The Wired Word for 3/14/2010

Dear Class Member, 

Last month, the new "Credit Card Accountability, Responsibility and Disclosure Act of 2009" took effect, placing some needed limits on the rates and penalties credit card companies can impose on borrowers. The law, and the unprincipled practices of card issuers that made the law necessary, give us an opportunity to consider what the Bible has to say about "usury," which is the charging of a fee for the use of money. So that will be the topic of our next class.

 

If you wish to start thinking about our topic in advance, below is some introductory material. 

 

New Law Aims to Protect Credit Card Users

The Wired Word for March 14, 2010

 

In the News

 

On February 22, nine months after it was enacted by Congress with high bipartisan support, the "Credit Card Accountability, Responsibility and Disclosure Act of 2009" (CARD) took effect. This comprehensive credit card reform legislation is intended, in the words of the act, "to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes." In short, it aims to curb unscrupulous practices by the credit card industry and to offer new protections to consumers.  

 

Treasury Secretary Timothy Geithner described the CARD act, which was signed into law last spring by President Obama, as "a critical step forward" in protecting the financial well-being of American families.

 

The new law includes several rules to limit how credit card companies can charge customers but does not have price controls, rate caps or fee-setting limitations. It does ban rate hikes on existing balances, calls for hard spending caps instead of over-limit fees and mandates that payments go toward high-rate balances first, thus minimizing interest charges for card users. For a quick summary of the CARD provisions, see New credit card laws 2010. 

 

The CARD law became necessary because of some unethical banking practices. For example, in some cases, when a person's overall credit rating went down, banks sometimes raised the interest rates they charged that customer even though the person was current and on time with payments to that card issuer. Some companies also wrote their user rules in such a way that a single late payment threw the card holder into a much higher rate bracket. Other predatory practices were sometimes embedded in legalese in the contracts the card holders were required to sign to receive the card. 

 

Although the new rules are expected to benefit card users, some of that benefit has been offset by banks that raised their interest rates and fees in the weeks before the law went into effect. While the bill was under consideration, credit card companies argued that the regulatory changes would lead to higher rates. Consumer advocacy groups point out that those same credit card companies have fulfilled their own prophecy, using their claims as cover to raise rates and find new ways to exploit their customers.

 

More on this story may be found at these links:

 

New credit card rules ease bills for consumers, but fee hikes still possible. Fox News 

Summary of "Credit Card Accountability, Responsibility and Disclosure Act of 2009." Library of Congress

Full text of "Credit Card Accountability, Responsibility and Disclosure Act of 2009." Government Printing Office

 

The Big Questions

Here are some of the questions we will discuss in class:

 

1. Almost everyone agrees that the ability to borrow money is important under certain circumstances, such as when loans allow borrowers to take advantage of significant opportunities they wouldn't be able to pursue otherwise. What guidelines help you decide when a purchase on credit is the wise thing to do?

 

2. What is a fair interest rate? At what percentage point do interest charges become unscrupulous and usurious? Explain your answer.

 

3. What cultural factors and thought processes make us as consumers prone to spend money on items we don't need and that don't move us toward our goals?  

 

4. If it is true, as most observers say, that careless spending by consumers is the chief cause of their debt, why does that not excuse those who issue credit from making as much as the market will bear?  

 

5. On what points, if any, do the principles of capitalism and the principles of Christianity disagree? On what points, if any, do they agree?

 

Confronting the News with Scripture

We will look at selected verses from these Scripture texts. You may wish to read these in advance for background:

 

Exodus 22:21-27

Nehemiah 5:1-13

Ezekiel 22:6-12

Luke 6:27-36 

Acts 4:32-37

 

In class, we will talk about these passages and look for some insight on the big questions, as well as talk about other questions you may have about this topic. Please join us.