President Obama has just signed into law the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009. The law protects consumers by outlawing somne of the worst credit card company abuses, such as retroactively raising interest rates on balances, manipulating payment due dates and charging high fees for paying a bill by phone or online. Yes, that’s right, some credit card companies have been known to charge customers fees for paying bills online. Why? Who knows. Just another way to jack up their profits.
I’m not naive. I know the credit card companies are not going to give up an estimated ten billion dollars in profits (that’s how much this bill may cost them). They will look for ways to recoup their profits. Deb Price writes in the Detroit News,
“In response to the new limits, credit card companies could add annual fees for cards, end interest-free grace periods, make cuts in reward programs, tighten credit, raise rates or lower card limits, analysts say.
If card issuers do add new fees or raise interest rates in response to the new law, the changes will have to be disclosed up front so customers will have a better idea of just how much they’ll pay to put purchases on their cards.
“The new rules definitely will help keep balances from increasing as quickly as they have in the past,” said Dianne Reichel, a credit counselor with GreenPath debt management in Detroit.
Many clients of the nonprofit agency have gotten in over their heads not only because of high credit card balances but also because of hefty fees and penalties that also push interest rates up to nearly 30 percent.
“For a lot of people who come to us, it just builds and builds and that’s when their debt spirals out of control,” Reichel said.
Consumer advocates and Democratic legislators, including Levin and Rep. Carolyn B. Maloney, D-N.Y., have pushed credit-card reforms for years. This bill finally passed because a Democratic president and Congress tapped into public fears over the sinking economy and outrage at being gouged by the bankers taxpayers have bailed out during this financial crisis, Levin said.
“The public has really been incensed about it for a long time, but we also had a Democratic president who would sign the bill,” Levin said. “That was not the case with President Bush.”
As welcome as the new credit card rules are, they won’t solve everyone’s debt woes, noted Reichel, the GreenPath credit counselor, especially for people who simply charge more than they can afford to pay off.
“I don’t think it’s the fix for everybody’s credit problems, unfortunately, because consumers still need to control their spending and really make an effort to pay down their bills.”
Still, I’m glad the President has taken a step toward eliminating these exploitative practices. I feel like we finally have someone in the White House who is looking out for the best interests of the people.