Credit-payment hike may slice into Oxnard pizzeria's profits
Omar Abu-Aita of Oxnard takes a phone order at Uptown Pizza, the shop he and his wife own at The Palms shopping center, 2200 Outlet Center Drive
Omar Abu-Aita makes a pizza at Uptown Pizza, the shop he and his wife own and operate in Oxnard.
The owners of Uptown Pizza in Oxnard were finally seeing success ahead. After overcoming the challenges of starting a business, they were growing sales and paying down debt.
Then, Chase notified Omar and Sylvia Abu-Aita it planned to increase their monthly minimum payments on three credit cards, which they used while getting started to buy equipment and pay other expenses caused by construction delays and a landlord change that pushed back their opening.
The change in minimum due — from 2 percent to 5 percent of the balance — will increase their base payment from $968 to $2,357 a month, beginning in August. Though they had been making payments on time and paying extra each month to bring the balances down, they were told the change was to help them get out of debt sooner.
“I said, ‘You’re just going to make me default sooner,’ ” Sylvia said.
While Omar works 10-hour days, seven days a week at the restaurant, Sylvia has been trying to work out a solution. She’s had to take a part-time job. That, and caring for their three children, leaves little time to get answers.
So far, she’s hit a brick wall with Chase. Sylvia is now exploring how to consolidate the roughly $47,000 debt on those three credit cards into a fixed-rate loan. She’s written to senators, the chairman of Chase and even a letter to President Barack Obama. If all else fails, she is considering having a nonprofit credit counselor arrange a payment plan for them.
The Abu-Aitas’ struggle is not surprising, said Patty Guertler of SurePath Financial Solutions, which provides consumer credit counseling.
“We’re definitely going to see a lot more of that now,” she said. “Many of our customers who are finally reaching out to us, it is because their minimum payments have increased or their interest rates are increasing.”
A spokesman for Chase said the company has increased the monthly minimum on certain accounts based on their history, including usage, balances, interest rates and payment frequency or size.
In August, less than 1 percent of the company’s active accounts on file will have their minimum balances increase from 2 percent to 5 percent, Paul Hartwick wrote in an e-mail.
“Our desire is to have these account balances paid back in a reasonable period of time,” he wrote.
He said customers with trouble making the increased payments should contact Chase to discuss their situations.
Sylvia speculates that credit card companies are racing to make changes before a new federal law starts to limit fees in February. Blogs and customer comments show such changes are affecting a lot of people.
Many big firms are changing account terms. A third of consumers reported that issuers had increased either their interest rate by 19 percent, increased fees by 14 percent, lowered their credit limit by 14 percent, increased the minimum payment due by 12 percent or reduced rewards programs by 9 percent, according to a survey released July 8 by Credit.com.
John Ulzheimer, president of consumer education for Credit.com, predicted in his column that such behavior would continue for the rest of this year.
Kevin Mukri, spokesman for the U.S. Treasury’s Office of the Comptroller of the Currency, said complaints are up and most involve credit cards, but it’s also a very bad economy, which drives up complaints.
He encourages those who run into problems to first take it up with their bank. If they’re not satisfied, they can file a complaint with the comptroller’s office.
Often, problems have to be reviewed based on the original agreement between the bank and customer, Mukri said. The Office of the Comptroller of the Currency advocates for consumer disclosures that read more like a Food and Drug Administration nutritional label, not gray blocks of small type, though companies have been slow to change.
The Abu-Aitas started Uptown Pizza in August 2007 and started working with a SCORE counselor a year later, meeting monthly to go over sales, profits and losses, marketing and more. SCORE offers free business consulting from volunteer or retired executives.
There are about 1,000 people a month walking into Uptown Pizza, which is doing well despite the recession and its obscure location in The Palms shopping center, 2200 Outlet Center Drive.
“We’ve been getting better slowly but steadily,” Omar said.
That’s what makes the change in their credit card terms even more outrageous, said Michael Scotto, vice chairman of SCORE’s local chapter.
“These are two very hardworking, honest people,” he said.
Scotto is frustrated because the action by Chase comes after Uptown Pizza has been able to get other help.
Working with Rep. Lois Capps’ office, the Small Business Administration and Rabobank, they were able to reduce the interest rate on their SBA loan from 12.75 percent to 5.5 percent and the business is paying only interest until October. The landlord also lowered their rent.
If the minimum payment increase is happening to them, Scotto assumes it’s happening to other small businesses.
“I wonder how many are out there that are not even saying anything — that are silently going bankrupt or silently going out of business,” he said.
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