DebtBytes News
Stay up to date with the latest debt and consumer news.
News of the Week
It seems that consumer debt and related issues is strongly on the move this week. Our snapshot of activity from around the world shows us that in some places consumers are viewed as a renewable resource that many assume can easily regenerate to support future economic activity.
Rather than understand the yin and yang between lenders and debtors, some banks appear to be creating an imbalance in the optimum relationship and rather than looking at consumers as a valuable resource, many are engaging in clear cutting timber harvesting of consumers in debt. This leaves large swaths of consumers felled in such a way that they are carelessly damaged. Banks in the United Kingdom are under clear pressure by the government for engaging in unfair consumer behavior, and as of now, the onslaught against banks in the UK is in its infancy. Class action lawsuits against banks in the UK for unfair and unreasonable consumer behavior are in the works.
It would be nice to see more lenders and countries engaging in new discussions and ways that consumers under financial pressure can find win-win solutions to repay their debt and find a way to engage in future economic growth in a sustainable way that benefits all parties. These win-win solutions should benefit consumers by allowing them to be treated fairly and benefit lenders by helping them to avoid future financial penalties and losses from bad current policies.
Along with this weeks news, you should read the paper "Behavioral Economics, Overindebtedness & Comparative Consumer Bankruptcy: Searching for Causes and Evaluating Solutions" by Law Professor Jason Kilborn.
He presents some very insightful observations why the reliance on financial literacy as a preventive tool to future debt problems is problematic. His underlying awareness about how the psychology of debt and behavioral economics influences consumer actions and beliefs is worth the time it takes to read and digest this paper.
Professor Kilborn has recently joined the Myvesta Foundation as a consultant to assist us with the demand from outside groups and governments in the creation of beneficial approaches and systems to allow consumers to overcome difficult financial problems.
As always, since we are a global social enterprise we are here to help if you are looking for advice and guidance in creating effective local solutions to assist consumers that need good solutions to bad debt problems. We provide our assistance and advice at little to no charge around the world for many groups and lenders in growing economies.
Steve Rhode
President
Myvesta Foundation
Today's Top Stories
BofA and CCB's collaboration credit card
Bank of America (BofA) and China Construction Bank (CCB) are entering a joint venture to commence a new credit card to present more novel card products for Chinese markets. The new BofA/CCB relationship is going to proceed in stages with Bank of America bringing its long history of credit card management and development into China in cooperation with CCB. Now that BofA has assimilated the MBNA card business, we wouldn't be surprised to see a whole new line of affinity cards; maybe the Great Wall of China card or the Three Gorges Dam card. However, don't hold your breath waiting for the Tiananmen Square card to be released in the near future.
China credit cards on the rise
The amount of credit cards in China increased this past year by roughly 23% with a final tally of 50 million cards. With HSBC and Citibank distributing joint cards with neighboring partners, the mass growth of cards is suspected to be a product of promotions by card issuers. Debit cards are still more popular with 1.08 billion cards at the end of 2006. With debt and credit cards combined they make up 17% of China's retail sales of 2006, some major cities totaling to 30%.
Halifax being sued for harassment
UK citizen, Alison Turner, has filed a law suit against Halifax bank under the Protection from Harassment Act of 1997. When the bank continued to harass her for a £775 payment that was previously agreed to be dropped from her bill Turner received copious letters and phone calls, resulting in her having to take a sick leave from work due to the stress. Her solicitor explains she endured restless nights of worry and having to take time off work due to the bank's taunting calls, which he deems as indubitable harassment.
Canada and UK share unfair charges trouble
Similar to the UK's "unfair bank charges" rage sweeping the country, Canada is experiencing similar trials with complaints about ATM charges; some machines charging up to $6 in fees, including the initial $1.50 fee to the machine issuer with another $1.50 "convenience" fee to the card issuer for using an ATM outside of their branch's name. So far, banks have made no comments about the issue but perhaps like bank charges in the UK, there will be an investigation about the actual costs of service in using an ATM.
US economic snapshot as of April
Published this week is a list depicting the current economic standpoint of the US. Some troubles including: low employment, declining benefits, rising debts, plummeting savings, increasing gas prices and deficient government funds.
Co-Op's homeless-friendly credit card
The UK's Co-operative Bank recently launched their new credit card that donates money to benefit the homeless charity, Shelter. The first time the card is used, £20 will be donated to the charity with a following 25p for every £100 spent. Shelter hopes to see 2,000 people support the card, whilst in the process donating £400,000 in the next three months.
The world has been warned
The world is being warned about some debt counseling companies that lie to consumers about their fees, services and capabilities to help; resulting in around a dozen of cases against such companies offering false hope to unsuspecting consumers. Some counseling companies blindly enter people into debt management plans without reviewing their financial status whereas a reputable company would take a look at all possible options for the consumers based on their specific information.
US diner skimming scam
A sophisticated "skimming" scam came to an end this week that has been stealing money from US citizens since November of 2005. Waiters and waitresses along the east coast discretely took customer's credit card information and sold the information to people who used it to make $3 million of illegal purchases. The ringleader was arrested this week in his Brooklyn home where officials found nearly 300 fake credit cards, $200,000 cash and multiple Rolex watches and designer handbags. With more light shed on the operation, police discovered that the leaders provided waiters with "skimmers", a hand-held device that read and saved vital card information, the waiters were then paid between $35 to $50 for each card saved on the device. So far, 12 of the 13 found for the crime are in custody and are being charged with fourth-degree conspiracy which could be up to 4 years in prison. Additionally 7 could face up to 15 years as they are being charged with second-degree grand larceny.
Suspected link between UK scam and Sri Lankan rebel network
The British Fuzz is exploring a multi-million pound credit card scam that struck 2% of petrol stations across the country that may be connected to a rebel network in Sri Lanka. The scam that has been several years running makes a copy of credit and debit card information and steals PINs during transactions. Then the criminals take out small sums of money over time to not draw immediate attention to the card owner. Britain's association for electronic payments, APACS, estimates a loss of £30 million from accounts with this technique. An official at the Sri Lankan embassy in London suspects the culprits running this scam to be the work of the Sri Lankan rebel group: LTTE (Liberation Tigers of Tamil Eelam). However, there is no official links drawn between the group and the crimes as of yet.
South African credit card interest rates rise
On average, South Africans owe about R40 billion on credit card accounts alone. Making the anger towards financial institutions all the greater, when they allegedly took advantage of customer's by rising interest rates on credit card accounts without warning. Most lenders rose rates by 2 to 3% this past month. Standard bank rose rates in debit accounts 2%, First National Bank raised rates by 3% and Nedbank's debt interest rate 3%. "The banks have justified the interest rate increases by saying that they did not pass on an increase in interest rates imposed on them by the Reserve Bank last year".
The money market: around the world
Notes from the Asian Banker's weekly meeting gave insight to money market moves around the world. Such as, European regulators start to discuss about monitoring cross-border financial trades, LaSalle Bank may be bought by Bank of America for $21 billion, Saudi billionaire, Maan Al Sanea, is now the largest individual share holder of HSBC and Citigroup may acquire a Taiwanese credit card business. More tidbits can be found here.