good real-time education.
Questions for Debate
1. Should Congress pass laws forbidding the practice of “universal default”?
No but I would favor an interest rate cap. Many states do this now. If theses companies cannot make 20-30% they will be less willing to take the risk.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
50/50. Ultimately we are all responsible for our own debts. The key here would be for Congree to force the card sellers to highlight the universal default wording so folks would know up front what they were signing up to.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
No.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
There are numerous “consumer education” services available. Perhaps better education (high school) on the issues surrounding consumer debt would help.
1. Should Congress pass laws forbidding the practice of “universal default”?
No but I would favor an interest rate cap. Many states do this now. If theses companies cannot make 20-30% they will be less willing to take the risk.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
50/50. Ultimately we are all responsible for our own debts. The key here would be for Congree to force the card sellers to highlight the universal default wording so folks would know up front what they were signing up to.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
No.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
There are numerous “consumer education” services available. Perhaps better education (high school) on the issues surrounding consumer debt would help.
Questions for Debate
1. Should Congress pass laws forbidding the practice of “universal default”?
Absolutely. And not just for banks, either. I saw something on TV a while back that things like missing a payment on a utility bill, or a mortgage payment can bump up your credit card interest as well, if the card company sees it on your credit report. Plus, apparently, it's perfectly alright now for auto insurance and homeowners insurance companies to raise your rates for defaulting on a credit card, or missing a payment of some kind that hits your credit record.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
I would say 75 / 25. As Ted noted, everyone is ultimately responsible for their own debs. On the other hand, Joe SixPack shouldn't have to retain a phalanx of attorneys and financial experts just to read the terms and conditions on the loan or credit card application.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
I think that congress should revisit the bill, but more needs to be looked at than just the universal default provisions.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Consumer financial education should be a requirement of every public school in the nation, starting with a basic class in middle school, and working up to the more advanced stuff (investing, cc rates, etc.) in high school.
1. Should Congress pass laws forbidding the practice of “universal default”?
Absolutely. And not just for banks, either. I saw something on TV a while back that things like missing a payment on a utility bill, or a mortgage payment can bump up your credit card interest as well, if the card company sees it on your credit report. Plus, apparently, it's perfectly alright now for auto insurance and homeowners insurance companies to raise your rates for defaulting on a credit card, or missing a payment of some kind that hits your credit record.
2. What percentage of blame do you assign to (1) credit card companies and (2) consumers when the universal default rate is applied to someone? (Total should add up to 100%)
I would say 75 / 25. As Ted noted, everyone is ultimately responsible for their own debs. On the other hand, Joe SixPack shouldn't have to retain a phalanx of attorneys and financial experts just to read the terms and conditions on the loan or credit card application.
3. Should Congress revisit the Bankruptcy Bill of 2005 to provide for relief of those caught in the “universal default” provision?
I think that congress should revisit the bill, but more needs to be looked at than just the universal default provisions.
4. What suggestions do you have for better consumer education? Should it be provided? If so, when should it be provided and by whom?
Consumer financial education should be a requirement of every public school in the nation, starting with a basic class in middle school, and working up to the more advanced stuff (investing, cc rates, etc.) in high school.
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