An Email from Citi's Vice President of Public Affairs; Dodd introduces bill to freeze credit-card rates.

Early this morning in How The Citi-Grinch Stole Christmas (and Why It's a Good Thing) I wrote "If ever there were screams of "Please Regulate Me" these actions by First Premier and Citigroup must be at the top of the list."

Well, that was fast.

Dodd introduces bill to freeze credit-card rates

Although Dodd has talked about this before, I was amused to see Dodd introduces bill to freeze credit-card rates at 3:16 PM today.

Senate Banking Committee Chairman Christopher Dodd on Monday introduced legislation that would temporarily freeze credit-card interest rates on existing balances, after saying that financial institutions weren't supporting a new credit-card law.

"No sooner had it been signed into law, credit-card companies were looking for ways to get around the protections this Congress and the American people demanded," said the Connecticut Democrat. "This bill would end those abuses and further protect customers today."

Congress in May approved a credit-card law, known as the Credit Card Accountability, Responsibility, and Disclosure Act, to crack down on abusive practices by credit-card issuers. Dodd's legislation would freeze rates on existing balances until the remaining provisions of the CARD act go into effect by February, at the latest.

Specifically, the CARD law would only allow interest rate hikes on existing balances based on limited conditions, such as when promotional rates expire or when a cardholder is late on a payment. The law also bans deceptive practices and includes a number of new transparency measures, including a provision that prohibits interest-rate changes without 45 days of advance notice.

Bankers opposition

A bank-industry group expressed concern about the House legislation, known as the Expedited CARD Reform for Consumers Act of 2009. A senior vice president for the American Bankers Association said it would be "extremely difficult, if not impossible" for them to meet the new Dec. 1 deadline.

"Moving up the implementation date will place additional strain on institutions and is likely to further restrict access to credit at a time when consumers, small businesses and the broader economy need it the most," Dodd said.

What's The Point?

If moving up the legislation will do what Dodd says then what is the point of the legislation?

Citigroup and others have been scrambling to beat the clock, probably well aware of Dodd's legislation in advance.

The only way the legislation will have much meaning is if it is retroactive.

Bear in mind I am in favor of a free market, but we don't have anything approaching that. Banks started extending credit to obvious deadbeats because of the Bankruptcy Reform Act of 2005. The sole intent of that legislation was to make people debt slaves forever.

Rather than calling for rate cap legislation, I am calling for sound money and establishment abolishing the Fed. If we do that, rates will take care of themselves.

By the way, there was an error in one of the emails that I posted.

"MM" writes: ... So, while the default rate is 33%; the loss is $270. [Correction: on one account it would be $70 - Mish]

One More Email for the Road

Steve writes ....

Hi, I just read the article about Citi raising rates. I just got the letter and I do not even have their card.

Steve

It's A Good Thing

Unlike Senator Dodd, I think that if these rate-jacks curtail consumer credit, it will be a good thing, not a bad one.

As I said previously ...

The odds are this will be the final incentive for many to get out of the debt slavery trap they are in. The more people that cut up their cards and tell banks to go to hell, the better off we will all be, and that's a good thing.

Email From Citi's Vice President, Public Affairs

This morning, in response to Citi-Grinch I received the following Email from Citi's Vice President, Public Affairs:

Hi Mr. Shedlock,

I have read your blog posting from Mish's Global Economic Trend Analysis, which appeared earlier today.

I am wondering if we can have a background discussion at your convenience.

Best regards,

Samuel Wang
Vice President, Public Affairs
Citi
153 East 53rd Street
New York, New York 10022

Cordial Conversation

I gave Mr. Wang a call and the conversation was quite cordial. He explained that customers could opt out of the rate hikes, and that in some instances consumers could keep using their card up to the expiration date of the card at their old rate.

What I asked Mr Wang:

• How many total cards do you have?
• How many received the letter?
• What percentage could keep using the card at the old rate until the card expiration date?
• What is the percentage breakdown by FICO score of those those receiving rate hikes or lowered credit limits?
• Is Citigroup setting up to exit the credit card business?

Whatever answers I get, I will post.

It would also be nice to see what Chase, Bank of America, and MNBA are doing with their customers.

Opting Out

CreditCards.Com explains Opt-Out procedures and other information consumers should know in Consumer Q and A: Credit card law, phase 1, debuts.

Q. When can consumers begin to use their opt-out rights for credit card changes?

A. Any notices of changes in terms received on or after Aug. 20, 2009, must contain information about consumers' new right to opt out of (or right to cancel) increases in interest rates, fees, finance charges and certain other changes in credit card agreements.

Opting out means the consumer can no longer make purchases with the card. Instead, the old, lower interest rate will be applied while the cardholder repays the balance. There are three methods for repaying balances on accounts that have been closed by consumers choosing to reject changes. Issuers can either:

• Collect the balance over at least five years.
• Charge a minimum payment amount that is up to twice the percentage charged before the change in terms.
• Use the same repayment plan used on the account at the time the consumer rejects the change in terms.

Credit card issuers cannot demand payment in full if consumers choose to opt out of changes to their accounts.

Q. Do consumers have the right to opt out of all changes in terms?

A. No. The Federal Reserve has ruled that consumers cannot opt out of increases in , reductions in or interest rate hikes triggered when cardholders are more than 60 days late paying monthly bills. In addition, interest rates increased by virtue of increases in the on variable rate credit cards also are not eligible for opt out.

There is more useful information about your credit card rights in the link.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Over 65 And Needing A Job; Interview Tips For Everyone

Over 65, out of work and desperate for a job? So are record numbers of people who thought they would be retired but now find they cannot afford to.

Please consider 65 and Up and Looking for Work.

It is well known that during the nation’s gale-force recession, many older Americans who dreamed of retirement continued to work, often because their 401(k)’s had plunged in value.

In fact, there are more Americans 65 and older in the job market today than at any time in history, 6.6 million, compared with 4.1 million in 2001.

Less well known, though, is that nearly half a million workers 65 and older want to work but cannot find a job — more than five times the level early this decade and this group’s highest unemployment level since the Great Depression.

The expectation once was to pay off your 30-year mortgage before you retired, or come close. Instead, the level of indebtedness among older Americans has risen faster than in any other age group, partly because so many obtained second mortgages to take money out of their homes.

The unemployment rate for older Americans is still much better than for others — 6.7 percent compared with 9.8 percent in the general population. But 6.7 percent is more than double the level of two years ago — and far higher than the minuscule 1.9 percent rate early this decade.

And unemployed older workers stay out of work longer — 36.5 weeks on average, 40 percent longer than for the unemployed in general.

“I often get told that I’m overqualified,” said Barbara Brooks, 71, who retired in 2003 after 30 years as an administrative assistant at the University of California, Los Angeles. She said being told that is code language for “you’re too old.” But Ms. Brooks said she wanted to work — and needed to — citing her monthly mortgage of $1,500, which eats up half her monthly pension.

65 and Over Unemployment Rate Highest In History



Tables Turned, Former Hirers Can’t Get Hired

Inquiring minds are reading Tables Turned, Former Hirers Can’t Get Hired

NANCY FINK is a career coach for Maryland’s department of labor, running seminars for the most skilled unemployed workers.

For 17 years, she has counseled professionals, business managers, engineers, accountants, scientists — people who are mature, middle-aged, highly motivated, well-educated, well-spoken. But in all that time, she’s never seen so many of the jobless with such impressive skills as this last year. “Last week I had seven lawyers in this room,” she said. “I’ve had lots of folks from TV and The Baltimore Sun. This week I’ve got five human resources directors — I’ve never had that.”

They ask questions young workers don’t. David Kozlowski, 52, a systems vice president laid off in June, wanted to know how far back to go when an interviewer inquires about his work experience in information technology. “I’ve had 30 years in I.T.,” he said.

During a discussion on cover letters, Ms. Fink wondered if the human resources directors in the room had any thoughts. “It can make a big difference,” said Hal Hamil Jr., 56, unemployed since August, but before then, a senior vice president of PNC Bank making $130,000 a year. Mr. Hamil said that last March he posted three openings for tellers paying $10 an hour and got 1,008 applications. “I hired two of them because of their cover letters,” he said.

Ms. Fink warned: “You could find yourself being interviewed by a millennial. As a boomer, you’re thinking that could be my kid. Your instinct is to use their first name. Don’t. They could have an M.B.A. from Wharton. It should be Ms. or Mr.”

They discussed how to respond when an interviewer asked them to describe a weakness.

“Can you say ‘I don’t have a weakness,’ ” Ms. James, the contractor said. “‘I’m just even-keeled’?”

“No, no,” Ms. Fink said, “you need a weakness that’s not really a weakness — they want to see you dance around the question.”

After the seminar, Ms. Fink said a lot of what she does is therapy — helping worried people feel less isolated.

Her boss, Stephen Gallison, who directs the program for skilled workers known as the Professional Outplacement Assistance Center, said that in the past people typically found jobs within five months, but in this economy that’s not a reliable gauge. Asked if he saw any hopeful signs, he said: “No. Nothing. Not yet.”

Interview Tips From The Article

• Attach a cover letter to your resume.
• Be prepared to mention a weakness.
• Be prepared to answer the question "Tell me about yourself."
• Send a thank you letter after the interview.
• Don't use first names even if the person hiring is half your age and looks like your son or daughter. They could have an M.B.A. from Wharton.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

How The Citi-Grinch Stole Christmas (and Why It's a Good Thing)

Emails are pouring in over Citigroup's "Hail Mary Pass": How To Know Citigroup Is In Serious Trouble.

Here is one from "HG" who writes

Hey Mish,

We have a 7 figure net worth, no mortgage debt (we do own our own home), pay credit debt in full each month, and have credit scores of 726 and 702 respectively. We are 56 and 53 years old.

Just got the Citi 29.99 credit card rate increase notice. It's not limited to those who carry a balance like the folks who carry 25k in debt.

Needless to say, I'm cutting it up on principle, but not closing it so that my credit limits don't go down.

Enjoy your posts and look forward to reading them going forward.

HG

Matters of Principle

Want to take it out on Citigroup? If so, then do what "HG" did.

If you have a Citibank credit card just stop using the Citicard to deny Citigroup every cent you can.

It is high time for people to stop buying junk they do not need with money they do not have. Citi's actions help.

Citibank Sends Out 2 Million Letters

Here is an Email from "MJ" who writes

Hi Mish,

I got a Citibank letter last week raising my interest rate to 29.99% from 7.99%. I have a 780 credit score and pay my account off every month. My limit was $18,200. I never made a late payment to Citibank (or anyone else).

When I called them to either maintain my current terms or opt-out, the rep told me she had been getting nothing but complaint calls all day. She said Citibank had sent out 2 million such letters. I was given one choice: accept the new terms or have my account canceled upon its expiration of 12/31/09. I told them to cancel the account.

The “hail Mary” you describe is even larger than you imagined.

MJ

I am hearing many stories about ridiculous rates but this one takes the cake.

First Premier Banks Offers Card With 79.9 Percent Rate

Please consider No, You're Reading That Right

Gordon Hageman couldn’t believe the credit card offer he got in the mail.

"My first thought, it was a mistake," Hageman said.

The wine distributor called the number on the offer, gave them the offer code and verified his information. Sure enough, it was right: the pre-approved credit card came with a 79.9 percent APR.

Yes, 79.9 percent.

The offer is for a Premier card from First Premier Bank, which is based in South Dakota. On its Web site, First Premier says it is the country's 10th largest issuer of Visa and MasterCard credit cards. The site also says it "focuses on individuals who have less than perfect credit but are actually still creditworthy."

According to information on the South Dakota Legislative Web site, there is "no maximum or usury restriction." In other words, the individual bank can set its own interest rate limits.

Several calls made to First Premier for a comment were not returned.

Banks Scream To Be Regulated

If ever there were screams of "Please Regulate Me" these actions by First Premier and Citigroup must be at the top of the list.

Stories like these are piling in from everywhere all over the internet. Yet, it is the Citigroup stories that seem to be jacked up more frequently without reason.

I just checked my United Plus Chase Credit Card and it is 13.15%. I don't carry a balance, except by accident (a bill comes in while on extended vacation). I think 13.15% is high.

29.99% across the board actions is absurd. It is also begging Congress for rate caps.

Some have Emailed me telling me this is nothing but greed. Others said this is nothing but preemptive action by banks to raise rates before new credit card protection laws go into effect.

I am sure there is a lot preemptive action happening. However, Citi's mass sending of 2 million letters, Citi's canceling of Gas-Linked cards and Citi's jacking of rates for virtually no reason on some accounts suggests other problems.

Email From A Collections Specialist

Inquiring minds will wish to consider the following email from "MM" who works in the financial industry. "MM" has a collections background. This Email is also in regards to Citigroup's "Hail Mary Pass": How To Know Citigroup Is In Serious Trouble.

"MM" writes:

Hello Mish

I wanted to clarify Karl Denninger's comments regarding Citigroup's 10% defaults on their credit cards.

I work in the financial industry, and have a heavy collections background. 'Defaults' is a loosely used term. For example, when my company says it has x% defaults, it is in reference to the number of loans. Karl seems to be assuming 10% is measured against fees, or what other people call revenue. This is not an accurate way of measuring true losses.

Here is a practical example to illustrate my point. At my company, if we give out 3 $100 loans and charge $10 per loan, we generate $30 in fees or revenue; However, we still have to get the $300 back we lent.

If one of those loans defaults, that is a 33% default rate, but the practical impact to revenue is a loss of $270.

So, while the default rate is 33%; the loss is $270. [Correction on one account it would be $70 - Mish] Karl is assuming the 10% of defaults is measured against revenue. It could just as easily be calculated against the principal. You have to check their annual report and go through their math, because default is not universally calculated the same way.

Thus, that 10% default could be exponentially much larger than Karl is characterizing. In fact, I would be willing to bet it is, because I have a friend who worked in the credit card industry for 15 years, and he was telling me his company uses the term default the same way we do.

MM

Credit Card Panic

The actions by Citigroup smack of panic. That panic is likely to backfire.

Those who have other cards can simply stop using their Citicard as "HG" did. Even those without other cards may simply tell Citigroup to go to hell by stop using the card.

Those in real trouble probably do not care and have no intent to pay anyway.

Add that all up and what you have is a scenario in which Citibank (and anyone else following the same misguided rate-jacking policy) is going to drive good business away while keeping the bad business.

How The Grinch Stole Christmas

Think these rate-jacking actions are going to spur sales at Christmas? I don't. Rising unemployment does not help one bit either.

Many people will look at those jacked-up rates and not buy. Some will not even have a choice because of slashed limits and canceled cards.

This Christmas is setup to be worse than last because of reduced credit lines, canceled cards, and rates that amount to usury. Last year was one of the worst in retail Christmas seasons in history.

Citigroup has no idea what it is doing. It would already be history had it not been for taxpayer bailouts. Yet....

It's A Good Thing

• To the extent that these jacked-up rates cause people to stop buying, it's a good thing.
  
• To the extent that canceled cards cause people to stop buying, it's a good thing.
• To the extent that these actions cause people tell greedy banks where to go, it's a good thing.
• To the extent that these actions cause people just give up, stop paying ridiculous rates, and declare bankruptcy, it's a good thing.

Thank You Citi-Grinch.

The same thanks go to every other bank that jacked up rates. The odds are this will be the final incentive for many to get out of the debt slavery trap they are in. The more people that cut up their cards and tell banks to go to hell, the better off we will all be, and that's a good thing.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List