In addition to the Bill in the U.S. House that may see a vote as early as next week, the new rules by the Fed that won’t go into effect until July 2010 (unless voluntarily by individual banks), and yesterday’s meeting between the president and 13 top bank executives in which he urged them to act less like predators, there’s one more bit of news about credit cards this week.
From Bloomberg.com:
Senate Banking Committee Chairman Christopher Dodd and Senator Chuck Schumer, saying credit-card providers are “aggressively” raising interest rates, asked the Federal Reserve to immediately limit interest rate increases on existing balances.
We’ve previously reported on the recent aggressive tactics of credit card companies:
- Chase Adding Annual Fee Out of the Blue
- 45% Less Credit in Americans’ Wallets
- Citigroup Credit Card Rates Going Up: A Mystery
So you can be sure we’ll keep a close eye on this latest request of the Federal Reserve. Does it comply with the spirit of the “free market?” Absolutely not. Will it save many Americans from tipping over into bankruptcy or homelessness? We might just find out.
Published or updated April 24, 2009. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.
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{ 6 comments… read them below or add one }
“Will it save many Americans from tipping over into bankruptcy or homelessness? We might just find out.”
Another question is – “if implemented, would it freeze lending and throw the country into depression” – it might.
With mounting losses on credit cards, banks need these high interest rates to offset these losses. If you set limits on the rates, the banks will simply stop lending. Of course, since federal reserve understands it, the chance of this happening is nil.
In Dec. of 2007 I sent my congressman Dan Burton of Indiana a letter outlining the then new practices of Discover Card. I wrote their rates and fees were obscene. I enclosed documentation from Discover Card. I am in Dan Burtons district. I asked that he use his considerable clout to change or cause change in the credit card business. I received nothing in return. His staff never replied, nor did Burton and they sure didn’t take any action. Here comes Obama (who I didn’t vote for) in his first100 days acknowledges there is a major problem. I don’t know where it will go but at least Obama addressed the problem. I can only imagine the pressure the credit card lobby is throwing up. I’m a republican but I wonder why we couldn’t do what Obama did. As for Burton his golf is far too important to get involved in such mundane issues.
How exactly were Discover card’s rates and fees ‘obscene’?
There are some things about card fees and card companies’ practices
I don’t like, but they DO notify you, and if you don’t like it, you can tell them
to get lost, or don’t carry a balance. They are aggressive businesses with some
shady practices, not muggers. Practice some self defense…….
Just wanted to add to my previous post and to Greg’s: since they invented online payments as well as automatic payments, especially automatic payments of the full balance, there is no excuse for paying late.
Again, as Greg said, if you didn’t like Discover terms, you didn’t have to accept their cards. Credit is their product and they sell it as any other product. You think their price is too expensive – don’t buy.
I agree that since there are huge losses on credit cards, the banks are resorting to increase their interest rates. Increasing the interest rates will make up for the amount they are losing from the huge losses on credit cards. Feel free to visit Finance Advisory Stop (my personal finance blog). I’m going to write an article in response to what you’ve written here soon. Quite an interesting post here. Keep up the good work and you just got yourself another subscriber!
Unfortunately, the only way for banks to pay the stimulus money back is through their customers.