Feds to Crack Down on Credit Card Issuers

According to a recent AP article, the federal government will soon be cracking down on credit card issuers who engage in “unfair and deceptive” practices. More specifically, the proposed rules would prohibit:

1. Placing unfair time constraints on payments.

2. Unfairly allocating payments among balances with different interest rates.

3. Unfairly raising annual percentage rates on outstanding balances.

4. Levying high fees for exceeding the credit limit because of a hold placed on the account.

5. Unfairly computing balances.

6. Unfairly adding security deposits and fees for issuing credit or making credit available.

7. Making deceptive offers of credit.

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11 Responses to “Feds to Crack Down on Credit Card Issuers”

  1. Anonymous

    I agree with petcircus [above]. I have over $50k in unsecured credit lines at my disposal [active, and less than 7 accounts] and I concur that interest does seem to fluctuate. The best plan: leave a reserve and always have FIVE [arbitrary, but you get my point] exit strategies in case, FIA, Chase, Discover, or Citi change your interest rate from 7.99 to 13 and 14.99 percent as they did to me!

    Borrowing money, if accepting this strategy [I use a LOT of math to prove I need to do this at all to get where I’m going] is a negotiation, a contract, so READ IT, and do your part and they should be doing theirs.

  2. Anonymous

    For those who side with the credit cards companies you apparently live in a perfect world.

    I have credit cards, I pay them on time and always more than the minimum payment required, I am never late nor do I exceed my limit. To those who side with credit cards companies explain to me and other credit card holders why our interest/payment seems to creep up regardless of payments made on time, not exceeding limits, etc… An example of credit card companies deceptive practices; I was just informed by Citi my interest rate is going from 7.99 to 13.99% Why? There is no explanation; it is NOT always about someone missing a payment this is greed pure and simple! With most of the larger financial institutions losing more money each day due to default mortgages, this further heightens their need to offset their losses by turning to their credit card holders to bail them out of the mess THEY created!

  3. Anonymous

    I agree with Rick. People need to take responsibility for their actions. People cannot be bothered by reading what they are signing before they sign up for it. i don’t think there are such things as predatory lenders or unfair practices, because if you sign up for credit you shouldn’t be stupid by not reading what you are getting into. if you don’t want to be hit by all the penalties and fees, then don’t sign up for one. If you do sign up for one, then read before you signup.

    people should stop being so mad at the credit card companies, mortgage lenders, etc, and start being mad at all the stupid people who got themselves into financial mess by not reading before signing up. yeah, but it’s so confusing. then if you don’t understand it, then don’t get into it. not rocket science.

    what is so “unfair” about any of the items mentioned? if you go over your limit, you get penalized. if you carry alot of debt balances you get penalized. if you are late, you get penalized. etc, etc. if you don’t want to be penalized then don’t go over your limit, pay late, carry balances forever, etc. nothing unfair about that. punishment is used to stop bad behavior, the proposed law seems to promote bad behavior.

  4. Anonymous

    I think I am with Rick. Yes, some practices may be unfair, but there is a very simple way to avoid all problems – pay the bill in full by the due date, don’t spend more than you can afford. Also, let’s say you are the lender and you are lending your own money to someone who you know spends more than he/she can afford – you know it because they carry balances, so they are high risk borrowers. Wouldn’t you want to protect yourself by all means possible including knowing if the person you lent your money to is late somewhere else and raise the rate if your risk increases? When we invest our money we want higher pay off for higher risk. Same with lenders. Wouldn’t you also want to have profits high enough to justify the risk of default?

    There are also 0% offers that some people use to their advantage – as long as they know that they need to repay everything before the interest goes up. Some people use it for arbitrage, but people also use it to transfer a real balance of a higher interest loan and repay it within 0% period, and it can save them a lot of money.

    Changing due dates is bad, but why not have a habit of looking at the due date when you get the bill? You can also sign up for having your credit card company automatically deduct the bill amount (or, if you prefer, minimum payment) by the due date. Then you are guaranteed you are never late.

    As to changing interest and all the fine print, the interest is written quite prominently on the montly statement, and not in small letters either. It’s the borrower’s responsibility to look at it. If you see the number is higher than it used to be – there is nothing to prevent you to a) send the check for the full amount – best option b)call the card and discuss it, I heard sometimes the call is enough to lower it c) get another card or even 0% offer.

  5. Anonymous

    Well, everyone’s certainly entitled to their opinions. But I find that usually the reason the issuer “jacks up the rates” is when the customer is late on a payment. This is called the “default rate”, and is listed in the original terms and conditions. Often, it’s a variable rate, it’s usually tied somehow to the prime rate, printed in the Wall St. Journal.

    Now, certainly, credit card issuers do change rates, a practice I do find unfortunate, though not illegal, since they do reserve the rights to change the terms. However, rather than sending a new “50 page document” listing the new terms, they usually send a short 1 or 2 page addendum to the terms and conditions. These addundums (addenda?) are not hard to read. Further, in most cases, they have an opt out condition. If you opt out of the new terms and conditions, and don’t make any additional purchases, you can remain on the old terms and conditions for the duration it takes you to pay off the existing balance.

    All in all, I find the credit card practices very fair and consistent. Again, all you have to do is read through the terms before agreeing to them.

  6. Anonymous

    It is true that in most cases when people get into a mess with credit cards it’s nobody else’s fault. But it really is not fair for credit cards to jack up interest rates and to bury this information in a new set of terms and conditions that’s 50 pages long. One of the reasons the government is around is to protect us from blatant trickery like that, and I’m glad they’re stepping up to the plate.

  7. Anonymous

    This is something that they should have done years ago instead of sitting back and letting people fall further into debt. Interest rates should NOT be higher then those of a loansharks!

  8. Anonymous

    I’ll believe it when I see it. Whether you call it a bribe or a ‘campaign contribution’, politicians want it, and financial institutions offer it.

    This is just election year song and dance, and nothing will come of it.

  9. Anonymous

    I see Rick’s point about the need for the consumer to accept responsibility, but you have to admit, some cc companies paint a very pretty picture with ultra fine print and deceptive language.

  10. Anonymous

    I actually disagree with this law. Everyone wants to put the blame on the other guy. It’s always the credit card issuer’s fault. They’re treating consumers unfairly. Look at all the times “unfair” appears in your list.

    That’s all a bunch of baloney. In *most* cases, it’s the consumer’s fault for living beyond his means, buying things he can’t afford, not making payments on the loan the credit card issuer gave him, and then blaming the credit card issuer for treating him unfairly.

    I call these late fees a stupidity tax. People are just too stupid for buying beyond their means, and they don’t bother reading the terms on their credit card agreements. All these “unfair” terms are printed right there clear as day in the terms and conditions they agreed to when they applied for the card.

    The reason I disagree with this is that by eliminating these fees, the revenue gained by the credit card companies will go down. I personally don’t pay a penny in interest costs and fees, but I make tons of money off the credit card companies via arbitrage (borrowing money at 0% and investing it). I think if the revenue from fees goes down, the card issuers will cut back on these other offers that allow me to make money off them (money that is currently offset by the fees stupid people pay).

    In short, just read your terms and conditions. If you think these are unfair, don’t apply for the card.

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