January 8, 2010
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A Global Journey, Pt.2
Nations' attempts at solving the problem.The credit card has its roots buried firmly in the United States (U.S.) when in 1950 a businessman named Frank McNamara found himself in an embarrassing situation. While dining out at a New York restaurant, McNamara realized he had left his money in the pocket of another suit hanging in his hotel room. Together with a group of businessmen, McNamara launched the Diner's Club card, the nation's first credit card. The Diner's Club card has undergone a great deal of transformation over the year is now owned by two separate financial institutions; the International Diner's Club credit card operations which is owned by Discover Financial and the North American card operations recently sold by Citibank to the Bank of Montreal. Today, Diner's Club cards have many of the same creative adverse fees that other cards have devised.
The U.S. credit card companies say the problem really originated when the nation's culture experienced a shift in values and many Americans used the court system to avoid taking responsibility for debt. Banks became the victims while having to write off millions of dollars in losses. The financial industry claimed it had no alternative but to being increasing interest rates and developing new fees to offset the losses. What are nations doing to rein in credit card companies?
United States: The U.S. enacted a weak attempt in 2005 when lawmakers passed the 2005 Bankruptcy Abuse Prevention and Consumer Protection. The new law makes it more difficult for consumers to default on card debt. It also forced borrowers to participate in financial education courses prior to being granted the final judgment. U.S lawmakers say the goal is to help the petitioner from falling back into debt. However, critics say the results of the act were less than hoped for. Statistics have demonstrated that more than 50% of bankruptcy debtors file a second time. The inadequacies of the Act do not address a much greater need to educate Americans before they get into credit card debt.