Giving Credit Where Credit’s Due: Three Cheers for Richard Cordray

By Curtis Arnold, Founder of CardRatings.com


Richard Cordray, the Treasurer of Ohio, has been spear-heading a drive to get Ohioans to take a stand in favor of the proposed changes to the credit card regulations that are being considered in Washington. He hopes to gather between 5,000 and 10,000 comments by August 4th, when he'll submit them to the Federal Reserve, as well as to the Office of Thrift Supervision and the National Credit Union Administration, the other two agencies that are pondering cardholder-friendly provisions.

Cordray is asking Ohioans to join with him "to let the federal government know that we support these proposed changes that will help to end some of the worst practices of 'gotcha capitalism' by credit card companies." Specifically, he is calling for an end to:

• Unfair time constraints for consumers to make payments.


• Unfair allocation of payments among balances with different interest rates.


• Unfair application of increased annual percentage rates to outstanding balances. 


• Unfair fees for exceeding the credit limit solely because of a hold placed on an account.


• Unfair balance computation method.


• Unfair financing of security deposits and fees for issuance or availability of credit.


• Deceptive firm offers of credit.

"The proposed rules are just that: proposed, but not yet final," as Cordray puts it. "No doubt the opponents will be making their voices heard. … and we want them to hear a strong response from people who favor these rules."

In addition to busily promoting his credit card initiative in Ohio, Cordray is trying to get other state treasurers to do likewise. To encourage your treasurer to undertake a similar campaign against unfair and deceptive credit card practices, start out at the National Association of State Treasurers, where you can get the correct link for your state. I think every single one of them ought to follow Cordray's lead. Do you agree?

Would you rather speak out to the Feds directly? I recommend a quick visit to Consumer Action, which makes it easy to add your send in your comments. Any way you do it (and even if you don't agree with some proposals), I think it's important to let your feelings be heard!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. His new book, How YOU Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line will be available soon! Pre-order online and receive a 37% discount.

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The Responsible Choice Plan: A "Win-Win" for Lenders and Borrowers with Excessive Credit Card Debt

By Curtis Arnold, Founder of CardRatings.com


Dr. Robert Manning is perhaps best known as the author of Credit Card Nation, the book that clearly lays out the consequences of our “addiction” to credit and the role that card issuers have played in creating the problems that we face. Or perhaps you saw him in the documentaries, “In Debt We Trust” or “What Would Jesus Buy?”

While detailing and exposing the problems are certainly important contributions, what Dr. Manning is working on now has the potential to dramatically change the way people with substantial debts can get back on their feet. His timing couldn’t be better, given how universal default, the subprime mortgage mess, the credit crunch, the resetting of adjustable mortgage rates, and the recession are wreaking havoc with so many of our wallets.

Far too many hard-working families are in very serious financial trouble. Although most want to do the responsible thing and pay all their bills, many are $20,000 to $60,000 in credit card debt and can no longer make ends meet. If Dr. Manning has his way, far fewer of these folks will go into bankruptcy, and many more will be able to keep their homes.

Math Like You Wouldn’t Believe

Manning has developed an algorithm, a very complex formula, known as the “Responsible Debt Relief Grading System (RDR)” that calculates how much of their outstanding debts people can realistically afford to pay back – depending on:

· What their total household income is.
· Whether they rent or own, live alone, have dependents, etc.
· Where they live and what their local tax liabilities are.
· What their employment status is.
· What they’re left with after taxes, based on how many dependents they have and whether they itemize their taxes or not.
· What the US Bankruptcy Court mandates for household budgets/cost of living expenses in their specific locality.
· How the current bankruptcy rules and regulations would apply to them.
· What they owe – and more!

(If you’re wondering how Manning could possibly figure all of this out, he’s a professor at the Rochester Institute of Technology (RIT) and Director of its Center for Consumer Financial Services.)

Now, he’s in the process of applying this grading system across the country to help both borrowers and creditors move forward realistically, by identifying who will benefit from consumer credit counseling services, who can only repay a small fraction of what they owe and unfortunately, will be best off filing for bankruptcy – and who is “near bankrupt,” only able to pay back between 20% and 60% of what they owe.

As Manning puts it, people can “get a free assessment and they don’t have to worry about rip-offs.” More technically, he explains:

“Based on the score and their cash flow/debt situation, consumers are referred to: (1) our national CCCS partner InCharge (over 80% net repayment), (2) our Hope Financial “Responsible Choice” program (if consumers can repay 20% to 60% of their unsecured debt), and (3) our Debtor Attorney Network (if they cannot repay at least 20% of their unsecured debts). As a result, anyone with a debt problem will be able to find a debt management/resolution program that best suits their situation.”

While CCCS programs typically take five years to complete, the Responsible Choice program is expected to last for three years, with Hope Financial managing the payments to creditors at a 40% to 80% discount. Manning adds:

“This is a win-win situation for all – people strapped financially can avoid bankruptcy; creditors will receive regular payments to offset their losses, and thousands of households will retain their homes.”

In a Nutshell

Here’s the way the Hope Financial site explains how the program works:

1. We objectively figure out what you can pay.
2. We fairly document why that is all you can pay.
3. We assist you through your payment plan over 36 months.

Sure sounds good to me! As of now, Hope Financial is taking on clients in Ohio and also in Texas, Florida, New York, Utah, and California, with other states soon to follow. Check it out and let us know what you think.

By the way, in the interest of full transparency, I am proud to say that I serve on the Advisory Board for RIT's Center for Consumer Financial Services. The center is truly one-of-a-kind and is really helping to facilitate positive change for consumers.

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. His new book, How YOU Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line will be available soon! Pre-order online and receive a 37% discount.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Debunking Myths about Credit Scores- Go Ahead, Pay Off that Credit Card!

By Amber Stubbs, CardRatings.com Reporter

Lurking among many other credit related myths is the belief that paying off credit cards may cause your credit score to decline. I continue to hear this and other related credit scoring myths from consumers that I interact with on a daily basis. In reality, when you pay off credit cards you decrease your overall utilization - your total balances vs. your total available credit - which improves your score.

In fact, utilization accounts for approximately 30% of your credit score. It is best that you keep your overall utilization below 10%. For example, if your total available credit on all credit cards is $25,000, then you want to keep your collective balance at less than $2,500. And, the lower your utilization is the better your credit score. So, the idea that paying off balances will negatively affect your score is simply not true!

However, the above scenario should not be confused with closing credit card accounts, which could have an adverse affect on your score for two important reasons. First, as discussed above, you have to consider how it will affect your utilization. Typically, closing an account will cause your utilization to increase and, as a result, your credit score to decrease. So, it is important to do the math before making a final decision. (Keep in mind how it could affect your utilization in the future as well!)

Additionally, you have to consider the age of the account. If it is one of your older credit cards, then it could also adversely affect the length of your credit history which makes up 15% of your FICO Score. Most of the time it is better to just "sock drawer" the card if you do not plan to use it anymore. That way having an account in good standing and the available credit is continuing to help your credit score.

Just be sure to remember to use the card about once per year for a small purchase, then pay in full when you get your statement. Doing so will help the account stay active and reporting as such to the three major credit bureaus. Reporting your on-time payments (preferably to all three major credit bureaus) is an effective way to boost your credit score. On a related note, it's also a good idea to check with your creditor to find out which bureaus they are reporting to.

Do you have a credit score related question or what you feel might be a myth that you'd like debunked? Please share your questions and comments by posting on our active credit forum! Also, if you don't know your credit score, be sure to check out our offers that allow you to get your credit score for free.

This article was written by Amber Stubbs, Amber began working for CardRatings.com on a part-time basis in July of 2005 while pursuing her bachelor's degree at the University of Arkansas at Little Rock. She was promoted to VP of Operations and became a full-time salaried employee in August of 2007. Amber is a member of the Arkansas Young Professionals Network and the Arkansas JumpStart Coalition for Financial Literacy.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!

Fed Cuts Key Rate By One-Quarter of a Point: Credit Card Users Will Likely Benefit

By Jessica Austin, CardRatings.com Public Relations Associate


The Fed announced a 25 basis point rate cut, bringing a key rate to 2.00 percent. The prime rate will also fall one-quarter of a percentage point to 5.00 percent. The move by the Federal Open Market Committee followed several rate cuts in the first quarter of 2008 that brought the federal funds rate down to its lowest level since December 2004.

This was the seventh consecutive rate cut. The Fed said in the statement accompanying the rate-cut announcement:

"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."

So, why is this happening? The goal is to promote spending and borrowing to boost the economy and to recharge the buying power of American consumers.

According to John Hoefl, a financial advisor with Ameriprise Financial in Little Rock, Arkansas:

"The rate cuts will be especially great for consumers if they take advantage of low rate cards such as Simmons Bank and Pulaski Bank. They have some of the lowest rates in the country."

The good news for some cardholders is that since the prime rate fell, interest rates on many variable rate credit cards will fall as well. Most credit cards issued today have variable rates that typically move up and down in response to the prime rate.

Curtis Arnold, Founder of CardRatings.com and author of How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line, notes:

Given the recent rate cuts, if you are paying over 10% on your current credit card and you have a credit score above 700, then I would strongly suggest that you search our listings of low rate credit card offers.

The rate cut should have a positive impact on most consumers that are revolving credit card debt on variable rate cards. Unfortunately, though, a significant portion of consumers will see no benefit at all for various reasons. For example, consumers with fixed rate credit cards will see no changes in their rates. The current average rate based on all the cards listed in our comprehensive database is about 12.5%."

It is worth noting that this latest rate cut brings the total rate cuts to 3.25 percentage points since September 2007. Many analysts feel this rate cut may be the last one that the Fed does for a while. Time will tell!

This article was written by Jessica Austin, Jessica joined our staff on a part-time basis recently, but has previous work experience in the credit industry where she served in a managerial capacity. She has met the equivalent hours requirement for a bachelor's degree in sociology/media relations from Southern Arkansas University in Magnolia, Arkansas and is currently pursuing a master's degree from the International School of Divinity.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

---

Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!