Friday, January 16, 2009

ways to regulate banks and solve credit card problems

Additional ways to spur the economic recovery:

Help the consumer with Bank and Credit Card Regulation
1. Make certain predatory mortgages illegal, such as:
a) interest only mortgages
b) ARMs that go up more than 2% over the length of the loan
c) mortgages with pre-payment penalties

2. Forbid Bank Leveraging 30 to 1
Regulate banks so that funds are leveraged not more than say five to one.

3. Prohibit credit card companies from sending unsolicited credit cards and checks to people. I receive many such offers I do not want. Poor people may use these cards & checks and get further into debt.

4. Limit allowed balances on credit cards in accordance with income, as is done in France. Also limit the interest rates companies may charge on late balances. High rates were supposed to discourage spending but they only benefit rich bankers and do nothing to stop the poor from going into debt. I cannot tell you how many of my friends have overdue balances and think they are paying the introductory rate of 4.5% instead of the 28% they are actually paying.

5. Require Credit Card bills to show the balance due and the interest rate being charged for late payments in ¼ inch high letters in bright red ink.

6. Limit bank fees.
These slip through unnoticed onto many Americans statements.
Even after being reprimanded Wachovia continued to slap fees for absolutely nothing (except to make the bank richer) onto my statements. Only after I challenged the fees did the bank agree to remove them. Many working people do not have the nerve to challenge the bank and/or do not notice the fees.

7. Prohibit the Float
Banks should not be allowed to hold my money and earn interest on my money for several days before making the funds available to me, the owner of the funds. Working people may suffer most from this unfair practice.

8. Regulate Mortgage Bundling, Upfront Fees, Appraising business and Sales of Mortgages
Mortgage companies should continue to own (and thus care about) all mortgages they buy; do not allow firms to sell and resell mortgages whereby they make their money upfront on fees. The current system means that mortgagors don't care who buys the loans or if they are good quality or sub-standard. The current system hurts the middle class borrower and benefits only the banks.

9. Start charging .25 on the sale or transfer of stocks, bonds, and other financial assets including the variety of exotic financial instruments.(See Bob Herbert column, Jan. 13, 2009, NYTimes).

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