January 8, 2010
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A Global Journey, Pt.4
The challenges of close ties and deep pockets.United Kingdom: In October 2009, the U.K. proposed new credit card reform laws that are similar to those enacted by the U.S. and Canada as well. The U.K. law restricts credit card interest rate increases, regulates the order in which lenders apply card payments, raises the minimum monthly payment, and prohibits bad credit interest and fee increases.
South Africa: Citizens of South Africa are feeling the positive effects of the swift action the nation’s lawmakers took in countering the abusive practices of credit card companies. The National Credit Act was passed three years ago to prevent the same credit card crisis that occurred in 2002. The law is effective most likely due to the stiff penalties imposed on lenders who violate the law. Regulatory action goes as far as holding the lender accountable for a borrowers entire debt if the company did not take adequate measures to assure the consumer can capable of repaying the debt. Statistics indicate that lenders significantly curbed abusive lending practices shortly after the law was enacted.
Consumer advocates across the globe are calling out to credit card companies to follow the lead of the Australian and South African companies by adopting their reform policies. They are also challenging lawmakers to implement powerful measures that will impose stiff penalties to lenders who do not adhere to the law.
Although there is a great deal of controversy over how to develop safeguards against abusive practices of credit card companies, everyone agrees that the law is only as good as the regulator. From the words of Ed Mierzwinski, Program Director for the U.S. Public Interest Research Group, "We don’t have that." It would appear that as long as some lawmakers continue close ties with the financial industry, government agencies will continue to be challenged in holding credit card companies accountable. Furthermore, U.S. citizens will see an even greater challenge as a new chairman is soon to be named as replacement for Senator Christopher Dodd (D-CT) who recently announced his retirement. The replacement for Dodd, a strong consumer advocate and supporter of credit card reform, will most likely be Senator Tim Johnson (D-SD). Johnson is said to reside deep in the financial industry’s pockets.