Word: credit-card
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...Then there is the financial system. Problems tied to bad loans persist. The latest victim came forward on Tuesday: small-business credit-card issuer Advanta said it would shut down all of its cardholders' accounts after billowing losses threatened its viability. And yet elsewhere the credit markets seemed downright rosy. The TED spread - a gauge of how willing banks are to lend to each other - hit its lowest point since the beginning of the credit crisis in the summer of 2007, and companies, including Microsoft and Wal-Mart sold a relatively sizeable $32.6 billion of debt to investors...
...vilification of credit-card companies - not entirely undeserved - has reached fever pitch. On Thursday, President Obama gave a speech in Albuquerque, N.M., and shared some of his thoughts in an effort to help push through a bill, currently in front of Congress, that would overhaul the credit-card industry's interactions with its customers, including the interest rates and fees it charges. "You should not have to worry that when you sign up for a credit card, you're signing away all your rights," the President said. "You shouldn't need a magnifying glass or a law degree to read...
...have less access to credit-card borrowing and simply dissects the bill before Congress, one starts to see that the proposed changes aren't really about dictating what a card company can or can't charge borrowers. There's a way to do that: impose interest-rate caps, as many states' usury laws do. That isn't what Congress is on track to do. Instead, the new law, which would build on regulations issued by the Federal Reserve and other agencies at the end of last year, would, above all else, inject transparency and fairness into credit-card contracts...
...Tellingly, the proposed law doesn't try to tweak those figures. If you go from being a good credit risk to a bad one, credit-card companies can still take steps to make sure they continue to be adequately compensated. When you go to buy new things, they can charge you 30% a year if they want to. The thing they wouldn't be allowed to do under the new law is to go back and change the terms of your original agreement - that is, hike your interest rate on existing balances - except in very few situations, such as your...
...approach therefore is not to smack down credit-card companies for high interest rates but rather to hold everyone to the original agreement about how much credit will cost. "Virtually no other contract in this country allows a business to change the terms of an agreement once a purchase has been made," says Travis Plunkett of the Consumer Federation of America. "That's the main issue." (One Senator suggested an interest-rate cap, but that was shot down...