New Legislation to Regulate Credit Card Companies

A bill will soon become law that curtails certain practices of the credit card companies. The irony is that banks were told this month to raise more capital, then Congress decides to impede one of the banking industries more lucrative businesses. That is not to say that banks should be allowed to run amuck with interest rates and fees. However, it will most likely be the 42 percent of Americans who pay their complete balances on time every month who will end up paying for this new law.

President Obama is expected to sign into law a bill passed by Congress that overhauls the credit card industry. According to the Associated Press, the bill will do the following:

-Credit card companies cannot charge retroactive rate increases unless the cardholder is at least 60 days behind in paying the bill.

-If a rate increase is enacted because a cardholder has fallen behind on payments, lenders must restore the lower rate after six months if the cardholder has paid monthly bills on time.

-Credit card companies must post credit card agreements on the Internet.

-Potential cardholders under 21 to prove to the credit card companies that they can repay the money before being given a card, or have a parent or guardian promise to pay off their debt if they default.

-Cardholders cannot be charged over-the-limit fees unless they elect to be allowed to go over a limit.

-Credit card companies must say how much time it would take and how much money in interest would be paid if only the minimum monthly payments are made.

-Gift cards must be valid for five years.

-Credit card companies cannot charge fees when cardholders pay the bill by phone or on the Internet.

-Credit card companies cannot eliminate the interest-free period for cardholders who move from paying the full balance monthly to carrying a balance.

-Credit card companies must give cardholders a reasonable time to pay the bill before it is considered late.

-Credit card companies must give cardholders 45 days notice before raising interest rates on new purchases, even if the customer is late or delinquent in paying the account.

"Those who manage their credit well will in some degree subsidize those that have credit problems," Edward L. Yingling, CEO of the American Bankers Association, told the New York Times. In other words, banks will recoup losses from higher interest rates and late fees by reviving annual fees, putting restrictions on reward programs and eliminating the grace period for charging interest on purchases.

It is the fine print on the credit card bill that has gotten many Americans into trouble with their credit. Research shows that the majority of credit card companies stipulate that rates can increase to any amount for any period of time if the cardholder is deemed a credit risk at any point.

"This is America and we don't begrudge a company's success when that success is based on honest dealings with consumers," President Obama said recently. "We need reform to restore some sense of balance." In this time of job loss and financial uncertainty, it is the credit card balances that may trump finding a true balance of fairness in the credit card business.

Ki graduated from UT with a CS degree. Now he works with buyers interested in Austin real estate. His website allows buyers to search Austin MLS listings. It also provides information on mortgage interest rates.