August 21, 2009
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CARDA's Immediate Effect on CC Consumers, Pt.2
The first wave:Again, this past Thursday (8/20/09), marks the first official regulation with any bite. Meager as it is, it reverses a tenacious trend that has shown real change in our nation not to be achievable because of bribery in Washington. The first two significant credit card regulations of about eight are now in effect.
1) Credit card lenders may no longer slam credit card consumers with surprise rate hikes, targeting debt that was accumulated at a lower rate. If you charged up a $20,000 debt on a 5% finance charge agreement last year, your lending bank can't just jump your interest to 29% to rake in some extra bucks off you. If you screw up, that's different and you may deserve it. Now, you're guaranteed at least a 45-day notice and only future charges can be charge interest at the higher rate.
2) Citi-Financial Services may no longer deliver your statement of Saturday for a due-date on Monday any more. (Neither can any other credit card lender, for that matter). Now, they must provide you with, at least, 21 days notice to make your payment.
Most of the significant legislation won't take effect until February of next year. But, we can learn a lot from the effects if this initial installment. For one thing, the credit card industry has threatened an extreme backlash for having their hand slapped. Actually that's an over-simplification. Most of the giants were well-behaved but, the rogues upset the apple-cart of the whole system.
Since the main concern of the credit card industry these days is risk, the industry realized the need to shore up reserves ahead because one of their key safety switches has been taken away. There was security, knowing they could raise interest at anytime, should the need arise. Most, hoped it would never be necessary, but relied on the security of knowing it was there for the emergency. So, the industry was forced to kludge around the regulation by jacking everyone's interest before Thursday and by doing away with fixed rates in the future.