Jeff Adair: Reining in the credit card industry

Jeff Adair

A couple years ago, I was so fascinated by a show on PBS that I recorded it and then forced my children to sit down and watch. Schools don't teach everything; most of the common sense stuff is left to parents.

It was about credit cards. Produced by Frontline in partnership with the New York Times, the 2004 documentary "Secret History of the Credit Card" is must-see TV.

Who knows whether the message sank in, but afterward I talked to them about what they saw, and gave each a stern warning to never, ever get sucked in by the industry's sneaky tricks.

The main thing that got me stirred is how credit card companies can automatically jack up interest rates if you're late on a payment to another credit card company, a telephone or utility bill, car payment or whatever.

Thirty days late on a bill, no matter how small the amount, and you're screwed. No one tells you. The new, higher interest rate just appears on your monthly bill.

The logic of the universal default rule?

Edward L. Yingling, then-incoming president of the American Bankers Association, noted that banks need flexibility to change terms on short notice to prevent what happened in the '90s when many were caught off-guard by customers who had been paying their bills on time and then filed for bankruptcy.

It's a rather weak defense. To be fair, why not put it in reverse. If I'm early with my other bills, then drop my rate.

"I don't know any merchant in America who can change the price after you bought the item, except credit card companies," Elizabeth Warren, a professor at Harvard Law, told Frontline, calling credit card companies "the new loan shark in America."

There is no logic really. It's just another example of the greed that caused the financial mess our country is experiencing.

Credit card companies prey on the poor and those in difficult financial situations. They peddle cards to college students whom they know won't have a steady paycheck for at least four years, and by then will be saddled with student loans in addition to credit card debt.

The Credit Card Holders' Bill of Rights recently passed in the House and awaiting action in the Senate will bring some sanity to these and other shady practices. Speaking in New Mexico last week, President Obama urged Congress to pass the legislation by Memorial Day.

I understand that the goal of business is to make money and credit card companies provide a valuable service that many people desire. Critics are correct, no one has a gun up to a consumers head forcing them to use credit cards.

Going in, consumers ought to be a little wiser, and ought to read the find print. Frankly, many people have caused their own problems, purchasing items - junk - on credit that they don't need, or are simply too impatient to save until they can afford such things.

This keeping up with the Jones mentality has to change. Americans need to practice a little more self control when it comes to spending.

That said as Obama explained, "You should not have to worry that when you are signing up for a credit card that you are signing away all your rights. You shouldn't need a magnifying glass or a law degree to read the fine print ... Enough is enough. It is time for strong, reliable protection for our consumers."

Amen to that.

Jeff Adair is a MetroWest (Mass.) Daily News editor and reporter. He can be reached at jadair@cnc.com