Congress Fumbled On Credit CARD Act, Needs To Recover Through Earlier Activation

When the Credit CARD Act got signed into law, the majority of consumers and their advocates were in a celebratory mood. The Act was specifically designed to end the predatory practices of credit card companies and give credit card holders a fighting chance in the credit card industry arena. However, Congress dropped the ball when it staggered the activation of the Credit CARD Act for as long as August of 2010, giving credit card companies 15 months to adjust their businesses to the requirements of the new Act.

The huge amount of leeway in terms of time that Congress gave credit card companies shows a certain uncharacteristic naivety in Congress. They had actually expected credit card companies to back away from their predatory practices and move to a more benign business model, one which conforms to the requirements of the Credit CARD Act. At the moment, it is readily apparent that credit card companies are not backing down and are actually intensifying their practices.

According to a report from the Safe Credit Cards Project of the Pew Charitable Trust, interest rates in the credit industry have gone up by an average of 20%. Aside from hiking interest rates, credit card companies have also used tactics akin to “sleight of hand” magic tricks to raise the rates of card holders who use their credit prudently and who manage to pay off their balances on time to more than double their former rates.

Consumers are getting hammered by what credit card companies are doing. Those who are lucky enough to move away have done so. However, a majority is still stuck with their credit cards and is fast sinking, burdened by the changes credit card companies are introducing. Consumers have gotten weary of the situation and pressure is fast building up for some changes to be made. As a result, legislators are finally speaking up against what credit card companies are doing and are now supporting a new law which will move up the effective date of the Credit CARD Act to as early as December 1 of this year.

Ben Bernanke, Chairman of the Federal Reserve, acknowledges the benefits that an earlier Credit CARD Act activation would bring to consumers. However, he also said that this might cause problems for credit card companies who need to adapt their billing and accounting systems to the new requirements of the act, among other changes.

Bernanke’s opinion will most likely weigh more heavily in the Senate that it does in the House. Senate lawmakers have been known to be very deferential to regulators and to the financial institutions such as banks and credit card companies whose biddings the regulators regularly conform to. Pressure in the House may yet overturn that tradition in the Senate however which may result in long awaited protection for American consumers.