Expect new credit card fees now that Obama is involved
The Obama administration and many in Congress – including our good friend Sen. Chris Dodd (D-Conn.) – are pretty disgusted at the contracts that are in place between credit lenders and credit card holders. The exorbitant fees and interest rates are just too much, and the federal government is planning regulatory legislation to stomp out the mean big-business practice.
In short, people who were provided credit they should not have received can not pay their bills right now due to the economy., so therefore, stop the banks from making any profit from those people. The issue is that the banks need to make a profit, so if the government steps in, the banks will need to find other sources of income.
What you’ll see happen is banks refusing to provide credit cards to those with lower credit scores and they will probably reduce benefits (cash back, airline awards, points…) and bring back or increase yearly fees.
The government will not refer this new banking practice as a “loophole” that must be closed since it is designed to “screw the rich.”
Hot Air has more and a poll up. This again is one of those situations where if you do the right thing on a month-to-month basis, you’re going to have to pay more in the future.
If you pay off your bill monthly, you must be rich and can afford to pay more. If you don’t pay your bills, spend more than you can afford, the government will come in to squeeze banks into giving you a better deal. If the banks do not do the bidding of Congress and the Executive branch, they will get crushed by those in power.
So for those of you who pay your monthly credit card bills on time and within the grace period, how do you feel about this? My emphasis in bold.
Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.
I use a credit card for convienence, and I’m known for accepting new cards if I can get free money over time, but I play the game correctly and pay it off so I pay zero interest. Provide me with a better deal and I’ll pay cash every time.
9 Comments
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Gives a whole new meaning to contract law … the scholars must be hard at work trying to find a way to explain what the government considers a contract. Oh, and well, I wonder when the government will step in on the profits the Attorneys are going to make fighting these arguments. Oh my … I hope the students of today are paying attention when choosing their career path out of college.
Funnily enough (well, not at all amusing actually) capital one today sent me a notice saying my interest rate had gone from 7.5% to 17.5% FOR NO REASON! I (thank God) have an excellent credit rating, have always paid on time – more than the minimum and have recently paid it off almost completely and only had a very small balance. I immediately called to ask them if there were some mistake, and was told ALL c.o. credit cards are being increased and this is the new lowest, rate! I cancelled the card telling them it is daylight robbery. Their loss.
I wonder what will happen when the revival of fees, a tightening of credit standards and the like makes credit cards harder to get. This will make flying, car rentals, etc., harder for certain economic demographics. I wonder what they'll cry then.
Dodd's doing it again. I wonder who's paying him off? Hmmmmm.
I think that it is outrageous that credit card companies can raise rates to such outrageous amounts. They are taking advantage of people who are stuck for one reason or another (lost job, medical payment, foolish spending, etc. ).
In addition, they send the bills and have the payment due often in such a short cycle that it is difficult to make the payment in time. For example, if you go on vacation the day before you receive the bill, by the time you come back, it may be too late to send it in on time. And you incur a $40 fee along with a 10-20% rate hike. This simply isn't right. I support legislation to limit the predatory practices of credit card companies.
I personally am not in credit card debt. I will not pay fees or interest starting from day 1. If the credit card companies try theses tactics, I will be using checks, cash and debit cards. They will be losing the amount that is charged to the merchants when I stop using their cards. Now they will make no money from me at all.
Read the contract. Don't like the terms? Walk away. Nobody is forcing people into these credit card deals. More legislation is guaranteed to create issue for other people in one way or another. Will the government again come in to save the day?
The problem is not the banks, the problem lies with the credit card American culture that has developed over time.
The problem is:
1. The credit card companies often send you a change of contract notice effectively stating 'your rate is going up to 29 or even 39% interest.' If they want to change your rate (to what I personally think is usury), it shouldn't apply to past purchases.
2. They should be required to put contract changed in simple terms with large type rather than buried in pages of legal mumbo jumbo.
3. Many credit card companies mail the bills 14 days before they are due. Considering that 4 days are taken up by weekend days and 6 days (3 each way) are taken up by the mail, that gives you a maximum of 4 days to pay the balance. If you have to 'allow 5 business days for processing,' you are late before you get the bill.
The average american household has over 7k in credit card debt and many are powerless to pay it off. The credit card companies know this and it leads some unscrupulous companies to act very predatorily towards consumers and I do support legislation to limit it.
The problem is:
1. The credit card companies often send you a change of contract notice effectively stating ‘your rate is going up to 29 or even 39% interest.’ ?If they want to change your rate (to what ?I personally think is usury), it shouldn’t apply to past purchases.
2. They should be required to put contract changed in simple terms with large type rather than buried in pages of legal mumbo jumbo.
3. Many credit card companies mail the bills 14 days before they are due. Considering that 4 days are taken up by weekend days and 6 days (3 each way) are taken up by the mail, that gives you a maximum of 4 days to pay the balance. If you have to ‘allow 5 business days for processing,’ you are late before you get the bill.
?The average american household has over 7k in credit card debt and many are powerless to pay it off. The credit card companies know this and it leads some unscrupulous companies to act very predatorily towards consumers and I do support legislation to limit it.?
Face it: this is the Chris Dodd rehabilitation tour. His mug has been all over the TV lately, although this morning, on SeeBS, he completely sidestepped the question of credit becoming much harder to get.
But heck, they will just pass a form of the "Community Reinvestment Act" to get credit cards back in the hands of those that cannot responsibly use them, and pass the costs onto those that use their cards responsibly and carry little or no balance.
Is it the law of unintended consequences, or another case of the law of total ignorance of the side effects of the legislation they voted for but did not bother to read?