May 24, 2009With the passage of the credit card bill from the Senate, consumers are seeing a bit of hope from the economic crisis. Consumer groups are also hailing the credit card bill and are excited to finally see a tough legislation for consumer protection come out of Congress.
Travis Plunkett from Consumer Federation of America recently said, “This is probably the strongest piece of consumer legislation to pass Congress in a decade.”
Although consumer groups consider the credit card bill as a step in the right direction, they feel that the bill can only provide partial protection for consumers against high interest rates and fees from creditors.
The credit card bill addresses many consumer concerns about troublesome credit card industry practices. Some of the most important amendments in the bill include prohibiting credit companies from retroactive interest rate hikes on old balances. Credit card companies are also required to provide fill disclosure to their customers regarding interest rate increases, transaction fees, and other related costs.
Dissatisfaction among consumer groups revolves mainly around the timeline for the implementation of the bill. They are also critical of the fact that the credit card bill can only slow down the surge of bills and does not provide a cap for interest rates.
Currently, once the President has signed the bill, it will become effective only after nine months have passed. This is mainly to give credit card companies some time to evolve their operations to meet the requirements of the bill. In the meantime, consumer groups are concerned by the fact that credit card companies continue to charge exorbitant fees and high interest rates on cardholders.
Although the bill puts a lot of limitations in the way credit card companies run their business, consumer groups say that there is still a lot of things that it allows companies to do which could be debilitating to consumers. For instance, although the bill puts restrictions on raising interest rates on old debts, it still allows credit card companies to hike up the rates on new purchases. It also does not stop credit card companies from changing their interest rates based on the cardholder’s payment history on another credit card.
Gary Schatsky, a financial planner in New York said, “It’s more than we could have expected in recent history, but in the end, it got watered down”. He also predicts that even as credit card companies are forced to make their terms more understandable, in the end, it all boils down to whether the buying habits of credit cardholders remain as they are or whether they learn from the credit crunch and change.
Legislation aimed at regulating unfair billing practices within the credit card industry have dominated the news for the past few weeks. While this is good news for consumers who are currently struggling to keep their accounts in good standing, there is another industry that is preying on consumers who have already fallen behind on credit card payments. Various debt “relief” companies are sprouting up everywhere, making promises that few cash-strapped consumers can resist. This largely unregulated industry is now in the cross hairs of lawmakers seeking to provide consumers will some level of protection.