Credit card regulations may help consumers, but lenders are
still looking for ways to profit
New credit card regulations that took effect Monday are predicted to
save consumers millions of dollars and keep them better informed about
the cost of borrowing, but they also have lenders looking for new ways
to profit.
The regulations were imposed as a result of a law
passed by Congress and signed last spring by President Barack Obama.
The
law is designed to curb what members of Congress said were unfair
tactics, like raising interest rates on money the consumer had already
borrowed.
It also requires 45 days notice on changes to rates or
fees, an accounting in consumer statements outlining how long it will
take to pay off balances by paying the monthly minimum, giving consumers
21 days notice before bills are due and requiring customers age 21 and
younger to have a co-signer for credit cards.
"These new rules
will put an end to some of the most abusive credit card lending
practices that have trapped millions of Americans in debt and made it
harder for them to make ends meet," said Pam Banks, a policy counsel for
Consumers Union.
"The Credit CARD Act is a historic reform that will save consumers
millions of dollars in unfair credit card fees and interest because of
'gotcha' tricks and traps that the industry started imposing about 10
years ago," said Ed Mierzwinski, consumer program director at the U.S.
Public Interest Research Group.
But, the bill has a downside for
consumers.
The Pew Chartible Trust estimates lenders will lose
$10 billion because of the new rules. As a result, credit card companies
are finding new ways to raise revenue.
When the law passed,
credit card companies started imposing large rate increases on
customers. That caused Congress to move up the start-up date of the law.
The
banks and lenders are also imposing new fees and rejecting more
customers.
Jonathan Snowling, a spokesman for the American
Bankers Association, said the rules restrict the flexibility of credit
card issuers to charge different customers different rates.
As a result, he said, customers with good credit will pay more to
subsidize those with risky credit.
He also said lenders will make
credit less available.
But some consumer advocates, such as
Consumers Union, publisher of Consumer Reports, are among those calling
for even tougher regulations.
"Consumers still need to be on the
lookout for unfair practices, but this new law is a big step forward,"
Banks said.
