Senator Evan Bayh made a stop in Fort Wayne last Wednesday to hold a dialog regarding the recently passed credit card bill and what it will mean for consumers. One of the hottest topics was the credit card industry's assertion that responsible credit cardholders will be the ones getting penalized because of the practices of bad credit cardholders once the bill becomes active.
According to Sen. Bayh, the regulations included in the credit card bill are specifically designed to protect and help out credit cardholders who have been hit by high interest rates and fees because they have had to rely more on their credit cards when the economic crisis hit. The senator told reporters stories about people who saw such incredible interest rate hikes, some from 0% to 29%, just for missing the payment deadline by one day. Many of those experiencing such high interest rate hikes belong to the middle class and, according to Sen. Bayh, they were “getting ripped off by credit card companies”.
With the new law in place, credit cardholders who regularly pay off their credit card bills will be protected from interest rate hikes. Credit cardholders will also have more time to examine their bills, as credit card companies will have to mail the bills 21 days before they become due. In the past, the ruling was 14 days. Notifications regarding interest rate and fee changes will also have to be given to credit cardholders 45 days before they are to take effect.
The legislation will obviously provide protection to credit cardholders who are having problems with their bill payments and are keeping their credit cards active by paying only the minimum amount due. In the past few years, credit card companies have been making a lot of money off these kinds of customers – customers who do not default but who try to keep their credit cards active by paying the minimum amount, which does not really subtract substantially from their debts. This is going to end when the credit card bill becomes active.
Critics are therefore saying that because of the large loss in profits from bad credit cardholders, credit card companies are going to turn to good credit cardholders to make up.
“That is not going to be allowed to happen,” Sen. Bayh said.
He cautioned the credit industry from punishing good credit cardholders and said that should it happen, Congress will probably revisit the law to penalize such practices. He also said that the situation is not likely to become reality. Since the credit card industry is very competitive, a credit card company that penalizes good credit cardholders will probably lose their customers to another credit card company with a better offer.