To be fare, the unsecured credit bill did help consumers in a number of ways. While some critics claim it didn’t go far enough, it did offer more protection than consumer had previous to the bill passing. For example, the federal bill banned hidden fees that the industry had become notorious for. It also banned the practice of “universal default” which allowed companies to dramatically raise interest rates on a credit card if the consumer was more than a month late on a payment.
Other positives that came out of the bill include: credit card companies must honor payments made in a bank the day of the payment; it banned credit card companies from charging fees when users exceed their limits; and it prohibits credit card companies from setting early morning deadlines for payments. Each of these is a step in the right direction and providers consumers with far more protection than existed in the past. Unfortunately, some of the most notorious practices of lenders was not prohibited in the credit card bill, which led many critics to lash out in anger.
Some of the major problems with the federal credit card bill include:
No cap on the fees or interest rates a lender can charge – Credit card companies use interest rates that would be astonishing if used in any other lending situation (such as a mortgage or car loan) yet this behavior was left unchecked. Cards with 30%+ interest rates were allowed to continue, and since many lower class families are stuck with such cards, it will surely lead to more debt by lower and middle income families.
Arbitration was not ended. When you sign a credit card contract, you agree to go to arbitration if there is a disagreement. Problem is, the credit card companies run the arbitration meetings. The federal unsecured debt bill did nothing to stop this practice, leaving some major companies with an unchecked, and some would argue illegal, advantage when disputes arise.
These are two major issues which leave the consumer behind the proverbial “8 bal” when dealing with credit card companies. While the federal credit card bill does go a long way towards protecting borrowers, it does little to curb the power that companies yield. As President Obama’s term continues, hopefully more consumer protections will be offered and Congress will help lower the outrageous interest rates that have caused nightmares for consumers across the country.