Feds Cracking Down on Credit Cards
Monday May 5, 2008
Federal regulators have proposed new rules for credit card companies. If passed, these rules will cut down on the unfair and often costly practices credit card companies have in place. The proposed rules include:
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- Borrowers will be given at least 21 days to make payment. Consumers often end up with late payments because of the short amount of time between receiving their billing statement and the payment due date.
- Credit cards can't unfairly allocate payments to balance with different interest rates. Often different types of balances, e.g. balance transfers vs. purchases, have different interest rates. Credit cards typically first allocate payment toward balances with lower interest rates, ultimately causing the consumer to pay more in finance charges.
- Creditors can't raise interest rates on balances incurred in the past.
- No more over the limit fees because of a hold on the account. In certain types of transactions, like at-the-pump gas purchases, the merchant authorizes the account for a higher amount than what's actually charged. Until that hold is released, your creditor treats it as you've already spent the money and could determine future purchases as over the limit. This also applies to overdraft fees on debit card accounts.
- Double billing cycle finance charges will be eliminated. This is the most costly method of computing finances charges and can lead to consumers paying interest on balances that have already been paid.
- No more "deceptive offers of credit." If a bank offers you a credit card with a low rate, it would need to disclose what you need to do to get that interest rate.
Related News Articles:
- The Associated Press: Fed OKs plan to rein in unfair, deceptive credit cards
- The Red Tape Chronicles: Regulators Target Credit-Card Shenanigans
- CNN Money: Fed moves on credit card crackdown
Comments
These are fantastic and long overdue changes. Credit card companies do everything they can to KEEP you in debt. It’s no wonder there are so many bankruptcies. - And by the way, if you get into deep debt trouble, there ARE alternatives much preferred to bankruptcy!
I’m not sure I understand the 21 day thing. This could still be a problem for people who are not paid every two weeks. You would still be expected to pay a creditor twice a month. I also think the current bankruptcy laws need to be repealed. People have to file bankruptcy because they’re in trouble and most of the time banks put them there. I also don’t think they should be able to give credit cards to college students and then expect their parents to bail them out. When a person is in trouble and sends a hardship letter (or submits a proposal from a consolidation company) to the credit card company, the credit card company should accept the proposal.
@Mingledolph - Under the proposed rules, a creditor would have to send a billing statement at least 21 days before the payment is due. So if your payment is due on the 22nd of the month, the creditor needs to mail your statement on or before the 1st.
You bring up some good points, especially about college students. Some states, like California, have passed legislation that makes it harder for banks to lure in college students. Unfortunately, college students are prime prospects for banks. Lots of parents don’t want their kids in a debt situation, so they bail them out. Banks know this and definitely capitalize on it.
It would be great if the default and the universal rates would be totally wiped out! I think it is rediculous for credit card companies to control your interest rates on other credit cards or to increase your rates just because you are late. Aren’t the HIGH late and over the limit fees enough? They make you too scared to miss their payments and forsake other more important bills just because of these obscene terms.Luckily, I shopped wisely when looking for my cards, but I’ve heard enough horror stories!
These proposed rules are long over due, but also the proposed rules do not go deep enough to stop the credit card company’s predatory practices.
So as not to ruin someone’s credit. If a credit card is only in one spouses name, then that individual should be the only one responsible for all charges even if their is a divorce so as to stop the other spouses credit score to be lowered .
Credit card companies should not be able to extend credit if individuals are display they are having difficulty in paying their bill/s’.
Credit card companies should not be able to give information to insurance companies etc. of your credit scores so that insurance company can base how much you will pay for your insurance and/or if you can receive coverage.
It’s about time the Feds step up to the plate for the consumer. Next in line should be price controls on gasoline and automobile insurance - 2 more thieves that need to reined in before they run us all into the poor house!
These rulings are great and long over-due. Some credit card companies charge over-the-limit fees based on finance charges taking the account over the limit. I would like to see this practice eliminated.
I also applaud that they are doing soething to stop these loansharks but as any of you have said much ore needs to be done. As a loan officer for 16 yrs I have seen my share of credit reports & credit card problems. I started helping my clients clean up their credit so they could be approved for their mortgage. After 15 years I decided to quit the mortgage business and help people full time so I wrote a credit repair guide and I started a website and a brick and mortar business A big part of my business are workshops geared toward High School and College students aimed at the credit card problems on campus from credit card reps and checking accounts being offered by banks to high school students (which also cause trouble)I am trying to educate them on the responsibility, benefits & pitfalls of using credit cards & checking accounts and how it can affect their future. Bad credit affects every aspect of our lives and JOBS are a huge part of what is affected. Students can graduate with a 4.0 but it won’t get the that job if their credit is trashed.