Senate slams credit card firms with tighter regulations

A Senate bill passed on Tuesday will see tighter regulations imposed on credit card companies starting February of next year amid scrutiny of the administration over skyrocketing fees charged by the firms, while the spending public continuously struggles with their consumption.

From the WSJ:

Starting in February 2010, a Senate bill passed Tuesday would ban practices such as charging consumers to pay by phone and sudden surges in interest rates. Payments above the minimum due would be applied to balances with the highest interest rates. Information once relegated to tiny print must be made clearer, and consumers will soon be told how long it would take to pay off a balance if they pay only the minimum due.

Senator and Senate Banking Committee Chairman Chris Dodd defended the position by saying that “[c]redit cards are a tremendously valuable and useful tool for consumers, providing them with relief during critical moments. This is a very important industry….We just want it to work better.”

I hear that, but with still growing unemployment, how are people able to fund their payments to these credit card firms? It might be unlikely, but in the event that some of these firms face much higher rate of delinquent loans, with more and more unable to pay, while they continuously cut the credit availability, I suppose the government will be there to bail them out again. The government is seeking protection for the public but I don’t see any sort of protection given to these firms when people mainly rely on their credit cards to fund their livelihood.

Among the changes that some consumers can expect: a return of the annual fee and fewer promotional rates and offers, as issuers look to offset the loss in revenues resulting from new laws. Consumers can also expect banks to pare back their reward programs.

I can picture one outcome of this legislation: those who managed to receive credit cards before the firms tightened their standards would continuously use them. But with the growing lack of credit availability and again, tighter standards, only those who are most capable of meeting their financial responsibilities would be able to take advantage of credit cards.  That while others who are still struggling with unemployment and finally lose their cards would suffer even more just because the legislation has made credit card firms more cautious than they were before. And I think this is worse than being charged high fees.

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