Credit Card Regulations May Have Unintended Negative Consequences

By Joe Taylor Jr., CardRatings.com Reporter



President Obama Signs Credit Card Act Into Law
As President Obama signed a new Credit Card Bill into law, financial industry analysts debated whether tough, new regulations would return America's consumers to a more responsible era or throw the sector into a tailspin. Major provisions of the new credit card law include:

• Strict limits on marketing to college students and other prospective cardholders under the age of 21.



• Preventing cardholder accounts from being charged beyond their limits, unless cardholders have authorized over-limit activity (and over-limit fees) in advance.
  Clearer disclosure of credit card interest rates and repayment estimates, using standard text sizes and styles.



• Tougher rules related to raising interest rates on delinquent cardholders, with clear paths to rehabilitate credit card accounts.

Consumer advocates hailed the new law as a major step toward decreasing personal debt in the United States. Upon passage by the House, earlier in the week, Consumers Union spokesperson Pamela Banks told reporters, "Consumers got fed up, they spoke out, and Congress approved reforms by an overwhelming margin." However, the news sent financial stocks into a tailspin, as investors grew concerned about the impact on credit card companies' bottom lines when the law takes effect in February 2010. This type of impact is not likely to help alleviate the credit freeze that the industry has been witnessing for quite some time.

Some consumer advocates, however, are concerned about a potential negative backlash for consumers. Although CardRatings.com founder Curtis Arnold thinks that some degree of regulation is definitely needed, he is concerned about the response of the credit card industry. "I definitely think average credit card rates will rise in the next 6-12 months. We are already seeing this, but the legislation will likely accelerate this trend. We may also see new types of fees crop up that we’ve never seen before." said Arnold.



Do you feel these credit card restrictions will positively or negatively affect consumers? Tell how you feel about it in our credit card forum.

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Joe Taylor Jr. is an internal business consultant for a Fortune 500 company, who writes about finance, culture, and design. He holds a Bachelor of Science in Communications from Ithaca College.

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Giving Credit Where Credit’s Due: Three Cheers for Richard Cordray

By Curtis Arnold, Founder of CardRatings.com


Richard Cordray, the Treasurer of Ohio, has been spear-heading a drive to get Ohioans to take a stand in favor of the proposed changes to the credit card regulations that are being considered in Washington. He hopes to gather between 5,000 and 10,000 comments by August 4th, when he'll submit them to the Federal Reserve, as well as to the Office of Thrift Supervision and the National Credit Union Administration, the other two agencies that are pondering cardholder-friendly provisions.

Cordray is asking Ohioans to join with him "to let the federal government know that we support these proposed changes that will help to end some of the worst practices of 'gotcha capitalism' by credit card companies." Specifically, he is calling for an end to:

• Unfair time constraints for consumers to make payments.


• Unfair allocation of payments among balances with different interest rates.


• Unfair application of increased annual percentage rates to outstanding balances. 


• Unfair fees for exceeding the credit limit solely because of a hold placed on an account.


• Unfair balance computation method.


• Unfair financing of security deposits and fees for issuance or availability of credit.


• Deceptive firm offers of credit.

"The proposed rules are just that: proposed, but not yet final," as Cordray puts it. "No doubt the opponents will be making their voices heard. … and we want them to hear a strong response from people who favor these rules."

In addition to busily promoting his credit card initiative in Ohio, Cordray is trying to get other state treasurers to do likewise. To encourage your treasurer to undertake a similar campaign against unfair and deceptive credit card practices, start out at the National Association of State Treasurers, where you can get the correct link for your state. I think every single one of them ought to follow Cordray's lead. Do you agree?

Would you rather speak out to the Feds directly? I recommend a quick visit to Consumer Action, which makes it easy to add your send in your comments. Any way you do it (and even if you don't agree with some proposals), I think it's important to let your feelings be heard!

This article was originally published on CreditBloggers.com by Curtis Arnold, a nationally recognized consumer educator and advocate. Curtis has been educating consumers about credit cards since 1998. He is regularly interviewed and quoted by respected members of the national press regarding consumer credit issues. His new book, How YOU Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line will be available soon! Pre-order online and receive a 37% discount.

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CardRatings.com is the most comprehensive source for comparing credit card offers. CardRatings.com is pleased to offer consumers free credit card ratings.

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Please Note! You are welcome to republish this article as long as you state that CardRatings.com is the source for the article. You must also include a link to our website if you republish the article online. Click here for more details about using our articles and thank you for your interest!