Credit Cards Come Under Gov’t Scrutiny
by Efin Advisor | April 26, 2009
In a showdown between the federal government and credit card issuers, president Barack Obama meets with executives from 14 credit card issuers today, including American Express, Bank of America, Capital One Financial, Citigroup, Discover Financial Services, and JPMorgan Chase, to discuss concerns over practices such as raising interest rates on existing credit card balances.
A congressional panel was expected to approve a bill mid-week that would curb high credit card fees and penalties imposed by many banks that have benefited from the federal government’s financial bail-out program. The proposals are similar to sweeping rules adopted by US federal regulators in December. These rules take effect in July 2010, but the bill’s approval would accelerate their implementation, forcing the country’s banking industry to forgo billions of dollars of annual interest payments sooner. The pro-consumer bill is an important test of the political will of Democrats who are pushing for US financial regulation reform.
What’s your view on credit card policies? Should there be strict new disclosure standards for credit card lenders? Should pricing practices that expose borrowers to unforeseen costs be prohibited?
I don’t get why the government is forcing these companies into anything. The fact is, no one is making Americans get credit cards at gunpoint, and if you get a credit card, you should know what the terms and conditions are. If you use a credit card and pay off your balance every month, you will never have to pay a cent of interest no matter how much you spend. And if you don’t pay your bills, you deserve to pay a ton of money! How else do you think credit card companies stay in business? It’s sad that lots of Americans can’t afford to pay off their debts, but neutering the entire industry just because most Americans are irresponsible is just bad policy.
Reply
I can agree and disagree with Dante. No one forces anyone to get a credit card, or take out a mortgage for that matter, but when the original terms of a “loan” change, particularly when the borrower has done nothing but make their payments on time, then increasing the interest rate or changing higher fees for those carrying a balance seems unethical and even predatory. Good for president Obama to stand up for the American people instead of those whose only motivation is to profit by them in any way possible.
Reply
“Bait and switch” has long been held as an illicit and deceptive business practice that is unlawful in most cases. How is it that credit card issuers can advertise one rate and one set of terms to “bait” a customer and then “switch” the rate and term when the customer has done nothing to warrant such a switch. It’s one thing to to charge fees or interest when a borrower is delinquent on a loan. But changing it once the borrower has established an account seems to me to be nothing more than “bait and switch.” And that is wrong!
Reply