Credit Card Industry Profiting from Consumer Missteps – National Consumers League

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By Sally Greenberg, NCL Executive Director

Last week’s public television’s Frontline featured “The Card Game,” an investigation of the credit card industry and what’s ahead for consumers and banks.

Frontline’s conclusions aren’t good news for consumers: Despite passage of the May 2009 Credit Card Accountability Responsibility and Disclosure Act (“*The Credit CARD Act”), the days of tricks and traps by banks and other financial institutions are far from over.

I ran headlong into the world this past week when I intervened with Capital One Bank on behalf of a family friend who was panicking over a credit card problem. The friend — I’ll  call her Marti — earns just over minimum wage in each of the two jobs she holds. She called me because she knows I do consumer work for a living. Anyway, Marti couldn’t figure out why her credit card balance kept growing when she hadn’t used the card since last year. Marti is conscientious. Each month since April 2008 she has faithfully paid the minimum amount that appeared in the box on her bill — yet her balance grew and grew.

Frankly, I couldn’t figure out the bill either. If she pay the minimum balance, it may take a long time to pay off the balance, but the balance shouldn’t grow. Or so I thought. Welcome to the world of “over credit limit” charges. Marti’s card carried a $750 limit. In her last transaction — April 2008 — she had gone $8 and change over her credit limit. That $8 triggered a $39 “over-limit” charge, accompanied by a finance charges. So, while Marti paid the minimum each month, her balance remained above the “over credit limit” triggering multiple $39-charges since last April.

I only learned this by calling Capital One. Indeed, Marti’s balance had reached $1,080 without her charging a dime on the card since last year. That’s $330 purely in finance charges — set at 22% — and over-limit fees. After much cajoling, the supervisor with whom I spoke agreed to forgive three of the $39 charges. She said she couldn’t do any more.

This story reinforced what the Frontline reporters found: that credit card companies trap consumers — particularly low income consumers — in a never-ending spiral of fees and charges that grow larger by the month. Even consumers like Marti, who pay something each month, find themselves sinking deeper and deeper into debt.

Marti is, I suppose, one of the lucky ones. She has someone to advocate for her. Still, there’s something I don’t understand: What happened to a bank earning profits the old-fashioned way, by making a reasonable profit by lending consumers money at reasonable interest charges. Say 6 or 7 percent?

But that’s not how banks make their money these days. And Capitol One’s practices aren’t unique. In 2007, the banking industry earned about $29 billion from overdraft fees, according to Celent, a consulting firm for the banking industry. That is more than the $28 billion consumers spent on major appliances and the $14 billion they spent on books.

If you think about it, banks today make much of their income from things their customers do wrong. Like unknowingly going over a credit limit, or being a few days late paying their bills. The new CARD bill will curb some of these practices, but undoubtedly the banks will find new tricks and traps. That doesn’t sound like a good customer relations strategy to me.

 

*Links are no longer active as the original sources have removed the content, sometimes due to federal website changes or restructurings.

Teen death highlights danger of machinery work – National Consumers League

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A few days before Thanksgiving in a small Virginia town called Poquoson, Frank Gornik, 14, was removing storm debris for his uncle’s company. The boy, a freshman in high school, fed branches into a wood chipper. He used a shovel to help force the branches and that shovel was grabbed by the machine and—in an instant—swallowed the boy and killed him.

Each year, 35-40 teens die similarly unimaginable deaths in workplace accidents—tractor rollovers, work-related car accidents, drownings in grain silos. Here at the National Consumers League, we try to monitor these deaths to prevent them from occurring. A decade ago, the number of working teens who died on the job was about double what it is today. The Occupational Safety and Health Administration, the National Institute of Occupational Safety and Health, federal and state departments of labor, nonprofit organizations and employers worked together to help bring the number of deaths down, but we must keep working to reduce that number even further.

Sadly, although it was a freak accident, Gornik’s death was preventable. The boy was much too young to work with such deadly equipment. Over the years, state and federal officials have realized that teens lack the judgment and experience to operate some hazardous machinery and require workers to be 18 to use them (although some exemptions are made for agriculture). Because of their ability to inflict massive and instantaneous damage, wood chippers are among the proscribed machines. Under the Bush administration, the U.S. Department of Labor refused to enact NIOSH-recommended changes to the “hazardous orders” regulations that would have improved teen worker safety protections. It is our understanding that under Secretary of Labor Hilda Solis’ leadership, the department is working to update those regulations and close some current exemptions that allow teens to perform dangerous work.

Although Gornik had his share of sadness— according to local newspaper reports, he lost both parents in a two-year stretch between 2005 and 2007—he was remembered by many fellow students for his ready smile and helpfulness. He was a very popular student who played sports and made the honor roll, and the Poquoson community continues to grieve his loss.

It’s hard to make any sense of an unspeakable tragedy like this, but the lessons learned from the accident that took Frank Gornik’s life might prevent similar deaths. Each year, NCL publishes a report—“The Five Worst Teen Jobs”—about dangerous job for teens, hoping that parents, employers, and young workers will carefully consider which jobs they take and what tasks they perform at work. It’s vital that employers learn state and federal child labor and safety laws, and it’s vital that young workers think about their own safety and know that they are able to say “no” to any job task that is dangerous or against the law.