One of the earliest priorities of the Obama administration and Congress was to put in place new rules governing credit card companies, all with the aim of protecting consumers from overzealous banks.
The government certainly got the rules instituted. But we are left wondering where the protection went.
The Wall Street Journal reported this week that credit card rates have climbed due to new laws passed by Congress which limited the ability of credit card companies to charge fees, hike interest rates and assess penalties. We just wonder why the Journal was so late coming to the party.
As most credit card holders know, the banks recognized the revenue-limits of the new laws as soon as they were enacted — and those same banks acted quite swiftly to make sure their own accounts stayed full.
Before Congress got involved, banks could boost rates fairly quickly to respond to customers whose credit riskiness suddenly spiked. Under the new Credit Card Accountability, Responsibility and Disclosure Act, banks must give 45 days notice before raising rates. Instead of following those procedures, the banks simply ratcheted up consumer's rates before the law even went into effect. They also lowered bank card credit limits and severely put a crimp on balance transfers.
The sponsor of the CCARDA law, Rep. Carolyn Maloney, D-N.Y., says that these changes are not a bad thing because consumers now have certainty about their credit card interest costs. That's one way of looking at it. Another is that many people are now smothered by credit card debt and can barely make the high minimum payments that came with the interest rate hikes.
The law that was intended to protect consumers from spikes in credit card interest rates did nothing but trigger a spike in credit card interest rates. Some day, we may figure out that it is better to deal with Big Business on our own, without Congress' help.
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