Vermonters Push Credit Card Reform
February 21, 2008
Anyone who has run up a credit card knows how easy it is to fall into debt. And with interest rates commonly topping out well above twenty percent annually, failing to pay the card off quickly results in a mountain of additional debt.
It may be a surprise to learn that individual stores are not the ones that make money from credit cards. With interest rates on credit cards skyrocketing, a group of affected people gave Rep. Peter Welch, D-Vermont, an update. They represented consumers, banks, regulators -- and the owner of a convenience store. Peter Annis of the Black River Quik Stop said, "When a person uses a credit card, based upon a certain margin, I'm paying that person to pump gas -- at the pump." The problem is that when a consumer gasses up and pays on credit, the retailer's payment to the credit card company can be more than the profit margin on the gas. Officials say the two largest national credit card companies, Visa and Master Card, charge stores an average of two and a half percent on each purchase. The two big companies own 80% to 85% of the credit card business, according to the banking industry.
Chris D'Elia of the Vermont Bankers Association said, "This really is a national issue and it needs to be dealt with in the halls of Congress." D'Elia said only two Vermont banks issue their own credit cards (Chittenden and Randolph), and so the state is virtually powerless. Assistant Vermont Attorney General Eliot Burg said the national credit card companies have made matters worse. He said, "There is aggressive marketing going on to young people and others, teaser rates that get switched without people realizing it." John Adams, a Fair Haven-based businessman, said his application for a credit card amounted to a bait and switch. "I was not notified of the interest rate change until the time to opt out had already passed," he said. "So the rate was changed from seven-nine-nine to 26 percent." High rates leave the consumer paying a lot of interest -- with no recourse. "Any time you fail to pay, you're defaulted," Adams said. "So your costs go up and your credit across the board goes bad. And you can't live without decent credit in today's society." For a lot of smaller, independent retailers, taking credit cards has become more a cost of doing business than a source of income. Congressman Welch says he expects legislation will pass this year, putting at least some restraint on predatory credit card practices.
News Source : http://www.wcax.com |
