Credit Card Companies Essay
The recent development in credit card lending is individuals are getting unsolicited cards in their mail. Such cards offer either a low rate of interest or they do not charge annual fees, popular baits among many credit card lenders that will end up entrapping unknowing customers into a debt pile that they will find difficult to untangle from, simply because that is how the credit cards are designed. The reality is there is an accusation that the card issuers are not doing an honest business.
In addition to the various baits they are using, their lending system is also loaded with what is termed as tricks and traps. It preys on customers who could stumble or would mistakenly take some of the offers as treasures and will get caught up into a non-ending spiral of debt servicing that will not have an end in sight (Warren, 2007). There are incidents reported where credit card companies have refused to clear borrowers who had declared bankruptcy.
Such borrowers approached other lenders after going through the required period to obtain loans and the credit bureau records was still showing those nullified loans by court order as an outstanding balance forcing some of them to pay
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There are also over limit fees always accompanied by a double cycle billing, disappearing grace period, and in some cases a $15 or more telephone payment charges. Sometimes, there is also a deliberate attempt by the lenders to avoid the arriving of the loan payments sent by mail on time and there is not much the borrowers can do, where such deliberate actions could change the status of a borrower into a defaulter overnight (Johnson, 2004). It is not only that the lenders are fully aware of where their lucrative revenue comes from and it is not from credit card borrowers who are paying their debt on time.
In fact, who will end up paying a considerable amount of money are those who falter on their payments. What this reveals is credit cards are the most profitable products financial companies are selling to their customers. When seen from the point of view of what the various loans generate in a form of interest and fees, since credit cards are laden with tricks and traps they are the best lending instruments that enable the financial establishments to maximize their profit.
One of the reasons that contribute to this fallout is lack of information, as there are charges hidden from the borrowers at the time of signing the agreements although the lenders are aware of them. They will only surface when borrowers stumble with their payments. There is no penalty directed at the lenders for failing to disclose all their charges at the time of signing the loan contract (Dell’Ariccia & Marquez , 2006). Yet, there are numerous wrongdoings governmental offices such as the General Accountability Office had recognized.
The fact that lenders are keeping a large amount of information away from the borrowers when they issue the loans is a fact identified all along by regulators. Other minor findings such as concealing important information that should have been at the forefront of the documents, making the financial documents unnecessarily difficult to understand and to skim through, putting either essential information or documents where borrowers signing the paper could not find them easily, and using difficult to read small typefaces were among them (Consumer Affairs, 2006).
The number of document borrowers used to go through in the early 1980s was not more than one page and in the year 2000 and later that number had surpassed 30 pages that each borrower has to go through to understand the content of the loan with a language that would be difficult even for lawyers to understand. Furthermore, the 2005 law that made declaring bankruptcy difficult is also contributing to the erosion of what little protection the borrowers had (Washington Monthly, 2005). When borrowers felt that they are getting unfair treatment by the lenders, they can always threaten to declare bankruptcy.
But now the law has made it easy for the lenders to get away by charging exorbitant sums, simply because some of the borrowers cannot get rid of the lenders and their loan because of the law that could force them to pay by garnishing their earnings making it difficult or impossible to declare bankruptcy. Some borrowers who could be allowed to declare bankruptcy cannot do so simply because of their changed financial circumstance where they also could have problem coming up with the money required to cover the attorney and the legal fees.