August 20, 2009
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Reflections on New Regs, Pt.1
The initial jolt.With the first installment of the new credit card regulations taking effect, we're left to wonder of it's effect. With the heavy hammer of major credit card lenders like Chase making those last-minute gouges by delaying payments in the mailroom an extra day or two, many quickly realized the ongoing tension between consumer and industry. Many credit card payments seemed to spike the "late curve" the day before the new rules went into effect. All of a sudden, borrowers were shocked to learn that, not only were they slapped with a hefty late penalty but also, their interest rates jumped to a daunting 29%. Apparently mailing the payment four days early wasn't enough to make the hurdle.
It will be interesting to see how things play out with these new credit card rules. These new regs are not sweeping, by any means. They are only the initial phase of much more to come over the next several months. What is landmark, however, is that the government has finally stepped in to protect credit card consumers. The premise in Congress when passing this bill was that the industry would adopt the new rules as the ethical norm. Most of the industry had been policing itself and abstained from the worst violations with only a few conspicuous abusers being greatly effected.
More like a "forward-lash" than a back-lash, the retaliation seemed almost pre-empted. The credit card new what was coming, so they planned an offensive just before the new regulations took effect (today). Many other regulations aren't due to become effective in February but, the lenders are already piling sandbags to hedge themselves well ahead of time. According to a new FICO study, millions of consumers have had their credit limits slashed at a time when FICO ratings were most vulnerable. For millions of consumers, having credit limits slashed will lower their FICO scores substantially.