I saw some credit related news this morning that was SO shocking that I felt I should share. On Good Morning America there was a segment about a man named Kevin Johnson. His father worked in the credit card industry, so Kevin is a very financially savvy guy because his dad taught him to manage his credit wisely. He pays his bills on time EVERY month and keeps his balances down. He is a homeowner and does everything that a consumer should do to keep his/her FICO credit scores up – keeping his debt to income ratio down, paying his bills on time and applying for credit only when he needs it. He got the opportunity to apply for an American Express Blue card and was approved. He had a credit line of $10,000, but was shocked to find that his credit line was recently slashed to $3,800 (probably what he owed them). The reason for this: WHERE he used the card.
When American Express slashed his credit line, they gave him the lame reason that he used his card somewhere where it has been observed that other people who have problems paying their bills have used theirs. Thus, they claimed he now is a risk of not paying his bills. They are engaging in behavioral analysis now. Apparently, now WHERE you shop and use your credit card can affect how much of a risk your creditor thinks you are. Because this has happened to someone with a stellar credit score, Good Morning America took it to House Speaker Nancy Pelosi because American Express received TARP funds. American Express was contacted for a comment, and they said they were trying to “balance servicing their card members while monitoring risk.” This is a company that took taxpayer money because they can’t manage their debt, but instead of using it to be able to lend to consumers, they, like other TARP recipients, are hoarding the money and coming up with MORE reasons to slash credit lines and NOT lend to consumers.
The credit card companies have been able to run carte blanche on consumers, slashing their credit lines for the lamest reasons. Mine have been repeatedly slashed because my creditors claim I have “seriously delinquent accounts”. These “seriously delinquent accounts” to which they are referring are ones that are 4.5 years old or older. Three of them are due to fall off my credit reports THIS YEAR due to age. I have one that drops off in May of this year, one in July and one in November. But, yet, the creditors are allowed to continue to punish me for these past financial problems that were actually a result of identity theft. Credit card companies REALLY need to be monitored, and now they are on the radar screen. Now, that it has happened to someone who is high-profile enough to have drawn attention, it will be interesting to see if these practices stop. The Debt Settlement Nationwide Blog, recently posted some similar comments.
The key to all of this is that creditors have been doing behavioral analysis, which apparently affects people’s credit scores, without telling their customers. Kevin Johnson has created a website called “New Credit Rules” as a result of this.
Kevin Johnson apparently created a blog as a result of what happened to him. Here’s where the debt story came from:
I also checked and found out that MARKET CONDITIONS are among the ways creditors determine lending risks. So, with the market being in bad shape, consumers are taking it up the rear. Consumers are now also being punished for high balances and past financial mistakes, even if those mistakes are several years old or, in my case, the result of identity theft. Banks are getting away with writing their own rules on how they assess credit risk.
In the criminal justice system, a person cannot be punished twice for the same crime. It’s called “double jeopardy”. But, banks are allowed to continue to punish consumers again and again. Plus, they can also continue punishing for high balances that resulted from another creditor cutting credit lines down to what the balance is on a consumer’s credit card. Thus, the endless loop of having credit lines slashed and interest rates and fees jacked up to phenomenal rates on not just new purchases but also old balances continues. This makes it even more impossible for people to pay off their balances. I’m a good example of that because on one of my credit cards I quite literally pay more than twice the minimum payment each month, but my balance never goes down. My minimum payment on the card in question is $84. I pay $200 each month, but it doesn’t bring my balance down. Maybe this would somehow make a great article with a headline something like this: Banks Go Carte Blanche on the Taxpayer’s Dime
And, the article can go into some of the new ways banks scalp consumers and force them to pay for the bank’s mismanagement of their bottom line. Let me know what you think. – Maria Ny
