Outside editorial: The good, the bad and ugly of credit card legislation

Posted: Wednesday, May 27, 2009

Credit-card customers, victims of complicated and aggressive billing schemes, won a substantial consumer victory with passage of the federal credit card bill. Much of the legislation is good news, but it also contains bad unintended consequences and an ugly, disconnected amendment.

The Good

The House and Senate approved legislation that gives cardholders badly needed relief from sneaky and unfair billing tactics. The new legislation, which President Obama is expected to sign, requires expanded and clearer disclosure of card terms and creates new rules about when companies can increase interest rates on existing balances.

Companies will have to wait until a customer is 60 days late making a minimum payment before applying a penalty. That helps. So does a requirement for 45 days notice before major changes to card terms.

A payment that arrives before 5 p.m. will be considered on time, not late because of some bogus morning deadline.

Banks now have to get customer permission to exceed the credit limit. Student credit will tighten, as no one under 21 can get a card unless a parent, guardian or spouse is the primary cardholder.

Consumers gain new rights and badly needed protection. Card companies are forced to treat people with a modicum of respect and a smidgen of ethical business practices.

The bad

An odd consequence of the bill is the companies' plan to pile additional charges on better customers and take back some existing perks.

Savvy consumers should be miffed by the punishment of good customers who exhibit responsible bill-paying behavior.

In the strange parlance of the industry, deadbeats are not customers who fail to pay the bill on time. They are cardholders who pay in a timely manner and therefore don't generate enough fines and fees.

The companies clearly aim to supplant lost revenue with new charges on better customers. How counterintuitive and illogical. They plan to revive annual fees, limit cash-back and rewards programs, and even charge interest right after a purchase instead of allowing a grace period.

The decision to award mileage or perks is an agreement between the card company and the customer. If a customer dislikes a reduced perk, or new fee, that individual can shop for a better deal.

But shaking more money out of top customers so blatantly to make up for the other lost revenues is a mistake. Sterling customers should not be victims of sensible consumer-protection legislation.

The ugly

Lawmakers tacked on an unconnected and absurd amendment that blocks the government from barring loaded weapons in national parks and wildlife refuges, if allowed by state law. Guns in national parks are a bad idea - a clear attempt to stymie Obama, who is eager to sign credit-card legislation.

Sen. Tom Coburn, R-Okla., says the provision will reduce crime in parks. Who is he kidding? Guns in the parks are a recipe for trouble. Park visitors are not allowed to shoot bears or any other animals, so there is little else to fire at other than people.

This is a plan to push the envelope on the issue of guns in general. Lousy legislative shenanigans.

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