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Banks boil my blood!

I gotta vent! It’s time this bank crap came to an end.These very institutions that greedily dug themselves into a high risk mortgage hole that’s now caving in around them are now choosing to use “guilt by association” as a tool for determining creditworthiness in the name of reducing their “risks.”  

It’s believed that credit cardholders are seeing their card limits reduced because of where they live, where they shop and even who holds their mortgage. According to Bill Hardekopf of LowCards.com, it’s becoming obvious that banks are looking for excuses to lower cardholder credit limits.

As reported on MSNBC.com, Hardekopf explains it this way: What issuers do is tighten up standards of how they analyze risk. Card agreements don’t allow credit card issuers to simply close accounts and demand full payment. So, they can lower credit limits repeatedly to prevent a consumer from making any new purchases. It does the same thing as closing the account.

Lowering the credit limits is a simple way for the card issuer to reduce risk. They do not reveal these strategies publicly, of course, so it’s never immediately obvious what’s happening. But Hardekopf believes efforts have systematically begun to reduce some users’ credit limits. They’re akin to what he says was a “quiet change” earlier this year that saw card interest rates mysteriously rise!

This isn’t wild speculation by Hardekopf, either. According to the CNBC report, Bank of America was asked if it is using new criteria to lower credit limits. Spokeswoman Betty Reiss said, “We adjust credit card limits based on the individual cardholder’s risk profile and performance with us.” She declined to answer additional questions. And at least one Washington, D.C. American Express cardholder was told in a letter his limit was being reduced, in part, because of where he shops and who holds his mortgage.

Now, it’s not just that I find the bank’s “guilt by association” policy another abysmal way to respond to a credit debacle they created for themselves. And, it’s not just that these banks now look to the taxpayers (who are also us credit cardholders) for a bail out.  No, in truth, I have serious concerns for dealers (in fact for all small businessmen) who may use credit cards for short-term funding of their business operations.

Apparently, if we shop in the wrong stores, live in the wrong places and have a mortgage from the wrong lenders, we may be elevated to a higher risk category and see our limits reduced. It sucks, but be warned it is happening.

Comments

14 comments on “Banks boil my blood!

  1. Rick Traskos

    While I agree with this opinion and most of Norm’s opinions we do see a major problem with valuing the asset at this time. It is possible a 30% down payment may be inadequate in just a few short month, much less over the life of a 15 or 20 year loan.

  2. LEN JORDAN

    I HAVE BEEN SAYING FOR YEARS THAT THE BOATING INDUSTRY INORDER TO SURVIVE SEVERE DOWNTURNS, MUST ALAIGN ALL OR A MAJORITY OF ITS DEALERS WITH ONE STRONG FINANCIAL SOURCE SO THAT DOWNTURNS COULD BE WEATHERED BY ALL.

    WE HAVE LOST ALL OF THE MAJOR PLAYERS IN THE MARINE FINANCE BUSINESS IN THE LAST FEW YEARS AND FOR THE INDUSTRY TO PROSPER WE MUST JOIN TOGETHER AND SUPPORT THE FINANCE COMPANIES IN THE GOOD TIMES AND HOPE THAT THEY WILL BE THERE IN THE BAD TIMES FOR US.THEY NEED TO BE ON CONTRACTS WITH US SO THAT THEY CANNOT PULL-OUT ON A WHIM.

    WE ARE JUST BEGINNING TO SEE HOW BAD IT CAN GET RIGHT NOW WITHOUT SUPPORT FROM MAJOR LENDING INSTITUTIONS. LEN JORDAN

  3. Bill Warner

    Norm,

    It is a disturbing policy however if it can prevent a 1-1.2 trillion dollar bail out of the credit card industry it may not be a bad thing…a little profiling would have been a good thing in the subrime sector….if this really boils your blood I highly advise to turn off all new sources for the next 12-18 months…this is not going to be fun…preserve capital my friends…

    Bill Warner

    PS Dealers make the best in the up coming boat shows …anyone on those docks at the shows that doesnt have walking shoes on will be a buyer….my phone lines will be open as usual

  4. Bill Warner

    If GE pulls a Key Bank on the dealers floor plans…ouch….there really needs to be some intitution there waiting to pick up the ball

    Dont see down payment as a big issue compared to debt income ratios and net worths due to to devalued realestate, eline positions ,wage loss etc ….it might be easy to get 30 k down on a 100k unit …the 70k is still a recreational financing issue…then throw in LTV using repos as comps and theres a train wreck …

    I know theres plenty of positive to talk about but some of the negatives should be addreseed sooner than later…

    As always…wholesaling fiberglass and cinderblocks
    Bill Warner

  5. Waterdog

    We all knew it was too good to be true.
    How many dealers sold boats with 0 money down Norm?? Everyone of them did.
    Not one ever said to a buyer “you shouldn’t do that as you will be upside down & not be able to get out incase of an emergency why don’t you buy a smaller boat”.
    How many dealers made big back end money on those 0 down loans along with your so called “Greedy Bankers”? All of them
    Greed is to blame! But everyone was greedy & not many were willing to say no, or to tell our political leaders, who have ultimate oversight of the banking system, that all this house flipping, house building, easy credit, wall street speculation was wrong from the get go….

    I hate when I hear folks say “I didn’t know what was going on”
    The correct response should be “I WASN”T PAYING ATTENTION or I DID NOT CARE”.
    You might be correct “it sucks” to be in a world of gult through association but the real question is: what are you suppose to base your trust of being repaid on today?
    A person word?
    A handshake?
    A phony lie filled credit app?
    From your current writing it sounds like your backing Obama. Your describing his answer to all questions regarding his relationships. “They just don’t matter”.
    Change is coming & it’s not good – Hold on tight.
    Hey want to stimulate the economy Norm? Move to better neighborhood, Buy a better car or boat with cash of course & start banking at the “United Bank of America” where money is as cheap as the paper it’s printed on…..Their motto is “We are print money 24/7 for you”
    Welcome to the USSA -United Socialist States of America
    I just had to vent as well. Thanks Norm I feel better…

  6. Bill Warner

    Waterdog…Amongst your words of wisdom lies the answer …one little word at the end of the third paragraph….TRUST…..Now that th bubble has burst who can you trust Banks?…..Wall street?….Fed?….Government?…Politicians ? …CNBC Analysts ……not a big religious guy but In God may hold true if he doesnt loose this law suit…

    Judge sends God lawsuit to afterlife
    Published: Oct. 15, 2008 at 7:45

    Comment OMAHA, Oct. 15 (UPI) — A Nebraska lawmaker says he may appeal after an Omaha judge tossed his suit against God because there was no evidence the defendant had been served papers.

    Douglas County District Judge Marlon Polk said another factor in his decision to throw out the lawsuit, which was brought by state Sen. Ernie Chambers, I-Omaha, was the fact “there can never be service effectuated on the named defendant,” the Omaha World-Herald reported Wednesday.

    Chambers’ suit, which was filed in September 2007, had sought a permanent injunction preventing the almighty from bringing about earthquakes, tornadoes and other acts of natural violence.

    The lawmaker said he may appeal Polk’s decision.

    “It is a thoughtful, well-written opinion,” Chambers said of Polk’s ruling. “However, like any prudent litigator, I want to study it in detail before I determine what my next course of action will be.”

    Chambers, a 28-year veteran of the state Legislature, said his suit was designed as a reaction to colleagues who sought to prevent “frivolous” lawsuits.

    “Nobody should stand at the courthouse door to predetermine who has access to the courts,” he said. “My point is that anyone can sue anyone else, even God.”

    © 2008 United Press International, Inc. All Rights Reserved.
    e trust may hold true if that law suit in

  7. Larry Keeter

    Besides annually dispersing all of his knowledge at MRAA pow-wows, I wonder how this retired show promoter earns a living?

  8. yachtmoneyman

    Hi Norm – You should be pissed off. The traditional banking industry has been making a ton of money for decade’s and when the economy goes into hard times they pull back so far that even a guy with a great credit profile can’t buy his boat of his dreams or get a the loan he want’s to buy the truck to pull his NEW boat. How do I know all this? For the past nine years I have been in the recreational lending business. If you ask the average honest F&I guy he will tell you that his dealership has more the a 50% decline ratio. That’s alot of boats not being sold.

    What is the solution for this on going problem? A Marine Industry Federal Credit Union!!! Your timing for this BLOG could not be even better. Myself and a few other marine industry vets are in the process of starting the industries first credit union. We will be making this public very shortly. Our target is to have a marine industry credt union in all major boating markets and then fan out to other markets.

    Why a marine industry credit union you ask? The answer could not be any clearer in these past few weeks. We as industry need to take control of our own financial future. With a marine industry credit union we as an industry can direct the course of lending from everything from boat loans to floor plan financing. The Marine Industry credit union will have all the services as a traditional bank plus a whole lot more.

    Myself and the rest of the Marine Industry Federal Credit Union organizing committee would like to reach out to others that are intersted in a CU in there market. Nows the time to take control not only for us but for those who follow in our footsteps. If any one has any questions or comments please feel free to email me at yachtmoneyman@yahoo.com.

    Thanks Norm for all your hard work.

  9. BOATMAN 11

    The big,ongoing motto with some of the more popular boat dealers from 2004-2007 was “BIGGER BOATS, SMALLER PAYMENTS”. Why get a 26′ boat when you can get a 40′ boat for 0% down? Storage? No-Problem, we will stick your first years storage in the financing. Fuel costs? No Problem. We will stick your first year of fuel in the financing. Insurance costs? No Problem. We will stick your first year of insurance in the financing. Great! You could be making an income of 50K a year, and live like a millionare for nothing! So what if you had 150k financing on a boat only worth 100k. All the banks, Dealers, Manufacturers and Marina owners loved it! All the Boating and Marine trade press propped up and promoted the dealers who were out front with doing all of this month after month, as if they were the saviors of the industry. No one questioned the viability of what this would do to the industry in the long run. No-One.
    Many of the boats sold during those years are now sitting in the Repo Slips.
    You reap what you sow.

  10. Jim

    Come on, Norm; maybe a reduction in available “revolving” debt isn’t such bad medicine. We all have felt the effects of retail loans being denied recently simply due to “high revolving debt relative to income”. Many people with good intentions get hooked by the feeling of immediate gratification and, rather than save for a purchase, get it now with credit card debt. It’s hard to be disciplined enough to pay those statements in full every month. Business also wants the immediate gratification of a sale so we offer rebates, terms and incentives to buy now rather than wait patiently for the prospect to properly “mature” into a sale. Also, we felt that we couldn’t wait patiently because another vendor was down the street making their products look “to good to turn down”. It was either get on the band wagon or be out of business – fast. Houses, cars, boats, vacations, etc – Our society since the 70′s has promoted “Get it now and get it fast”. A correction to more realistic expectations on the part of consumers and businesses will be painful as the pendulum swings too far the other way for a while. For those of us in the boat business it is a question of; how long will the swing last before returning more to center, how fast can we realign our organizations to remain profitable, and do we have enough capital to survive until the wound of this debt restructuring heals?

  11. dave boso

    Norm; your watching the wrong TV, This blame has to be shared,
    The Clinton Adm. wanted everybody to have a house of their own no matter what their credit, or ability to pay. After 2000 there was warnings that the card house was going to fall, but powerful members of congress blocked the fixin of “fannie and freddie” Yes because of greed.

  12. arch

    Where to start…..

    FIRST- When it comes to lines of credit, lenders have the right to modify the credit line as they see fit. If the consumer wanted a FIXED and SET loan, then they can get a fixed loan, not a revolving one. The whole point in revolving loans is that it adjusts as market conditions change.

    SECOND- All of you are exaggerating greatly on the current boat finance industry. There are plenty of banks out there still doing the loans. None of them require over 20% down, and on loans under 100k, 10% down is usually fine.
    BOA, BB&T, USBANK, BOW are all national and have attractive and competitive financing. YES, they have raised thier standards (and should have), but other than that, it’s business as usual for most of them.

    This mess we have on our hands is NOT solely or even primarily the banks fault. I blame dealers even MORE for puttting tens of thousands of boaters upside down in their boats. BOATMAN 11 is right. There is plenty of blame to go around.

  13. Mike Hnery

    Yachtmoneyman wrote comments to you about the ‘Banks Boil My Blood” article on October 16 and he requested comments or inquiries related to a Marine Industry Credit Union that he described be e-mailed to him….The e-mail link that he provided returnes the e-mails as “undeliverable to that address”
    Perhaps you can contact him to clarify or correct his contact info.

    Thanks

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