October 06, 2009
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Congress Must Spank CC Industry Again, Pt.2
Where the problems lie:How serious is this problem? Well, according to the Pew Safe Credit Cards Project, the median of the lowest advertised credit card interest rate has risen 20% just since last December. This data was compiled by randomly selecting 400 credit cards, chosen in the month of July. That's pretty extreme. Representative Maloney points out the undeniable trend of industry trying to "beat the system" with their acceleration to unreasonable proportions. Her reply was: "The breadth and depth of the rate hikes happening now point to the need for faster consumer protections."
All during this grace period, some of the more seedy credit card lenders like HSBC have been scrambling to do everything they can to take advantage of the leeway Congress has granted them in good faith. Congress can't act soon enough to stop them. Some of the greatest and most immediate concerns which are being circumvented to defeat effectiveness of the credit card protection bill are:
Hiking interest on back-debt: Back-debt is old credit card debt that was charged at a lower interest rate. At the time it was charged, consumers had already calculated in their ability to manage the debt and pay it back timely, When the interest is suddenly doubled, the consumers' prudent safeguards are defeated and nearly all of them find themselves financially strapped and unable to meet their obligations.
Exceptions for hiking interest are granted when appropriate. These are cases like promotional low rates which expire and were already mutually agreed upon. Other cases are contract breaches caused by the consumer like late payments. One last sore spot is with variable rates. Variable rates, in and of themselves, are considered fair when they were mutually agreed upon when the original contract is formed. The problem now is that credit card issuers like HSBC of Nevada are defeating all the upcoming protections by dictatorially converting all their existing fixed-rate accounts over to variably rates so, even after the new regulations go into effect, the bank is still able to jack interest rates any time they want without giving any reason.