June 26,2009
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Who Do You Believe?, Pt.1
Are CC lenders being straight w/us?This article reflects a synopsis of some fine research performed be Ryan Bubb and Alex Kaufman posted in their fine article on NYTimes.com. It is and extension of my background series entitled: "Who Are You Kidding?" in four parts. For more background, please refer to this series. Bubb & Kaufman have pointed out that the credit card industry is 'crying foul' over the recent passage of Sen. Dodd's (D-Conn.) CCARDA (Credit Card Accountability, Responsibility and Disclosure Act) bill into law. The series puts the reader in charge of what they should believe concerning the credit card industry’s stiff reaction to recent increases in consumer protections. The Bubb & Kaufman team points out that nearly all of this is unjustified.
As Bubb & Kaufman bring out, some leaders in the credit card industry go so far as to state that they can't be profitable without charging interest from the get-go. No grace period at all. When compared to the credit card industry's counterpart, the credit unions, Bubb & Kaufman came to the conclusion that: "These fears are largely unfounded." Grace periods of interest-free lending have been with us forever and the credit union counterparts are doing just fine with it.
As was pointed out in the earlier series, the credit unions seem to be fine with the restrictions imposed by the new CCARDA rules because they haven't found the need to break these rules in the past anyway. The major credit card industry has long-fallen into the practice of nailing credit card holders to the wall for minor infractions. High interest and stiff fees and penalties have long been the norm in the industry. As Bubb & Kaufman point out, this is largely unnecessary. When the necessity does arise, credit union fees for exceeding the credit limit (considered very serious) are only average half of the severity imposed by the major industry.