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Credit Card Rules May Be Enacted Sooner

This article was written by in Credit. 5 comments.

We reported earlier on some new regulations that attempt to curb “predatory” practices by credit card issuers, like an end to Universal Default and more accurate credit offers.

One of the interesting things about these new rules is that Congress didn’t vote on them, they were approved by a Federal Reserve committee, and they were set to go into effect in July 2010, or sooner, if a given individual company gets around to it.

The Dallas Examiner has a report out stating our incoming President’s support for such reforms, and saying that a similar bill might still go through Congress, which means the rules would have to be enacted within 90 days of the bill being signed into law.

One thing that didn’t make it through the recent Federal Reserve regulations was the idea of a Credit Card rating system, a proposal for which has been on Obama’s campaign Web site since the beginning, or at least since the first time I looked at it. Here’s the summary of the idea:

Obama and Biden will create a credit card rating system, modeled on five-star systems used for other consumer products, to provide consumers an easily identifiable ranking of credit cards, based on the card’s features. Credit card companies will be required to display the rating on all application and contract materials, enabling consumers to quickly understand all of the major provisions of a credit card without having to rely exclusively on fine print in lengthy documents.

We’ll keep you updated on future developments to this idea. In the meantime, welcome to the First 100 Days.

Published or updated January 20, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 5 comments… read them below or add one }

avatar Rassah

Um, wouldn’t the interest rate charged be one of the major factors of the credit card’s “quality”? And thus couldn’t a credit card offer you a very low interest 5-star card, then after you applied and they found out you have a bad credit score, give you a 1-star overly high interest rate card?

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avatar Russell

A problem over here in teh UK is that it is impossible to cancel direct debits made on credit cards … so one has to cancel the card in order to get out of the direct debit. That can’t be fair! Thanks for an interesting post.

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avatar Elisa@Thrive

At Thrive we appreciate the efforts by the Fed but we are bigger fans of the two bills currently working their way through congress, also to temper predatory lending and to curb bad practices currently hurting consumers.

In addition, after several of our users, and millions of Americans have been hit with false charges this month, we are encouraging credit card users to fight back (http://blog.justthrive.com/2009/01/fraudulent-charges-what-do-you-do/) and keep scam artists in check.

Congress is taking important actions to protect us from bad legal practices but we have to also take action to keep scam artists in check.

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avatar Rick

I think it makes great sense for these reforms to emanate from the Fed as opposed to the political system. The politically motivated changes that filter through our system are rarely beneficial to us, as a whole. Rarely are they designed to benefit both the company AND the consumer – typically they favor one over the other. As a consumer, I (rather oddly) would rather see the companies benefit slightly more, as it gives them incentive to perform more efficiently.

A rating system is a horrendous idea. Because it would eventually be altered in such a way as to no longer provide the information it was originally designed to provide. More importantly, people would cease to pay attention to the fine print (which they rarely do anyway…to their detriment) and only look at the rating as the “guide” by which to make decisions. I know I can go to the local butcher and buy USDA Prime meat, or I can go to Costco and buy the same. The quality is vastly different, yet they are the “same” rating. I see the same problem with a credit card rating system. It sounds nice and easy, but rarely is. In fact, if my experience with the meat is any indication, I can tell you that you’ll wind up paying more for a poorer credit card…when a little extra work would get you a better credit card at the same rating level.

Government intervention, as I see it, rarely yields useful results and never works the way it is designed.

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avatar thomas

Good riddance to some of these credit company scams.

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