Fixed-Rate Credit Cards May Vanish

From the Wall Street Journal:

Could fixed-rate credit cards soon be a thing of the past?

In June, Bank of America Corp. and J.P. Morgan Chase & Co.’s Chase Card Services notified some cardholders that their fixed rates were being converted to a variable rate tied to the prime rate. In March, Discover Financial Services also notified some customers that their fixed rates were changing to a variable one.

Spokespersons for the banks—who declined to provide details on the numbers of cardholders affected—said the changes were an attempt to better manage the businesses’ costs as market conditions change.

Nearly all of Bank of America’s fixed-rate cards will be converted to a variable rate. The exceptions: some student accounts, accounts in debt-assistance programs and some newly opened accounts, says spokeswoman Betty Reiss. At BofA, customers will not be able to opt out of the changes, which they will start to see with August statements.

Chase customers, however, will be able to opt out of the changes, although they will have to close their accounts. Chase spokeswoman Stephanie Jacobson said the switch was prompted by the company’s “changing costs for funding credit-card loans.” Discover cardholders were also allowed to opt out of the changes, which took effect May 1, but had to close the accounts.

With a variable rate, rates generally rise as interest rates rise, and fall in a declining-rate environment. With rates already near a bottom and expected to rise, most consumers probably won’t see their rates fall further.

The changes will make it easier for issuers to bump up the rates they charge without notifying cardholders. By contrast, fixed-rate cards typically must first mail a notice to clients announcing any rate changes. The changes come at a time when issuers are rushing to comply with new legislation that will soon limit their ability to raise rates on existing balances, require them to notify customers at least 45 days in advance of any changes to their terms, and make them eliminate other confusing practices.

Write to Jane J. Kim at

House Passes Bill Imposing New Rules on Credit-Card Industry

From the Wall Street Journal

Obama Expected to Sign Measure Soon

WASHINGTON — The House overwhelmingly approved legislation Wednesday imposing new restrictions on credit-card companies, sending the measure to President Barack Obama to sign in the coming days.

The 364-61 approval, following the Senate’s 90-5 vote Tuesday, will ban several of the industry’s most profitable practices and require clearer disclosure to cardholders about the interest they are paying.

Mr. Obama has pledged to sign the measure, which would take effect in late February 2010. One of the toughest provisions: Cardholders won’t see interest-rate increases on existing card balances unless they are 60 days late on payments. And if the customer pays on time for six months after that, the prior rate must be reinstated.

The new rules also would ban some fees, provide more notice for customers to pay bills and require clearer disclosures. For instance, credit-card statements will have to tell customers how long they would need to wipe out their balance if only paying the minimum each month, and how much interest they would incur along the way.

The legislation will force broad changes in the credit-card business, many of which were under way after the Federal Reserve approved similar — though less stringent — regulations in December. Industry officials say the most stringent elements of the legislation will constrain their ability to adjust prices for the riskiest consumers. Card companies have said they are considering shorter introductory rates, higher interest rates and more annual fees for some consumers as a result of the new restrictions.

By blocking many practices that aggravate consumers, however, lawmakers said the new provisions would help the economy in the long run.

“Consumers will have more money to invest in the economy instead of paying off debt,” said Rep. Carolyn Maloney (D., N.Y.), who co-wrote the legislation.

Over the past year, credit-card issuers have seen their losses mount as customers default on their bills. Many companies have been protecting themselves by raising rates and cutting credit lines in recent months, even for customers who pay their bills on time, at the same time the government stepped forward with expensive bailouts of the financial sector. “It absolutely inflamed the public,” Ms. Maloney said.

The industry found itself isolated on the issue as other business interests — and most Republicans — stepped forward to support the card legislation. But some members warned it could lead to unintended consequences, such as cutting credit to more consumers as card companies aim to protect their bottom lines.

“We don’t need to take away consumers’ credit opportunities at a time when the market is already contracting from the economic recession,” said Rep. Jeb Hensarling (R., Texas), who said he backed the clearer disclosure about terms.

The credit-card bill included an unrelated measure, attached in the Senate by Sen. Tom Coburn (R., Okla.), to allow loaded firearms on federal parks in areas where state and local laws would already allow it. The House carried out an unusual separate vote on the gun provision, which passed 279-147, allowing members to object to it while still putting their names on credit-card legislation.

Senate Approves Bill to Overhaul Credit Card Industry

News from FOX NEWS

The overwhelming bipartisan vote of 90-5 was lawmakers’ way of telling Americans that they haven’t been forgotten amid a recession that has left hundreds of thousands jobless or facing foreclosure.

The Senate voted on Tuesday to prohibit credit card companies from arbitrarily raising a person’s interest rate and charging many of the exorbitant fees that have become customary — and crippling — to cash-strapped consumers.

The overwhelming bipartisan vote of 90-5 was lawmakers’ way of telling Americans that they haven’t been forgotten amid a recession that has left hundreds of thousands jobless or facing foreclosure.

With the House on track to endorse the measure by week’s end, President Barack Obama could see a bill on his desk by the end of the week.

“We’ve got too many hard-working families in Massachusetts struggling to keep their heads above water, and the last thing they need is to get whacked with unfair credit card fees,” said Sen. John Kerry, D-Mass.

If enacted into law as expected, the credit card industry would have nine months to change the way it does business: Lenders would have to post their credit card agreements on the Internet and let customers pay their bills online or by phone for free. They’d also have to give consumers a chance to spare themselves from over-the-limit fees and provide 45 days notice and an explanation before interest rates are increased.

Some of these reforms are already on track to take effect in July 2010, under new rules by the Federal Reserve. But the Senate bill would put the changes into law and go further in restricting the types of bank fees and who can get a card.

For example, the Senate bill requires anyone under 21 seeking a credit card to prove first that they can repay the money or that a parent or guardian is willing to pay off their debt if they default.

Tax credit for buying home worth cashing in By Barry Armstrong / Money Matters Tuesday, May 19, 2009 –

Article from the Boston Globe

Is now the right time to buy a home?

The national median home price has fallen 26 percent since its peak in early 2006. Nearly all sales in the fourth quarter of 2008 were distressed sales, including foreclosures and homeowners selling their homes for less than they owe on their mortgage.

Homes have not been this affordable since the 1970s, and you can still get a 30-year, fixed-rate mortgage in the 4 percent range. This may be a good time to snag a bargain if you are confident in your job prospects and you don’t plan to sell for at least five years.

From a tax perspective, this is a great time to purchase your first home. Home purchases made before Dec. 1, 2009, may qualify for a first-time home buyer credit of $8,000 or 10 percent of the price tag, whichever is smaller. As long as you own the home for three years, you don’t need to repay the credit.Many buyers aren’t aware that they can re-file their 2008 taxes and claim the credit now, even if they bought their home after Dec. 31, 2008. That means you don’t have to wait until 2010 to receive the credit.

Everyone’s situation is different so talk to your tax adviser to see if you qualify for the credit.

E-mail questions to Barry Armstrong is the host of “Money Matters with Barry Armstrong” on WCRN-AM (830) and a registered representative with Securities America Inc.

$50M Home Rescue Pact

Article that appears in The Boston Herald

By Thomas Grillo
Tuesday, May 12, 2009 –

More than 700 Bay State homeowners on the brink of foreclosure could be rescued by a $50 million settlement with Goldman Sachs, Massachusetts Attorney General Martha Coakley said.

Under the terms of the agreement, Goldman will reduce the principal of 714 first mortgages they hold (or service) by up to 30 percent and reduce second-mortgage amounts by 50 percent or more. This will allow borrowers to replace troubled mortgages with more affordable loans that take into account today’s value of their properties.

“There’s no dispute that Goldman Sachs and other securitizers have been involved intricately in this whole process by which loans were made to homeowners and, as we have argued, in many instances destined to fail,” said Coakley – referring to the practice of offering mortgages to prospective homeowners who lacked a realistic means to pay them back.

Goldman and others further imperiled the financial system by bundling those very risky mortgages and selling them as mortgage-backed bonds, or securities. Coakley said that Goldman, a powerful and politically wired firm, has been cooperative and wasn’t asked to admit any wrongdoing.

Under the deal, borrowers whose first mortgage is significantly delinquent will be required to make a reasonable monthly payment while seeking refinancing or until they sell their home, Coakley said.

The attorney general acknowledged that Goldman was not the only company that profited from selling off subprime loans destined to fail. She declined to mention other firms under investigation.

“I cannot name names and I can’t comment other than to say that this was opened as a broad-based investigation and it’s ongoing,” she said.

Coakley has probed Fremont Investment & Loan, now defunct, and H & R Block Inc., owner of Option One Mortgage Corp., for making the types of mortgages that Goldman then securitized.

In addition to the cost of reducing the principal of the troubled loans, Goldman has also agreed to pay the state $10 million.

Michael DuVally, a spokesman for Goldman in New York, said: “Goldman Sachs is pleased to have resolved this matter.”
Herald wire services contributed to this report.