Bank of America blindsiding cardholders?

Bank of America blindsiding cardholders?
By Business Week

The nation's biggest bank is doubling interest rates for some of its most responsible credit card customers.

Credit card issuers have drawn fire for jacking up interest rates on cardholders who aren't behind on payments but whose credit scores have fallen for other reasons.

Now, some consumers complain, Bank of America is increasing rates based on no apparent deterioration in their credit scores at all.

The major credit card lender in mid-January sent letters notifying some responsible cardholders that it would more than double their rates to as high as 28%, without giving explanations for the increases, according to copies of five letters obtained by Business Week.

Fine print at the end of the letter -- headed "Important Amendment to Your Credit Card Agreement" –- advised calling an 800-number for the reason, but consumers who called say they were unable to get a clear answer.

"No one could give me an explanation," says Eric Fresch, a Huron, Ohio, engineer who is on time with his Bank of America card payments and knows of no decline in the status of his overall credit.

Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a "periodic review" that assesses customers' credit risk.

Reiss declined to say if the Charlotte, N.C., bank had changed its credit standards, thereby bumping some consumers' rates, or how many cardholders were being affected by the review. Bank of America has 40 million U.S. credit card accounts.
Buzz about the letters is building on the Internet. Since mid-January, Credit.com, a credit card information site, has received 40 complaints from consumers whom Bank of America notified of sharp rate increases, even though they were current on their bills, says Emily Davidson, a Credit.com researcher. Complaint sites My3cents and Bank of America: Bad for America say they have received similar complaints.
The so-called opt-out letters give borrowers the option of no longer using their cards and paying off their balances at the old rates. But they must write Bank of America by later this month if they plan to do so. If they don't, their rates on existing and new balances automatically will rise.

What's striking is how arbitrary the Bank of America rate increases appear, credit industry experts say.

In recent years, many card companies have turned to a practice called "risk-based pricing," in which they will raise a regular paying consumer's rate because of a decline in the person's FICO score.

FICO is a credit-risk score developed by Fair Isaac that includes a number of risk metrics the Minneapolis Company doesn't disclose.
Credit reporting bureaus supply creditors with FICO scores along with other data, such as late payments and debts owed.

In a December hearing spearheaded by Sen. Carl Levin, D-Mich., senators slammed big card companies for using such pricing with customers who pay on time. By law, credit card lenders can change terms as long as they notify borrowers. Even so, JPMorgan Chase and Citigroup announced ahead of Levin's hearing that they would stop the practice of raising card rates based solely on FICO scores.

But Bank of America appears to be taking an even more aggressive stance because, beyond credit scores, it is using internal criteria that aren't available to consumers. That makes the reasons for the rate increases even more opaque.
"Congress has faulted credit card companies for lack of transparency in raising rates," says William Ryan, a financial industry analyst at Portales Partners, a New York research firm. "Bank of America is bringing it to a new level."

Analysts also say they are surprised by the magnitude of the rate increases Bank of America is imposing on affected cardholders.

Michael Jordan, 25, a software developer who lives in Higganum, Conn., says he received a letter from Bank of America in late January advising him that his card rate would rise from 9.99% to 24.99%. The software developer, who earns $80,000 a year, says he was "shocked" because his payments had been on time and his credit scores hadn't changed in the past year.

In fact, Jordan says, he has only $4,500 in overall outstanding credit card debt on two cards and that, on the Bank of America card in question, he had paid down his balance to $3,000 from $3,700 in August.

"His rate increase seems unjustified based on his credit profile," says David Robertson, the publisher of The Nilson Report, a credit industry trade publication.

When Jordan called Bank of America about the higher rate, he says, the bank representative couldn't explain why his rate was going up. On a second call, he adds, the individual told him the reason for the increase was that he hadn't been paying down his balance fast enough, though he had lowered it by 19% in the past six months and was now utilizing only 54% of his $5,500 credit limit.

Riess, the Bank of America spokeswoman, declined to discuss individual rate increases or to list all the criteria the bank was using as reasons to raise rates on existing cardholders. Analysts say the bank's move is obviously aimed at shoring up profits. On Jan. 22, Bank of America reported a 95% decrease in fourth-quarter earnings due mostly to increases in loan-loss reserves for consumer credit, including rising card charge-offs and write-downs in mortgage-related securities.

Facts about Credit Card Debt in the United States

The statistics that go along with credit card and consumer debt are staggering. But do you know how bad things really are?

Consumer debt is running rampant in our society. People are choosing to charge stuff on their credit cards all the time even when they cannot afford to pay it off. Credit cards are maxed out and millions of Americans are up to their eyeballs in debt. If you are interested in just how bad it is, here are some facts about credit cards, credit debt and more.

• According to Experian, one of the three major credit bureaus, each American has an average of more than $16,600 in debt, excluding mortgage debt.

• If you add up the total consumer debt in the United States, it would be more than $2.55 trillion dollars. Those figures are from 2007 and it has probably only gotten worse since then.

• More than eight percent of American households owe more than $9,000 on their credit cards.

• Only about 40 percent of American credit card holders have a balance of less than $1,000.

• About 15 percent of American credit card holders have balances that total more than $10,000.

• The typical American consumer has about $19,000 worth of credit available to them when combining the available credit on their credit cards. More than 50 percent or cardholders are using less than a third of their total available limit.

• 28 percent of credit card holders surveyed said they are having a difficult time paying off their balances.

• More than 75 percent of undergraduates in college have at least one credit card. Of those, the average college student has more than $2,000 in debt and they will accrue more than $20,000 more debt in student loans during their undergraduate years.

• The average young adult household in the United States pays about 25 percent of their income toward debt. That is an increase of about four percent from 1992.

• Between 1992 and 2001, the average credit card debt among young adults went up by 55 percent.

• In the United States alone, there are more than one billion credit cards in circulation.

• Nearly one quarter of all the bankruptcies filed in recent years are done by consumers under the age of 25.

• The majority of Americans are not saving enough money to fund their retirement years.

• Lenders now collect more than $7 billion a year in late fees and other penalties. That’s up from only $1.7 billion in 1996.

Some of these numbers are probably pretty shocking to you. If they are not, they probably should be. Americans are spending more and more money that they do not have to buy stuff that they do not need. How do you fit into these statistics? Would you say you are above or below the average American consumer when it comes to credit card debt?

Article Submitted by: CA Hagy

Countdown to credit card reform ( 7 days )

In an ideal world, one would not worry about the recession, high unemployment rates, the foreclosure epidemic and the never ending debt load carried by the average American. In what has been referred to as the "Year of the Consumer," 2010 has a lot to offer in federally mandated "changes" in the credit card industry.

With only seven days until enactment of The Credit Card Accountability, Responsibility and Disclosure Act of 2009, commonly known as The Credit Card Act of 2009, several changes are occurring that will have an impact on how Americans utilize their credit cards, debit cards, and gift cards. Are you aware of your rights and protections under the new law?

Consumer protection

Interest rate increases will be banned except when a cardholder is more than 60 days delinquent in paying a credit card bill.

The credit card issuer must review a cardholder's account six months after increasing an interest rate and return the annual percentage rate to the prior lower level if all payments have been made on time.

An interest rate cannot be increased within the first 12 months of account existence and promotional rates must have a minimum of six months duration.

Advance notice of 45 days must be provided to a cardholder prior to changes in credit card terms and conditions. This includes any reward or benefit structure of a credit card.

The practice commonly known as universal default and double-cycle billing are no longer allowed.

Statements must be mailed at least 21 days before the payment due date.

Payments must be credited as on-time if received by 5 p.m. on the due date. All due dates that occur on a weekend or holiday are extended until the next business day.

Over-limit fees are now prohibited unless a cardholder specifically opts to allow processing of a transaction rather than being denied at a point of sale.

Enhanced consumer disclosures

A clear disclosure on how long it would take to pay off a credit card balance if cardholder makes only the minimum payment each month must be provided.

A clear disclosure on the total cost of interest and principal payments if a cardholder makes only the minimum payment each month must be provided.

Late payment deadline or postmark due dates are required to be clearly shown and provided to cardholders.

Protection of young consumers

Credit cards can no longer be issued to individuals under 21 unless they have an adult co-signer or prove payment ability through a reasonable income.

All college students must obtain permission from the adult co-signer to increase a credit limit on joint accounts they hold with those individuals.

Individuals under the age of 21 will now be protected from pre-screened credit card offers unless they specifically opt-in for said offers.

Gift cards

Gift cards are now required to remain active for at least five years from the day of their initial activation.

Dormancy or inactivity fees may no longer be imposed on gift cards unless there has been no activity in a 12-month period.

Dormancy or inactivity fees must be clearly disclosed to gift card buyers upon purchase.

Should a gift card expire after 5 years, the terms of expiration must be clearly disclosed to gift card buyers upon purchase.

To learn more about The Credit Card Act of 2009 and your rights and protections under the new law, visit www.tinyurl.com/thecreditreport

Low Interest Rates Could Hurt More Than Help

WASHINGTON (The Street) Federal Reserve policymakers last week held the overnight lending rate near zero to keep the economic recovery on track by making credit easier to access. But the benefits of a low rate might be diminishing for consumers.

Because nearly 70% of credit cards sport variable interest rates, one might think that the Fed's decision to stick to a near-zero strategy would be a boon for many Americans. Instead, in a scramble to beat new consumer protection regulations that go into effect on Feb. 22, card issuers have been raising rates, boosting fees and decreasing credit lines. Many credit lines also have baselines built into their products. Read the fine print and you may find that your card won't fall below 15%.

On the surface, the Fed's policy would also seem beneficial for new-car buyers. But those dealers offering attractive loan terms may be doing so to help sell slow-moving vehicles, irrespective of monetary policy. The fed funds rate impacts used-car loans even less. Used-car loans are more likely to reflect supply and demand, and default trends, which are tied to unemployment. Buyers will bad credit will continue to pay high rates.

"From a consumer standpoint, a marginal increase in interest rates will probably not have a material impact on the way people spend or save," says Srini Venkateswaran a partner with the financial institutions group at consultancy A.T. Kearney. "But I also don't believe [keeping rates near zero] stoked the economy to the degree that was expected."

Even mortgage rates might not see much of a change.

"As the fed funds rate falls, the mortgage rate does not come down to meet it," says Susanne Trimbath, chief executive of research firm STP Advisory Services and a former document editor for the San Francisco Federal Reserve. "If people look at where it says how your rate is calculated for mortgages, home equity loans and even credit cards, not many of them are tied to the fed funds rate."


Source:Joe Mont http://www.mainstreet.com/article/money/investing/low-interest-rates-could-hurt-more-help

Refinance with a Bankruptcy on Credit Report

A credit report is a record that encompasses the entire history of your borrowing and repaying, including information about your late payment and bankruptcy. This credit report is entitled under the federal laws. A credit report gives information to the mortgage companies and individuals regarding your credit history and helps them to determine whether to lend you further or not. A credit report would also show all the payments made by you faithfully on time throughout your life but still you may not become eligible to get more credit because you cannot ever pay off the credit you have.

Credit Reports Issued After Bankruptcy

If you declare yourself as a bankrupt, then your bankruptcy can be reported on your credit report for 10 years from the date of filing of the case. After filing a bankruptcy if you are able to voluntarily dismiss it before the discharge, it becomes the responsibility of the credit reporting agency to report the dismissal and also the bankruptcy filing. After the discharge, you are permitted under federal law to have the balance of each discharged debt reported as ‘O’.

Rebuilding Credit History Before Refinancing

If you are in need to refinance your mortgage, the first thing that you need to do is to rebuild your credit history. This will reflect on your credit report which is a key indicator to your lender. Although Chapter 13 and Chapter 7 bankruptcy would reflect on your report for seven and ten years respectively, you need not to despair. To get your credit back on your solid footing you can follow the concrete steps of paying your bills on time.

A credit report also reflects the assets you hold, so you need to be careful of making your spending habits into saving habits. Also you need to do regular scrutiny of your credit report because mistake on your credit history would bring successive miseries to you. If you have received a discharge from bankruptcy, then you need to get that discharge noted on your report. This would serve as a proof that the old debt is no longer legally enforceable.
Initial Refinancing Steps After Bankruptcy

The initial steps to refinance your mortgage after you have declared bankrupt are reviewing the following:

* Payment schedule to trustee
* Monthly expenses
* Payment history to trustee
* Monthly cash flow
* Potential savings

Since, you have been declared as a bankrupt, you need to pay higher interest during your refinance. But the most important step you need to follow before you refinance your mortgage is to find the right lender for your situation.
It is also possible for you to lower your payments. You can then save money each month and there would be opportunities for you to refinance your existing debts with lower payments. Mortgage lenders will likely consider refinancing your mortgage after bankruptcy because the risks that are involved in refinancing an existing mortgage are extremely low, thus lending them chances of making good profit.

View complete article:Refinance with a Bankruptcy on Credit Report
Resource:http://mortgagebible.org
Article Source: Refinance with a Bankruptcy on Credit Report

$82,000 Penalty Tag For Bad Credit

It is natural for people to ask for help when they are in trouble and it is within our nature to offer a hand when we can.

FOR IMMEDIATE RELEASE

PR Log (Press Release) – Jan 28, 2010 – It is natural for people to ask for help when they are in trouble and it is within our nature to offer a hand when we can. What throws this natural human relationship off its kilter is our ego that impacts our decision as to when we ask for help and when to extend a hand.

We often wait until we are in serious trouble before we ask for help and by that time the kind of help we receive is very very expensive and sometimes too late. On the other hand when we offer a hand too soon, we come across as interfering busy bodies who do not know the first thing about free will. Parents know what this is like when they talk to their children. But we leave the eagerness to help alone for now and concentrate on asking for help too late.

Let’s take the term "bad credit loan" for instance. According to a segment of Yahoo that keeps track of what people search for, in December of 2006 over 100,000 people searched for bad credit loan. On the other hand a little shy of 5,000 people looked for the term "bad credit repair."

When I added all the people that were looking for various loans related to bad credit, the number was over 500,000. But the number of individuals who looked for bad credit repair still remained under 5,000.

This seems to mean only 1 out of every 100 person look to cure the problem and the rest look to cure the symptom.

Wouldn't you think that the "bad credit" problem arises much before the need to get a "bad credit loan?" If this was the case, more people should have been searching for ways to repair their credit than those who seek to remedy the bad credit problem with a loan.

We as a society seem to seek remedy more than prevention. We live the dream of buy now and pay later and it is costing us dearly. Let’s look at two other examples of “bad credit mortgage” and “bad credit home loan.” 79,000 individuals looked for these services in December of 2006.

According to Fair Isaac Corporation as of January 11, 2006 and on a national basis, a person with a poor credit score of 500 – 579 is expected to pay $819 for a $100,000 thirty year fixed bad credit mortgage loan. For the same loan amount a person with an excellent credit score of 760-850 expects to pay $589 per month. That is $230 per month difference. This difference amounts to an $82,000 penalty tag for a bad credit mortgage loan.

The amazing part is that there is help in form of books, tapes, ebooks, firms and so on and it costs much much less. But when you look at the numbers most people chafe at $30, $50 or $100 one time fee but they flock to get solutions that cost them hundreds of dollars per month for a very long time.

You have these numbers, you know your situations, likes and dislikes better than any one else. I hope that you are reading this article and do not have to deal with bad credit. But if you are, consider placing some of your attention on bad credit repair and don’t let obtaining a bad credit mortgage loan consume all your attention.

NCR Credit Plus FAQ's

Question : What is the difference between a hard, soft, and promotional inquiry?

Answer : A hard inquiry is one that results from an application for credit, or in some cases a request for additional credit such as a credit limit increase. A soft inquiry is one that results from reviews by existing creditors. A promotional inquiry is one that is used by lenders looking to make offers such as pre-approvals for credit cards or loans. Only hard inquiries affect FICO scores.


Question : Should I sign up my spouse at the same time?

Answer : We suggest that you both sign up! As a couple you may share a significant number of accounts, or you may share none. Either way, when you sign up, we will set up individual files and you will both get the full benefits of individualized attention. To qualify as a couple you must share the same mailing address.


Question : How do you dispute joint accounts?

Answer : Joint accounts are treated the same as individual accounts. We set up individual files for the both spouse’s and every dispute will be pursued methodically. It is possible that we will be disputing the same information for you and your spouse at the same time. These disputes will have to be address separately, so its best to sign up as a couple. So negative accounts will be removed from both credit profiles.


Question : Can I get rid of student loan debt by declaring bankruptcy?

Answer : No. This has not been possible since the late 1990s.


Question : Can you stop collectors from calling me at work/home?

Answer : YES !! We will contact creditor on your behalf informing them to cease communications with you.


Question : Can a secured card help rebuild credit?

Answer : Yes. A secured card can help you rebuild your credit and eventually help you acquire unsecured lines. In addition, many secured cards can become unsecured cards with positive payment history. Visit our apply for Secured Credit Cards section.


Question : What is a charge-off?

Answer : A "charge-off" is an amount owed which has been classified as a "loss" for accounting purposes in the creditor's financials. On consumer debts, government regulations REQUIRE accounts to be charged off after a certain period of delinquency in order to keep financial institutions' records realistic and healthy. For example, if a credit card company claims it has a billion dollars in business on the books, it makes a huge difference in their financial standing if three-hundred million of that billion is UNCOLLECTIBLE. Statistically, it's recognized that the longer an account goes unpaid the less likely it will ever recover. Thus government regulations have been developed which require that if a consumer credit account remains delinquent for a specified period of time, it must be classified as a charge off, loss, etc. Charge Off's obviously are bad news on your Credit Report. They can have a severe impact on your credit rating, especially when they're relatively new. They can remain on your credit report for up to 7 years, however they can be removed sooner rather than later by various dispute/verifications and other processes that NCR Credit applies thru their credit restoration program.


Question : If the account was charged-off, do I still owe the money?

Answer : In most cases yes, the money is still owed and subject to collection attempts by both the original creditor (OC) and/or a collection agency (CA). Charge-off doesn't eradicate the debt. It simply changes its position on the creditor's books.


Question : If it's worthless, how can a Charge Off be sold?

Answer : A charged-off account is like a depreciated asset, like an executive's car that's 5 years old. It may be worthless on the books, but at the same time it might still have significant market value. So if the creditor can get money for that Charge Off either by collecting on it themselves or selling it to a debt purchaser, they can choose to do that.


Question : Can interest continue to accrue on a Charge Off?

Answer : Yes - if the terms and conditions of the credit agreement allow for the Original Creditor to charge interest after Charge Off (and when they do, it's usually at their default rate) then chances are good that they can - unless there's a conflict with state law. Note: We specifically referred to the Original Creditor being able to charge interest under the specified circumstances. It does not necessarily follow that a debt purchaser has the legal right to charge interest on a Charge Off if they buy the right to collect on the account. When faced with a demanding payment of interest on an alleged debt you may want to demand competent evidence of their legal right to do so, as well as proof that the amount they're demanding has been arrived at in accordance with all applicable state and federal laws. They should provide this as part of the debt validation (DV) process.


Question : What's the worst thing that can appear on my credit report?

Answer : There are basic things that look the worst on your credit report. This is difficult to state because lenders assess information differently. Some common examples are: multiple searches, late payments, defaults (paid/unpaid), charge off's, bankruptcies and repossession orders.


Question : I found errors on my credit report. What do I do now?

Answer : Contact NCR Credit Plus all incorrect credit information has to be eliminated from your credit file. All consumers have the right to challenge the accuracy of their credit report. We will challenge the accuracy of those particular items, then the credit bureau must investigate those items as soon as possible. If the credit bureau finds the items to be incorrect, or cannot confirm or deny it, it must be removed immediately from your credit file.


Question : How does a lender decide that I'm credit worthy?

Answer : When you apply for credit by filling out an application, you give permission to the lender to get your credit report from a credit bureau. Lenders use this credit report to work a short-term debt-to-income ratio, where they calculate your present short-term debt payments (excluding your mortgage), and divide the total by your total annual income. Lenders will refuse you credit if your short-term debt is more than 20% of your annual income. The second method lenders use is to add up your monthly bills (not including rent or mortgage and utilities) and divide the total by your gross income (before taxes). With this method, lenders are looking for a ratio of under 35%.


Question : What do I do if I'm turned down for credit?

Answer: The lender must provide you the specific reasons why you were rejected, and the name and address of the credit bureau that provided your credit report. You can appeal your rejection by sending a letter to the lender explaining why you are a better credit risk than your credit report indicates. But it is best to rebuild your credit before applying for credit again. NCR Credit Building program provides all the tools necessary to help you obtain new lines of credit.


Question : I have bad credit now. Do I have to wait 7 to 10 years before I can get a loan?

Answer : On a practical level you can have an A-rated credit profile within 2 years of even bankruptcy. How? Because lenders are much more interested in your present circumstances than what happened to you 3 to 10 years ago. Rebuilding your credit can be done rather quickly through a systematic plan, and a little perseverance. Keep in mind that positive credit information stays on your credit report forever. NCR Credit Plus will help you restore your credit profile to good standings.

Question : Can you help us build new credit?

Answer : If it looks like you will be left with insufficient credit when you finish the program, our Credit Building Program will provide you with all the tools necessary to help you re-establish new credit. This is an important step in the process of building credit. Creditors look for open accounts that are in good standing. A secured credit card may help, a secured credit card requires a small savings deposit which secures the entire credit line on a MasterCard or Visa. These credit cards will be reported on your credit report. Visit our apply for Secured Credit Cards section.


Question : What should I do while NCR Credit Plus is repairing my credit?

Answer : You should not apply for any type of credit until we have completed our process. If you fail to comply with our request and apply for any credit and are denied, we cannot be held responsible for additional negative remarks and the direct influence this might have on your credit profile.