The CARD Act, according to the White House web site, bans "unfair" rate increases, prevents "unfair" fees, requires companies to tell you how long it will take to pay off your balance, requires statements to arrive 21 days before the due date instead of 14, makes companies apply payments to the highest rate first, and severely limits the ways in which companies can raise rates on risky borrowers. Heck, it even requires gift cards to last at least five years before expiring!
Granted, the government has a role in protecting consumers from deceptive business practices. But, the disclosure that is currently provided with credit cards already shows your interest rate, tells you exactly what happens when you pay late, tells you when your statement will arrive in relation to the due date, lists all fees, and explains exactly how and when terms can be changed. You acknowledge all that when you choose to use a card. The government should not be determining what is "fair" or "unfair" about contracts that we voluntarily enter. The government should not have to protect people from their own bad decisions, especially when it imposes a burden on the rest of us.
If credit card companies are limited in charging late fees and raising rates on delinquent borrowers, they simply raise rates on everyone. We have about a 20-year credit history with not a single late payment ever. The interest rate on our card was just raised from a fixed 7.9% to a variable Prime + 10.99%. In other words, the legislation designed to prevent "unfair" rate increases caused our interest rate to almost double.
We are also willing to bet that the new disclosure laws will make it singificantly more difficult to understand the terms of your credit card agreement. The easy-to-understand box of important information will go the way of the hundred pages of gobbledegook you have to initial and sign when you buy a house. How much of that did you understand, or even read? Thanks to the Truth in Lending Act, the APR you see on a real estate contract is so nonsensical that you need to ignore it.
To emphasize, we do believe that government regulations are sometimes necessary, but the CARD Act is over the top, and only serves to shift the burden of the irresponsible onto everyone else. Unfortunately, that seems to be the way things are going these days.
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