December 15, 2008
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News: New Credit-Card Regulation Coming Down the Pike.
It's been brewing for a little while now but, it's finally coming. Government regulators are expected to release these new regulations on Tuesday. These restrictions being implemented, are designed to protect consumers from the giant credit card industry. One of the key points is over the industry arbitritarily raising interest rates on millions of card holders who already hold open accounts with set interest rates. In addition to this ruling, delinquency procedures are also under attack. The way it is now, credit card lenders are able to take liberties of slamming card holders if their payments are caught in the mail and arrive late. Steep penalties are sometimes imposed as well as other default measures like sharp rate hikes and account closures. The government's viewpoint is that, in these troubled times, hard-pressed borrowers need to be offered more innovative ways to pay on their credit card debts in lieu of creating more uncollectable debt. Over 16,000 lending institutions will be affected by these new regulations.
This marks an unprecidented move, where the government is stepping in to referee the problem in a more-fair way that, ultimately, benefits both sides. This plan couples with another government plan to provide security backup for the credit card industry to not carry as much risk. The hope is that the lowered risk will make the packaged debt, called securitization, more attractive to the secondary markets. This means of revenue has provided a mainstay for the the credit card industry for years now but has mostly gone away with collapse of the home-mortgage market.
The main impetus for all this government action is in response to the deepening economic crisis our consumers are facing. It is well-understood that credit cards have allowed for continued spending to keep our economy moving even with the dwindling paychecks that have prevailed for most of our nation's working class since Bush took office. The goal is to retain spending but, in a more responsible fashion.