May 21, 2009
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News: Warning From CC Companies
With the passing of new credit card reform legislation on the cusp of final enactment, lenders are anticipating difficulties in providing adequate financing for future use. Financial giants are warning consumers the new legislation will diminish their ability to provide sufficient financing at a time they say credit card consumers need it most. They claim consumers who pose greater risks will most likely experience a reduction in the amount of credit available to them. Lenders claims are that past strategies which allowed them to raise interest rates on high risk users allowed banks to react quickly to adjust for high delinquencies. In the wake of the new legislation, credit card companies believe the only alternative will be to limit the availability to these high risk accounts. On the other hand, supporters of the legislation say lenders will still have flexibility in adjusting interest rates for these consumers without using deceptive practices to do so.
Supporters of the credit card reform are expressing buyer beware in that lenders may find new ways to deceive consumers by using a back door approach. Quite possibly we could see the implementation of new gimmicks and additional fees by lenders who are not realizing a desired increase in profits. Lenders support their stand by saying interest rate increases and fees are only placed on users who abuse the cards and breach their contracts. Yet, lawmakers have received massive complaints from prime consumers who have never been delinquent and have experienced interest rate increases and have seen their credit limits slashed. An added concern is that fixed rate cards could be phased out as lenders feel the effects of the new constraints. Most likely, however, consumers can expect to continue seeing temporary teaser rates to lure them into accepting a new credit card or transfer balance offer.
Lastly, lenders will find the legislation’s mandate on writing a standard set of terms and conditions challenging. Lenders say the lengthy rules and protective measures that must be taken to protect credit card companies from failure-to-disclose litigation will make it difficult to produce an easy-to-understand set of standards. Nevertheless, financial institutions will need to gather up the experts and put on their thinking caps in order to conform to the new regulations while still protecting their assets.