Senate investigating predatory tactics of credit card companies

Credit card debt is the first cause of bankruptcy for many americans every year.

Statistics show that debt is increasing at a greater rate than income.

It looks as though Senate will be analyzing credit card company practices for increasing interest and late fees and that direct legislation to minimize these actions could be put in practice very soon. In fact, credit card companies, weary of these heightened restrictions, are already beginning to promise to be clearer with their policies toward consumers. They have vocally assured Senate that they will lower penalties and make fine print more easily understandable.

Several studies have shown that these companies use predatory tactics that insure the highest price interest rates and skyrocketing penalties on late payments and default accounts. Additionally, their billing structures allow for double-cycle billing, using an average of your balance over two months to calculate your interest, normally at a more significant amount to the consumer, and a tactic known as “universal default” which allows companies to raise interest rates in a consumer defaults on an account not related to the credit card.

The purpose of new legislation against credit card companies will be to prevent individuals capable of making only minimum payments to be buried under mounts of additional interest and late fees. As of right now, a definite timeline for new regulations has not been established, but nevertheless it will result in improvements for the consumer along with clear, more understandable terms and conditions.

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New Century filed for Chapter 11

2007 has been a horrendous year for subprime lenders throughout the entire mortgage market in the United States. To date, over two dozen individual subprime lending companies are either on the cusp of closing or have already done so. On April 2, the financial chaos claimed its most significant victim when New Century filed for Chapter 11 Bankruptcy.

The second largest provider of subprime mortgage loans in the United States, New Century lend out over $51 billion dollars in high risk mortgage loans in 2006 alone. While the company initially enjoyed an abnormally profitable growth and expansion from 2001-2005, seeing stocks reach a high of $66 in 2004, directors were unable to salvage the company from the recently high amount of defaults in mortgage loans that have left the industry severally wounded.

In the midst of plummeting stock prices and a recorded $100 million dollars in liabilities, company officers must still deal with an investigation by the Fed for possible securities fraud and accounting errors. As part of the bankruptcy, New Century officials would like to sell their loan operations to Carrington Capital Management LLC for $139 million.

However, it remains to be seen if the courts will allow such a transaction to take place.

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