Volume 63, No. 3 . . . . . .Founded in 1900 - In Our Second Century! . . . . . .January 2001 Newsletter

Consumers League of New Jersey Newsletter

In this issue:
Banks pay us 0.25% Interest, While we pay them 25%

"Greed Ratio" Chart Shows 66 to 1 Markup
President Clinton Vetoes Senator Torricelli's Disgraceful
Bankruptcy Bill
Bank Dirty Trick: Charging for Depositing Money!!
Bank Dirty Trick: Poisoned Check

Bankruptcy Lawyers Conference: April 27-29 in Philadelphia

Banks pay us 0.25% Interest,
While we pay them 25%

Before 1981 banks and thrifts used the"3-5-7" principle: Banks paid 5% interest on all accounts, banks charged 7% for mortgages, and bankers played golf at 3 pm. Equality for depositors was abandoned since 1981: banks have paid the rich more, and hit the poor with taxes on low balances.

CLNJ did a quick survey to see what 20 years of deregulation means to customers with less than $1,000 in the bank. The chart on page 2 is shocking. Banks are paying only 0.25% to 1% on Checking accounts. For low balance savings, the banks are paying 1.25% to 2%. What rate would low income customers pay for credit cards? These banks quoted 15% to 29%!! So when a person of moderate income deposits $500 into a bank, the bank pays him less than one percent for his money, and loans the money back to him at up to 29%! CLNJ calls excessive markups "greed ratios." Paying 0.5% interest on a checking account, while charging 29.47% credit card interest is a greed ratio of 59 to 1. Note that consumer electronics are sold at apx. 20% markup, a reasonable ratio of 1.2 to 1.

In contrast to local price gouging, new internet bank ING Direct, Wilmington Del, 800-ING-DIRECT, pays 6.50% APY saving interest to everyone, no matter how low their balance (even $1). You can take it out anytime via mail or the internet. This new bank is a subsidiary of a Dutch insurance conglomerate. CLNJ hopes this idea catches on. It's not a new idea, it's just a return to equality and old-fashioned banking which prevailed before 1981.

President Clinton Vetoes
Senator Torricelli's Disgraceful
Bankruptcy Bill

The poor and the middle class were saved at the last minute from an onerous bill to "reform" bankruptcy, when President Clinton used his pocket veto power.

The bill would have set many onerous requirements, even for those below the poverty level. Everyone would have to make a useless trip to credit counseling, just to get a letter saying he was there. It would become impossible to get an appointment. All would have to post their income tax returns, with grave danger of theft of identity. The bill would force the middle class into Chapter 13 payment plans, but then raise the number of debts which must be paid 100%, making those payment plans impossible to complete. We think this was intentional. The banks want debtors thrown out of bankruptcy, even those trying to save their homes from foreclosure by paying mortgage arrears in Chapter 13.

Shame on N.J. Senator Torricelli for sponsoring this disgrace. The Senator states that a contribution of $150,000 from MBNA, a credit card bank, to a committee he chairs, had nothing to do with his sponsorship of the bill. We respectfully suggest that Senator Torricelli has betrayed the trust of the citizens of New Jersey. The bank lobbyists are gearing up to try again in 2001. However, Sen. Torricelli will be gone from the Judiciary Committee, and the Senate has several new liberal members, so the prospects for a more moderate bill are good. However the consumer forces must fight this battle all over again.

Consumers League of N.J. Newsletter, Page 2

Consumers Loan Money to Banks at 0.25%, Banks Loan it Back to Them at 25%
Greed Ratio Chart

Checking Acct:
Interest Paid for our money
Savings Acct:
Interest Paid
by Bank
Credit Card
Greed Ratio Credit Card to Checking
Bank of NY 0.50% 1.25% 25% * 50 to 1
First Union 0.90% 1.88% 15% 16 to 1
Fleet 0.50% 1.75% 29.47% 59 to 1
PNC 0.55% 1.61% 24.98% @ 45 to 1
Summit Bank 0.25% 1.70% 16.4% # 66 to 1
Trustcompany Bank 1.02% 2.02% 18% # 18 to 1
Note: Banks with *, @, # - Credit cards provided to customers of the bank by a different bank through arrangement or purchase of accounts:* Chase; @ MBNA; # First USA Bank

** Greed ratio is the Credit Card interest charged divided by the Checking account interest paid. Most banks have several credit card rates, with lower credit card rates for richer customers and those deemed more creditworthy. This chart assumes a lower income customer with low deposit balances who is assigned a high rate card. Many banks no longer quote their credit card rates to customers, stating they will let you know your rate after you apply and they "evaluate" you.

Bank Dirty Trick:
Charging for Depositing Money!

Lowering savings interest paid is not the only obnoxious bank practice. Attorney Santiago Orozco, Clifton, advised us that the Bank of NY charged him a fee of $2 or 20% of the deposit to accept cash deposits on his business account! This bank has forgotten that banks exist to accept deposits of money. Mr. Orozco has complained to the N.J. Dept of Banking and Insurance. CLNJ thinks that a bank which does not give a customer full credit for every dollar he deposits is skimming and scamming. This practice, even if disclosed to the customer, should not be allowed to exist. What the banks are leading up to, is that consumers will have to pay the bank interest for the privilege of depositing our money. This ignores the small fact that banks invest our money in loans, credit cards, etc. which make money for banks. Lots of businesses would love to be a bank, and have thousands of people hand them money every day.

PS What did our brave N.J. Department of Banking do with Mr. Orozco's complaint? The N.J. Department of Banking had the audacity to write him that the Bank of New York is a NY bank, notwithstanding its many brances in New Jersey, hence he should try complaining to the New York Department of Banking. He sure could not do any worse!

Bank Dirty Trick: Poisoned Check

Just as Sleeping Beauty should not bite the poisoned apple, customers of Chase Manhattan Bank should not cash the check for $1.06 in their mail. This check is a ruse to make consumers sign up for a credit card protection plan of $24 per year in perpetuity. You don't need the plan either: federal law will protect you if your card is stolen, for free.

Bankruptcy Lawyers Conference:
April 27-29 in Philadelphia

The National Association of Consumer Bankruptcy Attorneys will hold its convention in Philadelphia on April 27-29. Keep up with current law and earn CLE credits. Also meet bankruptcy guru Henry Sommer and other NACBA attorneys who lobbied Congress not to ruin the bankruptcy laws for the poor and middle class families who need it.

Consumers League of N.J. Newsletter, Page 3

 Rent to Own RAP song -
Have you heard about the latest ripoff scheme?
It's called rent to own and it's really mean.
Sell you a radio, appliance or TV
Charge you a twenty just to rent it weekly.
By the time you get to own it, your paycheck's blown
Costs five times what it's worth to own.
Now rent to own is really bent,
Can end up costing 'bout 300 percent.
With rent to own, your money's blown,
You keep on paying until you turn to stone.
On weekly payments your cash will go.
A thousand dollar TV? No no no!
Appliances? DUMB RENT TO OWN!
Anything they sell? DUMB RENT TO OWN!

Copyright by Consumers League of New Jersey
Produced by Flo Powell and Mark Fogarty
Lyrics: Mark Fogarty
Music: Jerard Snell
Rapper: TAC
Backing vocals: Jerard Snell and Tim Shider
Voiceover: Flo Powell
Emgineered by: Tim Shider
Cover art: Peter Kelly
Layout & Pasteup: Bob Solomon
CLNJ President: Neil Fogarty
Download the
as a .MP3 file.
Click on the above link, to play it or save the file "RTO_RAP.MP3" (700K) to a folder on your computer. It takes about 3 minutes to download the file, and only one minute to play it. You'll need to turn the volume up. Play the RAP with software such as Music Match Jukebox. Pass the RENT TO OWN RAP to your church, school group, or community organization. You may copy it for educational and non-profit purposes, crediting the copyright of the Consumers League of New Jersey.

Media: contact Consumers League to get the original Rent to Own Rap on cassette! This is a 30 or 60 second public service announcement for radio, TV etc.

Consumers League
60 South Fullerton Avenue
Montclair NJ 07042

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$100 for CLNJ's Next 100 Years!

Consumers League of New Jersey celebrated our One Hundredth Anniversary in the year 2000!

As we work on our second century,
we have a simple plea:
if you can, please send us $100 for our next 100 years!

Please send your membership application and your check to:
Consumers League of New Jersey
60 South Fullerton Avenue
Montclair, New Jersey 07042

Thank you!
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