Wash Post: Credit Card Penalties, Fees Bury Debtors

Perhaps that is true, but if one considers that hospitals are not merely going to write off losses against "normal" income, then yo begin to get the picture that they are going to inflate the "normal" income to absorb the losses.

If they derive that income from Medicare/Medicaid or from Blue Cross and Blue Shield, then you can see that the hospital doesn't really care who is processing the insurance claim. All the hospitals - any health provider really - care about is that they get paid by somebody.

If they serve a dozen insured patients and one uninsured patient, then the dozen will foot the bill for the one. The patients will never know that they paid the bill for a deadbeat - and it should be made clear that all uninusred patients are not deadbeats. The trouble for the insured patients is that they oftern pay 20% of the bill up to a Stop Loss Clause, typically about $7500. But if the insurance company is charged more to cover the "losses" from the deadbeats, then the insured patient also pays more because they pay a percentage of the billing, not a percentage of the services and supplies provided.

All of that said, in my opinion medical expenses are a reasonable cause for one to claim BK, so this is really a moot discussion. If one files BK solely due to high balances on charge cards, then I have little sympathy for their plight. But when one incurs massive medical bills, then my sympathy for them goes up dramaticaly, and then they should be protected form all creditors, even credit card companies.

My only point in this discussion is that credit card companies charge high rates because they are left holding the bag for irresponsible borrowers that get in over their heads and then file for BK protection. The debt is unsecured by anything, so the creditors can't come and take the stuff that was purchased on a credit card. The affect in the end is that the borrowers get free stuff at the expense of the rest of us that pay our bills.

It's way more likely that CC companies charge such high rates simply because they can.

Really? Then how do you explain the $34 billion in profits made by the credit card industry the past year? Or the 124% increase in their profits over the past 5 years? Sub-prime loans are the most profitable segment of the credit card company's earnings. It sounds as if these accounts are subsidizing those such as you who pay their bills on time with a low rate of interest.

This "bankruptcy tax" that the credit card industry touts has been found to be a load of bunkum.

Yep...ANGRY Troll

Nice rhetoric, except that it's totally wrong.

Of course they can. The debt they are offering is unsecured. The new rules add some security for the credit card companies because the customers now actually have to pay for the stuff they buy.

If you were going to lend money and could take possession of the collateral that secured the debt and sell that collateral to recover the debt, then you would lend at a lower rate. If you could not take possession of any collateral, then you would charge more for the money you were lending out. Duh!

For example, if you could take the car or house that secured the debt and sell the it for the amount owed then you could lend for 5%. But if you passed out credit cards that people used to buy stuff that you don't want and can't sell again, then you charge 15%. It's really simple if you think about it. On the loans that make money, you are a happy guy. On the loans that do not make money because people do not make the payments, then you are no so happy and you have to take from the pocket that is filling up to cover the loses in the pocket that is being emptied.

Maybe. Or perhaps after getting bankruptcy laws reworked in their favour, they'll go after having anything tangible purchased by credit cards considered to be "secured debt." And increase interest rates even further.

And you may be totally wrong! A recent investigation by the Seattle P-I would seem to indicate that credit cards are heavily used with minimum payments and then when illness, etc, strikes, game over.

Is that the same Seattle P-I that wrote this:

Try the Tuesday, March 15, 2005 edition of the Seattle P-I.

You mean the opinion piece that concedes among other things:

"Then again, the data suggests most Americans are close to catastrophe because of regular, everyday debt."

That's precisely the point. A lot of "bad things" happen in life but a lot of them wouldn't result in bankruptcy if people had taken better care of their financial health from the start.

Can you recall which newspaper section? Business, local, etc. I'm looking on their website, but can't find that story.

I've represented Capital One and Metris in credit card fraud cases in every district in California. I've also represented hundreds of debtors. I think I have a very good understanding of the situation. There is nowhere the near the abuse you and the credit card merchants are complaining about. It just isn't there. This reform act is clearly a administrative payback to the credit card issuing banks. The people that this bill will hurt are already down. The suicide rate will rise and the bankers will get richer. I hope the country is moving in teh direction you think is best.

Or, people will not use credit so much and the economy will collapse.

Bad things do happen to good people, but smart people try to position themselves in such a manner that they are shielded from the bad things for more than a few weeks or months. Most American households are at their limit of the debt load they can sustain, and the tiniest instability in their lives can lead to late payments. If the instability is not taken care of in short order, they eventually fall into BK. They could have avoided the BK by not buying the most expensive of cars, the biggest Plasma TV on the block, the latest in fashion every season. Actually, the car can go back, so it isn't part of this discussion. The plasma TV and the clothes have no value to the credit card companies, so they are central to the issue here.

People _think_ they are in good shape so they go out and get stuff. But the boss turns around the following day and announces staffing cuts of 30%, and things aren't as good as once thought. The latest in technology should be purchased with cash, not credit. The latest fashions should be purchased with cash not credit. People should have cash reserves of at least 6 months of income, indeed they are required to have reserves of PITI (principle, interest, taxes and insurance) when they take out a home loan. Most people use these reserves once the loan is closed and then find themselves in dire straights later on.

If the debt was secured, the rates should fall not rise.

Or, if the danger that failure to pay the bills when due went away, then the rates should fall as well.

We can not sustain a climate where the demands of low rates are provided without any security that the lenders will actually be repaid. If you don't like the rates, cut up the card. If you pull the card out, pay the bills. It really is that simple.

Related question, one I've never seen an answer to. Suppose, as a result of identity theft, your 9.9% rate goes up to 29.9%. Now suppose you're success in clearing your record and restoring your high credit score. Will the credit card company lower your rate back to

We're talking about credit card companies here. What incentive would they have to lower rtaes in this case?

What happens if you're managing OK even with a brief layoff and identity theft comes along? All of a sudden your interest rate and minimum payments triple. Can you clear it up, get your rates lowered, and even get the penalties refunded, in time?

Maybe in case someone decided to sue them for not restoring the status quo after the fraud is discovered. The cardholders are supposed to be indemnified against fraudulent use of their cards unless they themselves perpetrate the fraud.