The credit card industry has been quite loud in expressing their fears over the negative effects that the passage of the credit card bill will bring. While consumers are hailing the credit card bill as their long awaited relief from oppressive credit industry practices, the credit industry insists that the bill stifle credit availability for consumers instead.
Last week, President Barack Obama presented his plans for establishing a separate agency to monitor and safeguard the rights of consumers. The agency will be called the Consumer Financial Protection Agency and, among other things, it will be in charge of implementing the rules and guidelines of the credit card bill. This has increased concern among the credit industry even more.
The credit card bill basically aims to limit the ability of credit card companies to issue fees, such as those issued to credit cardholders who go over their credit limits, and interest rate increases, such as those experienced by credit cardholders who miss a payment. Cardholders are naturally all for the credit card bill. However, credit industry advocates have been strongly campaigning that the credit card bill will actually bring more ill than help for consumers. According to them, the credit card bill will instead dry up available credit, especially for risky borrowers. They are also saying that, by cutting off the income generated from the fees issued to delinquent borrowers, the credit card bill will essentially force credit card companies to stop offering rewards programs, greatly limit available credit and credit limits and issue annual fees for all their customers.
While the warnings of credit industry advocates seem worrying, some experts are disagreeing. A few are citing the situation of credit unions as a perfect example of how legislation like those in the credit card bill can actually help both the consumers and the creditors. While major credit industry players are worried over the credit card bill, most credit union operations are already similar to what the credit card bill insists on.
According to a recent study, credit unions are not as likely to charge high fees and interest rates as major credit companies. They also have a lower annual fee and grace periods that last longer than what other creditors offer. However, these credit unions are still able to make a profit. Some may argue that credit unions are different from other credit companies but, on the whole, these companies actually share many similarities. For one thing, they are competing in the same market.
The example being given by credit unions show that the credit card bill can work. There might be some sacrifices but, on the whole, the bill will make the credit industry much more balanced between creditors and credit cardholders.