Leonardo"s Notebook by Mattheus Mei

I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.

Friday, May 02, 2008

Feds Targeting Credit Cards

Saw this on CNN, all I have to say is about time. The Credit Card industry is perhaps one of the least regulated industries with some of the shadiest practices.

On Thursday, the Office of Thrift Supervision, responsible for overseeing the nation's savings and loans, endorsed a seven-point plan to tackle "unfair" and "deceptive" practices by companies that issue credit cards.
The plan would allow consumers more time to pay their monthly bill. It would prevent companies from applying interest-rate increases retroactively to pre-existing balances. And it would ban "double cycle billing," a practice that computes finance charges based on previous billing cycles.
The article goes on to say that the National Credit Union Administration - which tend to be more customer or rather owner centric than banks has approved of the measures already and that:

Under the proposal, companies that issue credit cards would be required to outline the factors that determine which of several advertised interest rates and credit limits a customer will receive. In addition, the rules would prevent companies from charging fees to open an account and receive credit.

Many in the industry are complaining that this will somehow turn back the clock to pre1980 when interest rates on everyone's credit cards was 18% and everyone paid an annual fee as opposed to only 25% of cardholders paying an annual fee and average interest rates at over 13%.

These of course are regulatory changes which thankfully don't have to be approved by elected officials. But consumer rights groups are calling on congress to do more - or more appropriately address the issues that are most concerning to many Americans - unwarranted interest rate changes and aggressive marketing to college students, which may require changes to statute - and the Grand Old Party of George Bush and the "compassionate conservatives" under him are not in favour such proposals.

I agree with those rights groups, I had the misfortune of being maliciously solicited on my college campus to get a credit card - and I had a very low waged job at the time. Growing up I never saw my parents using a credit card - debit card yes, but not a credit card, and as such we never discussed the dangers of credit, long story short you can imagine what kind of trouble I got in to being uneducated and a source of open credit.
As far as the unwarrented interest rate changes - well lets say you have two credit card bills, you pay them both on time. One month (or more) you fall behind on one card while faithfully paying the other. The one that you've maintained paying on time can (and usually does) up your interest rate because you've become more of a credit risk with another entity. That's just Shady.

But I applaud regulators in finally taking a bold step to reign in what has been the wild west of the credit industry. If you think the fall out from mortgages was bad just imagine what it would be if Americans started bellying up in those same numbers because of credit card debt it would have been ten times worse than what it is now. The actions of the regulators now is probably goign to stem the tide of such a future event which I imagine would have been the next shoe to fall as the world credit crisis continues.

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