As discussed previously, the new credit card reforms are intended to help consumers from deceptive acts of credit card companies. And to make it a fair market, the credit card companies have been given a period of time until Feb 2010 (the deadline) to determine and clarify their final policies for customers before the act. This will give consumers much clearer idea about terms and rates, and after the deadline there will be no increase in rates on existing balances. However, this opened the door for more deceptive practices by these companies, taking the advantage of increasing rates and fees before the deadline.
Even though the new act will restrict the increase in rates, it doesn’t have restrictions on imposing new fees; it only requires a disclosure of these fees to consumers 45 days in advance before they are applied. Therefore, as we see these companies increasing rates and fees, we’ve thought that the new act might not be enough for protecting consumers of abusive acts. Some people have suggested a regulation of the market by the Fed, but it might not be a good idea as discussed in “Credit Card Market: Reforms vs. Regulation.”
The increasing of recent deceptive acts by companies led the members of House to seriously think about moving the deadline of the act to December 1, 2009. Rep. Carolyn Maloney has stated that the move up idea has come up after seeing how the rates on credit cards have been gone up enormously in this period; companies hold responsible about this, they brought this on themselves. The rates have been raised to more than 90 percent, up from 20 percent, just in half year of 2009. Maloney says that the December 1 new deadline is intended for consumers to be more relieved when using credit card. It will allow them to use this credit for charismas and new-year purchases. Further explanation and more speech about the new deadline by Maloney are in the following video.
It makes more sense for the deadline to be moved up, so people can benefit from the credit card for the coming break purchases, without the fear of raising rates on their cards. The credit card companies have already increased their fees and rates in the last period, and it’s more likely that they are going to take advantage of the break purchases, imposing more fees and charges and hiking rates on using the card. However, if the deadline is moved up before the break, the act will probably restrict issuers’ deceptive activities as intended, and give the consumers a relief for using the card.
It seems that the House is imposing a positive step toward consumer protection by moving up the deadline of the act. The new reforms should work to protect consumers by limiting increase rates, restricting credit card issuing for minors, and eliminating some deceptive acts like the universal default and double-cycle billing. It might be a good idea to first see the new reforms in action before we begin to think about other options to resolve the credit card issues. Hopefully, there will no more crazy charges that we can’t afford.
