Predatory Lending

My credit is crap, and I'm OK with that. I prefer living in the now on a cash available basis.

It's crap because of choices and decisions I made in the past that don't need to be delved into here. Perhaps another time.

Since my financial reboot, I have been getting lots of offers for credit cards.

Like this one.

"XAVIER ONASSIS,

You have been Pre-Approved for a Platinum Visa card with a credit line up to $1500."

They go on to tell you how fabulous this offer is, how easy it is to apply, all of the additional features they offer, blah, blah, blah.

The average consumer might think "This is my opportunity to rebuild my credit! Here is a company willing to give me a second chance! They've looked at my credit history and pre-approved me! They like me! They really, really like me!"

Umm, no, Sparky. That's not what is going on here.

The very first important piece of information listed is your Annual Percentage Rate.

23.90%

Yeah. You read that right. Seem excessive? Ever wonder why most credit card companies, including this one, have their HQ in Delaware?

It's because Republican Delaware Governor Pierre DuPont led an effort to redraft Delaware's tax laws to allow credit card companies to charge whatever interest rate they wanted to. No caps, no limits, no regulations. Go for it.

They can stick their predatory dicks as far up your ass as they want and you can't even scream for more lube.

So there's that.

Other prominent disclosures at the top are

Cash Advance Transaction Fee - $5.00 or 3% of the advance, whichever is greater

Minimum Finance Charge - $1.00 for any billing cycle in which a billing charge is due

Late Payment Fee - $32

Over Limit Fee - $30

Closed Account Maintenance Fee - $3 per month after account closure until paid in full.

The fine print in reduced font size and conveniently grayed out (as though it's not important) tells the informed consumer (like me) just how badly they can be butt fucked.

First of all, the Minimum Credit Line available is $200. Which is the credit line that people like me will get. People on this mailing list will NOT be getting the $1500 maximum. Don't kid yourself.

Immediately after that is the disclosure for ENROLLMENT AND ANNUAL FEES:

"A one time-only Enrolment Fee of $69 will be billed to your account when it's opened. The Annual Membership Fee of $69 will be billed to your account in monthly installments of $5.75 per month. These fees are not refundable unless you cancel your account within 30 days of the date your account is opened and if you have not used your credit account during this 30-day period."

But wait! It gets better!

"AVAILABLE CREDIT INFORMATION: The above Enrollment Fee and he first installment of he Annual Fee will be billed to your account when it is opened and will reduce the amount of your initial available credit. If your account is established with a $200 credit line, your initial available credit will be $125.25. If you select any optional feature for which a fee is charged, your initial credit will be further reduced."

One of the most prominent "optional features" is the Credit Protection Program.

I'll save you the legalese, but the bottom line is it's a program which, for a small monthly fee, it promises to allow you to cancel the "Payment Due for the Current Month" for up to 6 months and up to a maximum of $10,000.

Sounds good, right! Especially in this economy! You hit some hard times, you can just evoke your Credit Protection Program and not have to make any credit card payments for up to 6 months! Let you get back on your feet! AWESOME CREDIT CARD COMPANY!

Yuh huh.

Lets look at

AMOUNT OF PROGRAM CHARGE: The monthly Program Charge is based on your Account balance each month multiplied by the unit-cost, which is $0.96 (96 cents) per $100, or part thereof.

Alrighty then. Let's recap.

You're an average (stupid) consumer. You get an offer in the mail telling you you are pre-approved for a Visa card with a $1500 credit limit with a Credit Protection Program that will keep you from getting in the sort of problem you had before. They are willing to give you a second chance! Awesome!

You apply for the card and, of course, you get one.

You tuck it away in your wallet, not wanting to get back into debt again, but saving it for future emergency use.

Except.

It comes to you with a $69.00 balance and a guaranteed monthly charge of $5.75. This invokes the minimum finance charge of $1.00 a month in addition to the 23.90% finance charge.

If you went for the Credit Protection Program, there's another $0.96 per month per $100 of balance.

So even if you never swipe the card for a purchase and it just sits in your wallet, charges and interest rates increase without any action on your part.

Your initial $125.25 available credit is quickly overcome by automatic monthly charges and associated interest rates.

This will push you over your $200 credit limit and kick in the $30 Over Limit Fee.

If this gets hard to manage and you get behind, the $32 late payment fee starts to accumulate, adding to your balance to which the 23.90% interest rate is applied.

Get far enough behind that they close your account, and that triggers the $3 per month Closed Account Maintenance Fee.

So, bottom line.

You can optimistically apply for a seemingly generous credit card offer, never charge a dime on it, and immediately find yourself in debt over your head and very, very quickly get yourself in a downward spiral of fees and interest from which you can't escape.

This, my friends, is why unfettered Free Enterprise does not work.

Federal regulations are needed to call Shenanigans and say "No. I don't give a fuck what state you are in. You can't do shit like that in The United States of America, because we don't play that shit."