Credit Card Reform: Is it Good for the American Consumer?
by Efin Advisor | June 15, 2009
A few weeks ago Congress passed the Credit Card Bill of Rights Act, a bill designed to curb many standard credit practices used in America today. The bill was passed overwhelmingly by Republicans and Democrats alike, on a 90-to-5 vote in the U.S. Senate.
The bill is aimed to protect the 78% of American families that hold credit cards, about half of whom have credit card debt averaging $5729. New York Senator Charles Shumer claims the legislation is a victory for “the little guy.” The Bill of Rights will require credit card companies to give 45 days notice and a simple explanation before raising interest rates (currently they can raise interest rates substantially whenever they deem it necessary) as well as place a limit on penalty fees. The bill further restricts credit lenders to only being allowed to raise interest rates if a payment is over 60 days late, instead of the status quo where they can raise rates for paying even a single day late.
On the face of it, the reform bill seems to guarantee consumers a form of protection against predatory practices. The problem is that these practices have traditionally provided a significant amount of income for credit card companies, income that they are not likely to give up. Analysts are predicting that, to make up for this loss of profit, credit card companies will raise rates across the board, even for customers who pay on time. Nessa Feddis of the American Bankers Association stated “History has shown that when the government imposes price controls, consumers have fewer choices and pay more.”
Do you think credit card rates will rise? Should Congress have passed this legislation?
Why should the average consumer be punished because a few bad apples are screwing up. These things really are their fault. I have no problem paying off my credit cards on time and I’m not wealthy at all. I just moderate my spending and am responsible. Someone else’s irresponsibility is harming os many americans. Its a shame that congress would actually pass this
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You know, i usually pay my bills on time, but like everyone i sometimes make mistakes. In the past, despite my very good credit history, my credit card company was just looking for an excuse to screw me over and they did, and it ruined my credit as a result. They are just looking to hurt you and to use these terrible practices. It could happent o anyone. I am so glad that we are finally taking steps to stop these companies.
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I’d wait and see what credit card companies do before we all start jumping up and down about this. Would i pay a bit extra to ensure that my friends and neighbors are not being preyed upon? Yes and i’d like to think most of you would too. Also, this guarantees that you will never be preyed upon which, as of before, could have happened to anyone. I also think the most likely result is that credit card companies are goign to cut down on rewards programs because those are a serious drain on money and they could seem like the cost effective credit card company if they do that and kkeep rates low
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I honestly think this is the end of buying on credit. These predatory schemes are where credit card companies make ALL OF THEIR MONEY. When that’s gone, they will have to raise rates and annual fees significantly to make up for that lost money. People just won’t be willing to pay for it anymore and will more likely switch to just using debit cards.
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I don’t know if the credit card companies really have much cause to raise rates after this. I mean, i’m sure they will use this as an excuse, but I don’t imagine thisw ill actually be that big a deal to them. Most of their income does not come from actively screwing people, it comes from passively screwing them. If someone isn’t paying now, they probably won’t be paying in the future, so the credit card company will still get a ton of money from them. They can also still increase rates, it just takes aa bit longer to do so. They willl still be rolling in the dough though
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Thanks so much for taking the time to post this information. With the economy the way it is right now, with all of the layoffs and more to come; government spending and deficit out of control; the continued housing slump; one wonders where to turn for help. It is nice to know that someone is putting out the information that is useful to us, as consumers.
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