Credit Card Reform and Bankers Response
Most of you are aware that the Senate has passed a new bill that restricts unfair credit card practices called “The Credit Card Accountability, Responsibility and Disclosure Act“, which could very well be on Obama’s desk by Memorial Day. This is shortly after the “Credit Cardholders Bill of Rights” that was approved last month.
Now here are some of the cool things that could come from this bill, according to The Simple Dollar:
Existing balances: Issuers cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.
Payments: A consumer payment above the minimum applies first to the balance with the highest rate. (Before this legislation, banks could apply your payment to the balance with the lowest interest rate first—so your more costly balance just kept racking up interest. Now, payments in excess of the minimum amount owed must first be applied to the balance with the highest interest rate first, and then to remaining balances in descending order.)
Teaser rates: Issuers cannot raise rates for the first year after an account opened. Promotional rates must last at least six months.
Bills: Issuers must send a bill 21 days before the due date.
Over limit: Issuers cannot charge over-limit fees on credit cards unless the consumer has signed up to allow such transactions.
Minors: For consumers under 21 years old, a company must get the signature of a parent or another to take responsibility for the debt, or it must obtain proof that the under-21 consumer can repay credit.
Disclosure: Cardholders must get 45 days notice of change in terms.
Fees: Issuers cannot charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service.
Gift cards: All gift cards must have at least a five-year life.
Some other things it addresses:
Account closings: The Senate bill doesn’t address it, but the House bill requires an issuer give you 30 days notice before it closes your account.
Universal default: Both bills eliminate this practice, which allows a card issuer to raise your rates if it learns that you were late on another card.
Penalty periods: If you are late and your rate goes up, the Senate bill states that if you pay your bill on time for 6 months in a row, you can reclaim the lower rate.
Now I -like- all of these and think they are great for consumers, but it’s going to suck for some consumers who rely heavily on credit cards and being in debt (in which case they have other problems they need to work on anyway). Now if only they would allow consumers to opt-in to overdraft protection instead of forcing it unwillingly 😀
The problem comes from bankers supposedly trying to figure out more tricky and dishonest means of making money out of this. According to The Consumerist, some bankers are threatening to “charge interest immediately on a purchase” or “reinstating annual fees” or “removing reward programs”. I think and hope that most of that is just letting off steam, and not actually going to happen. But if it does, I can’t imagine those particular banks are going to keep customers very long.
How does it look for a bank to lash out at its customers when forced to treat customers fairly for a change? Tsk tsk. That’d be a bad move on their part, and I’m actually fairly disgusted that it’s even being brought up as an issue by the bankers, whether they go through with it or not.
I can’t say it really affects me all that much either way, at least it won’t for much longer. Once dad’s debts are paid off I don’t plan to use my credit cards much at all, and if I do the balance will be paid off immediately, in which case the “charging of interest immediately” might be a problem. But I never worry about reward programs, and if they start charging an annual fee, I’ll just switch to a different card.
