September 22, 2004
By Myra P. Saefong, CBS.MarketWatch.com
A credit card balance of $4,000 at 25 percent would take 27 years to pay off making minimum payments, for a grand total of more than $12,000.
(CBS) CBS News continues an election-year series titled "What Does It Mean To You?" focused on where the presidential candidates stand on major issues and how a vote for one or the other candidate might affect average people's lives.
In this report, CBS News Correspondent Mika Brzezinski compares the Bush and Kerry plans for protecting consumers against runaway credit card rates.
Not long ago, single mother Lenore Macioce was able to make the payments on her 12 credit cards – barely. But when she missed one payment on one card, paying any of them became nearly impossible.
Though she says she was never late before on any of her cards, half of the other companies jacked up her rates to as high as 25 percent.
"They told me well that's the way it is. You have to pay it," said Macioce.
And what you have to pay in those extra interest points isn't always obvious. For example, a credit card balance of $4,000 at 25 percent would take 27 years to pay off making minimum payments, for a grand total of more than $12,000.
"I think those practices are wrong," says Democratic presidential nominee John Kerry.
Kerry says there are far too many Lenores out there and has unveiled a new plan put a stop to across-the-board interest hikes on credit cards – or "universal default." Kerry would also require companies to disclose how much time and money it would take to pay off a bill with only minimum payments.
Harvard law professor Elizabeth Warren helped formulate the proposals.
"He's willing to turn the heat up and bring it to a presidential level," Warren says of Kerry. "Credit card companies always want to make more money – and that's what this is about."
President Bush has taken a different approach to consumer protection by signing a bill last year that helps ensure fair access to credit. He has no plan to address universal default. Instead, the Bush campaign cites identity theft as its high priority.
Howard Beales, former director of the FTC's Bureau of Consumer Protection in the Bush administration, says a ban on universal default would leave more customers out in the cold.
"This is a situation where I think the cure is worse than the disease," says Beales, now a professor at George Washington University.
"If creditors can't assess the risk on an ongoing basis, then they're going to have to be more restrictive about who they loan to in the first place and some consumers won't get credit," Beales says.
Lenore Macioce says she wishes the candidates had begun talking about universal default sooner.
Every 19 seconds, someone files for personal bankruptcy – and Lenore is now one of them.
http://www.cbsnews.com/stories/2004/09/22/eveningnews/main645041.shtml