Credit Companies Scrimp in Reaction to Credit Card Act
With several other laws of the Credit Card Act still yet to come into full effect until February 2010, credit card companies are projected to cost millions of dollars in projected profits. Thus, for customers in the midst of the Christmas season, consumer groups urge credit card holders to be wary of last minute hikes in their interest rates.
Though such a reaction to the holiday shopping spree is the best that companies can do to compensate for their losses within legal boundaries, Montrice Godard Yakimov, Managing Director of the Office of Thrift Supervision under the US Department of the Treasury, in a memo released after President Obama’s approval of the Credit Card Act, warns against unfair practices which companies in the past were found guilty of.
Yakimov expressed that while the government requires that “consumers receive a reasonable amount of time to make their credit card payments”, guilty parties were found to have “prohibited payment allocation methods that unfairly maximize interest charges and, in the subprime credit card market, limited fees that reduce the credit available to consumers.”
Yakimov urged CEOs of credit companies that consumers with a track record of paying credit card bills on time should be given the incentive of not raising the interest rate on an existing credit card balance. This recommendation may be easier said than done.
Since President Barack Obama signed the Credit Card Act into law in May to safeguard consumer rights against deceptive and unfair arrangements, especially for credit card holders and interested applicants, the policy has been met with lesser customer-friendly policies coming from the credit card companies themselves.
Since mid-August, companies which issue credit cards reacted to the policy with stricter policies against provisions such as the requirement that issuers provide 21 days for consumers to pay their credit card bills, and the requirement that issuers provide 45 days notice of changes in terms.
Time will tell as there are several other key provisions effective on February 22, 2010 in the Credit Card Act are anticipated to either make of break the affected credit companies which may either draw in more volumes of credit card ownerships and more efficient payment or severely increase the difficulty of acquiring new credit cards.
The fill force of the provisions include the following: (1) enhanced disclosure of card terms and conditions, (2) fairness in the timing and application of card payments, (3) responsible lending, (4) restriction of certain fees and interest charge, (5) prevention of unfair increases in interest rates and changes in terms, (6) strengthening oversight of credit card industry practices, (7) safeguards for young people who obtain credit cards, (8) enhanced penalties; and (9) gift card protections.
Writer: Anthony
