It’s by design that slick ads strive to make credit cards appear to be as friendly as your new puppy, or to be there for you in times of trouble just like your next-door neighbor.
But behind all the smiles, the singing, the happy talk and the hawkers who appeal to you with “free” off ers and T-shirts, consumer credit is big business. Credit card debt in the United States, by one estimate, increased by 25 percent over 10 years, and by January 2009 it had reached $963 billion.
And all along consumer advocates were warning consumers and lobbying Congress for legislation that would protect credit card users who quite often were ill-informed — and not accidentally either, because their ignorance of the small print was incredibly costly to them and incredibly profitable to the credit card companies.
Congress heard those concerns, and last spring, in a Rose Garden ceremony, President Obama signed the Credit Card Accountability, Responsibility and Disclosure Act, also known as the “credit card bill of rights.” Some of the law’s provisions were effective rather immediately, but most of the changes regarding credit terms, interest rates and fees went into effect only recently.
Needless to say, the law is imperfect, but in very important ways it does seek to level the playing field.
For example, credit card issuers must clearly spell out for their customers how long and how much it will cost them if they pay their debts with only the minimum due each month. Under the law, credit card companies won’t be able, as they had been, to play fast and loose with imposing late fees, over-the-limit fees and account-opening fees, all of which are now regulated.
And people under the age of 21, whom credit card issuers targeted with special promotions, now must have an adult co-signer unless they can prove sufficient income to support their credit limits.
In general, the new law is a good thing, but as Mr. Obama rightly said when he signed the law, it’s not intended “to give people a free pass; we expect consumers to live within their means and pay what they owe.” On the one hand, as the President also noted, the credit card industry does provide a valuable service and is entitled to turn a profit, but at the same time the thrust of the new law is to hold them to “basic standards of fairness, transparency and accountability.”
Sadly, the scenario of a newly level playing field is marred by maneuvers of the credit card industry, while it was still legal, to use the nine months it took before the law took full effect to create new fees, to raise interest rates, jack up old fees and to slap a $19 “inactivity” charge on customers who don’t use their credit card for six months.
All that begs the age-old question, “Can a leopard change its spots?” Consumers, beware!
— The Courier-Journal, Louisville