Additional Credit Card Regulations Coming Soon
Amidst an economy in turmoil, credit card companies are being forced to face additional regulations that will change the way they do business. Regulators are getting ready to revamp the way credit card companies are able to do operate in the near future. This move comes after thousands of people have complained about unfair lending practices by the credit card industry. These new rules will require the approval of the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration. They are all expected to vote on Thursday. This move will certainly help consumers alleviate some of the financial burdens that they are forced to deal with. Credit card issuers, on the other hand, say this will hurt their ability to lend money.
Many credit card issuers have raised interest rates and/or slashed credit lines due to recent economic conditions. Citigroup recently raised its interest rates on many cardholders after having said earlier that they were not going to do so. They claim that the increase in credit card default has caused them to have to suddenly raise rates. However, credit card companies are being criticized for raising rates unfairly as well. Some issuers will even raise your interest rate if you are late on other bills. For example, card issuers are increasing rates on people who have been late on car payments and even utility bills. This comes at a time when people are losing jobs by no fault of their own and falling behind on payments. Some consumers have even seen their rates rise from 14% to 28%. That is a 100% increase. These increased rates make it much more difficult for people to pay down debt. Many of these people are having a hard time making monthly payments and are consequently becoming even more indebted to the card issuers.
The regulation of the credit card industry will defiantly have a positive impact on consumers. Consumers spending less on credit card fees will be able to make other payments a lot easier. It is not right that card issuers raise rates on people for being one day late or even worse, being late on other bills that are not related. Consumers should be allowed at least 30 days to make the payment before any action is taken against their account. For many people a raise in interest rates means the difference between having food on the table and making a credit card payment. The regulation of interest will lower payments and free additional cash flow for the middle class consumer.
Credit card issuers on the other spectrum argue that further regulation will prevent them from be able to lend additional monies. Some analysts have even speculated that further regulation could cause banks to rescind an additional $2 trillion in credit lines. Card issuers will argue that 30 days is too long to allow before raising rates. Issuers also claim that the increased rates are needed to generate additional revenues to make up for borrowers who have defaulted.
In all, I think the consumer and ultimately card issuers will benefit from some of the regulations the Federal Reserve wants to pass. Hair trigger interest rate increases only prevent consumers from being able to pay off their credit card debt. Credit card companies will soon have access to TARP funds. This will help relieve their balance sheet of bad debt and enable them to continue to lend money.
For years card issuers have profited from unregulated lending practices. The further regulation of credit card issuers could ultimately prevent the credit card industry from the same turmoil that the mortgage industry has gone through. The prevention of another financial calamity in the credit card industry will keep our country from further financial ruin.
Amidst an economy in turmoil, credit card companies are being forced to face additional regulations that will change the way they do business. Regulators are getting ready to revamp the way credit card companies are able to do operate in the near future. This move comes after thousands of people have complained about unfair lending practices by the credit card industry. These new rules will require the approval of the Federal Reserve, the Office of Thrift Supervision and the National Credit Union Administration. They are all expected to vote on Thursday. This move will certainly help consumers alleviate some of the financial burdens that they are forced to deal with. Credit card issuers, on the other hand, say this will hurt their ability to lend money.
Many credit card issuers have raised interest rates and/or slashed credit lines due to recent economic conditions. Citigroup recently raised its interest rates on many cardholders after having said earlier that they were not going to do so. They claim that the increase in credit card default has caused them to have to suddenly raise rates. However, credit card companies are being criticized for raising rates unfairly as well. Some issuers will even raise your interest rate if you are late on other bills. For example, card issuers are increasing rates on people who have been late on car payments and even utility bills. This comes at a time when people are losing jobs by no fault of their own and falling behind on payments. Some consumers have even seen their rates rise from 14% to 28%. That is a 100% increase. These increased rates make it much more difficult for people to pay down debt. Many of these people are having a hard time making monthly payments and are consequently becoming even more indebted to the card issuers.
The regulation of the credit card industry will defiantly have a positive impact on consumers. Consumers spending less on credit card fees will be able to make other payments a lot easier. It is not right that card issuers raise rates on people for being one day late or even worse, being late on other bills that are not related. Consumers should be allowed at least 30 days to make the payment before any action is taken against their account. For many people a raise in interest rates means the difference between having food on the table and making a credit card payment. The regulation of interest will lower payments and free additional cash flow for the middle class consumer.
Credit card issuers on the other spectrum argue that further regulation will prevent them from be able to lend additional monies. Some analysts have even speculated that further regulation could cause banks to rescind an additional $2 trillion in credit lines. Card issuers will argue that 30 days is too long to allow before raising rates. Issuers also claim that the increased rates are needed to generate additional revenues to make up for borrowers who have defaulted.
In all, I think the consumer and ultimately card issuers will benefit from some of the regulations the Federal Reserve wants to pass. Hair trigger interest rate increases only prevent consumers from being able to pay off their credit card debt. Credit card companies will soon have access to TARP funds. This will help relieve their balance sheet of bad debt and enable them to continue to lend money.
For years card issuers have profited from unregulated lending practices. The further regulation of credit card issuers could ultimately prevent the credit card industry from the same turmoil that the mortgage industry has gone through. The prevention of another financial calamity in the credit card industry will keep our country from further financial ruin.
Labels: credit card, credit card regulation, credit cards
Credit Card / Financial news blog post by Todd Holliday at 7:54 PM 