October 08, 2009
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Congress Must Spank CC Industry Again, Pt.4
"Somebody stop me!"One good thing has also arisen from the regs that already went into effect as of August was relief from the the hideous over-the-limit charges. Already, the credit card lenders are painting a rosy picture of themselves, like they made this change without government coercion. Don't believe it.
Over-limit charge penalties: You may noticed the "good news" that credit card issuers are touting is the option to disallow over-limit charges from being approved. This avoids the terrible overlimit penalties. This feature is actually a return to the way things used to be, Originally (years ago), when a charge would exceed the credit left on a credit card, the transaction would be declined. Then banks started offering a feature that some people liked of allowing the transactions to go through anyway. There was a small extra charge for this convenience. Some liked it in order to not be embarrassed at the counter by being publicly rejected.
Over time, the credit card issuers came to realize that there was much revenue to be gained there and started building in this feature as a standard for new credit card accounts. Eventually the option came to be known as a penalty for people who were doing wrong. The fees (now called penalties) kept rising until they reached the highest-level fee of around $35 and also started causing interest rate hikes and other punishments as well.
Come Thursday, U.S. Reps. Carolyn Maloney and Barney Frank will be calling together the House Financial Services Committee to consider proposing that the three-month grace period which was extended to the credit card industry back in May be shortened to end on December 1 (almost three months shorter). One of the prime targets here is the hiking of credit card interest rates and attaching pre-existing balances to this new rate. This practice would all be stopped in February of next year but we are finding that the credit card lenders are circumventing this safeguard by slipping it in early so it,s already a done deal before the cutoff. For a summary of this series, please check out the conclusion at "Conclusions on CC Industry Spank".