March 9, 2010
-
New CC Regs -- Rate Jacks, Pt.3
Spoils of war.Jack it now:
The interest rates on millions of credit card accounts began doubling and even tripling. Not only just the few bad apple credit card issuers were involved but the entire credit card industry was (save the non-profit credit unions). As we all know, they did this quickly to get it under the wire before the credit card reg went into effect.The other initiative which was also implemented about the same time was:
Wedge the door open with "variable accounts":
Here, not only did the credit card industry rake in windfall profits by forced exorbitant finance charges on old debt under the wire but, millions (or billions) of accounts were switched from "fixed-rate" to "variable-rate" accounts (with the stroke of a simple fine-print paragraph). The primary reason for this strategy involves another provision coming in the future (third phase) where credit card lenders will have to justify (to a public protective agency) extreme rate hikes not based on the consumer's behavior. Since accounts have no "fixed interest rate" any longer, the rate floats freely, changeable at the bank's good-pleasure. There are no "rate hikes" anymore. Now they're called "adjustments".So, in the year-and-a-half the credit card industry was given the grace period to revamp their systems, they simply neutralized the consumer protection item by skirted right around it. Not to be fooled, Congress always realized this hazard but was neutralized from within. We have a few senators that need to be barred from politics forever for bribery but, like with Aaron Burr vs. Alexander Hamilton, when good men do nothing, only the good die young.
One more related protection from the list may or may not fit in here. That would be:
No fair jacking interest for the first year of a new account:
Because of the neutralizing effects of switching all accounts to "variable account", we can be certain that all new account offers will only be this type also. If the consumer is foolish and tolerant to this, the lenders may continue with their free reign to hike rates anytime they fancy and without a reason. If, however, our credit card consumers can become a little more savvy (by studying articles like this) they may discriminate good from bad and only be willing to open new accounts with "fixed rates". Then rates on new accounts may be protected (free market thing).