Will New Credit Card Laws Encourage Irresponsible Spending?
Thursday May 17, 2007
In a press release (pdf) on May 15, the “Stop Unfair Practices In Credit Cards Act” was announced. If passed, the legislation introduced by Senator Carl Levin (D-MI) will stop credit card companies from charging certain fees and interest rate increases.
The act proposes to eliminate several costly practices of credit card companies.
The act proposes to eliminate several costly practices of credit card companies.
- Interest rate charges on purchases that were made before the rate became effective. If you make a purchase on May 1 and the interest rate increases on May 2, it makes sense that your purchase should not be subject to the new interest rate.
- No fees ever for paying your credit card bill. Many creditors charge a fee for various methods of payment, especially payments made by telephone. The new bill would prohibit these types of fees.
- Double cycle billing and other billing methods that charge interest on balances that have already been paid. This, I believe, is robbery. There’s no legitimate reason for charging consumers interest on a balance they’ve already paid.
- Penalty interest rate increases will be limited to 7%. This would prohibit doubling and tripling interest rates because of a single late payment, over-the-limit charge, etc.
I like the idea of a staggered increase of 1-2% per incident with a cap of 7% for two reasons. Cardholders who only miss one payment in the life of their credit card shouldn’t receive the same penalty as someone who is chronically late with payments. I also believe that if subsequent incidents aren’t subject to an interest rate increase, cardholders don’t have as severe consequences to face when they miss a payment or go over their limit. - Over the limit fees will only be charged once unless the cardholder makes additional charges while the balance is over the limit. If there’s no penalty for remaining above the credit limit, how many cardholders will be motivated to reduce their over-the-limit balances?
The fear of multiple over-the-limit fees keeps some credit card users from maxing out their credit cards. It’s possible that reducing the number of times the fee can be charged will create the notion that it’s not so bad to max out your credit card.
Comments
I am pleased to see that these measures are being proposed. I don’t believe the changes are drastic enough to change the way people access credit. The only real way to change the way people use credit is to educate them on the dangers of spending unwisely.
Credit card companies are making an obscene amount of money by providing high-interest cards to people who buy on impulse, reducing the fees associated with credit is a real win for the consumer in my mind.
I also think the best way to relieve credit misuse is to educate people on its effects, starting with school-aged kids.
Unfortunately, I’m having difficulties now. However, in paying off my creditors one at a time, imagine my horror and surprise when I paid off a card (the amount remaing was $238) and then received a statement for $4.50 the next month, (I had expected one for zero dollars). Credit card companies need to accept some of the responsibility. I’m having difficulties, yet EVERY DAY I get solitations in the mail. I’m now throwing them out. I’m also receiving statements in less than 30 days and the due dates keep changing. For someone who gets paid on the 15th and the 30th of each month, it’s hard to make those kinds of financial adjustments and in some cases meet the creditors due date. So, yes, I was incurring a lot of late fees. I’d like to cancel all of my credit cards and then start over.
The people that are having difficulty paying their credit card bills are driven deeper into debt and probably more difficulty by being charged higher and higher fees for late charges and interest rates. Being late one time, only a few days, had generated rate increases on my card till they were charging me 28% interest. The other fairly new law that allows them to charge a higher percentage of your unpaid balance, surposedly causing you to pay off your balance sooner !!!! My payments went from $400 to $1100 per month in just 2 months. If I have trouble paying the $400 what makes them think I can come up with $1100. They would not bend or change the % either. One of my cards I had held for over 20 years and my credit was very good for that time — I agree I was over my head but was treading water until the new laws — I had no choice but to file bankruptcy. they don’t care, they are getting the money in higher fees.
It’s about time the legisltors take into account the growing decline in the middle class workers. As it gets harder and harder to survive, we the middle class are charged up the nose. Next issue should be allowing insurance companies to use credit scores inorder to hick premiums. I have never used my auto insurance yet premiums continue to rise.
Obviously the predatory tactics of the credit card companies have done nothing to curb the public’s need to use credit to meet their needs so I resent your implication that there is anything negative about these needed reforms to prevent these credit card companies from preying on those who are least able to afford high interest rates. You are obviously under the assumption that people have a choice whether or not to get in debt–what would you do if you needed your car repaired in order to get to work, pay for health care, or a suit so you could go out and get a job? Not everyone is in debt because they went out and bought a big screen TV on credit–there are other reasons.
I have a disabled son on SSI, who has two small credit limit cards with HSBC. He has been with them 4 years. He was late only one time by 2 days on one card and they raised his fee. On the other card, he had a small available remaining balance, but they added their annual fees, which took him over the limit and was charged the overlimit fee, then raised his annual finance charge. He called to complain that he did not charge anything to take him over the limit. They ignored him. Later, they raised both cards again, stating it was because his credit bureau report had a negative. We checked on the credit report and found there was some charges in a different state, that were not his, and also a medical charge that should have been billed to Medicaid. My son disputed both charges and they were removed from his record. HSBC was notified. However, they still increased his finance charge to nearly $30/month. His cards are primarily for food and gasoline. HSBC IS A HUGH PREDATOR CREDIT CARD COMPANY, WHO PRAYS ON THE POOR, THE ILL, AND HAS DOES BUSINESS UNER MANY NAMES. HSBC’s IDENTITY IS HIDDEN WITHIN EACH DISCLOSURE. YOU HAVE TO SEARCH OUT THE PARENT COMPANY TO FIND IT. BE AWARE. GET OUT FROM UNDER THEM NO MATTER HOW IMPOSSIBLE YOU FEEL IT WILL BE TO DO WITHOUT.
I don’t understand how someone can play with snakes (credit card companys), and still complain that it’s not their fault when they get bit. You don’t need a credit card, you need an emergency fund.
This is great!!! I definitely hope this passes.
Before 2005, I was paying the minimum for all my other credit cards, and paying of a chunk off of others, which eventually I paid off. I got bad advice about three years ago by closing my paid off credit cards. So then my debt to available credit was shot, giving credit card companies like Chase and Fidelity to up my APR. The funny thing is every time, i get the those two credit cards into the safe zone (20-50%), they keep lowering my credit limit to put me back in negative status. With the credit card companies given the power to double the minimum, I’ve barely can even get the minimums paid, let alone even think of paying off any one of my credit cards.
I think we should all write a letter to Senator Carl Levin and thank him for introducing this law.
SENATOR CARL LEVIN FOR PRESIDENT!!!
Did this Law pass? I dont thonk so. I was late One DAY on my Juniper card, I was charge the $39.00 late fee, Then my APR went to 28.99%. My payment is so high now I will never get it pay off. This Oct 2008. So do we just write about how unfair these credit cards are or do we do something, and how do we do it?
I learned many years ago not to trust credit card companies. Having said that, These past few years have been really hard economically. Forcing me to use credit that I normally wouldn’t use. I was late for the first time last month, through no fault of my own, work just isn’t there. And the Jackyls at Bank of America punished me like I was a habitually chronic late payee. May they go down like the rest of America!
I believe there is no consideration given for an exemplary payment history and as a result of one missed payment, was penalized by a rate increase from 3.99% fixed to 29.99% variable. It is now impossible to meet these payment terms. I would like to see this law passed to stop this despicable and underminded business practice.
I have a question, i cant find help for laws for interest rate hikes, my credit card company raised my rate from 4% to 25% .
I just don’t understand you people. You act as if the cc companies put a gun to your head and said “use this card or else…” You chose to use the card and therefor accept all terms and conditions- an agreement that was signed prior to the company’s extends credit. Bottom line is, you used the card, racked up bills and now people are trying to beat the system using Obama as a crutch. Do you think it is right for you guys to spend the money and not pay it back. On top of that you act as if you’re doing the cc companies a favor by paying your bill. You people disgust me. Bottom line is that by using the card you are subject to the terms and conditions. Now is it the cc company’s fault you didn’t read your contract? I’m am sick of heaaring people use Obama as a crutch and not pay their bills. Trust me, no matter what, your balance is your balance. Spending money you can’t pay back is called stealing.
to GQSmooth1981
An obvious igorant not informed of real life probably works for the credit card thieves.
Go out in life and see what really happens.
The debit cards from Visa,Master Card,American Express and even Discovery(pre-paid),are better than the credit ones(from the bank).In my experience,you can’t trust a credit card,specially when it comes to spending and credit management,without worrying the month and annual fees and high interests.Credit cards are simply a set up for consumers!!
GQsmooth 1981!
Yes it is true that some card holders don’t read the terms and agreements before signing up for that card. But that doesn’t excuse the cc from midleading consumers on the rules and regulations.
If the card holder ask a question they have right to be given a honest answer!
Alot of cc are not forthcoming on their terms!
The card holders have a right to accurate information before signing any agreement to the card!
That is why alot of us credit holders are in debt!
GQsmooth 1981, you were just one of the lucky ones that wasn’t fooled by the credit card companies!
These new laws could cause more bad than good.. I was getting my bills paid down, but now.. with the new laws in affect they almost doubled my rates on my cards now I may not be able to make the monthly payments.. Haven’t missed a single payment on either card.. I think the laws hurt some more than helped.. Therefore could hurt the economy more than help it..