Help for Credit Card Users Coming Sooner Than Expected, Lawmaker Says
Credit card users who are victims of sudden rate increases and other unfair practices commonly employed by banks and credit card companies will get help with some of their problems long before the July 2010 deadline currently set by federal officials, one U.S. lawmaker has vowed.
In December 2008, the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration set new rules for credit card companies, requiring them to limit sudden rate increases and reduce confusing payment schedules. Credit card companies have until July 2010 to comply with the new rules, but at least one person close to the situation predicts relief will come much sooner.
Calling the credit card practices “wrong” and “unfair,” Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, told members of the committee on February 12, 2009, “Mark my words: in the coming months, they will end.”
New Rules Limit Steep Interest Rate Increases
The new federal rules prohibit raising the annual percentage rate on existing card balances, except under some circumstances, and force card companies to give cardholders 45 days’ notice before a rate increase, then give consumers 21 days to pay the higher rate.
Many credit card consumers have been surprised in the past by sudden hikes in their interest rates, which can allow existing card balances to quickly balloon until the cardholder can no longer afford to pay even the minimum payment. Out-of-control credit card spending has been blamed for contributing to the financial downturn and economic turmoil currently plaguing the United States.
The new regulatory rules will also ban universal default, a commonly used practice which adjusts credit card terms based on how the cardholder performs on other bills, such as gym memberships and utility bills.
Lawmakers Vow to Shorten the Deadline
Dodd and other lawmakers want to revisit the new rules for credit card companies to force the changes to go into effect sooner than 18 months. Some leaders, although not Dodd, have called for requiring the changes to be in place in as short as three months. At least for now, the new rules are still set to go into effect by July 2010.
Banks Oppose Credit Card Rules
Perhaps not surprisingly, some of the nation’s largest credit card companies and banks are fighting the new regulations forcing them to stop jacking up interest rates and cease other long-held practices. Citigroup Inc., Bank of America Corp., and JPMorgan Chase & Co. have opposed past efforts to change how they conduct their profitable credit card businesses.
Citi, Bank of America, and JPMorgan are among the biggest issuers of Visa and MasterCard accounts. American Express and Discover offer their own credit products.
The banks point the figure of blame at individual consumers, who may abuse credit cards while racking up huge balances, only to complain when the companies increase the interest rate on the growing amount owed.
Some members of the Senate’s banking committee seemed to side with the credit card companies, including Sen. Richard Shelby of (R-Ala.), who said he was not inclined to act quickly on implementing the new rules, which he said could leave consumers with fewer choices for credit cards.
Related posts:
- Debit Card Scams to Steer Clear Of In today’s tough economy, consumers should be aware of all...
- ‘Credit Cardholders Bill of Rights’ Clears Senate; House Vote and Obama’s Signature Could Come By End of Week Tough new federal rules for credit card companies, which limit...
- ‘Credit Card Holders’ Bill of Rights’ Clears House, Senate Vote is Next Step Toward Law A proposed law that would seek to protect millions of...
- Bank of America Wins Round in Battle with High-Balance Credit Cardholders A federal appeals court has awarded Bank of America Corp....
- Food from China Poses ‘Serious Issues,’ U.S. Lawmaker Says Food imported from China has “serious issues” and more must...
