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Cracking Down on Credit Cards

Published 12/15/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

The Federal Reserve will vote on a long list of new credit card reforms on Thursday, perhaps putting their foot down on an industry that has long been criticized for its business practices.

The new rules were proposed earlier in the year and are expected to be acted on (and passed) by the Federal Reserve along with the Office of Thrift Supervision and the National Credit Union Administration before the New Year. The new regulations deal with everything from late fees, defaults and payment schedules to the confusing nature of billing statements. Major changes and slight alterations for these and many other areas are covered in the nearly 1,000 page list of new guidelines.

Credit lenders have said that these changes will unnecessarily tighten credit and increase the costs to the consumer. Policymakers on the other hand believe that now is the perfect time to rein in an industry that has long been considered to operate against its clients best interests.

The Democrats had singled-out this issue as one of importance during the past year, and with their increased stake in Congress are likely to back any further regulations. Many Americans would favor a more stringent regulation of credit card banks, because of the high rates, unscheduled contract changes and other nuances associated with card issuers. Most legislators, however, had tended to allow the industry to do whatever it wanted to. That ideology was thrown out with the bath water when the financial markets tanked and regulations/ government buyouts became a top priority once again.

Americans owe billions on their credit cards and typically carry several pieces of plastic which they employ simultaneously. The industry has appeared a bit rocky lately as defaults increased among otherwise well-paying customers. As thousands of people lost jobs their balance – which they had typically carried and paid off incrementally – became too much to bear. This gave card issuers the excuse they needed to increase rates even further. The recent economic climate has led many to speculate that card issuers would likely cut billions in excess credit lines.

Regardless of their outcome, these reforms are proof that a new day has come to the American economy. Regulation may be good in some cases and bad in others, but at the very least our government is once again discussing the issue instead of sweeping it all under the rug.

Source Yahoo News:

The Federal Reserve is to vote on credit card reforms that may bring some relief to customers who face a variety of ways for being hit with late fees, universal defaults, shorter payment periods and confusing payment allocations for different balances.

In 2007, Americans were using an estimated 694.4 billion credit cards with Visa, MasterCard, American Express and Discover logos, according to the Card Industry Directory.

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