Is Credit Card Reform Real?
The bottom line for me is that the legislation does away with the most insidious bait-and-switches in the industry, where the fine print of the agreement is used against the card holder to suddenly jack up their interest rate with no notice.
The bill, which passed the House today and Senate yesterday, would generally bar interest rate increases on existing balances unless a card-holder has failed to make even a minimum payment for 60 days. It would outlaw double-cycle billing, require 45 days notice before any interest rate increase and prohibit interest rate increases anytime in the first year that an account is activated. The legislation also would require card companies to apply a consumer’s monthly payment to the debt with the highest interest rate,or to all debts equally.
What didn't it do? Cap interest rates. An amendment by Senator Bernie Sanders last week to cap interest rates at between 15% and 18% only got 33 votes on the U.S. Senate Floor. With banks that issue credit cards receiving virtually free money from the Fed, on top of the hundreds of billions in bailout funds from taxpayers, there's a great case to be made for a national cap on credit card interest. As Congressman Brad Sherman said on Air Talk today, the lack of a cap shows the banks still have a lot of power on the Hill.
Overall, consumers will have less to worry about from credit companies under the legislation, and in my book that's a victory. My Consumer Watchdog colleague Harvey Rosenfield has a different take. You can read his analysis here.
Maybe more importantly President Obama showed the power of his populist pulpit. He needs to use it again soon, to get health care reform back on track.
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Nothing is going to change until 2010. And for those who now pay ussery rates, its not like the CC companies will lower them.
This bill is kind of pointless without a cap on interest rights. Nice symbolism but not much else. In public, the CC companies will gripe. In private, they are all celebrating.
they take taxpayer money at a fraction of a percent and loan it out for 12 - 30%...
and what happens to my wife's credit card, where the interest rate was recently raised to 28%?... and they just continue to raise rates any everyone until these rules are enacted.
Mr. Court, this is not a victory for the average American with card debt who pay their bills on time, manage that debt wisely and still get slammed with rate increases .
The rate cap was most important.
There should have been a mandatory grace period for making payments
the 45 day notice of increases is workable
there is no protection against the card companies authorizing over the limit transactions. There should be no over the limit transactions unless the card company has express authorization from card holder at time of purchase.
Why is this legislation not effective for another 9 months? It takes card companies 24hours to increase rates. There is nothing in this to make them have to make changes in their computer systems or processes, so why the delay? Because they have each and every one of our elected officials in their pockets!
And can you tell me why NRA legislation is wrapped into credit card, so called, reform?
With so many Americans losing their jobs and becoming depressed and with the right wing preaching that Obama is going to take guns, this is a recipie for disaster, and for proof, look at the senseless shootings of families, policemen and innocent people this year alone. Do we really need these people going into a national park with a gun?
This isn't reform. It's a sham and I truly hope that the president vetoes it and get some real reform in it and strips the gun toting from
It certainly isn't a victory at all. Besides the absence of a cap, and the delay you mention (during which the CC companies will heap abuses as much as they can), there is not a rollback provision. What is supposed to happen to those who paid on time but still saw their interest rates double to 30%? They are still locked into 30%. Well, maybe not 30%; with this much time before this toothless law gums the CC companies a bit, it will likely be 45%.
And the gun provision only makes sense if we can expect to run into bank execs in National Parks. Then the guns will come in handy so we can defend ourselves against robbers and nature's most vicious predators.
No reform of the last three decades is a reform at all. Corporate interests always come up with something that preempts real reform or they subvert any threatening reforms during the legislative process. The end result is that the media says we have a reform, American people buy the story and the corporatocracy is off the hook. That is how things work in a sham democracy.
I don't know exactly how the interest rate cap was written, but if it is what you described I would oppose it.
I am not saying that a cap on interest rates would not be a good thing, on the contrary a well thought out interest rate cap would discourage credit card companies from loaning to the people least likely to repay, and most likely to get themselves into "economic hot water."
However, any interest rate cap should be designed as "Prime rate plus 12 percent," or "Inter-bank lending rate plus 10 percent." rather than a flat rate.
Anyone who remembers the 70s can understand how capping interest rates at 15% would result in credit cards ceasing to exist once inflation reaches a high enough point.
Please note that Prime plus 12 and inter-bank plus 10 are both lower than 15%...
Exactly Aaror. The idea of a flat, fixed top rate on all credit cards is not a good idea for exactly the reasons you list.
But for the same reason,.. a flat, fixed % over prime would be a workable idea.
No they'll need a lot more lipstick for this pig..that's for sure..!
They did nothing about these outrageous rates that are constricting our economy killing any stimulus..!
More Lipstick Here Please, We Need More Lipstick...!
And some lip liner and some eyeshadow and some foundation and a 2 strings of pearls (one to be worn, one to be thrown to the other pigs.) And viola! Credit card is still a pig, but ain't it purty?
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