Punitive credit charges compound problems of poor cardholders

• For more than two years, special-education teacher Fatemeh Hosseini worked a second job to keep up with the $2,000 in monthly payments she collectively sent to five banks to try to pay $25,000 in credit card debt.
• Even though she had not used the cards to buy anything more, her debt had nearly doubled to $49,574 by the time the Sunnyvale, Calif., resident filed for bankruptcy last June.
• That is because Hosseini's payments sometimes were tardy, triggering late fees ranging from $25 to $50 and doubling interest rates to nearly 30 percent.
• When the additional costs pushed her balance over her credit limit, the credit card companies added more penalties.
• Punitive charges -- penalty fees and sharply higher interest rates after a payment is late -- compound the problems of many financially strapped consumers, sometimes making it impossible for them to dig their way out of debt and pushing them into bankruptcy.
• The Senate is to vote as soon as this week on a bill that would make it harder for individuals to wipe out debt through bankruptcy.
• The Senate last week voted down several amendments intended to curb excessive fees and other practices that critics of the industry say are abusive.
• Cleveland Municipal Judge Robert J. Triozzi said last fall when he ruled against Discover in the company's breach-of-contract suit against another struggling credit cardholder, Ruth M. Owens.
• Owens tried for six years to pay off a $1,900 balance on her Discover card, sending the credit company a total of $3,492 in monthly payments from 1997 to 2003.
• No one knows how many consumers get caught in the spiral of "negative amortization," which is what regulators call it when a consumer makes payments but balances continue to grow because of penalty costs.
• "There has to be some onus on the cardholder, some responsibility to manage their finances."