Category Archives: Credit Cards and Bankruptcy

Howdy Humans: Why Are Credit Card Interest Rates So High?

By Ryan C. Wood

They say your credit card interest rates are based upon credit risk.  It is far more complicated than that and a little history regarding interest rates is helpful.  Your individual credit risk does come into play.  It is just not as large a part of the equation as they would have us all believe.  Credit card interest rates are high because there is no law capping credit card interest rates under Federal Law.  Prior to 1978 state usury laws limited or capped credit card interest rates for you protection.    

In 1978 the Supreme Court of the United States allowed one bank in one state to export their interest rates based upon their state law to their customers in other states with different usury laws limiting interest rates.  Naturally state “X,” to be named later, just did away with all caps on interest rates under their state law, the banks said great, we will come setup shop in your state with no cap on interest rates so we scan export high interest rates to all our customers throughout the United States of America.  This is why credit card interest rates are so high and everything else you hear is just fake news to take your eye off the ball.

Here in California generally the cap on interest is 10%.  This is a generalization and there are of course exceptions after exceptions.  The 10% cap only really applies to human to human extension of credit/loans. Does not matter given Citibank, N.A. is doing business out of South Dakota and South Dakota has no caps on interest rates.  Citibank, N.A. may export the interest rates of South Dakota to their customer here in California trumping the California state law usury 10% cap.

If You Have A Net Over Worth $1.0 Million How Can You Have A 79% Interest Rate?

They say interest rates are based upon your credit risk.  That is why your credit card interest rate is so high.  That is not really true and probably the smallest part of the truth.  If so, then why does someone with an 825-credit score have not one credit card with an interest rate under 15%?  If so, then someone that has never missed a payment on anything their entire life should have a credit card interest rates that are extremely low, say 5%.  No, this is not how it works because YOUR credit risk is only a small part of the truth.  The truth those who pay each month and on time will always have to pay higher rates to make up for those that default.  So the truth is extension of credit/loans are given to those with a higher credit risk driving up the interest rates for everyone. Why not have a lower rate of default by lowering interest rates?  No, no, we make more money getting everyone to pay once illegal loan shark interest rates.    

The truth is 79% interest on a revolving credit account for an 80-year human that has a net worth over $1.0 million is somehow legal and has nothing to do with credit risk.  This is actual fact that happened to one human.  Only in certain aspect of our economy do we allow buyer beware to fully take over. 

Attempts To Reform Interest Rates At The Federal Level Are Always Rejected

It seems so simple given we had protection for consumers against loan sharking and predatory lending to consumers based on each state’s laws.  Just legislate caps on interest rates at the federal level and we will no longer have this patchwork of state usury laws confusing everyone and it seems limitless loopholes.  As I have yelled from the highest mountain top for years, we protect people from price gouging during natural disasters yet allow humans to get destroyed by once illegal interest rates during their personal financial disaster. Why is a bankruptcy attorney arguing for limits on interest rates decreasing the number of bankruptcy cases filed? How about we be intellectually honest and treat all types of disasters equally.  Oh no, there is that word again, equal.  We cannot equally apply philosophies to different circumstances creating equal opportunity. Somehow capping interest rates is arguably a bad idea because we have a free market economy? That has to be the biggest joke out there and the biggist lie. The government/law allows, even requires, manipulation of the free market creating financial losers and winners all the time. This market manipulation is how we have a safe food supply, safe buildings, safe cars, seatbelt laws, product liability, and finally speed limits.  The market is manipulated and made not free all the time for all kinds of horrible reasons.  THE REAL MANIPULATION OF THE MARKT NOW IS NOT LIMITING INTEREST RATES GIVEN WE KNOW NOT LIMITING INTEREST RATES IS BAD FOR HUMANS.  THIS IS WHY LAWS WERE PASSED IN EACH STATE TO LIMIT INTEREST RATES. 

PLEASE EXPLAIN TO ME HOW DOING AWAY WITH SEATBELT LAWS HELPS CONSUMERS?  PLEASE EXPLAIN TO ME HOW DOING AWAY WITH LIMITS ON INTEREST RATES HELPS CONSUMERS?

You all support rent control right.  The manipulation of the market for a very select few humans creating massive inequality.  If you qualify for rent control can you even have credit cards?  If you are a rent control human can you human also have your interest rates be capped too?  You are limiting how much rent control human pays for rent but still allow rent control human to have a $1,200.00 phone with a monthly bill of $200.00? How can a trillion-dollar world conglomerate charge rent control human 36% interest on what they are purchasing at Target?  The human only has money to drive to Target and buy stuff because their are on rent control and pay less rent. Does that make any sense to you?  So this human’s landlord is forced to not make as much money so the rent control human can have four credit cards, each with a 30% plus interest rate, and buy a bunch of junk that sooner than later will all be worth $0.00.  I am all about affordable housing but rent control does nothing to fix the problem of affordable housing.  Rent control merely treats the cancer for a select special few and does nothing to cure the cancer. Everyone seems to like band aids to cover cuts rather than preventing further cuts. No, no, we will just keep placing band aids.

See these issues are cherry-picked.  So just one parameter (RENT) is manipulated while not changing anything else in someone’s financial life.  It will never work.  No doctor is going to reattach your pinky finger when you have a punctured lung.  You cannot cherry-pick the remedy to the problem and ignore the other problems that are also contributing to the patient’s death.  So why do we do this when it comes to economic problems? Why can we not consistently apply philosophies equally to all issues?     

The Most Recent Matry I Am Aware Of – U.S. Sen. Sherrod Brown (D-OH)

U.S. Sen. Sherrod Brown (D-OH), Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs apparently would like to cap interest rates for poor people at 36% interest.  Sorry, but that will not help much, is still loan sharking, and used to be illegal for a reason.  Apparently, the following bill/law will be introduced to the U.S. Senate entitled: “Protecting Americans from Debt Traps by Extending the Military’s 36% Interest Rate Cap to Everyone.”  Thirty-six percent is almost five times the eight percent reasonable rate of return for us normal oxygen breathing humans are supposed to be happy to receive on our investments.  Wish I could guarantee 36% return on my money guaranteed.  

Toomey Statement 7-29-21.pdf (senate.gov)

I may comment on each paragraph of this “Opening Statement” by Ranking Member Senator Pat Toomey (R-Pa) via YouTube.  Please YouTube Ryan C. Wood and Bankruptcy to find the YouTube video.  It may not be up yet, but it will be shorty.

Hello Senator Sherrod Brown.  How about creating another federal or state entity to help protect consumers?  We have/had the Federal Trade Commission along with the Consumer Financial Protection Bureau (FTC).  It would be nice to see the FTC did not allow two corporations to merge together further and further limiting choice by human consumers thereby forcing us to pay more?  It would be nice to get back to trust busting for the benefit of the consumer.  Then the Consumer Financial Protection Bureau (CFPB) was created after the mortgage meltdown to help consumers more.  So now we have two federal entities, FTC and CFPB doing the same consumer protection, so consumers should be twice as protected right? Both entities are doing great things to help consumers everyday. The job is overwhelming though and there are just too many scamsters out there to prosecute. For ten plus years I see the same problems with interest rates and consumer loans and credit cards repeatedly. 

Here in California Governor Newsome signed into law the California Consumer Financial Protection Law (CCFPL) which created the new California government entity the Department of Financial Protection and Innovation (DFPI) in September 2020.  The language says the DFPI is supposed to resemble the Consumer Financial Protection Bureau.  But the CCFPL and DFPI only create another set of eyes on persons offering or providing consumer financial products or services in California.  Like magic federal and state-chartered banks ARE NOT SUBJECT TO REGULATION BY THIS NEW CALIFORNIA CONSUMER FINANCIAL PROTECTION LAW.  Ah, so you are creating more oversight of “persons” making loans to other “persons” in the State of California?  I will guess that the big federal and state chartered banks are the ones making 99.99% of loans and they are the ones that need 99.99% more regulation and oversight.  THIS IS THE NEW NORMAL THOUGH.  THE LAW ALLOWS CORPORATIONS AND THE GOVERNMENT ACTORS TO DO TO OTHER HUMANS WHAT THEY [CORPORATION OR GOVERNMENT EMPLOYEE] COULD DO TO ANOTHER HUMAN INDIVIDUAL ON AN INDIVIDUAL LEVEL.     

The reality is there is very little competition at the corporate large-scale consumer credit industry.  There are only a few players, and THEY ARE TOO BIG TO FAIL, and you are TOO SMALL TO MATTER.  The thermometer says 80 degrees, so I report the 80 degrees.  I did not make the 80 degrees.  The fake news is your individual life, your rights, your happiness, is more important than the over all system.  The overall system sadly is more important than you. 

Caps On Interest Rates Were Legislated For a Reason: Your Financial Protection

It all comes down to bargaining power and the free market.  Or what “they” call the free market.  Poor consumers have no bargaining power so those with the means of production, the money, can take advantage of the consumer.  This is precisely what took place until laws were passed to limit interest rates, prevent abusive loansharking, and bring order to the chaos.  The reason why usury laws were passed to limit interest rates still exists, yet we have chosen, well the Supreme Court of the United States in Marquette National Bank v. First Nat’l. Bank of Omaha Corporation, 439 U.S. 299 (1978) decided to take the limits off interest rates.  So, if there is no more cap on interest rates how is the problem this creates being solved now?  It is not.  You all are getting fleeced by banks and interest rates that are supposed to be illegal.  Since life is so short you should probably just dump as much money in the stock market and take advantage of the increase in share value of these same corporations. Why make things better when you can profit off the bad?   

The 1978 Marquette National Bank Supreme Court Decision Changed It All

I believe this case, its holding, changed more about our lives than previously considered.  Prior to 1978 there were caps on interest rates.  Each states usury laws regarding interest rates controlled.  In 1978 state parks were free.  There were no bank fees for services such as balance check fee, money order fee, ATM fee or statement fee.  Government buildings were not Taj Mahal’s built with marble with an entire room dedicated to “espresso.” Most people did not have multiple revolving consumer unsecured debts (a bunch of credit cards with balances carried over each month accruing interest.)

The removal of caps on interest rates changed it all.  This started the downward spiral of your ability to work a normal job and afford a normal house, two or more cars, a boat, a houseboat, a cabin, and retirement.  All of this when working a normal job clocking in day in and day out.  You know this person can no longer afford to buy a house let alone the other items to enjoy life. 

We are going to open the credit markets to the higher risk borrowers that are less likely to pay back the debt, so we have to charge everyone higher interest rates to lend you the money.  This is a blatant lie and an example of how truth is disseminated modernly.  We small consumers prior to 1978 were protected by state usury laws limiting credit card interest rates.  That is the entire point of the usury laws existing to begin with.  That said this limited the availability of credit and extension of credit. Limiting the availability of credit to the masses is also bad. Having the law determine the maximum interest rate is always better than “Joe Loan Shark” choosing an interest rate for a human…….. 

  • This opened the door to blatant discrimination that previously could not exist given there was capped interest rates for all; capping credit card interest rates at 10% ensures the delta/difference for manipulation is far less; we all get the same equal treatment with the same limited interest rates
  • When interest rates can be as high as 79% a company can give one person an interest rate of 5% and another 79% under the lie of credit risk; what a massive delta for discrimination creating winners and losers in our FREE market…….

So it is not your credit score or likelihood to pay back the debt controlling interest rates but the law itself, greed and extension of credit to everyone.     

There is nothing new about human interaction between humans or how humans interact with Earth.  Those in power who are not ignorant just ignore what history has taught us for their own personal financial gain.  Our system determined it was in the best interest of all to limit interest rates to limit abuse of the poor.  Once that determination is made over years of experience, trials and tribulations, I would call this an absolute.  There are certain absolutes in the law and why certain laws exist. You can call it natural law.  Limitations on interest were legislated to thwart loan sharking for the benefit of all yet somehow, we reverted back to loan sharking by even more powerful entities: corporations that live on forever. Infinite existence with infinite financial dealings with humans with limited lives. The law got rid of individuals or organized crime from loan sharking and gave the reigns to legal corporations.

It is called capitalism and life is just so short that humans choose themselves over other humans.  We are lucky to get 50 good years.  The first 18 years, or more, are spent trying to figure out whom you are and if what your parents brainwashed you with is the right or wrong stuff.  The next years are traditionally dedicated to making other humans and money to support them gaining experience.  The next period can range anywhere from 20 – 50 years or more depending upon the individuals’ finances.   Sadly, some humans have to work their entire lives until they die.  No human should be forced to die working.  So not necessary in 2022.     

THERE IS A FORREST BEHIND THE TREES; A BIGGER PICTURE

This saying is about only being able to see the first row of trees yet there is a vast forest behind that cannot be seen.  I encourage everyone to research the forest and ignore the first row of trees.  You must ignore the first thing you hear or read.  There is a reason this is the first thing you are being told.  The first row of trees is what leads to commercials advertising how cigarettes are healthy for you.  If you did not know this is true it is true.  There is always a bigger picture and what you are being shown is rarely the truth.

WHY ARE CORORATIONS PART OF THIS DISCUSSION?

Corporations are part of this discussion because the corporate entity insulates the officer and director humans from personal liability when charging humans loan sharking interest rates.  It is the “corporation” doing this not me personally.  The “corporation” is a fault.  Well, the corporation breaks all the rules of punishment and deterrence our system is based upon.  We cannot put a “corporation” in jail or put the “corporation” to death for premeditated willful murder of another human.  A “corporation” can commit willful first-degree murder and be fined money for it.  A human being will be put in prison and potentially put to death.  So, the “corporation” charges you the anti-human financial health interest rates and there is not one single human liable for such an atrocity. 

Here is an excerpt from a Federal Reserve article written by Lisa Chen and Gregory Elliehausen published on August 21, 2020.

Trends in Costs of Consumer Finance Companies
Gross revenue of consumer finance companies in 2015 was $29.09 per $100 of receivables (table 1), an amount higher than gross revenue per $100 of receivables in 1964 and 1987 ($21.40 and $24.89, respectively). Total cost in 2015 ($25.19 per $100 of receivables) was also higher in than in the earlier years. Gross revenue less total expenses (net income) is the cost of equity funds. This amount is compensation for owners’ investment on the firm. The cost of equity funds in 2015, $4.80 per $100 of receivables, was more than twice the cost of equity funds in 1964 or 1978.

So I will say that legislating out caps on interest rates significantly expanded the United States economy, hell the world economy, on the backs of working Americans and going into debt.  The argument goes now that banks can offer higher interest rates, they can offer credit to higher risk borrowers allowing everyone to have stuff, cars, whatever without having the money to purchase the thing.  Previously only high-cost items such as homes and cars had loans.  Everything else you had to pay for it all at once or you could not purchase the thing.  K-Mart has lay-away for certain items.  So, has opening up credit markets to everyone been a good thing?  For the rich and powerful of course.  For the poor and fragile no.

1968 is apparently the first-year revolving consumer credit was totaled.  In 1968 Americans had $1,316,000,000 ($1.3 billion) in revolving consumer credit debt versus $105,455,000,000 ($105 billion) in nonrevolving consumer debt like home or vehicle loans.

In 1968 revolving consumer credit debt was less than 1.5% of total consumer credit debt.

In 1978 revolving consumer credit debt increased to $36.92 billion versus nonrevolving consumer credit debt of $225,840,720,000 ($226 billion).  1978 revolving consumer credit grew to over 6% of total consumer credit debt.   

In 2021 revolving consumer credit debt increased to $974 billion versus nonrevolving consumer credit debt of $3.2 trillion.  As of 2021 revolving consumer credit grew to over 23% of total consumer credit debt. 

That is exponential growth.  $974 billion at an average interest rate of what?  Ony 6 percent or over 35%?  You do the math, and the result is trillions in interest for the poor to pay to obtain credit.  Prior to 1978 this was not legally possible for your protection. 

Look At The Stock Market Before 1978 and After 1978

Please go to: https://www.macrotrends.net/2324/sp-500-historical-chart-data and look at the chart after 1978.  But for a couple of blimps nothing but up for the largest companies in the world.  Is this direct evidence or merely a correlation?

How about something like:

THE PERSONAL FINANCIAL DISASTER AND EMERGENCY PRICING ABUSE PREVENTION ACT

So a law exists entitled: The Financial Disaster and Emergency Pricing Abuse Prevention Act barring price gouging during natural disasters and PANDEMICS.  Have you heard of enforcement of this Federal Law during the COVID NOVEL CORONA VIRUS PANDEMIC?  Yeah, some humans believed they could corner the market on hand sanitizer by doing what would normally be a perfectly legal way to screw people and charge too much.  So how about “The PERSONAL Financial Disaster and Emergency Pricing Abuse and Prevention Act?  Seems intellectually honest and consistent right? 

What is the point protecting humans from one disaster only to leave them entirely exposed to other types of disasters?  Is this intellectually honest to you?  If someone is starving due to loss of employment, does it really matter how or why they are no longer employed and cannot feed themselves anymore?  The important part is they are starving, and it is wrong to take advantage of this persons because they are under this stress.  Yet the system has you walking the fence on this one whether you admit it or not.  Anyone can buy a 75” television whether they need it or not or can afford or not at this point on credit.  There is no credit check when using the credit card.  When the card is issued a marginal evaluation of ability to pay back the credit card is made.  Understand that doing a thorough evaluation of ability to pay first was taken off the table with the SCOTUS 1978 holding.  Do not worry about ability to pay.  Just charge a very high interest rate to even it all out.  Why treat people fairly and equally when we can just charge 36% interest and we, the big bank corporations, will make money hand over fist no matter what.  It is a mathematical certainty.  We will CAPITALIZE upon the masses and the masses do not care so what is the problem? 

What is bad for one human is bad for all humans.  Be stubborn about this.  If you believe this and execute on it all humans should be happy and healthy.  You do want this right? 

You must work on raising the tide, so all ships go up.      

Can you honestly believe someone is in their right mind getting a payday loan at 70% or more in interest so they can eat or pay their rent?  Or the fees for this short period loan are 150% of the total amount borrowed? 

Are you being kept just treading water, your head is just above the water lever, never actually swimming anywhere but you can always see the land?    

Seems like prior to 1978 humans had a house, a boat, a motorhome, retirement, and healthcare all while working normal jobs.  How a wonderful a world this was.  Can you imagine?  State and Federal parks did not have admittance fees and the maintenance of the land was all part of your taxes already.  This is also back when government buildings would never contain marble.  There was a feeling of we are all in the same boat.  That changed.  I argue our entire economy changed with increased access to credit for all.    

Back to The Personal Financial Disaster and Emergency Pricing Abuse Prevention Act.  The human seeking a payday loan is under constant mental stress for probably an extremely extended period of time.  Unlike someone that is involved in an earthquake or tornado.  The earthquake or tornado happens, you deal with it, and hopefully things get better within a year or so.  Your personal financial disaster does not register the same as an equally devastating natural disaster.  Your personal financial disaster may extend for 10 years or more before there is some sort of finality for the stress and anxiety to go away permanently.  Your personal financial disaster should be treated the same way as a personal disaster due to a natural disaster.  The stress someone is under is daily when they are coming up short each day on their bills.  It is detrimentally affecting their entire life which will also affect yours because you are living in the same world as them.  Those things other people are doing you complain about are symptoms of their financial disaster and these symptoms are negatively affecting your life.  How about we do things that cure the debt cancer and not just treat the cancer only to have the patient die?  Why? 

Has Quasi-Deregulation of Caps on Interest Rates Worked?

Has this been a good thing?  I say no.  As a bankruptcy attorney that has dealt with thousands of humans in financial turmoil, I have to say no.  It has just led to financial abuse of those who can least afford it.  We humans have been here before.  This is nothing new.     

There is a reason why we created usury laws and caps on interest rates.  We humans lived for many years with no protection from those more powerful holding all the means of production and generational wealth. 

Individual humans born with nothing have always and will always needed protection from those that were born with everything.  This is an absolute truth regardless of period of history, location on Earth, skin color, or gender.  When will humans learn?  We must “OUTTHINK INSTINCT” (@ All Rights Reserved 2022) and this is what laws are. 

 Consumer Credit Levels: 

See Federal Reserve:              www.federalreserve.gov/releases/g19/hist/cc_hist_sa_levels.html

Unconscionability/Unconscionable:     

              CIVIL CODE – CIV – TITLE 4. UNLAWFUL CONTRACTS [1667 – 1670.11]   

1670.5. 

(a) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

(b) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.

What Are The Best Credit Cards To Rebuild Credit After Filing Bankruptcy?

By Ryan C. Wood

The best credit cards to rebuild credit after filing bankruptcy are secured creditors with no annual fee.  Do they exist?  Yes, secured credit cards with no annual fees do in fact exist.  Like all parts of capitalism there are business, banks and lenders that are targeting this segment of society and offer services.  Many of my chapter 7 clients report receiving vehicle loan offers in the mail even before they receive a discharge in their chapter 7 bankruptcy case.  Lenders are targeting them given the lenders know they have not debts post-discharge.   

Best Credit Cards to Rebuild Credit After Filing Bankruptcy

The following is a list compiled from many different websites and the information may no longer be accurate due to interest rate changes and other factors.  Some of the interest rates are very high.  If you pay off the balance each month it does not matter at all though.  You may want to start with the highest interest rate no annual fee cards since they are more likely to give you a card.  If no success, then try the low interest rate low annual fee cards.  If not then try the high interest rate with high annual fee cards. 

Surge MasterCard:                                      Annual Fee $75 – $100            APR- 26% – 30%

Total Visa Unsecured Card –                                       No additional information listed

Petal “1” Visa Credit Card: No annual fee                  APR – 20% – 30%

Platinum Elite Credit MasterCard Secured Card: Annual Fee $29          APR – 19.99%

  • First Progress

Capital One Secured Credit Card:                              No annual fee                                 APR – 26.99%

Discover It Secured                                                       No annual fee                                APR – 22.99%

  • 1% – 2% Cash back on certain purchases

Milestone Gold Mastercard:                                       Annual Fee $35 – $100                   APR – 24.90%

Avant Credit Card:                                                        Annual Fee $39                               APR – 25.99%

Next Gen Platinum Master Credit Card                  Annual Fee $48 – $75                    APR – 35.99 %

  • First Digital

Official Nascar Credit Card                                          Annual Fee: $0 – $100   APR – 17.99% – 23.99%

  • Credit One Bank; 1% cash back on certain purchases

Platinum Prestige Mastercard Secured Card        Annual Fee: $49                                APR – 9.99%

Merrick Bank Secured Visa Card                                 Annual Fee: $36                             APR – 17.45%

Platinum Elite Mastercard Secured Credit Card   Annual Fee: $29                            APR – 19.99%

Credit One Bank Plantinum Visa                                  Annual Fee: $0 – $99    APR – 17.99% – 23.99%

  • For Rebuilding Credit

Reflex Mastercard                                                           Annual Fee: $75-$99    APR- 25.90% – 29.99%

First Access Visa Credit Card                                        Annual Fee: Unknown            APR – Unknown

Fingerhut Advantage Credit Account                      Annual Fee: $0.00                       APR – 29.99%

  • By WebBank

Indigo Platinum Mastercard                                        Annual Fee: $0.00 – $99             APR – 24.99%

The Open Sky Secured Visa Credit Card                 Annual Fee: $35                          APR – 17.39%

Platinum Select Mastercard Secured Card            Annual Fee: $39.00                    APR – 13.99%

How To Rebuild Credit After Bankruptcy

Never ever pay anyone or any company to help you rebuild your credit. Not even a bankruptcy attorney like me.  There is no magic wand that can be waived to fix a credit score.  If you have inaccurate information on your credit report is should be removed so it does not drag down your credit score.  You can do this yourself and for little effort.  Do not call the phone number on that sign you see posted on a telephone pole promising to fix your credit in 30 – 60 days.  It is a scam.  At the same time you are always permitted to pay someone to wash your car even when the car is not dirty. 

  • Pay Your Bills Each Month On Time Each and Every Month

Yeah, easier said than done right?  It is still the single most important step you can take to rebuild credit once things did not go quite right.  Pay your cell phone bill on time.  Pay your rent on time.  Pay your utility bills on time.  If you do obtain a credit card or somehow are allowed to keep a credit card be sure to pay the monthly balance off in total each month.  Do allow a balance to remain that accrues interest.  It all matters at this point and every little bit will help rebuild your credit.

  • If You Have Credit Do Not Use It All

This is referring to the total amount you could borrow or use on your various credit accounts.  For example if you have two creditors both with credit limits of $10,000 you have a total of $20,000 in available credit.  If you use up all of your available credit you will probably need the services of a bankruptcy lawyer sooner than later. The amount of credit you use versus the amount you have is a metric used for your credit score.  The lower the percentage the better for your credit score.,  For example if you have $20,000 in available credit and you are have a balanced owed totaling $18,000 you are using 90% of your available credit.  Not good.  If you are only using $2,000 of the available $20,000 you are only using 10%.  That is what you want.  So a trick you can play to help this percentage is to apply for more credit cards thereby increasing your available credit  while the amount you are using stays the same.  This will lower the percentage of your available credit you are using.  In the example above the person with $18,000 in debt could apply and obtain two more credit cards each with $10,000 credit limits.  The would not have $40,000 in available credit while only using $18,000 lowering the percentage to 45% of credit used.  This is much better than 90% they had previously.  See  number three below though too.   

  • Opening A Bunch of New Accounts All At Once

Inquiries for obtaining credit can damage a credit score.  Each time you open a new account an inquiry is made to the credit bureaus and these temporarily will lower your credit score.  So if you open five new credit accounts within a six month period you will have many inquiries and your credit score will suffer.  This is a game of chess.  It is not just jumping over your opponent like in checkers.  So open accounts over a period of a long time to increase your available credit rather than all at once.  Just because you have $200,000 in available credit does not mean you have to use it.  That is the difficult part when things do not go as planned and credit are used for basic living expenses such as food and utilities.  But this is about rebuilding credit and having a great credit score so increasing your available credit slowly over time is a good thing. 

  • As Mentioned Above Apply For a Secured Credit Card

Secured credit cards are a great way to rebuild credit.  You will have to provide an initial deposit so secure the repayment of the credit card but that is fine.  As you use the secured credit card and there are no issues they will increase your credit limit and eventually the deposit can be refunded to you.  It is important to note this is not a pre-paid card but a secured credit card. 

Why Credit Card Interest Rates Should Be Capped

By Ryan C. Wood

Credit card interest rates should be capped for the same reasons we have laws to make sure the food supply is safe and why we have seatbelts in our vehicles.  It is all about consumer protection.  It is just that simple and laws about our credit “products” are no different.  I recently noticed another bill was put before Congress to legislate at the federal level interest rate caps on creditor cards for consumers.  Maybe this time the law might actually get passed and signed.  I have written all kinds of articles about how we need credit and short-term loan reform in a number of areas. I am hopeful, but I doubt any real progress will be made in the near future to limit taking advantage of people that need short-term loans to pay for food or housing. Even as a bankruptcy attorney I have advocated for years to legislate protection regarding debts………

How Did We Get To 30 Percent Interest Rates To Begin With?

Each state has usury laws to protect consumers from unreasonable or unconscionable interest rates and contracts.  I have previously discussed “Why Are Credit Card Interest Rates So High” given there are state usury laws that are supposed protect consumers from unconscionable interest rates. Big business can easily find all kinds of ways to skirt existing legislation or change protections that protect individual consumers. I could list hundreds of examples and it is nothing new. It is unfortunate that over the years it has just become worse and worse to the tune of millions of dollars in disparity.  We just see higher and higher shameless interest rates.   

Why Are Credit Card Interest Rates So High?

Payday Loans and Title Loans

In a prior article I wrote: “Why Payday Loans and Title Loans Need More Regulation and Not Less.”  I used the term loan shark not less than twelve times.  It is just the truth and why and how can this continue?  In this particular article I mention how there are laws to make sure there is no price gouging in the event of a natural disasters given people are vulnerable at that time………  These laws are protections resulting from a natural disaster. For some reason we do not want to protect consumers when they have a personal disaster whether in their control or not . . . . .

Why Payday Loans and Title Loans Need More Regulation and Not Less

The lending and credit practices in place right now are absolutely loan sharking and should be illegal period.  In the meantime let us discuss how things have run amuck. 

I have also questioned and complained about “How Can 1,000 Percent Interest Be Legal?” Well it should not be period.

How Can 1,000 Percent Interest Be Legal?

Why Are Unconscionable Contract Laws Not Enforced

Arguably, or just my opinion, most payday loans, title loans and potentially credit card agreement terms are unconscionable contracts. In California we have Civil Code Section 1670.5 providing that if a part of a contract or contract is found to be unconscionable the court may refuse to enforce the provision of the contract or contract. Proving a contract is unconscionable is no easy task but generally the contract is overly harsh, unduly oppressive or unfairly one-sided. Unconscionable contracts are agreements that are unreasonably favorable to the credit card company or bank given they are clearly the more powerful party in the transaction.  Contracts or agreements that are overly harsh or unduly oppressive or are so one-sided as to shock the conscience should not be enforced.  Again, arguably 20-30% interest shocks the conscience.  Can we not agree that 1,000% interest is shocking? What is the limit?  In some industries there is no limit on mark-up of goods or services.  In our system the market is supposed to determine price of goods or services.  At the same time there are all kinds of examples of regulation that manipulate market conditions to the detriment of some parties and the benefit of others.  It is very difficult to agree on what is right or wrong, but can we all agree that we as consumers are supposed to have protections from parties we have no bargaining power with……….

Regulation For A Safe Food Supply

No one really complains about regulations that ensure our food supply is safe from production to sale.  We all actually take it for granted.  If we have more financial regulations to ensure the safe distribution of borrowed funds is it so different?  Nope.  They are just different industries and products.  We need better regulation to ensure safe borrowing for the benefit of consumers.  People are getting sick on bad meat (bad credit agreements) and it is not okay.

Capping Credit Card Interest Rates [AGAIN] Is A Great Start

I cannot say this about all laws that are changed, but generally how we treat many circumstances under the law have been developed over hundreds of years of trial and error. As a bankruptcy attorney there has been some form of debt relief by law, Bankruptcy Code, to obtain the discharge of personal liability of debts. We have modified the Bankruptcy Code over time but never entirely done away with it. Do you think debt and credit is something new? It is not. There is absolutely nothing new about one party as lender and another as the borrower. Why cannot we not learn from history so we are not doomed to repeat bad history? We more or less have done away with interest rate caps even though for hundreds of years under state usury law we capped interest rates to protect consumers. I ask you what has changed to warrant eliminating caps on interest rates? If there anything? Is there no more capitalism with a conscience possibly?

I see capping credit card interest rates like legislating that cars must have seatbelts or regulation to ensure safe food supply.  It is just that simple.    

How Can Credit Card Interest Rates Be So High?

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The short answers is because the law has been interpreted to allow credit card interest rates to be criminally high.  It was not always like this though.  You may be thinking to yourself that each state has usury laws limiting interest rates.  You are correct but keep reading to find out why it does not matter.    

There are price gouging laws in time of emergencies to not allow improper increases in price to make money at the expense of human suffering. There are state usury laws limiting how much interest can be charged when lending money.  So why are credit card interest rates so high?  If someone is in financial turmoil, financial disaster why are there not laws limiting interest rates on what they can borrow just like you cannot price gouge during natural disasters? How can a bank charge 29% interest on a revolving unsecured credit account? It is like loan sharking right?  Loan sharking is illegal right?  My best analogy is seatbelt laws. Seatbelt laws save lives. This is a fact and without seatbelt laws requiring wearing seatbelts not as many people would wear seatbelts and vehicle deaths would be higher. Well, The Supreme Court of the United States more or less opened the door to the repeal of seatbelt laws regarding limits on interest rates and people have been getting killed with credit card interest rates ever since. We all need to be saved from ourselves sometimes and our laws protect us. So what happened?

State Usury Laws

First let us talk about state usury laws. Each state can have usury laws limiting how much interest can be charged under different types of financial transactions. Over time many exceptions and loopholes have been created to allow lenders in different forms of loans to charge ridiculously high interest rates. See our other bankruptcy attorney articles about 1,000% interest title loans and payday loans. Somehow these horrible loans are legal though . . . . Below are the various sections of law in California that make up California usury laws. Generally, and very generally, 10% is the highest interest rate under California usury laws depending upon the type of financial transaction.

California Const. Art. XV §1
California Civil Code §§1912-1916.12
California Civil Code §§1916-1 to 1916-3
California Civil Code §§1917-1917.006
California Civil Code §§1917.060-1917.069
California Civil Code §§1917.160-1917.168
California Civil Code §§1917.610-1917.619
California Commercial Code §§9201-9208
California Corporations Code §§25116-25118
California Financial Code §§22000-22064
California Government Code §§5900-5909

Why Are Credit Card Interest Rates So High?

If there is state usury laws limiting the amount of interest that can be charged how can banks charge 29% interest on a credit card debt? The case is Marquette National Bank v. First of Omaha Corporation, 439 U.S. 299 (1978). Somewhere there is a bankruptcy attorney, not this one, cheering for these high interest rates given unmanageable debts drive bankruptcy filings. “The First National Bank of Omaha (Omaha Bank) is a national banking association chartered in Nebraska; it is enrolled in the BankAmericard plan, and solicits for that plan in Minnesota. Omaha Bank charges its Minnesota cardholders interest on their unpaid balances at a rate permitted by Nebraska law, but in excess of that permitted by Minnesota law.” So there you go. First National Bank of Omaha solicited clients in the state of Minnesota but chose not follow Minnesota state law regarding interest rates. First National Bank of Omaha charged higher interest rates according to the law in which they were located, the state of Nebraska. What should be controlling was the issue? Generally speaking the law of the jurisdiction where the individual is located, a state or country, governs their legal rights and not the corporate headquarters or location of the business they are doing business with. Each state has usury laws to protect their state residents within that state and limit interest rates. Each state in the United States has many different laws than other states. Family law is a great example and the 8.5 community property states vs. equitable distribution in the remaining 41.5 states. Why is there a 0.5? Alaska is an opt-in community property state. Save that one for Jeopardy. Back to . First National Bank of Omaha and how they arguably disrespected the state law of Minnesota. SCOTUS provided: “Though the “exportation” of interest rates, such as occurred here, may impair the ability of States to maintain effective usury laws, such impairment has always been implicit in the National Bank Act, and any correction of that situation would have to be achieved legislatively. Pp. 439 U. S. 318-319.” So under the federal National Bank Act what The First National Bank of Omaha did was okay even though it violated the usury laws of Minnesota. There you have it and the rest is history.

But wait. What state allows interest rates of 29%? This is where capitalism and greed took over and now we have more deaths by higher interest rates than before 1978. Certain states repealed or changed their usury laws to allow for high unconscionable interest rates. These states did this to lure the big banks to set up shop in their states to create jobs in these states. Well it worked. So for a few thousand jobs millions of Americans can be charged massive interest rates that we can all agree of too high.

What is the legislative solution SCOTUS mentions in The First National Bank of Omaha? Our United States legislatures, the Senate and House of Representatives, would have to pass legislation to limit interest rates and then that would applicable nationally. Do not hold your breath given our federal legislatures chose to bailout these same banks from the mortgage meltdown. Too big to fail means too big to be honestly regulated.

How Long Does a Credit Card Company Have to Enforce an Unpaid Account and Statute of Limitations

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So you are having trouble making your credit card payments and probably wondering what will happen next?  The next few paragraphs will discuss the treatment and removal of unpaid credit card accounts based upon the Fair Credit Reporting Act and the statute of limitations under California law only.  Each state has its own statute of limitations for causes of action like enforcing an unpaid credit card debt.

What is a Statute of Limitations?

The first issue is what is the statute of limitations?  The statute of limitations is the length of time that one has to file a lawsuit to enforce a claim such as an unpaid debt, a personal injury cause of action or a products liability claim.  When you sign up for a credit card, you are entering into a written contract agreeing to pay back the money you charge to the credit card under varying terms.  When payment is not made, the contract is breached.  In California the statute of limitations for breach of contract is four years.

When does the Statute of Limitations start?

Generally the statute of limitations begins to run when the cause of action accrues or begins.  This is a complicated area of the law and this article will only touch on general information and not a case by case analysis your case may require.  When the statute of limitation usually begins is when you breach the contract by not paying, or the cause of action accrues arising from the date of last payment or when demand for full payment is received.  In California, pursuant to California Civil Code Section 337, the statute of limitations for breach of contract resulting from nonpayment is 4 years.  In California, the statute of limitations can be extended only by a new agreement in writing to agree again to repay the credit card debt.  If a credit card company does not file a lawsuit within 4 years from the date of last payment or when demand for full payment was received, and no new agreement in writing has been executed, the debt is then time-barred and is not legally enforceable.  The only way the credit card company can then get a payment from you is if you voluntarily choose to make a payment.  Some credit card agreements have an acceleration clause that must be invoked and once a payment is missed, then the statute of limitations begins to accrue.

What Happens if a Credit Card Company Does Not File Suit Within the Statute of Limitations and the Debt is Time-Barred?

There is also a statute of limitations regarding credit reports.  The statute of limitations for reporting accounts and credit reports is controlled by the Fair Credit Reporting Act (FCRA).  If a credit card company in California does not sue within 4 years and the debt becomes time-barred, it is still a negative account on a credit report though.  Pursuant to the FCRA negative accounts can remain on a credit report for 7 years and positive accounts can remain for 10 years.  There are some exceptions that are not listed here, so consult a professional in your state for the exceptions.  If a credit card company does not sue to enforce the payment of the debt, the next step is to dispute the negative account with all three credit bureaus.  The credit bureaus, Experian, Equifax and Trans Union are prohibited from continue to list old negative accounts on credit reports and must remove inaccurate item in 30 days.  To dispute a credit account on a credit report you will need a recent copy of your credit report.  There are a number of websites that will provide a free credit report.  Then to dispute an item on a credit report, you may write a letter, file a dispute on-line at the credit bureaus website and even by telephone.  Go to the Federal Trade Commission website at: www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm.

If a credit card company unfortunately seeks to enforce a debt by filing a lawsuit, it is time to consult one of our best bankruptcy lawyers or experienced bankruptcy lawyers for advice.  You may contact us toll free at 1-877-963-9543.

The CARD Act: Will This New Law Help Consumers

By Ryan C .Wood

The Credit Card Accountability and Disclosure Act (CARD Act) was passed in 2009 to protect consumers from abusive credit card issuers. One of the driving forces providing bankruptcy attorneys more clients is overwhelming credit card debt. Here’s how some of the laws will affect you.

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You Will Receive Notice of Rate Changes

The CARD Act prohibits credit card issuers from arbitrarily increasing your APR without 45 days notice and applying rate increases to existing credit card balances. The credit card issuers must also provide you with notice and the right to cancel your credit card and pay off the existing balance if the interest rate increases. The Act will also prevent a credit card issuer from increasing the rates in the first year after a credit card has been opened and requires promotional rates to last at least 6 months.

You Will not be Penalized for Making Timely Payments

The CARD Act prevents credit card issuers from charging interest on debts that are paid on time, otherwise known as “double-cycle” billing. It also requires credit card issuers to credit payments made at a local branch store immediately to your account, and it prevents credit card issuers from charging late fees if they delayed crediting payments made. If your rate increased, but you have been making payments on-time for at least 6 months, credit card issuers are required to review your account and return to your interest rate to the interest rate prior to the increase. If you make payments in excess of the minimum payment, the excess amount will be applied towards your debt with the highest interest rate first.

Your Payment Due Date Will be the Same Every Month

Your payment will be due by 5:00 p.m. EST on the same day every month, and if this date lands on a weekend or holiday, the due date will be pushed back to the next business day. Credit card issuers are also required to provide you with notice regarding penalties and late fees they will charge if you are late. In addition, credit card issuers are required to mail out credit card statements at least 21 days prior to the payment due date.

Prevents You From Paying Unfair Fees

The CARD Act prohibits credit card issuers from charging a fee for taking payments, either by phone, mail, online, etc. except in instances where you receive live in-person service to make expedited payments. It also prohibits credit card issuers from charging over-the-limit fees unless you “opt-in” for the credit card issuers to complete over-the-limit transactions. The fees charged by the credit card issuers must be reasonable and proportional to the violation, and it protects you from excessive fees on low-limit, high fee credit cards.

You will Receive More Detailed Information from Credit Card Issuers

Your credit card issuer will need to include more information on your credit card bill, including: 1) if you only make minimum payments, how long will it take for you to pay off your debt, and how much total interest you would have paid, 2) how much you would need to pay per month if you wanted to retire your debt in three years, how much total interest you would have paid, and 3) the difference between 1) and 2).

You will be Protected Against Misleading Terms

The CARD Act prevents credit card issuers from using terms such as “fixed rate” and “prime rate” in a misleading manner by providing set definitions to those terms. Credit Card issuers also must use a minimum font size for their statements to provide you with better readability. You also have an opportunity to reject any pre-approved credit card up until the moment of activating the card.

Strengthens Oversight of the Credit Card Industry

The CARD Act requires credit card issuers to post the credit card agreements on their website, and to provide their agreements to the Federal Reserve Board to post on their website. It also requires the Federal Reserve Board to review the consumer credit card market and allows the Federal Trade Commission powers to make rules preventing deceptive marketing of free credit reports.

Younger People will be Safeguarded from the Credit Card Issuers

Credit cards will not be issued to anyone under 21 years of age unless they have a co-signer over 21 and limits the amount of prescreened offers to younger people. The CARD Act also requires banks to provide a reason to participate on college campuses and university-themed events. The CARD Act prohibits banks from giving out promotional material to entice consumers into taking on debt by signing with their credit cards.

You will Receive Gift Card Protection

The CARD Act requires a minimum of a five year lifespan on gift cards issued. Credit card issuers are prohibited from charging hidden fees and declining values on gift cards unless the gift card has been inactive for at least 12 months. If fees are charged after this period, it must be clearly stated on the gift card, and credit card issuers cannot charge more than one fee per month under any circumstances.

The above benefits are a summary only! As with most laws, there are many rules and exceptions. Please consult with an attorney if you need legal advice. We have bankruptcy attorneys ready and available to help you, with offices in Oakland, San Francisco, San Jose, and Redwood City for your convenience.